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[2013] ZAFSHC 196
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Bambanani Fruits Holdings (Pty) Ltd v Bambanani Farming Operations (Pty) Ltd (2839/2013) [2013] ZAFSHC 196 (15 November 2013)
FREE STATE HIGH
COURT, BLOEMFONTEIN
REPUBLIC OF SOUTH
AFRICA
Case No.: 2839/2013
In
the Business Rescue application of:-
BAMBANANI FRUITS
HOLDINGS (PTY) LTD
........................
Applicant
and
BAMBANANI FARMING
OPERATIONS (PTY) LTD
...........
Respondent
HEARD ON:
7
NOVEMBER 2013
JUDGMENT BY:
DAFFUE, J
DELIVERED ON:
15 NOVEMBER 2013
I
INTRODUCTION
[1] This is an
application for the placement of respondent under supervision and
business rescue in terms of s 131(4)(a) of the
Companies Act, 71 of
2008 (“the Act”), together with ancillary relief. The
application has been set down on the opposed
roll, but as will be
indicated later, the only issue to be considered at this stage is the
costs of the application.
THE PARTIES
[2] Applicant is
Bambanani Fruits Holdings (Pty) Ltd. It holds 25% of the shareholding
in the respondent company, whilst the remaining
75% shareholding in
respondent is held by the Bambanani Workers Black Employee Share
Trust, a trust with 50 beneficiaries of whom
35 are employees of
respondent. Respondent is cited in the application papers as
Bambanani Fruits BEE (Pty) Ltd, but its name was
changed prior to the
launch of the present application to Bambanani Farming Operations
(Pty) Ltd. Applicant dealt with this issue
in reply and during oral
argument an amendment was sought which application was not opposed.
This will be reflected in my order.
The business rescue application
was opposed by Newsa Pack CC (“Newsa”), a creditor of
respondent and an affected person
in relation to respondent as
defined in s 128(1)(a) of the Act, which opposition was eventually
withdrawn in circumstances to be
explained later.
THE ISSUES
[3] As mentioned
applicant seeks an order in terms whereof respondent is placed under
supervision and business rescue. In its notice
of motion it seeks an
order that the costs of the application be paid by any party opposing
the application.
[4] Detailed and
voluminous papers have been filed. The notice of motion and founding
affidavit with annexures consist of 271 pages.
Newsa filed opposing
papers dealing with the merits of the application for business rescue
and these together with the replying
affidavit and annexures
increased the documents to 377 pages.
[5] Mr Snellenburg, who
appeared for the applicant, filed extensive heads of argument
timeously and in accordance with the rules
of practice of this
division. No heads of argument were filed on behalf of Newsa. I
communicated through my secretary with Newsa’s
local attorney
on Monday, 4 November and Tuesday, 5 November 2013 in order to
establish when the heads of argument, which had to
be delivered on
Friday, 1 November 2013, could be expected. The response on both
occasions was that the attorney was waiting for
instructions from his
instructing correspondent.
[6] On 7 November 2013
when the application was heard, Mr Benade, appeared for Newsa. He was
not previously involved in the matter
and was not initially briefed
to argue the case. He cannot be blamed for not filing heads of
argument. He informed me that Newsa
was not opposing the business
rescue application anymore, but that it sought certain relief from
the court and was not prepared
to pay the costs of the application. I
deem it apposite to quote the draft order handed in from the bar by
Mr Benade:
“
1. that the
intervening creditor (NEWSA Pack CC) is granted leave to intervene in
the winding-up application under case number
2299
/ 2013
and
is hereinafter cited as a co-applicant the said winding-up
application;
2. the winding-up application is
removed from the roll, with no order as to costs;
3. the respondent is placed under
business rescue in terms of
section 131
of the
Companies Act, 2008
;
4. the winding-up application is
suspended until the business rescue proceedings have terminated;
5. should the business rescue be
terminated, in that the said business rescue proceedings fail, then
in that event, the intervening
creditor is entitled to set down the
pending winding-up application, on notice to the applicant forthwith;
6. in that event, the intervening
creditor is granted leave to supplement its founding affidavit in the
winding-up application;
7. no order as to costs is made in
regard to the business rescue proceedings and the winding-up
application.”
[7] I shall deal with
issues raised by Newsa when the factual matrix is discussed, but
merely mention at this stage that the crux
of the argument before me
was about the costs of the business rescue application and nothing
else.
THE FACTUAL MATRIX
[8] Insofar as there is
no dispute anymore that the respondent should be placed under
supervision and business rescue, I do not
intend to give a detailed
explanation of all material facts, but will concentrate on those that
I feel might be relevant in the
exercise of my discretion pertaining
to the costs of the application.
[9] Respondent is a major
role-player in the stone fruit and fruit industry in this country and
it even exports stone fruit to Europe
and Africa. It cultivates,
distributes and supplies fruit to major chain groups, such as Spar
and Pick & Pay.
[10] Respondent is a
black economic empowerment initiative and as I have indicated above,
75% of its shareholding is held by a trust
of which the majority of
beneficiaries are employees of respondent. It has the support of the
Department of Rural Development and
Land Reform.
[11]
Inter alia
due to two severe hailstorms, which caused considerable damage in
excess of R16 million, respondent’s cash flow was severely
put
under pressure to such an extent that it is financially distressed as
defined in s 128(1)(f) of the Act.
[12] Respondent is not
insolvent. Its movable and immovable property are valued in excess of
R30 million, whilst the total debt
amounts to just over R17 million.
Newsa’s claim is R563 669,97 and thus a minute percentage
of the total debt.
[13] On 25 January 2013
Fruit & Veg City – Import and Export (Pty) Ltd t/a FVC
International (“Fruit & Veg”)
brought winding-up
proceedings against respondent, but on 28 February 2013 that matter
was settled. Respondent had to pay the outstanding
amount of the
claim in certain instalments.
[14] During May 2013 the
Standard Bank of SA Ltd perfected its security in terms of its
general notarial bond. However, respondent
is in the process of
engaging Land Bank of South Africa to consolidate and take over the
Standard Bank debt.
[15] On 12 June 2013
Bryoped Fruits CC issued an application for the winding-up of
respondent under application no 2299/2013. A
month later Fruit &
Veg filed an application to intervene as a creditor in the
liquidation application by Bryoped, application
no 2299/2013. This
winding-up application was enrolled at a stage, but postponed from
time to time and eventually to 28 November
2013 in anticipation of
the outcome of this application.
[16] On 25 September 2013
Newsa filed a notice of motion in case no 2299/2013 (the winding-up
application) requesting leave to intervene
in the winding-up
application and to intervene and participate as an affected person in
terms of the provisions of s 131(3) of
the Act in the business rescue
application no 2839/2013, which had been issued on 16 July 2013
already. The business rescue application
was set down for hearing on
18 July 2013 initially, but postponed to 15 August and then to 26
September. On this day and because
of the steps taken by Newsa the
matter was postponed to 7 November 2013. Although Fruit & Veg
gave notice of intention to oppose
the business rescue application,
it later withdrew its opposition.
[17] On 16 October 2013
applicant replied to Newsa’s affidavit attached to its
aforesaid notice of motion which affidavit
was pertinently used to
seek an order dismissing the business rescue application and which
dealt with the merits of the application
in detail.
[18] On the morning of 7
November 2013 and prior to going to court, Mr Gerdener of McIntyre &
Van der Post attorneys, approached
me in chambers and by agreement
requested a further postponement of the winding-up application as
well as Fruit & Veg’s
intervening application, which as he
informed me, was agreed between the parties to be postponed to 28
November 2013 in anticipation
of the outcome of the business rescue
application. I granted such orders.
[19] I informed Mr Benade
during the hearing that I could not grant prayers 1 and 2 of his
draft order as I had already made orders
in that regard in chambers.
The order requesting the suspension of the winding-up application is
unnecessary due to the provisions
of the Act. I also indicated that I
was not prepared to grant prayers 5 and 6 as Newsa would be entitled
to exercise its rights
in this regard whenever the business rescue
proceedings fail and/or are terminated.
[20] Mr Benade informed
me that the allegations in the founding affidavit pertaining to the
financial assistance provided to respondent
and still to be provided
by the Department of Rural Development and Land Reform had been
verified by Newsa’s legal team on
Friday, 1 November 2013. As a
result of this confirmation obtained Newsa decided not to oppose the
business rescue application
anymore. According to the founding
affidavit an amount of R7,6 million was already paid over to the
account of an appointed strategic
partner of respondent to be
utilised for and on behalf of respondent and its creditors. Certain
amounts have already been paid
to creditors, but the largest portion
will be paid to creditors in terms of a business plan to be proposed.
The Department has
committed an amount of R22 million to respondent
of which R11 million has been paid (including the R7,6 million
referred to above),
whilst the balance would have been paid by the
end of September 2013. However due to unforeseen circumstances the
completion of
a due diligence study, which should have been finalised
at the end of August 2013, was delayed. According to applicant’s
papers respondent also expects the proceeds of its crop of fruit and
vegetables to yield in excess of R14 million. Harvesting of
the fruit
will take place between now and February next year.
[21] Based on the
evidence presented by applicant and the confirmation apparently
obtained by Newsa from the Department as late
as 1 November 2013, it
was advised not to proceed with the opposition of the business rescue
application.
LEGAL PRINCIPLES
[22] It is not necessary
to deal extensively with the relevant provisions of the Act and the
case law pertaining to business rescue.
For purposes hereof it is
merely required to refer to the recent judgment of the Supreme Court
of Appeal in the matter between
Oakdene Square Properties (Pty)
Ltd & Others v Farm Bothasfontein (Kyalami) (Pty) Ltd &
Others
2013 (4) SA 539
(SCA).
[23] In
Oakdene
Square Properties
Brand JA dealt with an argument of counsel
to the effect that all the applicant for business rescue has to show,
is that a plan
to rescue the respondent is capable of being developed
and implemented, regardless of whether or not it may fail, as follows
in
para [31]:
“
I
do not agree with this line of argument. As I see it, it is in direct
conflict with the express wording of s 128(1)
(h)
.
According to this section ‘rescuing the company’ indeed
requires the achievement of one of the goals in s 128(1)
(b)
.
Self-evidently the development of a plan cannot be a goal in itself.
It can only be the means to an end. That end, as I see it,
must be
either to restore the company to a solvent going concern, or at least
to facilitate a better deal for creditors and shareholders
than they
would secure from a liquidation process. I have indicated my
agreement with the statement in
Propspec
(a
judgment by Van der Merwe J in
Propspec
Investments v Pacific Coast Investments 97 Ltd
and
Another
2013 (1) SA 542
FB paras [11] and [15]) that the applicant is
not required to set out a detailed plan. That can be left to the
business rescue
practitioner after proper investigation in terms of
s 141. But the applicant must establish grounds for the
reasonable prospect
of achieving one of the two goals in
s 128(1)
(b)
.”
At paragraph [38] Brand
JA continued as follows:
“
As I see it,
the applicant for business rescue is bound to establish reasonable
grounds for the prospect of rescuing the company.
If the majority
creditors declare that they will oppose any business rescue scheme
based on those grounds, I see no reason why
that proclaimed
opposition should be ignored. Unless, of course, that attitude can be
said to be unreasonable or
mala
fide
.
By virtue of s 132(2)
(c)
(i)
read with s 152 of the Act, rejection of the proposed rescue
plan by the majority of creditors will normally sound the
death knell
of the proceedings. It is true that such rejection can be revisited
by the court in terms of s 153. But that,
of course, will take
time and attract further costs. Moreover, the court is unlikely to
interfere with the creditors’ decision
unless their attitude
was unreasonable.”
[24]
Mr Benade referred me to the judgment of
C
ape
Point Vineyards (Pty) Ltd v Pinnacle Point Group Ltd and Another
(Advantage Projects Managers (Pty) Ltd Intervening)
2011 (5) SA 600
(WCC) and requested me to consider this
judgment when the issue of costs is considered. The judgment does not
support Newsa at
all. The costs of the intervention application were
reserved for later adjudication. I agree with Rogers AJ that although
the Act
does not contain an express provision for costs incurred in
business rescue procedure as is the case with winding-up and
sequestration,
s 135(3) is probably applicable insofar as it refers
to
“other claims arising out of the costs of the
business rescue proceedings.”
I am also in
agreement with him that the court’s inherent jurisdiction in
regard to costs applies to business rescue applications.
[25] Neither Mr
Snellenburg, nor Mr Benade referred to any other case law dealing
specifically with the issue of costs in business
rescue applications
or for what it is worth, sequestration and liquidation applications.
In terms of
s 97(3)
of the
Insolvency Act, 24 of 1936
, the costs of
opposition in sequestration proceedings are not included in the costs
of sequestration, unless the court directs
that they be included.
Such orders have been granted in the past on the sole ground that the
debtor’s opposition was
bona fide
and reasonable. See
Hugo, NO v
Lipkie
1961 (3) SA 66
(O) at 73A and the
further case law referred to by
Mars:
The Law of Insolvency in South Africa
,
9
th
ed, para 5.40
at 150. However it appears as if such costs should as a general rule
be refused unless special circumstances exist
and the debtor had real
and substantial grounds for opposing, or because his opposition
assisted the court in coming to a decision.
See
Slabbert,
Verster & Malherbe (Vrede) (Edms) Bpk v Bothma
1975 (1) SA 232
(O) at 236A and
Lotzof
v Raubenheimer
1959 (1) SA 90
(O) at 94G.
[26] If other creditors
in sequestration proceedings unsuccessfully intervene to oppose the
granting of a sequestration order, they
should as a general rule bear
the costs occasioned by their opposition. (
Robinson v Smerling
1922 EDL 213.)
However the court has on occasions ordered such costs
to be paid out of the estate assets.
Jhatam and Others v Jhatam
(2)
1958 (4) SA 187
(N). The court refused to allow costs of
an unsuccessful application for intervention which was found to be
unnecessary and vexatious.
See
Ex Parte Jordaan: In Re Grunow
Estates (Edms) Bpk v Jordaan
1993 (3) SA 448 (O).
Section
97(3)
of the
Insolvency Act applies
to a winding-up by virtue of s
342(1) of the Companies Act, 61 of 1973. Notwithstanding the 2008
Companies Act, Chapter 14 of the
1973 Act is still applicable in
certain instances. Therefore, also in the case of companies the costs
of an unsuccessful opposition
to a winding-up application form part
of the costs of liquidation only if the court so orders
(s 97(3)
of
the
Insolvency Act). To
conclude, the effect of
s 97(2)(c)
and (3) of
the
Insolvency Act, read
with s 342(1) of the 1973 Companies Act is
that the costs incurred by the applicant for the winding-up order are
automatically
“the taxed costs of liquidation” (unless
the court otherwise orders) and the costs of unsuccessful opposition
to the
grant of the order are costs in the liquidation only if the
court so directs. Contrary to an earlier approach that the court
should
so direct only if the opposition was
bona fide
and
reasonable - see for example
Premier Industries Ltd v African
Dried Fruit Co (1950) Ltd and Others
1953 (3) SA 510
(C) at
513 – 514 - more recent authorities are to the effect that the
court should so direct only where special circumstances
exist. See
Prudential Shippers SA Ltd v Tempest Clothing Co (Pty) Ltd and
Others
1976 (2) SA 856
(W) at 868. See also
Absa Bank
Ltd v Rhebokskloof (Pty) Ltd and Others
1993 (4) SA 436
(C)
at 450 – 451 where the court refused so to direct where it was
satisfied that at no relevant time had there been any
reasonable
prospect of the opposition proving successful.
[27] In an intervention
application where the intervening creditor furnished information
which has contributed significantly to
the reaching by the court of
its conclusion, the costs of such intervening creditor was found to
be costs in the liquidation. See
Confrees (Pty) Ltd v Oneanate
Investments (Pty) Ltd (Snoek Wholesalers (Pty) Ltd and Others
Intervening)
1996 (1) SA 759
(C) at 766.
EVALUATION OF THE
FACTS AND SUBMISSIONS
[28] I am satisfied that
applicant has established grounds for the reasonable prospect of
achieving one of the two goals contemplated
in section
128(1)(b)(iii), to wit the primary goal which is to facilitate the
continued existence of the company in a state of
solvency and if it
is not possible to so continue in existence, the secondary goal, to
obtain a better return for the respondent’s
creditors and
shareholders than would result from its immediate liquidation.
[29] Mr Snellenburg
argued that Newsa should be ordered to pay all of applicant’s
costs of the application. When I indicated
to him that this appears
to be totally unfair as applicant in any event had to make out a case
for business rescue and to achieve
that it had no choice, but to deal
extensively with respondent’s position and the grounds relied
upon for business rescue,
which it did, he conceded this, but
submitted that Newsa should then be ordered to pay the costs of
opposition, i.e. all those
costs from the notice of opposition, the
filing of the further sets of affidavits, the drafting of the heads
of argument and the
costs of the opposed application.
[30] He argued that
although Mr Benade had made acceptable and forceful submissions, the
facts
in casu
did not support these arguments at all. In this
regard Mr Benade argued that s 131(3) of the Act provides for
participation by
affected persons and that Newsa as an affected
person merely utilised that right in opposing the application.
Therefore it should
not be penalised with a costs order even if its
opposition fails. Such order will deter other affected persons in
future to rely
on their right of participation which has been
explicitly granted by the legislature. Although I agree that this is
an aspect to
be considered, I am unable to agree with Mr Benade’s
submissions, bearing in mind the facts
in casu.
[31] Newsa acted
unreasonable and is directly to be blamed for the increase in costs
in this matter. It is a minority creditor and
was at all relevant
times fully aware of the fact that the applicant in the winding-up
application and Fruit & Veg, the other
creditor who wants to
intervene in that application, as well as all other major creditors,
elected not to oppose the business rescue
application. Real
participation would entail consulting with the major creditors, the
Department and applicant at an early stage
of the proceedings in
order to confirm the true facts.
[32] Furthermore, in its
opposing papers Newsa challenged the applicant’s averments by
relying on speculation and the casting
of suspicion rather to rely on
a solid and factual foundation. It went so far to deny that
respondent was the owner of the immovable
property for which a
valuation was attached to applicant’s founding affidavit. It
even alleged that respondent was no longer
trading.
[33] Newsa has satisfied
itself now and as late as 1 November 2013 that the Department was
serious in assisting respondent financially
in accordance with the
evidence supplied by applicant in the founding affidavit. This
affidavit was filed as long ago as 16 July
2013 and Newsa together
with all other affected persons were properly given notice of the
intended application to place respondent
under supervision and
business rescue. Newsa’s affidavit in opposition of the
application was filed on 25 September 2013,
about six weeks ago. If
it was really interested in participating it could and should have
contacted the Department on receipt
of the application papers to
ascertain whether there was any truth in the applicant’s
allegations. This it failed to do until
four court days before the
hearing of the opposed application. Initially Newsa was guilty of “
”n
groot dosis van swak oordeel”
in the words of
Kotze J in
ex parte
Jordaan
supra.
[34] Newsa did not
contribute at all to the decision arrived at by me pertaining to the
merits of the application, but worst of
all, its unreasonable
opposition caused not only unnecessary and wasted costs, but wasted
valuable time that could have been utilised
by the business
practitioner to do his investigations and to prepare a business plan
for submission to creditors. Was it not for
the opposition, the
business practitioner might have been in the process of wrapping up
the business rescue operation by now.
It
remains a mystery why I was not informed earlier than the morning of
the hearing of Newsa’s changed attitude and why some
respect,
or at least the required courtesy, was not displayed. Applicant was
unnecessarily drawn into an opposed application and
I also had to
study the papers and prepare for the hearing.
[35] There is no reason
why applicant should be saddled with the costs incurred since the
filing of the notice of opposition. That
would effectively be the
case if no order as to costs is granted. Mr Snellenburg did not
submit that applicant’s costs, excluding
the costs of
opposition, be paid by respondent or that those costs to be costs in
the business rescue proceedings. In any event,
the notice of motion
does not contain an order to that effect and if the matter was
unopposed, applicant would in any event not
be entitled to any costs.
Whether this is an oversight does not have to be considered. If such
costs were claimed in the notice
of motion I would be inclined to
grant such order.
ORDER
[36] Therefore the
following orders are made:
1. Respondent’s
name is deleted and substituted with Bambanani Farming Operations
(Pty) Ltd.
2. Respondent is placed
under supervision and business rescue in terms of
section 131(4)(a)
of the
Companies Act, 71 of 2008
.
3. Daniël Theodorus
van Jaarsveld is appointed as interim practitioner in terms of
section 131(5) of the Act.
4. No order as to costs
is made, save that applicant’s costs pertaining to the
opposition of the application by NEWSA Pack
CC, i.e. all the costs
incurred since 25 September 2013, including the costs of 26 September
2013 which have been reserved, shall
be paid by NEWSA Pack CC on the
scale as between party and party.
_____________
J.P. DAFFUE, J
On
behalf of applicant: Adv N. Snellenburg
Instructed
by:
Honey
Attorneys
BLOEMFONTEIN
On
behalf of respondent: Adv H.J. Benade
Instructed
by:
McIntyre
& Van der Post
BLOEMFONTEIN
/spieterse