Cheetah Chrome South Africa (Pty) Ltd v Dilo Chrome Mine (Pty) Limited (In business rescue) and Others (45259/2020) [2020] ZAGPPHC 642 (19 October 2020)

IN THE HIGH COURT OF SOUTH AFRICA

(GAUTENG DIVISION, PRETORIA)

CASE NO: 45259/2020

In the matter between:

CHEETAH CHROME SOUTH AFRICA (PTY) LTD Applicant

and

DILOKONG CHROME MINE (PTY) LIMITED

(IN BUSINESS RESCUE) First Respondent

JOHANNES FREDERICK KLOPPER N.O. Second Respondent

CHRISTOPHER RAYMOND REY N.O.

Third Respondent

JUBILEE TAILINGS TREATMENT COMPANY (PTY) LTD Fourth Respondent

JUDGMENT

FABRICIUS J

[1] In this urgent application the applicant sought the following relief as per the notice of motion dated 8 September 2020, before applying for an amendment thereto on 15 September.

Final Relief

1. That, non-compliance with the form, service and time periods provided for in the Uniform Rules of Court be condoned and that the application be heard as one of urgency in terms of Uniform Rule 6(12).

2. The applicant be and is hereby authorised to perfect its security under the Special and General Notarial Covering Bond with number BN 000013547/2020, a copy of which is attached to the founding affidavit and marked "FA13" ("the bond"), by entering in and upon all and any of the premises in which the first respondent carries on business and by taking into its possession all of the first respondent's movable property and effects, of whatever nature and description, both present and future and corporeal and incorporeal, wherever such assets may be situated ("the moveable property"), however, not exceeding the value of R190 000 000.00.

3. The Sheriff of this Court alternatively his/her Deputy and with the applicant or its agent are directed and authorised to take steps and do all things necessary to ensure the due and proper execution of this order, including the attaching and taking into possession of the movable property and to deliver

possession of such property to the applicant or its agent.

4. The applicant is hereby authorised to retain possession of the moveable property for so long as the first respondent remains indebted to the applicant and to deal with the moveable property in accordance with the terms of the bond, including, inter alia, to sell the moveable property by private treaty or by public auction and to reimburse itself in all amounts for which the respondent is indebted to the applicant and to account to the first respondent for the balance.

5. Declaring that the tailings contained in the tailing dams as depicted on page 2 of annexure A to the bond ("the tailings" ) (and that the first, second and third respondents have concluded an agreement to dispose of to the fourth respondent ("the tailings agreement"), forms part of the "encumbered property" as defined in the bond and the moveable property that is the subject of the orders in paragraph 2 to 4 above.

Interim relief

6. That, pending the final determination of the dispute that has been declared in terms of clause 20.1 of the amended sale of business agreement in the letter at annexure FA37 to the founding affidavit ("the dispute"), as provided for in terms of clause 20.2 of the amended sale of business agreement:

6.1. The respondents are interdicted and restrained from implementing the terms of the tailings agreement without the written consent of the applicant;

6.2. The first, second and third respondents are interdicted and restrained from disposing of the tailings to the fourth respondent and/or any third party without the written consent of the applicant;

6.3. The respondents are interdicted and restrained from hypothecating, alienating, pledging, otherwise disposing of or giving up possession of the tailings or any portion thereof; removing, or causing or permitting to be removed the tailings or any portion thereof without the written consent of the applicant;

6.4. The first, second and third respondents are interdicted and restrained from:

6.4.1. disposing of the assets that form the subject of the amended sale of business agreement concluded between the applicant and the first respondent to any third party; and

6.4.2. hypothecating, alienating, pledging, otherwise disposing of or giving up possession of the assets or any portion thereof; removing, or causing or permitting to be removed the assets or any part thereof.

7. That, in the event that the applicant fails to refer the dispute in accordance with the rules of the Arbitration Foundation of Southern Africa as provided for in terms of clause 20.2 of the amended sale of business agreement within 30 days of this order, the interim relief will ipso facto lapse.

8. That, the first, second and third respondents (and the fourth respondent only in the event of opposition) pay the costs of the application, jointly and severally, the one paying for the other to be absolved.

[2] Material and detailed grounds of opposition by the respondents resulted in a 600 page application with an additional 250 page bundle of heads of argument. I thank counsel for their detailed input.

[3] Apart from the issue of urgency which was detailed at great length both in the affidavits and during the 4 hour virtual hearing on 7 October 2020, the first to third respondents (“DCM respondents”) took the point in limine that Cheetah’s application was premature pursuant to the provisions of s133(1) of the Companies Act 71 of 2008. DCM was placed into business rescue on 24 March 2016, and Cheetah has not obtained the necessary written consent of the Business Rescue Practitioners (“the BRR’s”), nor has it obtained the leave of the Court to commence legal proceedings against DCM.

[4] In light of the complexity of the matter, which involves material disputes of facts, interpretation of agreements and peremptory arbitration proceedings in a given contractual context, I decided that on 7 October 2020 I would only hear the parties on urgency and the s133 (1) issue. Section 133(1)(a) and (b) provides for a general moratorium on legal proceedings against a company which is in business rescue except with the written

consent of the practitioner or “with the leave of the court and in accordance with any terms the court considers suitable.”

[5] Before I deal with these issues a very brief summary of background facts is necessary so as to place the dispute in proper context.

5.1 DCM was placed into business rescue on 24 March 2016;

5.2 Jubilee (previously named Jubilee Platinum Pic) provided post commencement funding (PCF) to DCM in the initial amount of R10 million, in order to stave-off DCM's liquidation;

5.3 DCM and Jubilee entered into the 2016 Framework Agreement on 24 March 2016, in terms of which:

5.3.1 Jubilee and/or JTTC were given the exclusive right to process DCM's tailings until the tailings resource has been depleted;

5.3.2 the chrome content of the tailings was extracted and the produced chrome concentrate products have been sold into the market since 2016;

5.3.3 the parties participated in an earnings share model based on chrome concentrate sales;

5.3.4 the funding put up by Jubilee and/or JTTC, was to be secured by a cession in securitatem debiti over the chrome and PGM content of the tailings dam;

5.4 on 13 June 2016, DCM and Jubilee concluded the Jubilee Cession in terms of which DCM's right to the revenue streams generated under, inter alia, the 2016 Framework Agreement was ceded to Jubilee. It was recorded in the cession that ownership of the existing PGMs and the PGM concentrate produced from processing of chrome and the tailings would at all times vest in JTTC;

5.5 thereafter, DCM and JTTC entered into the 2017 Framework Agreement to consolidate various agreements concluded since 2014 and to regulate their relationship in terms of which:

5.5.1 JTTC was exclusively appointed to continue processing the tailings and to procure and treat any chrome ores;

5.5.2 JTTC's ownership of the existing PGMs in the tailings were reaffirmed and JTTC acquired rights to and ownership of future PGMs to be extracted from the ground, together with a right to process those PGMs ad infinitum;

5.5.3 the chrome content of the tailings was extracted and the produced chrome concentrate products have continued to be sold into the market since 2017;

5.5.4 the parties participated in an earnings share model based on chrome concentrate sales and will participate in an earnings share model in respect of the PGMs once the PGMs are processed in due course to produce PGM concentrate for sale into the market;

5.5.5 it was recorded that JTTC continued to hold the cession in securitatem debiti over chrome and PGM content of the tailings dam;

5.6 on the termination of Parts B & C of the 2017 Framework Agreement after the initial period provided for in that agreement (being 1 September 2017 to 31 August 2020); the new Tailings Agreement dated 26 August 2020 (for ease of reference, the "2020 Tailings Agreement" ) was entered into between DCM and JTTC, inter alia, to deal with DCM's indebtedness to JTTC in the sum of over R37 million and JTTC's security cession previously put in place, the material terms of which included the following:

5.6.1 DCM sold the chrome portion of the tailings to JTTC with a portion of the sales proceeds being used to satisfy the aforementioned debt over time. The balance of the sales proceeds would accrue to DCM, essentially, as an upfront earnings participation share;

5.6.2 JTTC acquired possession and ownership of the chrome portion of the tailings under the new 2020 Tailings Agreement on 26 August 2020; it already owned the current portion of the PGM portion of the tailings in terms of the Jubilee cession;

5.6.3 JTTC was afforded exclusive access to DCM's property in order to remove and process its tailings, make sales of produced chrome concentrate and pay to DCM its 42% share of the purchase price as defined;

5.6.4 JTTC was contractually obliged to site-establish and to perform its end of the bargain, which site establishment is underway, with JTTC having already made the first, upfront payment to DCM in the amount of R3 187 800.00;

5.6.5 JTTC's ownership rights to the future PGM content of the tailings was preserved as was the case under the 2017 Framework Agreement.

6. It is common cause that DCM afforded Jubilee and/or JTTC security since 2016 in the form of the cession in securitatem debiti and the Special Notarial Bond, which was registered over DCM's Ben Plants in 2017 and in terms of which, under the 2017 Framework Agreement, no third party funder is entitled to call-up any security afforded to it for as long as any PCF is due to JTTC.

[6] I mention these simply as background circumstances referred to in 4th respondents’ heads of argument which has no issue with the s133 (1) debate. In referring to these given facts, I do so merely for the sake of convenience and I am by no means finding or holding that any interpretation of any agreement referred to, is indeed the correct one. Any such contentions will be dealt with in due course. Mr Eyles S.C presented a more detailed chronology which also dealt with relevant terms of the various agreements and correspondence. This document will be of great assistance when the main argument proceeds.

[7] Neither in the Notice of Motion nor in the Founding Affidavit is any mention made of s133. The relevant evidence was thus not pleaded as is required. It is scarcely necessary to give authority for this trite principle but I can refer to: National Council of Societies for the Prevention of Cruelty to Animals v Openshaw [2008] ZASCA 78; 2008 (5) SA 339 (SCA) at paras [29] and [30].

[8] In the absence of such allegations DCM did not deal in their Answering Affidavit dated 16 September 2020 with the question why leave in terms of s133 should not be granted. However, on 15 September 2020 a notice of intention to amend the notice of motion dated 8 September 2020, was received without any supplementary founding affidavit. It sought leave to introduce new prayers to the effect that leave be granted as provided for in s133 (1). It was said that in event of opposition, the application would be made at the hearing of this matter. the notice reads as follows:

“TAKE NOTICE that the abovenamed applicant intends to amend its notice of motion dated 8 September 2020 as follows:

1. By the introduction of new prayers 1A, 1B and 1C (after the existing prayer 1) which read as follows:

“1A. That the applicant is granted leave by this Honourable Court to proceed with this application against the first respondent in

accordance with any terms that the Court considers suitable as provided for in section 133(1)(b) of the Companies Act, 71 of 2008

(“the Companies Act”).

1B. That the applicant is granted leave by this Honourable Court to proceed with the dispute, as foreshadowed in prayers 6 and 7 below, against the first respondent in accordance with any terms that the Court considers suitable as provided for in section 133(1)(b) of the Companies Act.

TAKE NOTICE further that the applicant tenders the wasted costs of the proposed amendment and in the event of an objection to this proposed amendment, application for leave to amend will be made at the hearing of this matter.”

[9] On 17 September DCM filed a written notice of objection based on 2 grounds. These grounds are important for my decision, especially paragraphs 3.1-3.3 as well as par 6, and I therefore deem it convenient to quote the objection in full:

“FIRST GROUND OF OBJECTION

1. The proposed amendment seeks to introduce a new paragraph 1A to the notice of motion which reads as follows:

"1A. That the applicant is granted leave by this Honourable Court to proceed with this application against the first respondent in accordance with any terms that the Court considers suitable as provided for in section 133(1)(b) of the Companies Act, 71 of 2008 ("the Companies Act"). "

2. The proposed paragraph 1A to the notice of motion does not raise a triable issue in that:

2.1. no allegation is made in the founding affidavit to the effect that such relief would be sought;

2.2. no evidence is presented in the founding affidavit to support the relief now sought;

in circumstances where the main application has been launched as a matter of urgency.

3. In this regard, the founding affidavit is deficient in evidence of facts which would enable this Court to deal with the following questions:

3.1 the effect that the grant or refusal of leave in terms of section 133 of the Companies Act would have on the applicant's rights as opposed to other affected persons and relevant stakeholders;

3.2 the impact that the application, both final relief as sought in paragraphs 1 to 5 and the interim relief sought in paragraphs 6 to 8, would have on the well-being of the first respondent and its ability to regain its financial health; and

3.3 whether the grant of leave in terms of section 133 of the Companies Act would be inimical to the object and purpose of business rescue proceedings as set out in sections 7 (k) and 128 (b) of the Companies Act.

4. The proposed amendment seeks to introduce a new paragraph 1B to the notice of motion which reads as follows:

"1B. That the applicant is granted leave by this Honourable Court to proceed with the dispute, as foreshadowed in prayers 6 and 7 below, against the first respondent in accordance with any terms that the Court considers suitable as provided for in section 133(1)(b) of the Companies Act."

5.1. no allegation is made in the founding affidavit to the effect that such relief would be sought;

5.2. no evidence is presented in the founding affidavit to support the relief now sought;

6. In this regard, the founding affidavit is deficient in evidence of facts which would enable this Court to deal with the following questions:

6.1 the effect that the grant or refusal of leave in terms of section 133 of the Companies Act would have on the applicant's rights as opposed to other affected persons and relevant stakeholders;

6.2 the impact that the arbitration proceedings foreshadowed in the notice of motion would have on the well-being of the first respondent and its ability to regain its financial health; and

6.3 whether the grant of leave in terms of section 133 of the Companies Act would be inimical to the object and purpose of business rescue proceedings as set out in sections 7 (k) and 128 (b) of the Companies Act.”

“[10] Little will be achieved by again repeating tried and tested authorities on the topic when amendments should be allowed, even if they add a new cause of action or introduce a new topic. These are all discussed in great detail in Erasmus, Superior Court Practice, 2nd Ed., Vol 2, Van Loggenberg, and Herbstein & Van Winsen, The Civil Practice of the High Court of South Africa, 5th Ed, Vol 1, by Cilliers et al, at 678 and further, and also from 685 to 688 in the context of the introduction of new causes of action and new claims. It is clear that the purpose of Rule 28 is to obtain a proper ventilation of the dispute between them (on the main battlefield, I may add), so that justice may be done. An important, if not almost decisive comment appears in: Affordable Medicine Trust and Others v Minister of Health and Others [2005] ZACC 3; 2006 (3) SA 247 (CC) at par 9. The practical rule is that amendments will be allowed unless such would cause an injustice to the other side. In this decision the following general principles referred to in Commercial Union Assurance Co Ltd v Waymark No 1995 (2) SA 73 (TK) were approved by the Constitutional Court:

10.1 The Court has a discretion to grant or refuse an amendment;

10.2 Some explanation must be offered therefor;

10.3 The Applicant must show that a triable issue will exist;

10.4 The modern tendency is to allow an amendment if it results in the proper ventilation of the dispute;

10.5 The application must be bona fide;

10.6 It must not cause an injustice which cannot be compensated by costs.

This list is not intended to be exhaustive.

[11] A technical approach is to be avoided nor should an excessively formalistic approach in the application of the Rules be adopted. One should aim at an expeditious and inexpensive approach to determine cases on their real merits.

See: Trans-African Insurance Co Ltd v Maluleka 1956 (2) SA 273 (A) at 278 F-G.

[12] In recent times the above well-known considerations have been amplified by the notion that Rules of Court should be seen and given life against the back-ground of relevant constitutional law considerations, such as the right of access to Courts, provided for in section 34 of the Bill of Rights contained in the Constitution. The core function of a Court is after all to dispense justice without being hamstrung. The object of Court Rules is twofold: the first is to ensure a fair trial or hearing. The second is to “secure the inexpensive and expeditious completion of litigation and … to further the administration of justice.

See: Eke v Parsons [2015] ZACC 30 at par [39] and [40], as well as Kgolane v Minister of Justice 1969 (3) SA 365 (A) at 369 H.”

Those passages obviously refer to amendments in general but there is some over-lapping with what is required by s 133(1) where additional considerations apply.

[11] In its Replying Affidavit the applicant says that the BRP’s have consented to “these proceedings” as evidenced by clause 20 of the Amended Sale of Business Agreement. They however also say that an amendment was sought and that “the factual and legal basis for seeking the leave of the court are precisely the same for the substantive relief and are dealt with

comprehensively in the Founding Affidavit” (the said clause 20 is a usual dispute resolution clause requiring an arbitration).

[12] It is clear from the Absa judgment supra and Eke v Parsons supra that a more modern approach is required to amendments sought so as to enable a speedy and cost-effective resolution of disputes in the interest of justice. Any undue formalism that would defeat those objects is to be avoided. This, what I refer to as “the modern approach” is mandated by the Constitution and the attainment of its spirit and purpose, particularly in the context of s34 thereof, which deals with the right to access to a court.

[13] I have also considered the various authorities relied on by DCM, such as: Merchant West Working Capital Solutions (Pty) Ltd V Advanced Technologies and Engineering Co Pty Ltd [2016] JOL 36732 (GSJ), LA Sport 4 x 4 Outdoor CC v Broadwalk Trading 20 (Pty) Ltd 2015 JDR 8405 GP (a full bench decision of this division), Arendse and Others v Van der Merwe and Another NNO 2016 (6) SA 490 (GJ) , Msunduzi Municipality v Uphill Trading 14 (Pty) Ltd 2015 JDR 0702 CKZP, and Booysen v Jonkheer Boerewynmakery (Pty) Ltd (in business rescue) [2017] 1 All SA 862 (WCC) at par 54. The relevant principles emanating from these decisions and which are applicable hereto are the following, (and I respectfully agree that they need be considered in each particular case), however, also keeping in mind the modern approach to amendments, when this becomes applicable.

13.1 In certain instances, but not in all, a formal application is required to place sound factual material and sound legal contentions before the court;

13.2 In other cases such facts may be self evident. Context is everything in law, I may add;

13.3 Whenever relaxation is sought, the rights of the company, affected persons and the interests ‘of those persons must be considered in the context of the purpose of the particular business rescue plan;

13.4 The court has a wide discretion dictated by the interests of justice. It must be asked: what is the purpose of the moratorium in any given context, and what will be the consequence of it being lifted?

13.5 Will the particular business rescue plan be enhanced or defeated by the moratorium being lifted?

13.6 The object and purpose of business rescue proceedings as set out in s7 (k) and 128 (b) of the Act must be considered;

13.7 “Exceptional circumstances” are however not required;

13.8 An application can be brought within the context of a main application;

13.9 It is not necessary to establish on a prima facie basis that the main application will succeed, as long as the basis laid is bona fide and reasonably arguable.

[14] In light of the mentioned authorities and on the present facts, I exercise my undoubted discretion in favour of the applicants. The relevant facts, and many are commons cause, appear from applicant’s founding affidavit. It is clear that there are no other parties involved. It is also clear what the business rescue plan is: it is not to save the Company and preserve its assets, but rather to pay creditors. The company will certainly not regain financial health, as Mr J.P Daniels S.C on behalf of Applicant, put it. Once the debt due to 4th respondent is paid, nothing of commercial value will remain. The BRPs, having noted applicants’ Rule 28 application and their

stated intention referred to in the replying affidavit, would have been at liberty to file a supplementary affidavit to deal with all the considerations that I have mentioned in par 13 above. Mr A.J Eyles S.C, on behalf of the DCM respondents agreed (and properly so) that a s 133 application could be contained in a replying affidavit, subject of course to the respondents right to file a supplementary affidavit to deal with the appropriate considerations.

[15] In light of all of the above, I deem it just that the Rule 28 application dated 15 September 2020 be allowed and that the notice of motion dated 8 September 2020 be amended accordingly. It is in the interest of justice that the relevant leave sought by way of the new par 1A and 1B be granted.

[16] In holding as I do, I have not omitted to consider detailed arguments relating to urgency. Applicant seeks to perfect its security and preserve its assets on an interim basis, though its right to do so is vigorously disputed. It must be noted that the amendments sought are only vis-à-vis the 1st respondent. I do not agree with DCM’s argument that applicant can have sufficient redress in due course by way of a claim for damages. It seeks specific performance and that is its right to seek such in due course. See: Christie, The Law of Contract, 7th Ed at p 630 and footnote 135.

[17] The dispute about the removal of the tailings, and its financial implications is of such a nature, that I hold this part of the application to be urgent. In doing so I do not intend to deprive any party of any future argument relating to background facts and the interpretation of relevant agreements or to raise the number of facts that are disputed. For the sake of clarity I can mention that the chrome seam is the particular mine consists of chrome and PGM’s. Chrome is removed from the ground and consists of chrome, PGM’s and rock. PGM’s is a by -product of the mining of chrome and consists of a group of minerals. “Tailings” is the balance of the chrome after the chrome has been extracted. A more detailed description of the process and who was or would be the owner of the various product is at this stage not desirable as there is a dispute about this topic as well.

[18] The following order is made:

18.1 Applicant’s Rule 28 application of 15 September 2020 and the amendments to the Notice of Motion of 8 September 2020 are granted.

18.2 The costs of this part of the application are to be paid by the first to third respondents including the costs of 2 counsel, except that applicant is to pay the wasted costs occasioned by the amendment including costs of 2 counsel. This cost order is made provisional for 7 days and the parties are at liberty to submit further representations in regard thereto. Should no such representations be made, this costs order will become final.

18.3 The arbitration mentioned in par 7 of the Notice of Motion is to be referred within 15 days of the date of this order, if the other prayers are granted.

18.4 The remainder of the prayers are postponed to a date to be arranged on a semi-urgent basis.

___________________________________

H FABRICIUS

JUDGE OF THE HIGH COURT OF SOUTH AFRICA

GAUTENG DIVISION, PRETORIA

DATE OF HEARING: 7 OCTOBER 2020

DATE OF JUDGMENT: 19 OCTOBER 2020

COUNSEL FOR THE APPLICANT:

JP DANIELS S.C & CT VETTER

INSTRUCTED BY:

THOMSON WILKS INC

COUNSEL FOR THE FIRST TO THIRD RESPONDENT:

AJ EYLES S.C & C ROBERTSON

HOGAN LOVELLS (JOHANNESBURG) INC

COUNSEL FOR THE FOURTH RESPONDENT:

T MUNDELL S.C & CH BOTHMA

AJH ATTORNEYS