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2024
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[2024] ZAECMKHC 65
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Kets Group Proprietary v Business Partners Limited (3540/2023) [2024] ZAECMKHC 65 (7 May 2024)
IN THE HIGH COURT OF
SOUTH AFRICA
(EASTERN CAPE
DIVISION, MAKHANDA)
CASE
NO.: 3540/2023
Reportable
NO
In the matter between:
KETS
GROUP PROPRIETARY
Appellant
(REGISTRATION NO.:
2019/68747/07)
and
BUSINESS
PARTNERS LIMITED
Respondent
(REGISTRATION NO.:
1981/000918/06)
JUDGMENT
DUNYWA
AJ
[1]
T
his court granted the order for the provisional winding up of
the applicant on 28 November 2023 and the order for final winding up
on 5 March 2024. The applicant is seeking rescission, as well as a
stay or suspension of the final liquidation.
[2] The
applications above were premised on the understanding that the
applicant is insolvent. The first application was for
the issue of
Rule Nisi, which was served to the applicant at its place of business
in the form of personal service to Mrs Ketsesile.
The latter is the
deponent of the founding affidavit in this application. The service
was also done to her attorneys. The provisional
liquidation was
granted as an unopposed application.
[3]
The next order was for the final liquidation granted at 09h45
also as unopposed application on 5 March 2024. At 11:00 on the same
day, the applicant's attorney informed the respondent's local legal
representative that they had instructions to oppose the second
application for the
Rule Nisi
.
[4] On 6 March
2024, the applicant purportedly issued application papers which were
served on the respondent’ 18 March
2024. Respondent contended
that the papers were defective since they were unissued and not
signed. This led to the exchange of
correspondence between the
parties.
[5] On 26 March
2024, another application by Notice of Motion was served on the
respondent. The application before this court
is for the rescission
of the liquidation order and the suspension of the final liquidation
order pending the rescission. The application
is divided into Part A
and Part B. Part A deals with Rule 45A which must resolved first as
directed by the applicant and Part B
the rescission shall be
considered later.
[6] The respondent
in opposing the application, submits that the application
suffers
from fatal procedural and substantive defects
. The first
procedural defect is that the application is not urgent, but only
premised on self-created urgency. Alternatively, the
application must
be removed from the roll to be re-enrolled for hearing on the opposed
roll in the normal course.
[7] It contends
that the applicant decided to dump their application which was
purportedly issued on 6 March 2024 because
of its defectiveness and
launched the urgent application on 26 March 2024.
The
applicant has chosen to insist that the matter be heard on 2 days’
notice, thereby prejudicing the respondent in its ability
properly to
answer and prepare for the application.
[8]
The
respondent insists that the founding affidavit is devoid of any
factual allegations which address what is required of an applicant
in
an urgent application. There are no facts, whatsoever, which are
advanced to justify the contention that the application is
urgent.
The degree of relaxation of the rules and truncation of time frames,
as determined by the applicant, is not justified
[9] The certificate
of urgency is criticised by the respondent, in that it does not
provide the grounds of urgency, with sufficient
particularity for the
question of urgency to be determined solely therefrom, without
perusing the application papers as required
in Practice Directives of
this Division.
[10] It argues that
affidavits filed in support of the relief sought under headings Part
A & B are not properly deposed
nor are they properly
commissioned. The matter was heard on two days’ notice. The
litigation to the fact that the matter
is urgent is an abuse of
power. The matter should be dismissed with costs.
[11]
It
is a fact that the applicant must demonstrate
inter
alia
that
it will suffer real loss or damage were it to rely on normal
procedure. The attractiveness of finally disposing of the
litigation
should not be allowed to govern. The approach should rather be that
there are times where, by way of non-suiting an
applicant, the point
must clearly be made that the rules should be obeyed and that the
interest of the other party and his lawyers
should be accorded proper
respect, and the matter must be looked at to consider whether the
case is such a case or not
[1]
.
[12]
I agree with respondent’s submissions that they were
prejudiced. In
Voigt
NO and Another v EGH IP (Pty) Ltd and Others
[2]
my
brother Lowe J had this to say about prejudice, at paras 32 and 33;
“
This
is clearly such a case and more especially that Respondents, whilst
no doubt working night and day putting up a well-drafted
response,
nevertheless and understandably complained of prejudice. It must be
accepted that matters factual and legal usually require
thought and
careful consideration by clients and the legal team. In this matter
this was substantially denied Respondents and their
legal team for
absolutely no good reason, Applicants having afforded themselves a
considerable period to consider and draft and
having had the luxury
thereof”.
[13] The respondent
submits that the substantive defect lies in Part A of the application
for the suspension and staying of
executions of the final liquidation
granted on 5 March 2024. The relief sought is in terms of the court's
general powers to stay
enforcement proceedings, alternatively in
terms of Rule 45A of the Uniform Rules of Court.
[14] The argument
put forward is that according to Rule 45A, the court must be
satisfied that the requirements for an interlocutory
interdict have
been established when exercising its discretion
[3]
.
I
t
is trite that where a stay is sought in terms of Rule 45A, in the
exercise of its discretion the Court will borrow from the
requirements
for the granting of an interlocutory interdict, namely
that the applicant must show:
(a)
that the right which is the subject of the
main action and which he seeks to protect by reason of the interim
relief is clear, or
if not clear, is
prima
facie
established though open to some
doubt and
(b)
if the right is
prima
facie
established, there is a well-grounded apprehension of irreparable
harm
[4]
.
[15] The respondent
has submitted that no
case is made out in the
affidavit filed in support of the Part A relief. This court shall not
make any determination in relation
to Part B of this application, but
it is ineluctable not to refer to Part B when dealing with Part A of
the same application. As
a result, it is submitted that to succeed in
terms of Rule 45A the applicant was required to demonstrate at least
a
prima facie
prospect
of success in the rescission relief which forms the subject of Part
B. It is also required to have demonstrated facts which
support the
contention of a well-grounded apprehension of irreparable harm.
[16]
The court’s power to stay or suspend the winding up of the
company is discretionary
[5]
. The
applicant has the onus to prove the existence of circumstances
warranting the stay or suspension of the winding up
[6]
.The
principles that the court must consider in exercising it discretion
in staying the proceedings for the winding up of a corporation
were
discussed in
Klaas
v Contract Interiors CC and others
[7]
.
[17] I agree that
the applicant must prove that he has a
prima
facie
prospect of success in the rescission relief which forms part of Part
B and that there was good cause for not appearing in court.
The
respondent’s argument is valid in that prospects of success
concerning the rescission relief are not addressed at all
in the
applicant’s affidavit. The basis on which the rescission is to
be sought is not even touched on. The respondent opines
that when one
considers the affidavit purportedly filed in respect of the Part B
relief it becomes evident that what the applicant
intends in this
regard, is to rely on section 354 of the Companies Act 61 of 1973
(“
the
1973 Companies Act”)
.
[8]
[18] The apparent
route to be followed by the respondent in its application for
rescission is one in section 354 of the 1973
Companies Act. It is
significant to examine what the section requires. Section 354 of the
1973 Companies Act read as follows:
“
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 voluntary winding-up on such terms and
conditions as the Court may deem fit.”
[19]
In
Ward
& Another v Smith & Others: in re Gurr v Zambia Airways
Corporation
[9]
the
Supreme Court of Appeal considered the provisions of section 354
(1) and explained its application 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 and 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.”
And,
“
The
object of the section is not to provide for a re-hearing of
the winding-up proceedings or for the court to sit in
appeal upon the
merits of the judgment in respect of those proceedings. 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 appeal against the order.”
[20]
Again
in
Storti
v Nugent
[10]
the Court found that where:
“…
a
party wishes to set aside winding-up proceedings on the ground that
the winding-up order should never have been granted due to
a defect
in the procedure or the merits of the application must bring his
claim under section 149(2) of the Insolvency Act, or
as a rescission
at common law.
On either basis, he must
at least establish “sufficient cause” which in turn
involves two essential elements: (1) the
party seeking relief must
present a reasonable and acceptable explanation for his default, and
(2) such party must on the merits
have a bona fide defence that prima
facie has some prospect of success which, in the context of
winding-up, means that the applicant
must show prima facie that the
company is solvent.”
[
A court should take note of the surrounding circumstances, and the
wishes of all the parties concerned, including the liquidators,
and
should never set aside the winding-up order if all the creditors will
not be paid from the residue of the estate
[11]
.
It
is clear that the applicant has to show exceptional circumstances and
that the rescission application is not an opportunity to
simply
re-argue the factual evidence that was before the court when the
original liquidation order was sought.
[22]
An applicant in a common law rescission application must show good
cause for the granting of the rescission application
[12]
.
A good cause must be illustrated in clear terms in the founding
affidavit.
[13]
Although the phrase “
good
cause”
defies
comprehensive definition it has been held that it ordinarily includes
at least two requirements which an applicant is generally
expected to
establish to succeed in a rescission application, being a reasonable
explanation by the applicant for the default;
and a
bona
fide
defence
which reflect some prospects of success
[14]
.
[23] I
t
is common cause that, despite not opposing the liquidation
proceedings, the applicant was aware of them and sent a
representative
to court on 5 March 2024. As a result, despite proper
service and despite being aware of the liquidation proceedings, the
applicant
provides no explanation at all for its default.
[24]
In
my view, the respondent’s argument is valid and acceptable that
the applicant has failed to show that exceptional circumstances
exist
for setting aside the winding-up order. The applicant has
denied liability to the respondent without showing that the
company
is
prima facie
solvent. Lastly, it has not provided a reasonable and
acceptable explanation for its default in opposing the liquidation
proceedings. The application itself is not urgent considering all the
submissions made by the respondent and as reflected in the
papers.
[25] I further
agree with the respondent that the conduct of the applicant who
changed from the enrolment in the ordinary
course to an urgent
application was not justified and merely abused the court process.
The applicant had not filed the replication
papers when the matter
was heard, and failed to comply even with Practice Directives of this
Division. The fact that the applicant’s
counsel was from
another High Court Division is no excuse. I am persuaded, for
all the reasons given above that the applicant
be given punitive
costs.
[26] As a result,
1. The application
in Part A is hereby dismissed with costs.
2. The costs shall
be at attorney and client scale.
MS DUNYWA
ACTING JUDGE OF THE
HIGH COURT
APPEARANCES:
Counsel for the
Applicant
Adv. Ntila
Instructed
by
Luxolo Fodi Inc.
c/o Mabentsela &
Associates
110 High Street
MAKHANDA
Counsel for the
Respondent
Adv. Brown
Instructed
by
Edward Nathan Sonnenberg’s Inc.
c/o De
Jager & Lordan Inc.
2 Allen Street
MAKHANDA
Date
Heard
02 April 2024
Date
Delivered
07 May 2024
[1]
Caledon Street Restaurants CC
v D’Aviera
[1998]
JOL 1832
(SE).
[2]
Voigt
NO and Another v EGH IP (Pty) Ltd and Others
(1076/2021) [2021] ZAECGHC 40 (4 May 2021.
[3]
Gois
t/a Shakespeare’s Pub v Van Zyl 2011(1) SA 148 LC at 155
H-156B.
[4]
Erasmus,
Superior Court Practice
,
Service 21, 2023 at D1 – 604A.
[5]
Aubrey
M Cramer Ltd v Wells NO
1965
(4) SA 304
(W) at 305.
[6]
Herbst
v Hessels NO
1978 (2) SA 105 (T).
[7]
2010 (5) SA 40
(WLD) at paras 65-66.
[8]
Despite the new
Companies Act of 2008
the provisions of the
(“
the
1973
Companies Act&rdquo
;)
in
relation to insolvency and liquidation is still applicable and has
not been repealed.
[9]
1998
(3) SA 175
(SCA).
[10]
2001 (3) SA 783
(W) at 805I to 809D
[11]
Klass
v Contract Interiors
2010
(5) SA 40
(W)
at para 65
[12]
Ferris
& Another v FirstRand Bank
2014
(3) SA 39
(SCA)
[13]
Shakot
Investments (Pty) Ltd v Town Council of the Borough of Stanger
1976
(2) SA 70
(D).
[14]
Scholtz
v Marry Weather
2014
(6) SA 90
(WCC).