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2024
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[2024] ZAECQBHC 56
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Sundays River Citrus Company (Pty) Ltd and Another, In re: Bouwer v Lonetree Citrus CC and others (1626/2024; 1623/2024) [2024] ZAECQBHC 56; [2025] 1 All SA 571 (ECP); 2025 (1) SA 529 (ECGq) (17 September 2024)
IN THE HIGH COURT OF
SOUTH AFRICA
(EASTERN CAPE
DIVISION, GQEBERHA)
REPORTABLE
Case
no: 1626/2024
1623/2024
In the matter between:
SUNDAYS RIVER CITRUS
COMPANY First
Intervening
Applicant
(PTY) LTD
SRCC HOLDINGS (PTY)
LTD
Second Intervening Applicant
In re:
DANIEL JACOBUS
BOUWER Applicant
and
LONETREE CITRUS CC
(REGISTRATION NUMBER:
2007/029280/23) First
Respondent
COMPANIES AND
INTELLECTUAL PROPERTY
COMMISSION Second
Respondent
STANDARD BANK OF SOUTH
AFRICA LIMITED
(REGISTRATION NUMBER:
1962/000738/06) Third
Respondent
JUDGMENT
Govindjee J
[1]
This
matter raises various inter-related questions of substance in the
context of business rescue. It is uncontroverted that ‘affected
persons’, including creditors, enjoy a right to participate in
the hearing of an application to court for an order ‘placing
a
company under supervision and commencing business rescue
proceedings’. But do those proceedings commence, for purposes
of the Companies Act, 2008
[1]
(the Act), at the time an affected person applies to court for the
order, or only when the court grants the application? Irrespective
of
the answer to that question, is there scope for a person who does not
form part of the definition of an ‘affected person’
to
participate in the hearing of an application for business rescue,
based on a direct and substantial interest in the proceedings?
And is
the notion of ‘creditor’ confined, for purposes of
business rescue applications and proceedings, to claims sounding
in
money and already due, as a gateway to participation?
[2]
Rolust
Sondagsrivierplase CC (Rolust) is a property-owning entity that owns
several valuable farm properties from which the first
respondent
(Lonetree) conducts citrus farming.
[2]
Lonetree is indebted to the third respondent (Standard Bank) to the
tune of some R30 million for credit facilities. Rolust entered
into a
suretyship agreement with Standard Bank and executed guarantees in
favour of Standard Bank for this amount. Rolust’s
indebtedness
to Standard Bank also includes an overdraft and loan facility in the
amount of almost R40 million. Standard Bank brought
applications for
the liquidation of Lonetree and Rolust during February 2024.
[3]
The applicant is a member of Lonetree and
its chief executive officer. On 7 May 2024, he applied to this court,
in terms of s 131
of the Act, seeking an order placing Lonetree under
supervision and commencing business rescue proceedings, together with
related
relief (the main application). Simultaneously, an application
to place Rolust under court ordered business rescue was instituted
(under case no. 1623/2024) (the Rolust application), the affairs of
Lonetree and Rolust being intertwined. In terms of the proposed
business rescue plan, Standard Bank would receive payment through a
combination of the proceeds of the sale of immovable property
owned
by Rolust, as well as monthly payments of R800 000 from
operating income to be generated by Lonetree through its farming
operations.
[4]
The first intervening applicant (SRCC)
entered into a production loan agreement with Lonetree, in terms of
which Lonetree’s
operational costs for the 1 May 2023 to 30
April 2024 citrus season were financed. At the time the main
application was instituted,
Lonetree was indebted to SRCC in terms of
the production loan agreement in an amount of R4,5 million. SRCC was
notified of the
application and listed as a creditor, with a 4,68%
voting interest, in a schedule of creditors attached to the main
application.
Rolust bound itself as surety and co-principal debtor of
all amounts due to SRCC by Lonetree.
[5]
Less
than two weeks earlier, on 26 April 2024, SRCC, having become aware
of Standard Bank’s liquidation applications, demanded
repayment
of the full amount due to it in terms of the production loan
agreement.
[3]
On 10 May 2024,
three days after the main application was filed, Lonetree purported
to repay the production loan to SRCC.
[4]
Despite this, SRCC seeks to file an affidavit and to participate in
both the main application and the Rolust application. Its first
basis
for doing so is that business rescue proceedings, once ordered, would
have commenced on 7 May 2024. At that time, it was
a creditor of
Lonetree in terms of the production loan and, as such, an ‘affected
person’ as contemplated in the Act.
SRCC avers that the
repayment was made after the commencement of business rescue
proceedings. It was precluded by s 134(1) of the
Act and not in the
‘ordinary course of business’, given that it was not made
in terms of the ordinary repayment obligations
contemplated by the
production loan agreement. SRCC is also concerned that the payment is
invalid or a voidable disposition, which
may ultimately be set
aside.
[5]
Interpretation
[6]
The
issues at hand require statutory interpretation to be determined. The
proper approach is as follows:
[6]
Interpretation is the
process of attributing meaning to the words used in a document, be it
legislation, some other statutory instrument,
or contract, having
regard to the context provided by reading the particular provision or
provisions in the light of the document
as a whole and the
circumstances attendant upon its coming into existence. Whatever the
nature of the document, consideration must
be given to the language
used in the light of the ordinary rules of grammar and syntax; the
context in which the provision appears;
the apparent purpose to which
it is directed and the material known to those responsible for its
production. Where more than one
meaning is possible each possibility
must be weighed in the light of all these factors. The process is
objective not subjective.
A sensible meaning is to be preferred to
one that leads to insensible or unbusinesslike results or undermines
the apparent purpose
of the document. Judges must be alert to, and
guard against, the temptation to substitute what they regard as
reasonable, sensible
or businesslike for the words actually used. To
do so in regard to a statute or statutory instrument is to cross the
divide between
interpretation and legislation … The
“inevitable point of departure is the language of the provision
itself”,
read in context and having regard to the purpose of
the provision and the background to the preparation and production of
the document
… from the outset one considers the context and
the language together [in the light of all relevant circumstances],
with
neither predominating over the other … the enquiry is
restricted to ascertaining the meaning of the language of the
provision
itself.’
[7]
The
Act must be interpreted and applied in a manner that gives effect to
the purposes set out in s 7. The purposes listed in that
section
include transparency and high standards of corporate governance, the
efficient and responsible management of companies
and the ‘efficient
rescue and recovery of financially distressed companies, in a manner
that balances the rights and interests
of all relevant
stakeholders’.
[7]
A
purposive interpretation of the Act requires that the provisions
relating to business rescue must be viewed holistically and
in
context.
[8]
Achieving the goal
of proper interpretation considering the text, context, purpose and
surrounding circumstances is made difficult
because of the manner in
which the statutory provisions governing business rescue have been
drafted.
[9]
Court order to begin
business rescue proceedings
‘
There
are two routes through which a company may enter business rescue,
namely, by way of a resolution of its board of directors
(s 129(1))
or by way of a court order (s 131(1)).’
[10]
[8]
Section
131(4)(
a
)
provides that the court may ‘…make an order placing the
company under supervision and commencing business rescue
proceedings…’ (a
s 131(4)(
a
)
order).
[11]
By contrast, s
132(1)(
b
)
states that ‘…proceedings begin when an affected person
applies to the court for an order placing the company under
supervision in terms of section 131(1)’.
[9]
Interpreting
provisions seemingly in conflict with one another requires a court to
consider whether there is a sensible interpretation
that can be given
to the provisions that will avoid anomalies. Courts endeavour to give
a meaning to all words and sections in
a statute and will not lightly
decide that a provision has no practical effect. If possible, the
provisions of the statute that
appear to conflict with one another
should be reconciled.
[12]
[10]
Is it possible to reconcile s 131(4)(
a
)
and s 132(1)(
b
)
without violating the language contained in these provisions? The
wording of the two sections themselves, other provisions contained
in
chapter 6, the link between the point of commencement and
supervision, and established principles of interpretation all point
in a single direction. Before discussing each of those aspects,
however, it is important to comment on the use of terminology in
the
relevant parts of the Act.
Terminology
[11]
The
phrase ‘during business rescue proceedings’ is used in a
variety of places in the Act, including the heading of
part C of
chapter 6, in the definition of a ‘business rescue
practitioner’ and in respect of protection of property
interests.
[13]
The phrase is
used consistently to refer to a point in time subsequent to the
‘start’, ‘beginning’ or ‘commencement’
of business rescue proceedings.
[14]
Each of these three words, in one form or another, appears in chapter
6. Ordinarily understood, they are synonymous. On my reading,
there
is no basis for considering any of the three words to mean anything
other than the point at which a company enters business
rescue,
irrespective of the route taken to arrive at that point.
[12]
Although
this matter involves the ‘second route’ referred to in
Panamo
Properties
,
a glance at the provisions regulating the first is helpful for
purposes of confirming this seemingly obvious assessment. Section
129
is headed ‘company resolution to begin business rescue
proceedings’, and ‘begin’ is repeated in s 129(1),
which explains that the board of a company may pass a resolution.
[15]
Section 130, which deals with objections to such a resolution,
explains when any director who voted in favour of the resolution
may
be saddled with a costs order. Now, however, the ‘begin’
of s 129 has been replaced seamlessly with reference to
a resolution
to ‘commence’ business rescue proceedings.
[16]
Similarly, the heading of s 131 refers to the ‘beginning’
of business rescue proceedings, only for two of its subsections
to
refer to ‘commencement’.
[17]
The words ‘begin’ and ‘commence’, and their
derivatives, along with the solitary use of ‘start’,
appear to be used interchangeably and in accordance with their
ordinary meaning, at least in chapter 6 of the Act.
[18]
That construction also accords with the axiom of interpretation that
‘the same words in the same statute bear the same meaning’.
[19]
Absent clear indication to the contrary, the words used are to be
understood in the same sense throughout the enactment.
[20]
As will be indicated, this principle is also significant in respect
of the use of the word ‘initiated’ in the Act.
The sections
themselves
[13]
But that on its own does not resolve the
conflict at hand. In the context of s 131(1), do court ordered
business rescue proceedings
begin at the time of the application for
the order, as suggested by s 132(1)(
b
),
or only when the court makes the order placing the company under
supervision, in accordance with s 131(4)(
a
)?
[14]
Section
132(1)(
b
)
provides that business rescue proceedings begin, inter alia, when an
affected person
applies
to
the court for an order placing the company under supervision in terms
of s 131(1). The heading of s 131 and the wording
of s
131(4)(
a
),
literally construed, are perhaps the clearest indication that
business rescue proceedings only begin once a court makes a s
131(4)(
a
)
order. It cannot be ignored that, as the section heading suggests, s
131 is focused on the commencement of business rescue proceedings.
The section also deals with the process leading up to an order and
its immediate aftermath. Although s 132(1) also deals with when
business rescue proceedings ‘begin’, the focus is in fact
on its duration, including the possibility of extension.
Significantly, however, s 132 itself contains reference to the court
order, rather than the application, ‘that began those
proceedings’.
[21]
‘
Initiation’
and other provisions
[15]
Section
141(2)(
b
),
including the cross-reference to s 131, compounds the difficulty in
accepting s 132(1)(
b
)
at face value. To use the terminology of s 141(2)(
b
)(i),
the application to court only ‘initiates’ the process
that may lead to a court order, at which point business
rescue
proceedings begin.
[22]
This
provision accords with a sensible interpretation of the Act and the
sequence of events. The meaning of ‘initiates’,
as
opposed to ‘commencement’, has been the subject of a
detailed analysis.
[23]
To
quote Sher J, the choice of word cannot be a linguistic accident:
[24]
‘
[I]t
is ‘intended to refer to some act which precedes the publicly
formal beginning or “commencement” of the legal
process
referred to therein … ie it refers to a preceding act or
conduct which sets the process in motion … the word
“initiate”
is used to denote the factual, causative action by means of which the
legal process which gives rise to
the proceedings concerned is put
into motion … The word “initiated” in s 129(2)(
a
)
is therefore intended to refer to a preceding act or conduct by which
liquidation proceedings are set in motion and is not intended
to
signify the moment in time when the proceedings are deemed to have
formally “commenced”. In my view, therefore,
the word
“initiated” does not bear the same meaning as the word
“commenced in ss 348 and 352 of the previous
Act, and it was
never intended that it should have the same meaning … the fact
of the matter is that by deliberately referring
in s 129(2)(
a
)
to the “initiation” of proceedings rather than either the
“beginning” or the “commencement”
thereof the
legislature clearly had something else in mind than what is meant by
the use of either of the latter terms …’
[16]
Initiation
of the process by way of application is not without significance. It
is the application that must be served on the company
and the
Companies and Intellectual Property Commission (the Commission) and
the time for notification of each affected person in
the prescribed
manner. Perhaps most importantly, it is an application, in terms of s
131(1), that will suspend any liquidation
proceedings that have
already commenced.
[25]
Considering s 141(2)(
b
),
the application to court in terms of s 131 merely initiates business
rescue proceedings. But that cannot be the moment that business
rescue proceedings commence or begin.
[26]
[17]
Furthermore,
if liquidation proceedings have already been commenced by or against
the company at the time an application is made
in terms of s 131(1),
‘…the application will suspend those liquidation
proceedings until – (a) the court has
adjudicated upon the
application; or (b) the business rescue proceedings end, if the court
makes the order applied for.’
[27]
This is separate to the general moratorium on legal proceedings
against the company ‘during business rescue proceedings’.
[28]
The specific inclusion of a provision to suspend liquidation
proceedings ‘at the time an application is made’ also
suggests that business rescue proceedings have not commenced at that
time. Had that been the point of commencement, there would
have been
no need for s 131(6) at all, given the general moratorium on legal
proceedings against the company during business rescue
proceedings
contained in s 133.
Commencement and
supervision
[18]
‘
Business
rescue’ refers to ‘proceedings to facilitate the
rehabilitation of a company that is financially distressed’.
[29]
This is achieved through temporary supervision of the company,
management of its affairs, a temporary moratorium on the rights
of
claimants and the development and implementation of a business rescue
plan.
[30]
‘Supervision’
means the oversight imposed on a company during business rescue
proceedings.
[31]
That
oversight is the responsibility of a business rescue practitioner
(the practitioner).
[32]
It
occurs ‘during business rescue proceedings’.
[33]
[19]
In
the case of court ordered business rescue proceedings, a practitioner
is only appointed after a court has made a s 131(4)(
a
)
order.
[34]
The mere filing of
an application is no guarantee that the court will make the s
131(4)(
a
)
order to begin business rescue proceedings, or that a practitioner
will be appointed. The sequence is logical. A creditor has
initiated
liquidation proceedings against a company. The company is financially
distressed and requires supervision, but the board
is unable to
resolve to commence voluntarily business rescue proceedings.
[35]
A shareholder is an ‘affected person’ and applies to
court for an order. The purpose of the order is two-pronged: commence
business rescue proceedings and place the company under supervision.
That order, by definition, imposes oversight and that oversight
is
the responsibility of a practitioner to be appointed. That
appointment may only be made by the court as a ‘further order’,
after a s 131(4)(
a
)
order has already been made. Oversight is now the responsibility of
the practitioner and is imposed on the company for the duration
of
the proceedings.
[20]
By
regulating the conduct of the practitioner at various stages
during
business rescue proceedings, it must be accepted that the legislature
intended for the necessary supervision, in the form of the
practitioner, to be in place during that time.
[36]
The notion of supervision by an appointed practitioner and the
duration of business rescue proceedings are intertwined so that
the
purpose of the legislation is served by imposing oversight over a
company during such proceedings. Considering business rescue
proceedings to begin on the date of application, at a time when no
practitioner could be appointed, therefore appears to conflict
with
this purpose.
[37]
[21]
Other
provisions highlight the reality that a practitioner is appointed
after commencement of business rescue proceedings by court
order and
performs their functions
during
these
proceedings. To repeat, it is only if a court makes a
s 131(4)(
a
)
order that it may make a ‘further order’ appointing an
interim practitioner.
[38]
This
requires emphasis given that various sections contemplate actions on
the part of a practitioner ‘during business rescue
proceedings’.
[39]
The
definition of ‘business rescue practitioner’ adds further
weight to this reading: a practitioner is appointed ‘to
oversee
a company during business rescue proceedings’. During a
company’s business rescue proceedings, each director
must
continue to exercise the functions of director. But this is subject
to the authority of the practitioner.
[40]
Each director must also attend to the requests of the practitioner
‘at all times’ during a company’s business
rescue
proceedings.
[41]
As soon as
practicable after business rescue proceedings begin, each director
must deliver to the practitioner all books and records
relating to
the affairs of the company in the director’s possession.
[42]
Within five business days after business rescue proceedings begin,
the directors must provide the practitioner with a statement
of
affairs.
[43]
[22]
Read together, this is suggestive of the
date of commencement coinciding with the order placing the company
under supervision, rather
than either the date of application or,
perhaps, retrospectively from date of order to date of application.
Were that not the case
there would be an indeterminate period,
between the date of the application and the date of the order, where
‘business rescue
proceedings’ were ongoing without the
oversight imposed by the legislature ‘during business rescue
proceedings’.
This would also impact negatively on a director’s
ability to comply with various statutory prescripts, as detailed
above,
during this time.
Principles of
interpretation
[23]
Although
it is accepted that statutory drafters are not expected to use
language unnecessarily, and that words are not lightly to
be
construed as superfluous, there are exceptions.
[44]
Sections 129 and 131 deal directly with the point in time at which
business rescue proceedings begin. Section 132, which is focussed
on
the distinct notion of the duration of business rescue proceedings,
re-engages the various possible points of commencement emanating
from
earlier provisions. At least in respect of the second route, the
language used conflicts with what appears in the earlier
section. To
quote Du Plessis:
‘
The
interpreter should also be open to the possibility that, due to human
error and fallibility, the draftsmen of an enactment “may
have
made a mistake … or may have omitted a word or added what is
mere surplusage”.’
[45]
[24]
Hesitant
though one may be, the present circumstances require such a finding
to be made. The comments made by the SCA about the
quality of the
drafting of the Act offer further support for what is a seemingly
drastic conclusion as to the words used in s 132(1)(
b
)
and their meaning.
[46]
The
reference in that section to business rescue proceedings beginning
upon application is, for the reasons described, anomalous
when
considering the language used elsewhere in the Act. To make sense of
that provision requires, it seems, and as Mr
Nepgen
suggested, the addition of a word or words to confirm that business
rescue proceedings only begin when the application referred
to is
successful, in the sense that the court has granted the order placing
the company under supervision in terms of s 131(1).
[47]
To do so remains unsatisfactory in that the subsection, read as such,
would amount to nothing more than a repetition of s 131(4)(
a
).
[25]
Considering
the context and purpose of the legislation, there are various reasons
to support the conclusion that proceedings only
commence, on the
second pathway, when the court makes a s 131(4)(
a
)
order. This outcome, which is supported by erstwhile judicial
management provisions and comparative law,
[48]
is, ultimately, little more than a restatement of s 131(1). Unless a
company has adopted a resolution contemplated in s 129, an
affected
person may apply to a court at any time for an order placing the
company under supervision and commencing business rescue
proceedings.
It is the court’s granting of the order which will be the point
at which business rescue proceedings begin or
commence.
[49]
Is SRCC an affected
person by virtue of the production loan?
[26]
The
effect of the preceding analysis is that business rescue proceedings
have not yet commenced and Lonetree’s repayment of
the
production loan occurred prior to, not during, business rescue
proceedings. That transaction, in the ordinary course of business
or
otherwise, does not appear to be regulated by chapter 6.
[50]
Section 134(1)(
a
),
which deals with company disposal of property, only applies during a
company’s business rescue proceedings and is therefore
inapplicable to the repayment.
[51]
That being the case, it is unclear on what basis the repayment might
be set aside as invalid or a voidable disposition.
[52]
At the very least that concern is premature. It may be added that
Lonetree’s cession and pledge to SRCC of its right, title
and
interest in the proceeds derived from the sale of citrus fruit up to
the amount of the production loan was contained in the
production
loan agreement. As correspondence between the parties confirmed at
the time of repayment, the cession and pledge came
to an end upon
repayment of the production loan and is irrelevant for present
purposes.
[27]
Does SRCC nevertheless remain an affected
person on the basis that it was a creditor, in respect of the
production loan, at the
time the proceedings were initiated by way of
the application in terms of s 131?
[28]
An
‘affected person’, in relation to a company, is defined
to mean ‘a shareholder or creditor of the company’,
in
addition to any registered trade union representing company employees
and, absent union representation, each employee of the
company or
their respective representatives.
[53]
The word ‘creditor’ is undefined in the Act.
[29]
Various
stages of proceedings are contemplated by chapter 6 of the Act.
Section 129 deals with a board resolution to begin business
rescue
proceedings. Section 131 includes reference to an application to
court,
[54]
the hearing of such
an application, a court ‘order placing the company under
supervision and commencing business rescue proceedings…’
[55]
and ‘a further order’ appointing a suitable interim
practitioner.
[56]
The
appointment must be ratified by the holders of a majority of the
independent creditors’ voting interests at the first
meeting of
creditors.
[57]
That meeting is
convened by the practitioner within ten business days of their
appointment.
[58]
A company
that has been placed under supervision in terms of s 131 must notify
each affected person of the order within five business
days after the
date of the order.
[59]
The
bulk of the provisions contained in chapter 6 deal with events
‘during business rescue proceedings’
[60]
and s 132(2) indicates when business rescue proceedings end.
[30]
An
‘affected person’ enjoys a right to participate in the
hearing of an application for an order placing the company
under
supervision and commencing business rescue proceedings.
[61]
That right is distinguishable from the ‘
rights
of affected persons during business rescue proceedings
’
regulated by
Part
C
of the Act. As the heading of the part suggests, those rights,
including participation by creditors, are rights of affected persons
after the commencement of business rescue proceedings.
[31]
Business
rescue proceedings are directed towards the development and
implementation of a plan, if approved. This is to be achieved
through
restructure of company affairs, business, property, debt and other
liabilities and equities in a way that maximises the
chances of the
company continuing its existence on a solvent basis. If that is not
possible, the proceedings are directed towards
achieving a better
return for the company’s creditors or shareholders than would
result from the immediate liquidation of
the company.
[62]
Five days after the business rescue proceedings begin, the company
directors must provide the practitioner with a statement of
affairs
including ‘any creditors and their rights or claims against the
company’.
[63]
Within ten
business days after being appointed, the practitioner must convene a
first meeting of creditors.
[64]
Notice of this meeting must be given to ‘every creditor of the
company whose name and address is known to, or can reasonably
be
obtained by, the practitioner.
[65]
Each creditor is entitled to participate during business rescue
proceedings in the manner described in s 145. The practitioner
is
responsible for developing a business rescue plan after consulting
the creditors and other affected persons.
[66]
Importantly, the plan must contain all information reasonably
required ‘to facilitate affected persons in deciding whether
or
not to accept … the plan …’. The background part
of the plan must include ‘… a complete list
of the
creditors of the company when the business rescue proceedings began
…’.
[67]
The
practitioner must convene and preside over a meeting of creditors,
and any other holders of a voting interest, to consider
the plan.
[68]
Participation by creditors includes the right to vote to amend,
approve or reject a proposed business rescue plan. If the plan
is
rejected and the practitioner fails to take any action contemplated
in s 153, it is ‘…any affected person present
at the
meeting…’ that may choose to do so.
[32]
It
appears to be insensible to interpret these provisions to permit
persons who are no longer creditors the right to participate
in the
proceedings, even if they were previously creditors. To do so
requires ignoring or distorting the wording in a manner deprecated
by
the SCA.
[69]
The context and
purpose of the legislation, including the nature of the meeting to
determine the future of the company and the
framing of the right to
vote, supports only the participation of persons who remain creditors
during the proceedings, in addition
to other affected persons.
Section 150(2)(
a
)(ii)
offers strong support to this approach, referring specifically to a
complete list of creditors at the point of commencement.
There
appears to be no basis to prefer a different interpretation, which
would place the object of the proceedings at risk of inefficiency.
Permitting unaffected persons to participate in the proceedings, with
all that this entails, would not be businesslike.
[70]
[33]
It
may be added that this interpretation is supported, at least to some
extent, by the decision in
Wescoal
Mining (Pty) Ltd and Another v Mkhombo NO and Others
[71]
(
Wescoal
).
In that matter, Wilson J held that the Act means to refer to
creditors who have an interest in the business rescue process that
is
meaningfully comparable to those of other affected persons, and that
these are persons who are ‘affected’ by the
commencement
of the business rescue process itself.
[72]
In principle, a person who is not a creditor at that time would be
unaffected by what is to follow. Permitting a non-creditor to
vote at
a meeting called in terms of s 152 could skew the outcome. Although
the scenarios are very different, parts of the rationale
expressed in
Wescoal
are equally applicable to those who may have been affected persons
prior to the commencement of business rescue proceedings, but
who are
no longer creditors at date of commencement:
[73]
‘
This
is in conformity with the overall purpose of business rescue: to
preserve the social value of a business as a going concern
and to
avoid the destruction of that value that would come about if the
company was liquidated. If just any creditor could vote
an interest
at a s 152 meeting) … there would be little to stop
speculators or asset strippers preying on business rescue
proceedings, blocking the adoption of appropriate business rescue
plans, and forcing liquidations where they could be avoided …
Creditors who vote an interest at a s 152 meeting must be
pre-commencement creditors…’
[34]
Just
as the complete list of creditors of the company referenced in s
150(2)(
a
)(ii)
of the Act has been held to exclude post-commencement creditors,
[74]
so too must that list, and those later permitted a voting interest,
exclude those who were previously creditors of the company
but who no
longer are at the date of commencement of business rescue
proceedings.
[75]
In fact, the
case for exclusion appears to be far more compelling than the
Wescoal
scenario.
[76]
Direct and substantial
interest
[35]
SRCC and the second intervening party (SRCC
Holdings) both claim to be parties with a direct and substantial
interest in the proceedings,
also in respect of Rolust, so as to
justify their intervention. In the case of SRCC Holdings, the
argument is that Lonetree is
a shareholder of SRCC Holdings so that
it has an interest in Lonetree complying with the provisions of its
memorandum of incorporation.
[36]
There
are at least three related difficulties with these arguments.
Firstly, and as already discussed, chapter 6 of the Act affords
various participation rights to ‘affected persons’, as
defined, not to ‘interested persons’ or an otherwise
undefined group. Both ss 130 and 131 clarify that ‘each
affected person’ has a right to participate in the hearing
of
applications in terms of these sections. This is a technical phrase
specifically defined in the Act to encapsulate those potentially
impacted by the business rescue application and process. Read with
the provisions that follow, there appears to be no space for
those
who are not affected persons to enter the fray. During business
rescue proceedings, it is the practitioner and affected persons
that
take centre stage. It bears repeating that the legislature has
designed the proceedings to place a temporary moratorium on
the
rights of claimants against the company, to give effect to the rights
of affected persons during the proceedings and to support
the quest
for the company to continue in existence on a solvent basis,
alternatively to enhance the return for creditors or shareholders.
That being the case, the context and the stated purpose of business
rescue support the exclusion of other parties claiming an
interest.
[77]
Limiting
participation in this manner also finds support in foreign company
law.
[78]
In addition, the
court hearing an application in terms of s 131 is tasked with
determining if the company is financially distressed,
if it has
failed to pay over any amount in terms of certain employment-related
matters or if it is otherwise just and equitable
to make a s
131(4)(
a
)
order for financial reasons. The court must also be satisfied that
there is a reasonable prospect for rescuing the company.
[79]
Permitting non-affected persons, acting in their self-interest, to
intervene risks clouding and delaying the enquiry.
[80]
[37]
Secondly,
Uniform Rule 12, and the authorities upon which reliance is placed,
pertains to intervention of persons as applicants
or respondents in
applications.
[81]
This has
been confirmed by the SCA.
[82]
An application in terms of s 131 may be brought only by an affected
person for an order placing the company under supervision and
commencing business rescue proceedings. It follows that the affected
person would be the applicant and the company the respondent.
Section
131(2) provides that such an application must be served only on the
company and the Commission. By contrast, other affected
parties need
not be served and must merely be notified of the application in the
prescribed manner.
[83]
The
legislation provides for their participation other than as a party to
be cited and there appears to be no need for formal intervention.
[84]
As Rogers
[85]
AJ held in
Cape
Point Vineyards v Pinnacle Point Group
:
[86]
‘
In
terms of s 131(3) each affected person has a right to participate in
the hearing of an application in terms of s 131. In the
circumstances, I do not think the legislature contemplated that an
affected party would have to apply for leave to intervene in
the
proceedings. If the person is an “affected person” such
person has a right to participate in the hearing.’
[38]
Participation in a manner akin to
participation by affected persons is what is sought by the SRCC
parties. Considering the way participation
by affected parties has
been configured by the legislature, I am unconvinced that such
participation is tantamount to participation
as an applicant or
respondent, so that reliance on Uniform Rule 12 is misplaced.
[39]
The
SRCC parties are also unable to rely on the common law or
well-established, unique practice regarding intervention of third
parties in insolvency proceedings. That approach favours the
intervention of creditors and minority shareholders, with due
consideration
to the relevant legislative provisions.
[87]
Accepting that the production loan has already been settled, the SRCC
parties are not affected persons and the business rescue
context,
considered with the purpose of the Act and the specific wording of
chapter 6, closes the door to broader forms of intervention.
[40]
Thirdly,
it is accepted that a mere financial interest is only an indirect
interest in litigation and is insufficient for intervention.
It
has been held, in a different context, that an aspirant intervener
must demonstrate a material legal interest sufficient to
affect the
outcome of a winding-up application.
[88]
Bearing in mind the preceding determination regarding repayment of
the loan, I am in any event unconvinced that the SRCC parties’
interests qualifies as ‘direct and substantial’ in
respect of the order the court is asked to make in the main
application.
[89]
The packrights
[41]
The
preceding analysis puts paid to SRCC Holdings’ application for
intervention, and to SRCC’s bid to participate in
Rolust’s
application for business rescue.
[90]
In respect of the main application, however, there is at least one
further string to SRCC’s bow outside of the production
loan. It
claims to be an affected person by virtue of being a creditor in
respect of ‘packrights’.
[42]
A
packright may be understood as Lonetree’s formal, contractual,
right to pack with and to have marketed by SRCC a certain
volume unit
of citrus fruit. The packright system is designed to ensure that SRCC
can market as large a volume of fruit as possible,
to strengthen its
negotiating position in the marketplace, and deliver what has been
promised to the market. On the papers, it
is common cause that
Lonetree, as a member of SRCC Holdings, was at least obliged to
deliver citrus fruit to the SRCC packing facilities
in accordance
with any delivery schedules concluded for the particular fruit
season. In addition, failure to deliver fruit representing
75% of the
packrights per variety of citrus fruit held by Lonetree may result in
additional charges.
[91]
On my
reading of the papers, the case made out by SRCC, both in respect of
a possible interdict to compel Lonetree to deliver citrus
fruit and
in respect of the levying of additional charges, is linked to
obligations emanating from the packright system.
[92]
[43]
To
exercise its packrights during a particular season, a packright
holder must, by no later than 28 days before the commencement
of the
relevant variety packing season, negotiate and conclude a delivery
schedule with SRCC. This is to enable SRCC to plan in
advance the
packing and / or marketing of the fruit of the owners of so-called
‘linked units’.
[93]
It may be accepted for present purposes that Lonetree’s
obligation to deliver fruit is dependent upon the negotiation and
conclusion of delivery schedules at the commencement of each
season.
[94]
On Lonetree’s
own version:
‘…
bar
one variety of fruit…no delivery schedules have been concluded
by the parties for the 2024 season and there is thus no
obligation on
Lonetree to deliver any of the varieties of fruit (except the one
agreed to) to SRCC for the 2024 season …
Once a delivery
schedule is concluded, a Packright holder is then obliged to deliver
citrus fruit to the packing facilities in
accordance with the
relevant delivery schedule.’
[44]
Lonetree attached to its answering papers
the only delivery schedule concluded with SRCC, dated 21 June 2024,
for the 2024 season,
adding that it ‘fully intends complying
with its obligations to deliver the nadorcotts as contracted for…’.
This is in respect of 170 crates of a single variety of citrus
(nadorcotts).
[45]
Despite
this acknowledgement, Lonetree maintained that SRCC’s case in
respect of the nadorcotts was made out only in reply.
I disagree.
[95]
SRCC’s locus standi was premised both on the production loan
and packrights. It averred in its founding papers that ‘Lonetree
was obliged to deliver citrus fruit to the packing facilities in
accordance with the relevant delivery schedule…’,
bemoaning Lonetree’s apparent intention to deliver its fruit to
FreshGro from 2024. In response, Lonetree highlighted the
absence of
delivery schedules, other than in respect of the nadorcotts, for the
current year.
[46]
Loantree’s only remaining contention
in this respect is that the obligation to deliver the nadorcotts does
not constitute
a monetary debt and, therefore, does not result in
SRCC being a creditor of Lonetree. Although the point was not
addressed in argument,
it also appears necessary to consider whether
a party may be a creditor in respect of an obligation due in the
future.
Is SRCC a creditor
in respect of the obligation to deliver fruit
[47]
The
conclusion of a contract confers personal rights and imposes
corresponding obligations on one or more of the parties. The person
who acquires the right is called the creditor, and the one upon whom
the obligation is imposed the debtor.
[96]
As already indicated, ‘creditor’ is undefined in the Act.
The erstwhile Insolvency Act, 1916, defined the term to mean
‘a
person who is a creditor in the usual sense of the word’.
[97]
Section 9 of that Act referred to a person as a creditor who has a
liquidated claim and ‘whether or not the claim be payable
at
the date of the petition’.
[98]
Although the word is also undefined in the
Insolvency Act, 1936
,
[99]
the term has been interpreted, in that context, along the lines of
the 1916 legislation. Various sections of the
Insolvency Act, 1936
,
lend themselves to a broad interpretation.
[100]
[48]
It
has been said that the term creditor is not confined to one who has a
claim against the estate sounding in money; any person
to whom
anything is owed from the estate is a creditor of the estate.
[101]
More precisely, the words ‘creditor’ and ‘debtor’
are applied not only in respect of a claim for money
but to a claim
for anything else which is owing, whether unconditionally,
conditionally or in the future.
[102]
[49]
Consideration
of the notion of a ‘debt’ supports the statement that a
person may be a creditor even though the debt
only becomes due in
future.
[103]
Borrowing from
the dictum of Holmes AJA in
Joint
Liquidators of Glen Anil Development Corporation (in liquidation) v
Hill Samuel (SA) Ltd
,
in ordinary parlance, a debt is a firm obligation to pay, whether now
or later.
[104]
Whether a
debt is in existence is one question, when that debt is due
another.
[105]
There is a
difference in principle between the ‘arising’ of a debt
and its exigibility or recoverability.
[106]
A person may, therefore, be a ‘creditor’, even though the
cause of action is incomplete.
[107]
The parties to a contract may, for example, intend that the creditor
is entitled to determine the time for performance, so that
the debt
only becomes due when demand is made as agreed. But this does not
alter the creditor / debtor status of the parties.
[108]
[50]
This interpretation appears to be supported
by
s 136(2)(
a
)
of the Act:
‘
Subject
to subsection (2A), and despite any provision of an agreement to the
contrary, during business rescue proceedings, the practitioner
may –
(a)
Entirely, partially or conditionally
suspend, for the duration of the business rescue proceedings,
any
obligation of the company that
–
(i)
arises
under
an agreement to which the company was a party
at
the commencement
of the business rescue
proceedings; and
(ii)
would otherwise become due during those
proceedings
…’
(Own
emphasis).
This
section of the Act envisages the situation where the company is a
party to an agreement at the commencement of business rescue
proceedings, with one or more obligations only becoming ‘due’
during those proceedings. The practitioner to be appointed
may decide
to suspend, for the duration of the business rescue proceedings, any
of Lonetree’s obligations that would otherwise
(only) become
due during those proceedings.
[109]
Should that occur in respect of the nadorcotts, SRCC would be
restricted to a claim for damages.
[110]
That being the case, it would be prejudicial to SRCC to disallow its
participation in the main application purely on the basis
that
Lonetree’s admitted obligation to deliver nadorcotts would only
arise sometime in the future. Adopting a broad understanding
of the
word ‘creditor’ also appears to be apposite when
considering the Act’s definition of ‘financially
distressed’, which includes debts that only become due and
payable within the immediately ensuing six months after the s
131(4)(
a
)
order.
[111]
[51]
During
business rescue proceedings, no legal proceeding against Lonetree, or
in relation to any property belonging to Lonetree,
including its
nadorcotts, may be commenced (or proceeded with) in any forum, other
than in the circumstances described in s 133.
Permitting SRCC to
participate in the main application on the strength of Lonetree’s
obligation to deliver fruit accords
with the legislature’s
intention. This, it has been held, is to allow the company in
distress the necessary breathing space
by placing a moratorium on
legal proceedings and enforcement action in any forum, without
interfering with the contractual rights
and obligations of the
parties to an agreement.
[112]
Granting this particular component of the application also
contributes towards balancing the rights and interests of all
relevant
stakeholders.
[113]
Adopting a broad interpretation of ‘creditor’ appears to
accord with the accepted, ordinary meaning of the word in
South
African law. Bearing in mind the context of the Act and the purpose
of participation, I am satisfied that SRCC is an affected
person on
this basis and, therefore, entitled to participate in the hearing of
the main application. To conclude to the contrary
would stultify the
broader operation of the legislation, potentially resulting in the
impractical, unbusinesslike or oppressive
consequences cautioned
against in
Natal
Joint Municipal Pension Fund v Endumeni Municipality
.
[114]
[52]
In
support of this approach and conclusion, it is interesting to note
that the first draft of the Companies Bill
[115]
introduced in Parliament contained a definition of a creditor for the
purposes of business rescue proceedings.
[116]
Loubser explains what transpired subsequently:
[117]
‘
A
creditor was defined as a person to whom the company owed money under
any arrangement immediately before the start of business
rescue
proceedings, irrespective of whether the money was already due and
payable … In my submission on the Companies Bill
to the
Portfolio Committee on Trade and Industry, I pointed out that the
definition was flawed in several respects: firstly, the
definition
referred only to persons to whom the company owed money although a
person could also be a creditor as a result of services,
products or
property that the company was obliged to deliver in terms of a
contract … My recommendation that the definition
should be
removed was accepted by the Department of Trade and Industry and the
Portfolio Committee, and the definition was accordingly
scrapped.’
[53]
While
genetic interpretation is only of limited value in statutory
interpretation, it may serve to confirm results arrived at through
other methods.
[118]
Loubser’s explanation appears to do so in this instance.
The additional
charges
[54]
Given
the conclusion that SRCC is a creditor in respect of the nadorcotts,
it seems unnecessary, for present purposes, to determine
if it is
also entitled to participate in the hearing of the main application
based on potential additional charges to be imposed.
Any suggestion
that SRCC may do so on this basis appears to be premature. While it
may indeed be likely that the additional charges
will be imposed,
this had not occurred at the time the application was argued.
[119]
Should the charges be lawfully imposed prior to the hearing of
the main application, the position may be different to the
extent
that SRCC is a creditor on this basis at the time of commencement of
business rescue proceedings and, as a result, entitled
to participate
in terms of s 145.
[120]
Although Lonetree appeared to concede this point, I make no finding
in that regard, also considering that the issue was argued
as part of
SRCC’s alternative claim for participation based on a direct
and substantial interest.
Orders
[55]
The following orders are issued:
1.
In respect of the application to
participate or intervene in the business rescue application under
case number 1623/2024 (Rolust
Sondagsrivierplase CC):
a)
The application is dismissed with costs, to
include the costs of Counsel on scale B.
2.
In respect of the application to
participate or intervene in the business rescue application under
case number 1626/2024 (Lonetree
Citrus CC):
a)
The first affected person (Sundays River
Citrus Company (Pty) Ltd) is granted leave to participate in the
hearing of the business
rescue application;
b)
Any late filing of the answering affidavit
is condoned;
c)
The relief in part B is postponed, to be
heard on the date when the business rescue application is heard;
d)
Costs are reserved.
_________________________
A GOVINDJEE
JUDGE OF THE HIGH
COURT
Heard:
07 August 2024
Delivered:
17 September 2024
Appearances:
For the Intervening
Applicants:
Adv JC Butler
SC & Adv C Morgan
Chambers,
Cape Town
Instructed
by:
Schoeman Oosthuizen Inc.
167
Cape Road
Gqeberha
Tel:
041 373 6878
Email:
paso@soattorneys.co.za
For the Applicant and
Adv JJ Nepgen SC
First Respondent:
Chambers, Gqeberha
Instructed by:
A & R Attorneys
255
Main Road
Walmer
Gqeberha
Tel:
041 100 0080
Email:
mc@mcbotha.law
[1]
Act
71 of 2008 (the Act).
[2]
The
sole member of Rolust and owner of 100% interest is the Lonetree
Trust.
[3]
In
terms of the production loan agreement, the loan was to be repaid,
without deduction or set-off, at the election of SRCC, in
five equal
monthly instalments, the first payable on or before the last day of
July 2024, or by SRCC setting off against the
loan the proceeds of
funds received by SRCC or any other agent in respect of citrus fruit
sold or marketed by SRCC or any other
agent on behalf of Lonetree.
SRCC triggered repayment of the full amount due based on Lonetree’s
offer of a compromise
to Standard Bank.
[4]
Lonetree’s
attorneys paid the amount of R4,565,921,02 to SRCC’s attorneys
on 10 May 2024. A further payment of R2100,00
was made on or after
15 May 2024, purportedly to cover additional interest.
[5]
This is on the basis that the repayment ‘…
was
likely achieved or procured by means of an unlawful payment, or
promise of payment, of proceeds to [another company] FreshGro,
or by
an unlawful agreement to deliver their fruit to FreshGro’.
SRCC
complains that this would amount to the swopping of one creditor
(SRCC) for another (FreshGro), and that it has been paid
‘in
circumstances of insolvency and the inability of Lonetree to pay at
least one other creditor (Standard Bank)’.
[6]
Natal
Joint Municipal Pension Fund v Endumeni Municipality
2012
(4) SA 593
(SCA) (
Endumeni
Municipality
)
paras 18–20, 24. Also see
Road
Traffic Management Corporation v Waymark Infotech (Pty) Ltd
2019
(5) SA 29 (CC); 2019 (6) BCLR 749.
[7]
Sections
7(
b
)(iii),
7(
j
)
and 7(
k
)
of the Act. (All subsequent references to sections pertain to the
Act, unless indicated otherwise.) ‘Stakeholders’
has
been construed to refer to the creditors, shareholders and employees
of the company: P Delport
Henochsberg
on the Companies Act 71 of 2008
(Service
Issue 34) (May 2024) at 445; C Marumoagae “The rights of
affected persons as stakeholders during business rescue
proceedings
in South Africa” (2018) 4(2)
JCCL&P
117.
[8]
N
Locke and K van der Linde “Business rescue and the fate of
accessory security rights – recommendations for the
improvement of the business rescue procedure in the Companies Act of
2008 (2018)
TSAR
839
at 841.
[9]
Panamo
Properties (Pty) Ltd and Another v Nel N.O. and others
[2015]
ZASCA 76
;
2015 (5) SA 63
(SCA);
[2015] 3 All SA 274
(SCA) (
Panamo
Properties
)
para 1.
[10]
Wallis
JA in
Panamo
Properties
above
n 9 para 8. A third possibility also involves a court order, now in
terms of s 131(7) during the course of any liquidation
proceedings
or proceedings to enforce any security against the company.
[11]
Also
see s 163(2)(
c
),
repeating this wording in the context of a shareholder / director
application to court for relief.
[12]
Panamo
Properties
above
n 9 para 27.
[13]
S
134.
[14]
S
135(1)(
a
)
appears to support this reading: during the company’s business
rescue proceedings, money due and payable, but not paid,
to an
employee is regarded to be ‘post-commencement financing’.
Cf
Mouton
v Park 2000 Development 11 (Pty) Ltd and Others
2019 (6) SA 105
(WCC) (
Mouton
)
paras 65 – 69. Although the court referred to ‘commence’,
‘begin’ and ‘start’
synonymously, in the
context of voluntary proceedings a distinction was drawn between the
‘factual’ and ‘legal’
point of commencement:
para 67.
[15]
S
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 …’.
That the resolution has no force or effect
until it has been filed
is not, on its own, a basis for altering the meaning of ‘begin’.
[16]
S
130(5): ‘… the court – (
c
)
if it makes an order under paragraph (
a
)
or (
b
)
setting aside the company’s resolution, may make any further
necessary and appropriate order, including - … (ii)
…
an order for costs against any director who voted in favour of the
resolution to commence business rescue proceedings
…’.
[17]
‘
S
131(1). Court order to begin business rescue proceedings. –
(1) Unless a company has adopted a resolution contemplated
in
section 129, an affected person may apply to a court at any time for
an order placing the company under supervision and commencing
business rescue proceedings.’ For the sake of completeness, it
may be noted that s 131(6) refers to the commencement of
liquidation
proceedings.
[18]
See, for example, ss 136(2)(
a
),
142(1) and 142(3).
Cf
Mouton
above n 14 para 65 – 69, dealing, inter alia, with the
previous legislative position in the context of winding-up.
For
comments as to the inconsistent use of terminology in the Act, see A
Loubser
Some
comparative aspects of corporate rescue in South African company law
(2010)
(unpublished LLD thesis, UNISA) at 331–332.
[19]
Smit
v Minister of Justice and Correctional Services and Others
[2020]
ZACC 29
para 63.
[20]
See the judgment of Steyn JA in
Minister
of the Interior v Machadodorp Investments
1957
(2) SA 395
(AD) at 404D–E;
Chagi
and Others v Singisi Forest Products (Pty) Ltd
2007
(5) SA 513
(SCA) para 13.
[21]
S
132(2): ‘Business rescue proceedings end when – (
a
)
the court – (i) sets aside the resolution or order that began
those proceedings…’
[22]
On
the initiation of liquidation proceedings, in the context of s
129(2)(
a
),
see
Mouton
above n 14.
[23]
Mouton
above n 14 para 60 and following. Also see
Lutchman
NO v African Global Holdings
2022
(4) SA 529
(SCA) (
Lutchman
NO
)
paras 32, 33.
[24]
Mouton
above
n 14 para 73 and following, although no mention is made of the use
of the word in
s 141(2)(
b
).
The quotation appears in paras 75, 77 and 81.
[25]
S
131(6). See
Lutchman
NO
above
n 23.
[26]
R
Sharrock
et
al
Hockly’s
Insolvency Law
(9
th
Ed) (2021) at 280.
[27]
S
131(6).
[28]
S
133.
[29]
The
notion of ‘business rescue proceedings’ repeated
throughout chapter 6 is, accordingly, tautologous, but will be
repeated for the sake of consistency.
[30]
S
128(1)(
b
).
[31]
S
128(1)(
i
).
[32]
S
128(1)(
d
).
[33]
Ibid.
[34]
S
131(5) read with s 131(4)(
a
).
[35]
S
129(2).
[36]
See
Loubser above n 18 at 83.
[37]
See A Loubser “The business rescue proceedings in the
Companies Act of 2008
: concerns and questions
(part 1)
(2010)
TSAR
501
at
513.
[38]
S
131(5).
This is subject to ratification by the holders of a majority
of the independent creditors’ voting interests at the first
meeting of creditors, as contemplated in
s 147.
[39]
See,
for example,
s 132(3)
, which contemplates action by a practitioner
after the ‘start’ of proceedings. Had proceedings
started by way of
an application, instead of by court order, there
would be no appointed practitioner able to approach the court for an
extension
of time, if a delay of more than three months had occurred
during the hearing of an application, and prior to a court order in
terms of
s 131(4)(
a
).
The report envisaged in
s 132(3)
would not be possible. Similarly,
s
133(1)(
a
)
assumes the pre-existing appointment of a practitioner able to
consent to the institution of legal proceedings ‘during
business rescue proceedings’. If business rescue proceedings
commenced on application there would be no practitioner appointed
and able to provide written consent in respect of legal proceedings
instituted prior to, at the earliest, the date of a
s 131(4)(
a
)
order. That interpretation would also deprive the company of the
imposed oversight during a part of business rescue proceedings,
seemingly in conflict with the purpose of the legislation. Likewise,
affording the practitioner the power to suspend contractual
obligations of the company during business rescue proceedings, or to
apply urgently for cancellation of a company obligation,
makes less
sense if the proceedings in fact commenced some time before the
practitioner was even appointed:
s 136(2).
S 134(1)
also supports
this approach. Leaving aside company disposal of property, or
agreement to dispose, in the ordinary course of its
business, the
practitioner’s advance written approval is required unless the
transaction is part of an approved business
plan. That section also
protects property in the lawful possession of the company during
business rescue proceedings: the practitioner’s
written
consent is required before a person may exercise any right in
respect of that property. That protection would also be
negated if
proceedings were deemed to have commenced at the time of
application, at which time no practitioner could have been
appointed.
[40]
S
137(2)(
a
).
[41]
S
137(3).
[42]
S
142(1).
[43]
S
142(3).
[44]
L
du Plessis
Re-Interpretation
of Statutes
(2002) (LexisNexis) 213–214.
[45]
Du
Plessis above n 44 at 214 quoting Wessels ACJ in
Ex
parte the Minister of Justice. In re: R v Jacobson and Levy
1931 (AD) 466 476–477.
[46]
See, by way of example,
African
Banking Corporation of Botswana Ltd v Kariba Furniture Manufacturers
(Pty) Ltd and Others
2015
(5) SA 192
(SCA) para 43.
In
Loubser’s view, this ranks as one of the most ill-considered
provisions in the Act: Loubser above n 18 at 83; A Loubser
“The
business rescue proceedings in the
Companies Act of 2008
: concerns
and questions
(part 2)
(2010)
TSAR
689.
[47]
Also
see Loubser above n 18 at 353.
[48]
See
Loubser above n 18 at 82–84, read with
s 5(2).
[49]
Cf
s 81(4)(
b
):
leaving
aside certain occurrences, a winding-up of a solvent company by a
court begins only when the court has made an order applied
for in
terms of various subsections of
s 81
;
Mouton
above
n 14 65.
[50]
See
Loubser above n 18 at 85: contrary to the position in other
jurisdictions, no provision is made in the Act for an interim
moratorium that would protect the company before the official
commencement of business rescue proceedings. Also see R Bradstreet
‘The new business rescue: Will creditors sink or swim?’
(2011) 128
SALJ
352
at 374.
[51]
S
134(1)(
b
)
references an agreement made in the ordinary course of the company’s
business
before
the business rescue proceedings began, but this pertains only to
property owned by the company and in the lawful possession of
any
person during business rescue proceedings.
[52]
S
136(2)(
b
)
enables a practitioner to apply for an urgent order of cancellation
of ‘any obligation’ emanating from an agreement
to which
the company was a party at the commencement of the proceedings, but
this seemingly pertains to uncompleted contracts.
For present
purposes it is unnecessary to take the point further. See Loubser
above n 18 at 87 and following. Also see E Bertelsmann
et
al
Mars:
The Law of Insolvency in South Africa
(10
th
ed) (2019)
at
405: a creditor is under no obligation to accept payment of their
debt when such payment is offered at a time when the debtor
is in
insolvent circumstances if the payment would constitute a voidable
or an undue preference.
[53]
S
128(1)(
a
).
[54]
Also
see s 131(6).
[55]
As
indicated above, there can be little doubt that what follows occurs
‘during business rescue proceedings’, and the
various
references in the chapter to that phrase are interpreted
accordingly.
[56]
Ss
131(1), (3) and (4)(
a
).
S 131 is headed ‘Court order to begin business rescue
proceedings’.
[57]
S
131(5) read with s 147.
[58]
S
147(1).
[59]
S
131(8)(
b
).
[60]
In
some instances, such as ss 141(1) and 141(3), the Act references
specific points in time after business rescue proceedings
begin.
[61]
S
131(3).
[62]
S
128(1)(
b
)(iii).
[63]
S
142(3)(
f
).
[64]
S
147(1). At that meeting, the creditors may determine whether or not
a committee of creditors should be appointed and, if so,
may appoint
the members of the committee: s 147(1)(
b
).
Leaving aside agency and written authorisation, a person may be a
member of a committee of creditors only if they are independent
creditor of the company: s 149(2)(
a
).
[65]
Ss
147(1) and 147(2).
[66]
S
150(1).
[67]
S
150(2)(
a
)(ii).
[68]
S
151(1).
[69]
Chetty
t/a Nationwide Electrical v Hart and Another NNO
2015
(6) SA 424
(SCA) para 8.
[70]
Koen
and Another v Wedgewood Village Golf & Country Estate (Pty) Ltd
and Others
2012
(2) SA 378
(WCC) para 10.
[71]
Wescoal
Mining (Pty) Ltd and Another v Mkhombo NO and Others
2024
(2) SA 563 (GJ).
[72]
Ibid
para 21.
[73]
Ibid
paras 22, 27.
[74]
Ibid
para 23.
[75]
Cf
Morris
NO v Airomatic t/a Barlows Airconditioning Co
1990
(4) SA 376
(AD) at 398J–399J, citing
Ex
parte Kaplan and Others NNO: In re Robin Consolidated Industries Ltd
1987
(3) SA 413
(W) at 427–8.
[76]
An
appeal against this decision was heard by the SCA on 30 August 2024
and judgment was reserved.
[77]
Delport
above n 7 at 449. To the extent that this approach amounts to a
limitation of the constitutional right of access to court,
considering the purpose of the Act and s 36(1) of the Constitution,
this is a reasonable and justifiable limitation by virtue
of a law
of general application. Cf
Booysen
v Jonkheer Boerewynmakery (Pty) Ltd and Another
2017 (4) SA 51
(
Booysen
)
paras 41 and following.
[78]
S
5(2). Loubser above n 18 at 78.
[79]
S
131(4)(
a
).
[80]
Booysen
above
n 77 para 48.
[81]
Uniform
Rule 12, read with Uniform Rule 6(14).
[82]
Smyth
v Investec Bank Ltd
2018
(1) SA 494
(SCA) at 511F.
[83]
Cape
Point Vineyards (Pty) Ltd v Pinnacle Point Group Ltd and Another
(Advantage Projects Managers (Pty) Ltd Intervening)
2011
(5) SA 600
(WCC) (
Cape
Point Vineyards
)
paras 13, 16.
Regulations
123 and 124 of the Companies Regulations, 2011 (GG No. 34239) (26
April 2011). An applicant in court proceedings who
is required, in
terms of either s 130(3) or s 131(2)(
b
),
to notify affected persons that an application has been made to a
court, must deliver a copy of the court application, in accordance
with regulation 7, to each affected person known to the applicant.
The position is different in respect of an application to
set aside
a business rescue plan:
Absa
Bank Ltd v Naude NO and Others
2016 (6) SA 540
(SCA) (
Naude
NO
).
At least in the context of s 129 of the Act, a creditor who has not
been given notice but who knows of the business rescue
proceedings
may apply to set aside the business rescue proceedings for want of
compliance with the requirements of that section:
Eravin
Construction CC v Bekker NO and Others
2016 (6) SA 589
(SCA) paras 28 and 29.
[84]
Joinder
in the context of an application to declare an adopted business
rescue plan invalid is a different matter:
Golden
Dividend 339 (Pty) Ltd and Another v Absa Bank Limited
[2016] ZASCA 78
;
Naude
N.O.
above
n 83. On the distinction in the case of business rescue
applications, see
African
Global Holdings (Pty) Ltd v Lutchman N.O. (Commissioner for the
South African Revenue Services Party and Fidelity Security
Services
(Pty) Ltd Intervening Parties)
2020 JDR 1794 (GJ) para 7.
[85]
Henri
Viljoen (Pty) Ltd v Awebuch Brothers
1953
(2) SA 151
(O) at 169.
[86]
Cape
Point Vineyards
above n 83 para 21.
[87]
Levay
and Another v Van den Heever and Others NNO
2018
(4) SA 473
(GJ) para 23.
[88]
Absa
Bank Ltd v Africa’s Best Minerals 146 Ltd; in re Sekhukhune NO
v Absa Bank Ltd
[2015]
2 All SA 8
(GJ) para 17.
[89]
Lebea
v Menye
2023
(3) BCLR 257
(CC) para 30.
[90]
The
argument, it may be noted, was that Lonetree’s failure to
validly repay the production loan debt meant that Rolust remained
indebted to SRCC in terms of the cession and surety contained in the
production loan agreement.
[91]
Schedule
1 to SRCC’s Memorandum of Incorporation details the packright
system, including the following provisions:
‘
2.4
Failure to utilise packrights in any citrus packing season in terms
of actual deliveries of fruit owned by the packright owner
to the
extent of a minimum of 75% (seventy five per centum) of all
packrights owned by a packright owner, may at the election
and in
the discretion of the board render the packright owner liable to the
Company for additional charges calculated according
to the following
formula (which measure the Board shall apply reasonably and with due
regard to climatic and other circumstances
reasonably beyond the
control of the packright holder) …
2.6 The Board shall
implement a procedure to allow packright owners who did not deliver
their entire crops to the Company for
packing and marketing during
the season under review, and who have not utilised the required
minimum number of packrights as
determined in 2.4 above, to motivate
to the Board why they should not become liable for the additional
charges as calculated
in terms of that paragraph.’
[92]
Properly
construed, the founding papers cannot be read to support an
undertaking to deliver fruit outside the packright system
as a basis
for participation. It was the alleged breach of obligations to
deliver fruit, in terms of the packright system, as
well as payment
of additional charges, that formed the alleged alternative basis for
participation in the main application. See
para 18 of the
application for intervention, dealing with
locus
standi
,
read with paras 53 and 54, headed ‘conclusion as to standing’.
[93]
This
is defined in the memorandum of incorporation of SRCC Holdings as
one share in SRCC Holdings, one packright, and the rights
and
obligations in terms of the service contract (between SRCC and the
packright holder) related to the packright.
[94]
Clause
43 of the SRCC Memorandum of Incorporation provides that ‘the
terms and conditions governing the packright and the
service
contract shall be as set out in schedule 1 hereto…’.
Schedule 1 defines ‘delivery schedule’
to mean ‘the
negotiated schedule per packing season in terms whereof the
packright holder concerned commits himself to
exercise his
packrights, and to deliver citrus fruit to the packing facilities,
on the basis set out therein, which schedules
shall form part of the
service contract concerned’.
[95]
Also
see
De
Polo and Another v Dreyer and Others
1991 (2) SA 164
(WLD) at 178A–179A;
Baeck
& Co SA (Pty) Ltd v Van Zummeren and Another
1982 (2) 112 (WLD) at 119A–B: the approach of the court should
always be to attempt to consider substance rather than form
in the
absence of prejudice to any party.
[96]
F
du Bois (ed)
Wille’s
Principles of South African Law
(9
th
Ed) (2007) at 789.
[97]
Insolvency Act, 1916 (Act 32 of 1916);
See
Ex
Parte Vanqua
1928
(WLD) 294;
Moosa
v Olgar and Another
1932 NPD 686.
Cf
JVJ
Logistics (Pty) Ltd v Standard Bank of South Africa Ltd and Others
2016 (6) SA 448
(KZD) paras 39–41, 47. In that matter, Olsen J
drew a distinction between the interests of an owner denied
possession of
property in the possession of the company, and a
creditor of the company owed money, in the context of s 133.
[98]
McLean
v McLean’s Trustee
1923
AD 141
at 148. Section 45 of the Insolvency Act, 1916 (Act 32 of
1916) referred to a person whose claim was dependent upon a
condition
as a creditor.
[99]
Act
24 of 1936. Cf s 2 definition of ‘debtor’ in the
Insolvency Act, 1936
.
[100]
Ss
48
(proof of conditional claim), 9(2) (a liquidated claim which has
accrued but is not yet due): Bertelsmann above n 52 at 404; S
346(1)
of the Companies Act, 1973 (Act 61 of 1973) does likewise: an
application to court for the winding-up of a company may
be made,
inter alia, by one or more of its creditors, including contingent or
prospective creditors. Also see
Simon
and Another v The Assistant Master and Others
1964 (3) SA 715
(T) at 719D–E.
[101]
Grobler
v Grobler’s Trustee
1908
TS 423
at 427–8.
[102]
MacMaster’s
Trustees v Executor of Kruger
(1863)
4 Searle 205
at 210, as cited in Du Bois above n 96 at 790. On the
wide meaning attached to the term ‘creditor in the
Digest
,
15.16.10, see
McLean
v McLean’s Trustee
1923 AD 141
;
AF
Philip & Co Ltd & Others v Adie, NO & Others
1970 (4) SA 251
(R) at 254. SP Scott
The
Civil Law
(1932), accessed at
https://droitromain.univ-grenoble-alpes.fr/Anglica/D50_Scott.htm
:
‘…it is established that creditors should be understood
to be those to whom something is due and collectible by
any action
or prosecution, or under the Civil Law, … whether the
indebtedness is absolute, or is to be discharged within
a certain
time, or under some condition … If, however, the claim should
not be based upon money lent, but upon a contract,
they are still
understood to be creditors…By the appellation of “creditors”,
not only those are understood
who have loaned money, but all to whom
anything is due for any reason whatsoever.’ Also see
E
Bertelsmann above n 52 at 404.
[103]
Cf
Eravin
Construction CC v Bekker NO and Others
2016 (6) SA 589
(SCA), dealing with the notion of ‘debt owed’,
as distinguished from when a debt falls due for purposes of
prescription,
in the context of s 154(2) of the Act.
[104]
Joint
Liquidators of Glen Anil Development Corporation (in liquidation) v
Hill Samuel (SA) Ltd
1982
(1) SA 103
(A) at 103, 110A – 111E.
[105]
List
v Jungers
1979
(3) SA 106
(A) at 121C–E. Also see
Union
Share Agency & Investment Ltd v Spain
1928
AD 74
at 80–81: the distinction between the indebtedness being
subject to the happening of an event and the payment being so
subject is a vital one that should not be overlooked. The date on
which a debt becomes ‘due’ may not coincide with
the
date on which it arises:
Trinity
Asset Management (Pty) Limited v Grindstone Investments 132 (Pty)
Limited
[2017] ZACC 32
(
Trinity
)
para 100. A debt is due when it is claimable by the creditor, and as
the corollary thereof, is payable by the debtor:
Standard
Bank of South Africa Ltd v Miracle Mile
Investments
67 (Pty) Ltd
[2016]
ZASCA 91
;
2017 (1) SA 185
(SCA) para 24, as quoted in
Trinity
above
para 66. Cf
Henque
3935 CC t/a PQ Clothing Outlet (in Business Rescue) v The
Commissioner for the SA Revenue Service
[2023] ZAGPJHC 234;
2023 (6) SA 260
(GJ); 86 SATC136 para 18.
[106]
List
v Jungers
ibid
at 109B–C;
Truter
v Deysel
[2006]
ZASCA 16
;
2006 (4) SA 168
(SCA) para 16. Also see
Apalamah
v Santam Insurance Co Ltd and Another
1975 (2) SA 229
(D) at 232F. The SCA has also held that to construe
an ‘obligation’ to mean that a debt exists only when the
debtor
is required to do something, would be too limiting:
Duet
and Magnum Financial Services CC (in liquidation) v Koster
2010 (4) SA 499
(SCA) para 24.
[107]
The
Master v I L Back and Co Ltd
1983
(1) SA 986
(A)
at
990D–E.
[108]
Trinity
above n 105 paras 47 and following, read with para 95.
[109]
S
136(2)(
a
)(ii).
[110]
S
136(3). Similarly, the draft business rescue plan provides that the
practitioner ‘will engage with parties who are presently
contractually committed to the Close Corporation with a view to
terminating or renegotiating onerous contracts that might be
in
existence.’
[111]
S
128(1)(
f
)(i)
read with s 131(4)(
a
).
[112]
Cloete
Murray and Another NNO v FirstRand Bank Ltd t/a Wesbank
2015
(3) SA 438
(SCA) para 40.
[113]
FirstRand
Bank Ltd v KJ Foods CC
2017
(5) SA 40
(SCA) para 75.
[114]
Endumeni
Municipality
above
n 6 para 26.
[115]
Bill
B 61A – 2008.
[116]
As
s 128(1)(
e
).
[117]
Loubser
above n 18 at 53.
[118]
S
v Makwanyane
1995
6 BCLR 665
(CC) paras 18, 25, 33 as cited in Du Plessis above n 44
267–269.
[119]
Sideralloys
International SA v Rahida Investment (Pty) Ltd
[2019]
ZAGPJHC 227 paras 4, 102, 103. Also see
Rogal
Holdings (Pty) Ltd and Another v Victor Turnkey Projects (Pty) Ltd
and Others
[2022] ZAGPPHC 167 (
Rogal
Holdings
)
para 19 and following and para 34, explaining that it is not only
creditors who have proven claims against the debtor that are
to be
regarded as affected parties.
[120]
See
Wescoal
above n 71. Lonetree indicates in its answering papers that it
intends to make use of its right to motivate why it should not
be
levied with an additional charge, as contemplated in clause 2.6 of
schedule 1 to SRCC’s Memorandum of Incorporation.
See
ABSA
Bank Ltd v Scharrighuisen
2000
(2) SA 998
(C);
[2000] 1 All SA 318
(C) as cited in
Jeany
Industrial Holdings (Pty) Ltd and Others v Zungu-Elgin Engineering
(Pty) Ltd
[2019]
ZAKZDHC 38;
2020 (2) SA 504
(KZD) para 19; FHI Cassim (Ed)
Contemporary
company law
(3
rd
Ed) (2021) at ch18-p 1193. Cf
Ellerine
Brothers (Pty) Ltd v Vestacor (Pty) LTd; Rubenstein v Vestacor (Pty)
Ltd & Another (KNS Construction (Pty) Ltd Intervening)
[2019] ZAGPJHC 85 para 4.