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[2013] ZAWCHC 136
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Blue Star Holdings (Pty) Ltd v West Coast Oyster Growers CC (2544/2013) [2013] ZAWCHC 136; 2013 (6) SA 540 (WCC) (23 August 2013)
IN THE HIGH COURT OF SOUTH AFRICA
WESTERN CAPE HIGH COURT, CAPE TOWN
REPORTABLE
CASE
NO: 2544/2013
In the
matter between:
BLUE STAR HOLDINGS (PTY) LTD
..........................................................................
Applicant
and
WEST COAST OYSTER GROWERS CC
...............................................................
Respondent
JUDGMENT: 23 AUGUST 2013
___________________________________________________________________
GAMBLE, J:
[1] On 20 February 2013 the Applicant launched an application for the
winding-up of the Respondent company on the basis that it
is unable
to pay its debts.
[2] When the matter came before the Motion Court on 27 February 2013
the Respondent opposed the application and an agreed order
was taken
referring the matter to the semi-urgent role for hearing on 6 May
2013. A timetable was agreed for the exchange of further
affidavits
and the filing of heads of argument.
[3] The Respondent did not file its Answering Affidavit on time (it
was some 6 weeks or more late) and the timetable had to be
adjusted
at the hearing on 6 May 2013 pursuant whereto it was further
postponed for hearing on the semi urgent roll on 30 July
2013.
[4] When the matter came before me on that day an attorney from
Coetzer Attorneys in Melkbosstrand (Mr Lou Coetzer) appeared and
informed the Court that his partner who had been dealing with the
matter (Mr Paul Myburg) was unable to argue the matter on that
day. I
accordingly stood the matter down for 2 days to enable Mr Myburg to
prepare properly for argument.
[5] It came as little surprise that when the matter was called on 1
August 2013 Mr Myburg was not in Court and a Notice of Withdrawal
was
handed up by Mr Coetzer: the matter had by then all the hallmarks of
dilatory practice by the Respondent. The Court was informed
that the
Respondent’s sole member, Ms Nelia Lochner, was in Court to
appear in person on behalf of the Respondent.
[6] In an emotional plea for an indulgence, Lochner informed the
Court that the Respondent required a postponement of just 1 week
to
overcome its long-standing economic woes. She told the Court that an
investor with very deep pockets was due to return from
Zimbabwe
shortly and that she required a postponement to save the Respondent
and its various employees from bankruptcy. The indulgence
was
reluctantly granted much to the chagrin of the Applicant and the
matter was accordingly adjourned until 8 August 2013.
[7] However, the dilatory tactics continued apace. Late on the
afternoon of 7 August 2013 a new firm of lawyers, Van Aswegen
Attorneys,
fortuitously also from Melkbosstrand, filed a Notice of
Appointment as Attorneys of Record. This appointment was supported by
a
resolution signed by Lochner on behalf of the Respondent.
[8] When the matter was called on 8 August 2013, Mr Blom of the Cape
Bar appeared. He informed the Court that he did so as “a
courtesy” as he put it, but that he had no instructions to
represent the Respondent in the pending winding-up application.
Rather, he handed up to the Court a copy of an application lodged
that very morning with the Registrar under case number 12865/13.
That
case is an application by Lochner for the Respondent to be placed
under the supervision of a business rescue practitioner
in terms of
section 131 of the Companies Act, 71 of 2008 (”the New Act”).
The Notice of Motion was drafted in the long
form and in the
(unlikely) event that it is not opposed, it will be heard on the
ordinary Motion Court roll on 27 August 2013.
[9] No submissions were advanced to the Court by Mr Blom in respect
of the business rescue application, properly so because that
would
have been premature. Mr Tsegarie then addressed the Court on behalf
of the Applicant and pressed for a provisional order
of winding-up.
It was of great concern to the court that Van Aswegen attorneys had
filed an entry of appearance and failed (intentionally
it must be
inferred given the presence of Lochner and Mr Blom) to instruct
counsel to appear, or to appear themselves to represent
their client.
But that is a matter for consideration by the Law Society and not
this Court.
[10] I should mention that after a break in the proceedings on 8
August 2013, Ms Lochner sought to appear on behalf of the Respondent
and handed up a document which she believed was a Notice of
Withdrawal on behalf of Van Aswegen Attorneys. However, the unsigned
document related to another matter and was returned to Lochner, whose
manipulative attempts to delay the matter had by then reached
new
heights.
[11] I asked Mr Tsegarie to then address the Court regarding the
power to consider the granting of a provisional order of winding-up
once business rescue proceedings had evidently been launched. Lochner
played no further part in the proceedings although she and
Mr Blom
remained in attendance throughout.
[12] Mr Tsegarie referred the Court to section 132 of the New Act and
in particular sub-para (1) (b) which provides as follows:
“
132 Duration of business rescue proceedings-”
(1) Business proceedings begin when-…
(a) …
(b) An affected person applies to the court for placing the
company under supervision in terms of section 131 (1)….”
[13] Section 132 must be read in conjunction with section 133 (1) of
the New Act 133
whichis to the following effect:
“
133 General moratorium on legal proceedings against
company-
(1) During business rescue proceedings, no legal proceeding,
including enforcement action, against the company, or in relation to
any property belonging to the company, or lawfully in its possession,
may be commencedor proceeded with in any forum, except-
(a)with the written consent of the practitioner;
(b) with the leave of the court and in accordance with any terms
the court considers suitable;
(c) as a set-off against any claim made by the company in any
legal proceedings, irrespective of whether those proceedings
commenced
before or after the business proceedings began;
(d) criminal proceedings against the company or any of its
directors or officers;
(e) proceedings concerning in any property or right over which the
company exercises the powers of a trustee; or
(f) proceedings by a regulatory authority in the execution of its
duties after written notification to the business rescue
practitioner.”
[14] No leave was sought from the Court in terms of section 133 (1)
(b) and the
remaining proviso’s to the section do not apply here. In the
circumstances, the
application for voluntary winding-up of the Respondent may not be
proceeded with
“during business rescue proceedings”.
[15] The issue that then arose was what was meant by the word
“during” in section
133 (1)? Was it intended that the commencement of a business rescue
application
by the filing of the papers with the Registrar would stop any pending
liquidation
proceedings in their tracks? Or, did business rescue proceedings only
commence
when that application came before the Court for the first time? Or,
was it only when
the business rescue practitioner had been appointed by the Court in
terms of section
131(4)?The relevant parts of that section read as follows:
“
131 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.
(2) …
(3) …
(4) After considering an application in terms of sub-section (1),
the court may-
(a) make an order placing the company under supervision and
commencing business rescue proceedings, if the court is satisfied
that-
(i) the company is financially distressed;
(ii) the company had failed to pay over any amount in terms of an
obligation under or in terms of a public regulation, or contract,
with respect to employment-related matter; or
(iii) it is otherwise just equitable to do so for financial
reasons, and there is a reasonable prospect for rescuing the company;
or
(b) dismissing the application, together with any further
necessary and appropriate order, including an order placing the
company
under liquidation.”
It will be noted from the a foregoing that section 131(4) (a)
contemplates
commencement of business rescue only upon the granting of an order to
that effect.
[16
] Mr Tsegarie
opted for the second scenario and argued that
the phrase “
applies
to the court’
in section 132 (1) (b) meant that the
general moratorium contemplated
in section 133 onlycommenced when the application for business rescue
actually
came before theCourt for the first time. Only at that stage, it was
argued, did
business rescueproceedings begin. That submission does not accord
with the
express provisions of section 131 (4) (a) which have been set out
above.
[17] I asked
Mr Tsegarie
with reference to the provisions of
section 348 of the Companies Act 1973 (“the Old Act”) and
the body of case law
that has developed thereunder
1
,
whether presentation of the application for business rescue to the
Registrar of the Court for the issue thereof did not in fact
constitute the requisite application to Court sufficient to interrupt
the pending application for winding-up.
[18]
Mr Tsegarie
suggested that the use of the word “applies”
in section 132 (1) (b) was an obvious attempt at distinction on the
part
of the Legislature, indicating that some time other than the
presentation of the papers to the Registrar of the Court was the time
that business rescue proceedings commenced. If the Legislature had
intended that time to be when the papers were issued by the
Registrar, it would have said so, argued
Mr Tsegarie
.
[19] Section 348 of the Old Act is cast in the form of a deeming
provision and has been interpreted as ante-dating the consequences
of
the winding-up order to the date of lodgment with the Registrar
2
.
The provisions of the New Act dealing with business rescue do not
contain any such deeming provisions.
[20] The matter is not without its problems as Rogers AJ observed in
Bruyns
3
.
In a case like the present, a business rescue application might
well be used by an obstructive debtor intent on avoiding the
obviously
inevitable as part of its ongoing strategy to hinder a
creditor from pursuing its lawfully permissible goal, and, experience
tells
one that the business rescue proceedings may then be advanced
by the debtor with a degree of tardiness inversely proportional to
the alacrity with which it initially approached the court.
[21] The answer to the conundrum in this case I think lies in the
provisions of section 131 (6) of the New Act:
“
S 131 (6)
If liquidation proceedings have
already been commenced by or against the company at the time an
application is made in terms of
sub-section (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.
[22] The operative phrase for consideration in section 131(6) is “
at
the time an application is made”
. Was the application for
business rescue under case number 12865/13 “made” by
Lochner on the morning of Thursday 7
August 2013, or will it only be
“made” when the matter eventually comes before the Court
some weeks (possibly only
months) hence, after the potential
objectors to business rescue have delivered their papers under
section 131 (3) and Regulation
124, Lochner has replied thereto,heads
of argument have been filed and the matter is allocated a date on the
semi-urgent role?
4
[23] Absent any directions in the provisions of the New Act dealing
with business rescue as to how the word “
made
” (or
its synonym “
make
”) is to be understood, the word
must be given its ordinary meaning in the context in which it appears
in the statutory setting.
[24] The use of the word “
made
” in a statute was
discussed in a series of cases relating to earlier compulsory motor
vehicle insurance legislation. For
present purposes it will surfaceto
refer to the judgment of Theal Stewart JP in
Modise
5
in which the earlier authorities are collected. The statutes in
question in those cases permitted a person whose damages claim
had
statutorily prescribed to approach the court by way of an application
for condonation. Such application was, however, completely
barred
“
unless….the application is
made
within a period of 90 days after the date on
which the claim became prescribed”.
(See section 24 (2) (b) (i) of the Compulsory Motor Vehicle Insurance
Act, 56 of 1972 – emphasis added)
[25] The Court held
in Modise
that such an application was
“
made
” when it was filed with the Registrar and
served on the respondent. As to the proposition that the application
was only “
made
” when first called in open court,
the Court held that this interpretation was impractical given the
time delays that would
inevitably result once the application was
lodged with the Registrar.It was conceivable, said the Judge
President,that this could
even occur only after the expiry of the 90
day period contemplated in that Act.
[26] In
Zungu
6
,
which was cited with approval in
Modise
, Didcott J considered
the same argument and dismissed it without more.
7
“
Strictly linguistic treatment perhaps elicits nothing less
than a demand for every
application to be moved by counsel in Court during the period of
ninety days.
The purist would properly insist that none was actually “made”
unless and until that happened. The Courts, however, have
balked at
such a construction. It is far too pedantic for the sub-section to
bear. I say this because of the artificial and incongruous
results it
would often produce. These were discussed in
Kunene’s
case, supra,
8
and need not be repeated. Once one declines to go to such lengths,
one is left with a number of other stages in the progress of an
application which suggest themselves of alternative criteria for the
“making” of it.”
[27] As to the method of interpretation, Ditcott J offered courts the
following advice
9
:
“
It should rather, in my opinion, take the words of the
sub-section as it finds
them, examine the particular course of the application before it,
and decide
whether the proceedings had gone far enough when the period
expired for it
to be said of them in all the circumstances, and aptly said, that
the application
was already “made” by then. Of crucial importance to
the inquiry, of course, is
the question whether they had advanced sufficiently to fulfill the
sub-section’s
underlying purpose. This, as Friedman AJ mentioned in Peters
case
10
,
was to ensure that such an application was brought to Court
without delay.
To that end an arbitrary deadline was set, and the applicant was
certainly required to meet it when starting its application. There
was not the same need for pressure on him, however, once the
respondent or the Court itself had
become involved, and he alone no longer controlled the pace of the
proceedings.”
[28] In
Peters
11
Friedman
AJ defined the crux of the approach as follows:
“
After an application is launched, the Rules of Court make
provision for the
manner in which and the time limits within which that application
is to be
brought before Court. If the applicant does not avail himself of
the time
limits within which he can set the matter down for hearing, rights
are afforded
to the respondents to bring the matter before Court.But, once the
application
is launched, then it is within the respondent’s power in
terms of the Rules of
Court to ensure that the matter is disposed of as expeditiously as
the Rules
permit. This being so, it seems to me that the rights both of the
applicant and
of the respondent are fully protected and that finality will be
reached in the
matter within a reasonable time.”
[29] Applying this functional approach to section 131 (6), it is
obvious that in this case the lodging of the application with
the
Registrar for the issue thereof, constituted the “making”
of the application and the commencement of proceedings
to place the
company under business rescue (as opposed to the commencement of
business rescue
per se
). It was fortuitously brought to the
intention of the creditor’s legal representatives an hour or so
later when a copy was
handed to them at Court. Service therefore
occurred almost instantaneously and the application then fell within
the purview of
the Rules of Court, read with the New Act and the
Regulations issued thereunder
12
.
[30] To suggest that the application for business rescue only
commences when it is called some day in open Court will lead to
impractical and even absurd consequences. It would mean that the
Court seized with the winding-up application could continue with
its
work and notionally even grant a final order of liquidation before
the business rescue application is heard.
[31] Our Courts are enjoined to interpret statutes purposively
13
.This
requires the Court to examine the objects and purport of an Act and
to interpret legislation in conformity with the Constitution
to the
extent that this is reasonably possible. If one has regard to the
various purposes of the New Act set out in Section 7 one
finds under
section 7 (k) that the New Act is intended to:
“
(k) provide for the efficient rescue and recovery of
financially distressed
companies, in a manner that balances the rights and interests of
all relevant
stakeholders;”
Such a purpose is likely to be thwarted if the application for
business rescue only commences when it is called in open Court
sometime in the uncertain future when a winding-up order could
already have been granted.
[32] In the circumstances, I am satisfied that the provisions of
section 131 (6) of the New Act apply to this case and that the
application for winding-up is therefore automatically suspended.
[33] Now that the application for business rescue has commenced, it
is open to the applicant in this case, (as a creditor of the
Respondent and therefore “an affected person” in the
business rescue application) to hold Lochner to the time limits
that
govern the business rescue application, to ensure that dilatoriness
does not persist (or at least is limited) and to ensure
that the two
applications are heard simultaneously. If the business rescue
application has merit it may well be to the benefit
of the Applicant,
whose debt may be settled in full, or who may receive a better
dividend than anticipated in liquidation. If there
is no merit in the
business rescue application, the Court hearing that application will
be entitled, under section 131(4) (b),to
put the Respondent out of
itscommercial misery and place it under provisional liquidation.
[34] There are two further issues that merit brief mention at this
stage. Firstly, there is a substantial amount of wasted costs
that
have been incurred by the Applicant as a result of Lochner’s
machinations.When the Court hearing the liquidation matter
(together
with the business rescue application) ultimately comes to consider
the question of costs, Lochner will, in terms of the
order I intend
making, be given the opportunity to show cause why she should not
bear those costs personally on the punitive scale.
[35] Secondly, the conduct of Messers Coetzer Attorneys and Van
Aswegen Attorneys of Melkbosstrand in this matter has,
prima
facie
been to subvert or hamper the proper administration of
justice. Their conduct merits the attention of the Cape Law Society
to whom
a copy of this judgment will be forwarded.
[36]
In the circumstances the following order is made:
A. The application for winding-up is suspended in terms of
section
131
(6) of the
Companies Act, 71 of 2008
;
B. The application for winding-up is postponed to be heard
together with the application for business rescue commenced in this
Court
under case number 12865/13;
C. The Registrar is directed to afford the parties, including any
affected parties, to the business rescue application, the earliest
possible set-down of that matter;
D. In the event that the applicant in the business rescue
application (or any other party thereto) unduly protracts that matter
or fails to take any steps timeously in terms of the
Companies Act,
the
Regulations promulgated thereunder, the Rules of Court or the
Practice Notes of this Division, the Applicant may approach this
Court on 3 days notice to the relevant parties for appropriate urgent
relief;
E. All wasted costs in this application occasioned by the
commencement of the business rescue application are to stand over for
determination by the Court hearing the business rescue application;
F. When liability for such wasted costs is determined,
Respondent’s sole member, Ms Nelia Lochner, is to show cause
why she
should not be held personally liable to pay, on the scale as
between attorney and own client, the wasted costs of 6 May 2013, 30
July 2013, 1 August 2013 and 8 August 2013.
G. The Registrar is directed to send a copy of this judgment to
the Director of the Cape Law Soceity.
____________________
P.A.L Gamble, J
FOR APPLICANT :
Adv.
A. Coetzee
INSTRUCTED BY :
Apollos and Associates
FOR RESPONDENT :
Attorney Mr. Louw Coetzer
INSTRUCTED BY :
Coetzer Attorneys
New Counsel 1 August
2013
FOR APPLICANT :
Adv.
G. Blom
INSTRUCTED BY :
Apollos and Associates
FOR RESPONDENT
:
Adv. CMD Tsegarie
INSTRUCTED BY :
Van
Aswegen Attorneys and Conveyancers (New attorneys of record)
c/o Heyns and Partners
DATES OF HEARINGS :
30 July 2013; 1 August 2013; 8 Augustus 2013
DATE OF JUDGMENT :
23 August 2013
1
See
for example
Wolhurter Steel (Welkom) (Pty) Ltd v Jatu
Construction (Pty) Ltd
1983 (3) SA 815
(O) at 816 D – E;
Storti v Nugent and Others
2001 (3) SA 783
(W) at 794 E –
F;
Development Bank of South Africa Ltd. v Van Rensburg and
Others NO
2002 (5) SA 425
(SCA) at 431 para 8.
2
Development
Bank
case
supra
, at para 8.
3
Investec
Bank Ltd v Bruyns
2012 (5) SA 430
(WCC) at 433
para 12.
4
At
the time of this judgment dates on the semi-urgent roll are being
allocated in the second half of October 2013.
5
Modise
v Incorporated General Insurances Ltd
1985 (4) SA 650
(BGD) at
655 D
6
Zungu
v Kwazulu Government
1980 (1) SA 231
(D)
7
233
A – B
8
1976
(4) SA 782
(D)
9
233
D - F
10
1978
(2) SA 58
(D) at 60 G - H
11
Peters
v Union National South British Insurance Company Ltd
1978 (2) SA
58
(D) at 60 G - H
12
Regulation
124
, for example, prescribes the method of service on parties
affected by the lodging of the business rescue application.
13
Investigating
Directorate
:
Serious Economic Offences and Others v Hyundai
Motor Distributors (Pty) Ltd and Others
[2000] ZACC 12
;
2001 (1) SA 545
(CC) at
558 para 22 – 559 para 24