BRC-Diamondcore Limited v River Corporate Finance (Pty) Ltd and Another, River Corporate Finance (Pty) Ltd v Diamond Core Resources (Pty) Ltd (642/2009) [2009] ZANCHC 32 (17 July 2009)

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[2009] ZANCHC 32
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BRC-Diamondcore Limited v River Corporate Finance (Pty) Ltd and Another, River Corporate Finance (Pty) Ltd v Diamond Core Resources (Pty) Ltd (642/2009) [2009] ZANCHC 32 (17 July 2009)

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IN THE HIGH COURT OF
SOUTH AFRICA
(Northern
Cape High Court, Kimberley)
Case
Nr:
642/2009
Case
Heard:
10/07/2009
Date
delivered:
17/07/2009
In
the matter between:
[A]
BRC-Diamondcore
Limited
Applicant
River
Corporate Finance (Pty) Ltd First Respondent
Diamond
Core Resources (Pty) Ltd (“In Liquidation”)
Second
Respondent
IN
RE
River
Corporate Finance (Pty) Ltd Applicant
Diamond
Core Resources (Pty) Ltd Respondent
And
[B]
River
Corporate Finance (Pty) Ltd Applicant(Respondent)
And
Diamond
Core Resources (Pty) Ltd Respondent(Applicant)
Coram:
Henriques AJ
JUDGMENT
Henriques
AJ:
INTRODUCTION
The
applicant Diamond Core Resources (Pty) Ltd
(hereinafter referred to as” Diamond Core) brought an urgent
application in which it sought the following relief:
“
1.
That
the forms and service provided for in Rule 6 (12) of the Uniform
Rules of Court be dispensed with and that this application
be heard
as one of urgency;
2. That
the judgment of his Lordship Judge Kgomo JP delivered on 3 July 2009
placing the Respondent in liquidation be suspended,
pending
adjudication of the Applicant’s appeal of the aforesaid judgment;
3. Costs
of the application in the event of opposition
.”
This
application
which
I shall refer to as the suspension application, was opposed and
subsequently on 9 July 2009 a further application was issued
in
which the applicant was BRC Diamond Core Limited (hereinafter
referred to as” BRC).
BRC sought the
following order:
“
1.
The
winding up of the Respondent pursuant to the order of the Court on 3
July 2009 be stayed in terms of s354(1);
2.
A rule nisi is issued calling upon all interested persons to appear
before the Court on a date to be determined by the Court
as to why:
the winding up
should not be set aside in terms of s354(1); alternatively
by the liquidation
order should not be suspended pending the outcome of the Second
Respondent’s appeal against the liquidation
order;
the
costs of the application should not be paid by any party opposing
the application;
s
ervice
of the rule be effected on:
the Master;
by one
publication in the Kimberley Herald newspaper;
the employees of
the respondent;
the South African
Revenue Service; and
by prepaid
registered post on all known creditors of the company who have
claims in excess of R10 000,00.
3.
That
the First Respondent is entitled to anticipate the return date
hereof on 24 hours notice on the Applicant’s attorneys
of
record
.
I
had on receipt of the initial application issued directives which
appear not to have been communicated to Counsel
Mr
Howie who appeared for BRC and Diamond Core. I was informed by Mr
Howie that he would only at this stage be proceeding with
the
application by BRC and that the application by Diamond Core was
contingent on BRC’s application.
At
the hearing of the matter Mr Howie handed up a proposed draft order.
The wording of the draft order differs somewhat from
the relief
sought in the notice of motion and it is convenient for me to
mention the draft order. This order and amendments thereto
were the
subject of much debate between Mr Howie and Mr Ackermann who
appeared for River Corporate Finance (Pty) Ltd, cited as
the First
Respondent in BRC’s application and Respondent in Diamond Core’s
application. For the sake of convenience I will
refer to it as River
Corporate Finance. The draft order provides as follows:
“
1. The
winding-up of the second respondent pursuant to this Court’s order
of 3 July 2009 (“the order”) is stayed in terms
of s354(1);
2. A rule nisi is
issued calling upon all interested persons to appear before this
Court at 10h00 on , or as soon
thereafter as counsel
may be heard, and show cause why:
the
winding-up of the second respondent should not be set aside in
terms of s354(1),
alternatively
,
the winding-up of the second respondent should not be stayed in
terms of s354(1) pending the final determination of the second

respondent’s appeal against the order; and
the costs of the
application should not be paid by any party opposing the
application.
The
remainder of the relief sought is the same as that appearing in the
notice of motion.
I
must also record my dissatisfaction with the manner in which the
application papers were drafted. The reference to the parties
is
confusing and appear to have been drafted in haste without much
thought for the convenience of the court. I may add that Mr
Howie
indicated that he had no part in the drafting of the papers and the
comments are therefore not directed at him. It’s
also worth
mentioning in addition that part of the relief which BRC seeks in
the rule nisi is the same as the relief which Diamond
Core seeks in
its application.
Prior
to the matter proceeding I enquired from both counsel whether either
of the parties require
d
an opportunity to file further affidavits. Both parties indicated
that they did not intend doing so in either of the applications
and
this was also formally placed on record at the hearing of the
matter.
At
the commencement of
his
argument, Mr Howie informed me that the relief that the BRC sought
was for the winding-up to be stayed. When I indicated
to him the
difficulty that I had with the draft order and relief he sought in
relation to the interests of creditors, he indicated
that BRC would
be content with a rule nisi should I be persuaded to grant the
application. One will note from a reading of the
papers and from the
heads of argument the relief sought does not appear to be confined
to merely an application to stay.
Before dealing with
the applications that served before me, it is necessary for me by
way of background to deal with the liquidation
application and the
application by Diamond Core to re-open its case.
THE
LIQUIDATION APPLICATION AND DIAMON
D
CORE’S APPLICATION TO REOPEN ITS CASE
The
liquidation application was heard by Mr Justice Kgomo and the
somewhat a
crimonious
relationship between the parties is evident from the papers filed.
River Corporate Finance launched the liquidation
proceedings on the
basis of Diamond Core’s inability to pay its debts. The deponent
to the affidavit opposing the liquidation
order was Brian Scallan in
his capacity as Director of Diamond Core.
A
final winding up order was
granted
on 3 July 2009. Prior to this order being granted, Kgomo J also had
to consider an application by Diamond Core to reopen
its case to
introduce new and material evidence.
The
basis for
such
application was that information had come to light which indicated
that Diamond Core was solvent and able to pay its debts.

Incidentally, the deponent to the affidavit in support of the order
to reopen its case was Stephen Thompson a Director of Diamond
Core
who also appears to be the same Thompson of Thompson Wilks, both
Diamond Core’s and BRC’s attorney of record.
In the supporting
affidavit Thompson alleges the following:-
Diamond
Core had alleged in its opposition to the liquidation order, that
an agreement had been concluded which would establish
its solvency;
the
precise nature of the agreement could not be disclosed as
negotiations were taking place and
the
parties to such agreement had not consented to disclosure of the
details of the agreement and in addition the parties to
the
agreement were bound by stock exchange regulations relating to
disclosure;
consent to the
disclosure of such agreement was provided on 29 May 2009 by KIG
Mining PLC (KIG);
Diamond
Core is the ultimate recipient of the proceeds of the agreement.
After
considering the submissions of Counsel who appeared, an application
for a postponement was dismissed as well as the application
to
reopen the case. I have had the benefit of perusing a transcript of
the proceedings of 3 July 2009. Counsel who appeared for
Diamond
Core could not argue the matter on the papers as drafted, and was
instructed to move for a postponement of the matter.
During
the course of argument he made the following submission
s
in relation to the application…”
Dit
so vol soveel foute, dat as ek moet begin dan gaan ons ‘n uur lank
staan net om die foute te bespreek. En ek kan nie anders-ek
kan
nie-I cannot make a responsible submission My Lord. The other big,
big problem that I have got to concede is that notwithstanding
the
directive-it contradicts my instructions.
…”. Later on he further concedes as follows:..”
As
I have said My Lord, my instructions are to move for a postponement
of this application and I am duty bound to inform the Court
that I
have gone through the application. And I could not find any
responsible submissions to make, even if I were to argue the

application today….”.
THE APPLICATION TO
STAY ITO S354(1)
In
support of the application for a stay of the winding-up
,
BRC filed a supporting affidavit deposed to by Brian Scallan who is
the Vice-President of Finance and a Director of BRC. It
is further
common cause that Diamond Core is a wholly owned subsidiary of BRC
and is cited in these papers as the second respondent.
In
paragraph 5 of the affidavit BRC seeks the following relief namely:
the
s
etting
aside of the winding-up in terms of s354(1) pursuant to this
Court’s order of 3 July 2009;alternatively
suspending
the operation of the liquidation order pending the adjudication of
the Second Respondent’s application to set the
winding-up aside.
BRC
seeks to
set
aside the liquidation order on two specific grounds. Firstly, that
the liquidation should not have occurred because River
Corporate
Finance did not have locus standi to proceed with the application as
it was not a creditor of Diamond Core. It alleges
that at the time
of the liquidation application River Corporate Finance had ceded its
claim against Diamond Core to a third party.
(This point was not
pursued by Mr Howie.)
Secondly
BRC seeks to set aside the liquidation application on the basis of
events which occurred subsequent to the arguing of
the application
and the delivery of judgment on 3 July 2009. The subsequent
events
which BRC relies on is that it has concluded an agreement for the
sale of its assets to KIG Mining PLC (KIG). To this
end BRC
indicates that it will receive $10.7 million in cash and tradable
shares from the sale and as such puts it in a position
where it can
settle River Corporate Finance’s claim in full. In support of
such allegation BRC relies on an affidavit of Vicken
Kaprelien dated
7 July 2009 which is annexed to the application for the suspension
of the liquidation order.
Scallan
indicates that the transaction confirms that Diamond Core is able to
pay its debts including that of River Corporate Finance
although,
will do so under protest. The winding-up is no longer necessary as
Diamond Core is solvent and able to pay its creditors.
Scallan
indicates that the winding-up would undermine the transaction with
KIG and this was disclosed to him personally in a meeting
with
Kaprelian on 1 July 2009. As a result of this meeting with
Kaprelian, BRC resolved to immediately pursue this application
in an
attempt to salvage the transaction.
At paragraph 6 of the
papers Scallan avers that the relief sought in the main and in the
alternatives are necessary as:-
The continuation of
Diamond Core as a going concern is imperative to ensure that the
assets which are being sold to KIG are
capable of being delivered;
Employees are
becoming disconcerted and are threatening to leave the company and
this undermines Diamond Core’s ability to
keep its operations
intact to ensure delivery to KIG in the event of an appeal being
successful;
An
appeal process he is advised takes a considerable period of time
and in the event of the application for leave to appeal
not being
granted it will then have to petition the Supreme Court of Appeal
which may also delay matters;
Depending
on how long the appeal process takes Diamond Core cannot operate
under the limited circumstances which exist in a
liquidation
environment pending its appeal and ensure the preservation of
assets for ultimate delivery to KIG.
As grounds for urgency
BRC relies on the indication given by Kaprelian of KIG on 1 July
2009 that the liquidation proceedings
undermine the transaction with
KIG.
BRC’S LOCUS STANDI
BRC
alleges that it ha
s
locus
standi
to bring this application as it owns all the issued ordinary shares
in Diamond Core and is also a creditor of Diamond Core. It
avers
that it provides a management and consulting service to Diamond Core
in terms of a contractual arrangement and Diamond
Core is required
to pay it at least $30 000.00 a month. To assist Diamond Core to
maintain its cash flow in order for it to
pay its administrative
costs and trade creditors, BRC has not enforced payment of the
contractual agreement since October 2008.
I may also add that
having perused the liquidation papers together with the application
to reopen its case and lead further
evidence at no stage did BRC
ever come forward as a creditor of Diamond Core, nor did the papers
contain any allegation that
it in fact had a contractual arrangement
in place with Diamond Core.
Scallan
annexes to his affidavit a
resolution,
BSC1 by directors of Diamond Core Resources Proprietary Limited
signed at Sandton on 14 April 2009. Such resolution
reads as
follow:
“
It
is hereby resolved by the COMPANY that-
BRIAN
SCALLAN be and is hereby appointed to represent the COMPANY in
regard to any litigation against or by RIVER CORPORATE FINANCE
(PTY)
LTD, and is further authorised to sign any documents necessary in
the prosecution and/or opposition of such litigation;
…
”
Mr
Howie indicated that a new resolution was being obtained and would
be filed. Such resolution was indeed filed on 13 July 2009

subsequent to the matter having been argued. Such resolution is
dated the 10 July 2009 after Scallan deposed to the affidavit
on
behalf of
BRC.
GROUNDS OF
OPPOSITION
River
Corporate Finance opposes the application on the grounds
firstly of urgency as BRC only launched these proceedings on 9 July
2009 but had resolved on 1 July 2009 to immediately pursue
this
application in light of the meeting with Kaprelian.
As
regards the merits of the application, River Corporate Finance
opposes the relief on the following basis:
t
hat
there are insufficient averments to support BRC’s contention that
it is a member of Diamond Core;
t
hat
insofar as its alleges it is a creditor of Diamond Core, this debt
was not disclosed by Diamond Core in the liquidation
application;
the
allegations concern
ing
a cession is merely a further attempt on behalf of BRC, Scallan and
Diamond Core to avert the liquidation process;
Diamond Core is not a
party to the agreement with KIG.
BRC had not provided
any proof that the liquidators will receive payment of their fees.
THE SUSPENSION
APPLICATION
In
the application
to suspend the judgment delivered by Kgomo J on 3 July 2009 the
applicant Diamond Core relies on the following allegations.
Once
again I must place on record that Brian Scallan is authorised to
depose to the affidavit by virtue of a resolution dated
14 April
2009.
Essentially it relies
on the following in support of such application:
t
hat
an application for liquidation was launched on the basis of a claim
for non-payment of a fee owed by Diamond Core to River
Corporate
Finance;
this
application was argued on 19 June 2009 and judgment was to be
handed down on 3 July 2009;
subsequent
to 19 June 2009 new and material facts became known to Diamond Core
which had a material bearing on the liquidation
application as such
facts served to confirm the solvency of Diamond Core and its
ability to pay its creditors.
Diamond
Core did not
make
full disclosure of these facts prior to 19 June, as it was
precluded from doing so due to an obligation of confidentiality
in
terms of stock exchange regulations in Frankfurt and Johannesburg;
on
29 June 2009, the transaction was finalised and it was then
authorised to make full disclosure of the transaction and the

parties thereto. That is why it sought to apply to re-open its case
to introduce these new facts;
such
application was filed on 1 July 2009, pursuant to a directive of
Kgomo J. Diamond Core did not expect that the application
would be
argued that same day and as result its counsel who was more
familiar with the matter was not available to argue the
matter
;
Scallan
at paragraph 1.11 confirms that it has instructed its attorneys to
appeal this judgment as well as the judgment in the
liquidation
application and will augment its notice of application for leave to
appeal on receipt of the reasons in respect
of the dismissal of the
application to re-open its case;
Scallan
once again indicates that he had during the liquidation application
acknowledged
Diamond
Core’s indebtedness but this was as a result of him being
unfamiliar with the financial affairs of Diamond Core;
subsequent
to him becoming more familiar with the
financial
affairs of Diamond Core, he realised that it was not indebted to
River Corporate Finance as it had not fulfilled its
duties and
obligations in terms of the mandate agreement.
t
hat
the agreement between KIG and BRC show that Diamond Core is solvent
and able to pay its debts and relies on an affidavit
by Vicken
Kaprelian deposed to on 7 July 2009 in his capacity as chairman and
chief executive officer of KIG Mining which confirms
that in terms
of the agreement KIG will pay in cash and publicly tradable shares
the sum of $10.7 million.
I
may add that the contents of paragraphs
29.8
and 29.9 above were fully canvassed in the liquidation application.
In
o
pposition
to the suspension application River Corporate Finance alleges as
follows:-
the
application
should dismissed for want of urgency;
the
provisions of s150 (3) of the Insolvency Act 2
4
of 1936 applies by virtue of s339 of the Companies Act.
It
further challenges the contention of Diamond Core that the
application is urgent as liquidators would take control of its
assets and begin the process of divesting the company
of
its assets. It alleges that in light of the provisions of s150 (3)
the idea that the liquidators will begin the process of
divesting
the company of its assets is misconceived. Should an appeal be
lodged, s150 (3) then governs the processes.
River
Corporate Finance
further contends that the purpose of s150 (3) is to protect the
interests of creditors by laying and keeping the hand of the
law on
the assets of the company in liquidation pending an appeal while at
the same time protecting the interests of the liquidated
company, by
barring the realisation of its assets without its written consent.
It
further
denies that new and material facts would have had an influence and
bearing on the solvency of Diamond Core and its ability
to pay its
creditors. It alleges:
Diamond
Core
is
not a party to the agreement with KIG but BRC is.
Clause
8.3 of the agreement with KIG which is relied upon,
provides
that the agreement is subject to the approval of each party’s
board of directors. There is no suggestion that such
approval from
the respective board of directors has been obtained.
There is further no
indication that Diamond Core would receive any money pursuant to
the transaction. The purchase price is
destined for BRC and the
only other company which will benefit in terms of the agreement is
Diamond Core Technical Services
(Pty) Ltd.
Shares in KIG are
only convertible into cash after 1 May 2010.
Diamond Core will not
receive us$2 million in cash as it is not a party to the agreement.
no where in the
papers does Diamond Core indicate how its will pay its debt as the
agreement between KIG and BRC does not make
provision for the
receipt of monies by Diamond Core. What is also apparent from the
agreement is the fact that Diamond Core
is not the owner of the
assets being sold. The only assets which Diamond Core has are
shares in its subsidiaries. The heads
of agreement between KIG and
BRC do not referred to any of the assets of Diamond Core.
River
Corporate also points out that Diamond Core did not raise the fact
of a counterclaim before and as such same is a
“
trumped
up claim
”
which is merely an afterthought to avoid liquidation. In addition
the respondent averse that in the application to place
new and
material facts before the Court the counter claim was not mentioned
in that application.
THE
SUSPENSION
APPLICATION
The
papers in this
application
are drafted in the form of an application for an interdict. I have
considered the arguments presented by both parties
in this matter
and note the following.
Diamond
Core has not
filed
an application for leave to appeal. The reasons for this is not
clear in light of the allegation contained in the papers
at
paragraph 1.11 on page 8 in which the applicant says “
…
although the respondent has instructed its attorneys to appeal this
judgment in addition to the judgment placing the respondent
in
liquidation, the respondent will amend its notice of application to
appeal, if necessary, upon consideration of the written
reasons by
Judge Kgomo. … JP for his judgment dismissing the application to
reopen ….”
A
detailed
judgment was delivered on 3 July 2009 in the liquidation
application.
Section 150 (3) reads
as follows:
“
When
an appeal has been noted … against a final order of sequestration,
the provisions of this Act shall nevertheless apply as
if no appeal
had been noted: Provided that no property belonging to the
sequestrated estate shall be released without the written
consent of
the insolvent concerned.
”
I
have considered the authority which
Mr
Ackerman has referred me to namely that of
Choice
Holdings Limited v Yabeng Investment Holding Co Ltd and Others
2001 (2 ) SA 768 and I agree with him that the provisions of s150(3)
would apply. I am in agreement with the finding of Wunsh
J in which
he found that the consequence of the noting of an appeal does not
suspend the operation and execution of the winding-up
order.
In any event I am of
the view that the application to suspend by Diamond Core ought not
to succeed as it has not discharged the
onus to show any good reason
for this court to exercise its discretion. There is no difference in
the application by Diamond
Core to suspend the order and the
application by BRC to stay the order. Both parties rely on similar
reasons for their applications
namely the agreement with KIG.
I
am of the view that similar considerations apply in considering the
application to stay and or set aside the order and the application

suspend the order.
For
reasons set out hereinafter and the provisions of section 150 (3)
should an appeal be noted, I am of the view that no purpose
would be
served by granting an order for the suspension of the winding up
order pending an appeal of Kgomo J’s judgement.
THE
SECTION
354 APPLICATION TO STAY AND OR SET ASIDE THE ORDER
s354 of the Companies
Act 61 1973, provides as follows:
“
(1)
The
Court may at any time after the commencement of a winding-up, on the
application of any liquidator, creditor or member, and
on proof to
the satisfaction of the Court that all proceedings in relation to the
winding-up ought to be stayed or set aside, make
an order staying or
setting aside the proceedings or for the continuance of any
voluntarily winding-up on such terms and conditions
as the Court may
deem fit.
(2)
The Court may, as to all matters relating to a winding-up, have
regard to the wishes of the creditors or members as proved to
it by
any sufficient evidence.”
The
only creditor before this court at present is River Corporate. I
must also place on record that at no stage during the liquidation

application did BRC opposed the granting of either a provisional
winding-up order or a final winding-up order. At no stage prior
to
judgment being delivered on 3 July 2009, and subsequent to the
agreement with KIG being amended on 29 May 2009, did BRC at
any
stage seek to intervene in the proceedings.
In
considering the merits of these applications I have considered the
authorities which Mr Howie referred me to in his heads of
argument.
In
Helderberg
Laboratories CC v Sola Technologies
2008 (2) SA 627
at 632 Fourie J considered an appeal against an
order granted by Traverso DJP for the winding-up of the appellants.
Traverso
DJP had granted a winding-up order on the basis of the
inability of the appellant to pay its debts as contemplated in s344
of
the Companies Act. She was of the view that as the tender and
payment of the admitted indebtedness was made by a third party on

behalf of the appellants, the appellants did not make payment in
respect of their admitted indebtedness. This she concluded
led to
the inevitable inference that the appellants were unable to pay
their debts. This was further reinforced by the fact
that she
concluded that a tender subject to a condition did not constitute
payment and as the appellants had not unconditionally
paid their
admitted indebtness the payment was insufficient to avoid
liquidation. At para 16 of the judgment on appeal on p
632D Fourie
J disagreed with the finding of Traverso DJP that the fact that the
payment was made by a third party justified the
inference that the
appellants were unable to pay their debts. He held as follows: “I
n
my view, the ability of a company or a close corporation to pay its
debts may be demonstrated by the itself making payment or
by its
ability to obtain the necessary finance from an exterior source.
…The emphasis in determining the ability of a company
or close
corporation to pay its debts should be on the fact of payment and
not on the source of payment.
”
I
agree with the views expressed by Fourie J. This is what I need to
have regard to in determining whether BRC has discharged
the onus to
show that the winding up order ought to be stayed or set aside on
the basis of new and subsequent events.
Mr
Howie also referred me to the decision in
Ward
and Another v Smit and Others: In re Gurr v Zambia Airways
Corporation Ltd
1998
(3) SA 175
where Scott JA remarked and ruled as follows:
“
The
language of the section is wide enough to afford the Court a
discretion to set aside a winding-up order both on the basis that
it
ought not to have been granted at all on the basis that it falls to
be set aside by reason of subsequent events…… In the
case of the
former, the onus on an applicant is such that generally speaking the
order will be set aside only in exceptional circumstances.”
(
180
H – I
)
“
The
object of the section is not to provide for a rehearing of the
winding-up proceedings or for the Court to sit in appeal upon
the
merits of the judgment in respect of those proceedings. To construe
the section otherwise would be to render virtually redundant
the
facilities available to interested parties to oppose winding-up
proceedings and to appeal against the granting of a final order……

It follows that an applicant under the section must not only show
that there are special or exceptional circumstances which justify
the
setting aside of the winding-up order; he or she is ordinarily
required to furnish, in addition, a satisfactory explanation
for not
having opposed the granting of a final order or appealed against the
order. Other relevant considerations would include
the delay in
bringing the application and the extent to which the winding-up had
progressed.”
(
181
B – D
)
49.
In
Ex
Parte Strip Mining (Pty) Ltd: In Rè Natal Coal Exploration Co
Ltd (In liquidation) (Kangra Group (Pty) Ltd and Another
Intervening)
1999 (1) SA 1086
in respect of the onus, Plewman JA remarked and ruled as follows:
“
I
see no parallel between applications for an attachment or an
interdict and proceedings in terms of s 354(1). ………. But
nothing in s 354 (1) suggests that a rule nisi procedure need
necessarily be adopted and where it has (as in the present case) the

stage at which appellant suggests the lesser standard of proof should
be applied is the sta
ge
when a final determination of the issue is made. Even in the
examples relied on by the counsel, this has always been on the
basis
of the normal onus”.
(
1091
E – G
)
“
It
is these circumstances which, no doubt prompted Scott JA in the Ward
case supra to suggest that the standard of proof would be
that used
in relation to an application to set aside a judgment
-that
is the normal onus”.
(
1091
H
)
“
There
is also the wording of s354(1) itself. What is said is that there
must be proof ‘to the satisfaction of the Court’.
This phrase
imposes the normal standard of proof of the facts which are to lead
the Court to hold that the winding up ‘ought’
to be set aside.”
(
1091
I
)
“……
This
clearly envisages proof according to the normal standard.
(
1092
D
).”
What
I
am required to consider is whether the provisions of section 354
have been met.
It is also trite that
even if a party is seeking interim relief in the form of a rule nisi
it must make out a case in its founding
papers in order for the
relief to be granted.
I must at the outset
say that these proceedings were launched on an urgent basis at very
short notice to the parties concerned
and with very little regard
for the interest of creditors. Mr Howie submitted that it was not
for River Corporate to be concerned
about creditors apart from
itself and that affected creditors could intervene and make
themselves heard on the return day. That
to my mind is not the
answer.
I
now turn to consider the agreement between KIG and BRC
.
which BRC relies on as the grounds for subsequent events. This as I
have already mentioned is also relied on by Diamond Core
in the
application to suspend the winding up order. These facts were also
drawn to the attention of Kgomo J in the papers filed
in support of
the application to reopen Diamond Core’s case.
Having
regard to the agreement the following
is
noted:-
Diamond
Core is not a party to the sale agreement with KIG
;
The
description of the assets to be sold in clause 3 of the agreement
with KIG does not refer to
the
assets of Diamond Core, pgs 42 and 43;
It
appears from the agreement that other companies and their assets
are included in the assets to be sold, and BRC’s contention
that
the purchase price will be used solely for the benefit of D
iamond
Core cannot be sustained;
BRC will not receive
the cash component of the purchase price if one has regard to p 48
of the agreement same reads as follows:
“
In
terms of clauses 4.2.1 and 4.2.3 of the Heads of Agreement, instead
of these payments being made to BRC Diamondcore Limited(“BRC”)

the parties agree that these funds will be paid directly to the
Diamond Core Technical Services Creditors and employees to be
identified by Brian Scallan on behalf of BRC and payment will be made
to these creditors and employees in the amounts determined
by Scallan
within 3 days thereof. Any balance will be transferred to an account
number nominated by BRC.
”
53.5. Of
paramount importance is the fact that this agreement between KIG and
BRC is subject to a suspensive condition namely that
prior to the
sale agreement becoming effective the sale is subject to the approval
by the Board of Directors of both BRC and KIG.
In as much as
Kaprelian has confirmed that KIG still wishes to continue with the
sale, what has not been dealt with since 29 May
2009 being the date
of the amendment of the agreement, is whether or not the Board of
Directors of KIG have approved the agreement
and or what steps have
been taken in this regard.
The
only basis upon which BRC seeks to stay and or set aside the order
are to be found in the new and subsequent events namely
the
agreement between KIG and BRC. I am not satisfied that BRC has
discharged the onus on it to satisfy this Court in this regard.
I
do not agree with Mr Howie that this must only be determined on the
return date, as BRC has to make out a case at this stage
in order
for the granting of a rule.
In
fact in his heads of argument
Mr
Howie has conceded that BRC is not relieved from the obligation to
prove at the first hearing that it has satisfied all of
the
requirements in section 354 to justify a stay in the interim. See in
this regard paragraph 22 of his heads of argument.
I
would have thought that since 5 May
2009,
being the date of signature of the agreement, alternatively 29 May
2009 steps would have been taken to convene a meeting
of the board
of directors of either KIG or BRC for the approval of the agreement.
Nothing appears to have been done in this
regard and neither have
any facts been placed before me regarding this.
All
that
BRC
has contented itself with is to simply file an affidavit by
Kaprelian in which he confirms the conclusion of an agreement
which
is subject to a suspensive condition.
In
addition as its e
xplanation
for not having opposed the final winding-up order BRC indicates that
Diamond Core was bringing an urgent application
to reopen its case
in the winding-up application. However, Mr Howie submitted that BRC
and Diamond Core are different parties
and therefore I must conclude
that BRC simply did not take any steps. BRC needs to provide an
explanation – it did not seek
leave to intervene in the
application for a final winding-up order. There is simply no
explanation provided in the papers as
to why it did not oppose the
winding up order. It contents itself and relies on the actions
taken by Diamond Core which to my
mind it cannot do.
Accordingly
I am of the view that BRC has not provided an explanation to the
satisfaction of this Court as to
why
it did not oppose the final winding-up order or at least seek to
intervene in such application.
I
agree that BRC
did
not delay in launching the application in terms of the provisions of
s354 although I must express my dissatisfaction with
the manner in
which it was brought.
Both
applications were brought on short notice without any regard for any
of the creditors and/or parties who may have an interest
in the
matter. The only persons who appeared to have been considered were
BRC and River Corporate Finance.
In
addition Scallan contradicts himself in that there was no evidence
which BRC could placed before the Court of any meeting of
creditors
nor of any appointment of a provisional liquidator. Yet in the
application for a suspension of Kgomo JP’s order
on p 17 at
paragraph 5.5 Scallan indicated that Thompson was advised on the
evening of 6 July 2009 that a first meeting of creditors
was
convened for the purpose of appointing a liquidator. In the
application in terms of s354 Mr Howie was not able to advance
any
argument in relation to how far the process of winding-up had gone
and also in his heads of argument indicated that there
is no
evidence before the Court that any meeting of creditors had been
called pursuant to which liquidators would be appointed.
If
that is the case then surely sufficient notice ought to have been
given to interested parties and/or creditors in this matter
rather
than BRC and Diamond Core rushing to Court on an urgent basis.
In
light of the aforementioned reasons I am of the view that BRC has
not discharged the onus and has not
proved
to the satisfaction of this Court that I should exercise my
discretion to grant a stay of the winding up.
In addition I am also
of the view that no purpose can be served in issuing a rule nisi in
this matter in light of the fact that
the provisions of s354 deal
both with an application to stay and an application to set aside.
The basis for both the application
to stay and the order to set
aside relates to the agreement with KIG.
For
reasons already mentioned in this judgment I am of the view that BRC
as well as Diamond Core ha
ve
not and will not be able to satisfy the requirements for such an
order. The parties indicated they did not want to supplement
the
papers.
Accordingly
I made the following orders:
In
application A the application to stay and or set aside the winding
up order in terms of s354, the application is dismissed
and BRC is
directed to pay the costs occasioned by such application on an
opposed basis
In
relation to application B
,
being the application to suspend the liquidation order pending an
appeal such application is also dismissed and such costs should
form
part of the cost in the liquidation.
_____________
_________
J I HENRIQUES
ACTING
JUDGE
NORTHERN
CAPE DIVISION
For the
Plaintiff:
Adv
R Howie
Instructed
by:
Du
Toit –Bomela, KIMBERLEY
For the
Respondent: Adv Ackerman
Instructed
by: Van der Wall & Partners,. KIMBERLEY