Essack v Resfam Investments CC and Others (81703/2019) [2020] ZAGPPHC 145 (14 April 2020)

HIGH COURT OF SOUTH AFRICA

(GAUTENG DIVISION, PRETORIA)

(1) REPORTABLE: NO.

(2) OF INTEREST TO OTHER JUDGES: NO.

(3) REVISED.

CASE NO:81703/2019

14/4/2020

In the matter between:

ISMAIL SULIMAN ESSACK

Applicant

and

RESFAM INVESTMENTS CC (in liquidation)

1st Respondent

MOHOMMED MARIER TA YOB N.O

2nd Respondent

JACQUES FISHER N.O

3rd Respondent

NOMVUYO YVONNE SERITI N.O

4th Respondent

STANDARD BANK OF SOUTH AFRICA LIMITED

5th Respondent

COMPANIES AND INTELLECTUAL COMMISSION

6th Respondent

MASTER OF THE HIGH COURT, .JOHANNESBURG 7th Respondent

JACK KLAFF INVESTMENTS (PTY) LTD

8th Respondent

JUDGMENT

DAVIS, J

Nature of application

[1] This is an application by the erstwhile sole member of a close corporation for the setting aside of "a business rescue order" and a subsequent final winding-up order granted in the Gauteng Local Division on 14 May 2019 and some ancillary relief. The relief claimed is set out in the Part B of the Applicant's Notice of Motion.

[2] Jurisdiction:

2.1 Ordinarily, an application for the setting aside of a winding-up order should be brought in the court which granted the order[1].

2.2 Counsel for the Applicant argued that there were other jurisdictional facts, justifying a departure from this rule on the basis of some extended causae continentia (lite rally; a cohesion of actions, a jusrisdictional rule of convenience).

2.3 Furthermore, all the parties who wished to oppose the application consented to this court's jurisdiction.

2.4

This issue has to all intents and purposes become moot due to the fact that, when the relief claimed in part A of the Applicant's Notice of Motion for a stay of a liquidation sale of the close corporation's primary asset, a shopping complex, was granted by Ranchod, J, he ordered that the Applicant take the required steps by a certain date to have Part B of the Notice of Motion enrolled. He also ordered that the stay of the sale and interim payment of rentals to the liquidators must take place, pending the determination of the relief claimed in aforesaid part B. Declining to now exercise the concurrent jurisdiction of this court over the relief claimed in Part B would unduly prejudice all those who have consented to jurisdiction as well as those whose rights may be affected by the interim order of this court.

2.5 For the above reasons, this court shall assume and exercise jurisdiction in respect of the relief claimed in respect of the winding-up order granted by the Local Division (I shall deal with the ancillary relief later).

[3] Background facts

3.1 The First Respondent is Resfam Investments CC. It is a property holding corporation of which the Applicant was at all relevant times the sole member. It is currently in liquidation and shall be referred to henceforth as "the Corporation".

3.2 On 9 July 2015 the Applicant, on the advice of a forensic auditor, cited as the Second Respondent ("Tayob"), voluntarily resolved to place the Corporation under Business Rescue. This resolution was duly filed with the Sixth Respondent (the "CIPC" ). This was done in terms of Section 129 of the Companies Act 71 of 2008. Tayob was the business rescue practitioner nominated by the Corporation.

3.3 Business rescue proceedings commenced in terms of Section 129 (3)(a) on 15 July 2015, according to the Third and Fourth Respondents ("the liquidators" ).

3.4 There is some dispute on the papers as to whether Tayob was properly appointed and whether such appointment had been filed in terms of Section 129 (3 )(a) and 1 29 (4)(a) but that does not appear to be the real dispute or complaint by the Applicant. The real complaint and which formed the crux of the Applicant's argument, was that Tayob was only licensed as a business rescue practitioner (and then only initially conditionally so) on 26 August 2015 whilst the last day on which he should have been appointed in terms of the aforementioned

sections was 20 July 2015.

3.5 Despite these shortcomings Tayob in his capacity as business rescue practitioner, did a great many things: he caused a draft business

rescue plan to be published (although out of time and without having procured an extension), he convened a meeting with creditors pursuant to which he prepared an amplified business rescue plan and convened a further meeting of creditors, he launched an application for the setting aside of the majority vote against the business rescue plan which application was later withdrawn. He further, in terms of a court order which he had obtained , proceeded to attempt to sell the Corporation's primary immovable asset, he litigated against a tenant of the Corporation (" MultiFurn" ) and he obtained an order in the Limpopo Division of the High Court whereby the Applicant was removed as a member of the Corporation. Ta yob also sought to convene an enquiry in term of sections 417 and 418 of the Companies Act, 61 of 1973 to have the App li cant' s conduct examined.

3.6 After the passage of almost four years, the Applicant launched an application in the Gauteng Local Division, Johannesburg under case number 16468/2019 for the removal of Tayob alternatively for liquidation of the Corporation. Tayob opposed the application and counter-applied for an order terminating the business rescue proceedings and also for the liquidation of the Corporation. In this, Tayob was supported by the Fifth Respondent, Standard Bank who, during this whole process had not been paid in respect of its debt , secured by bonds over the Corporation's property.

3.7 It is the above counter -application which led to the final winding-up order of 14 May 2019 which the Applicant now seeks to set aside. The orders sought in the counter-application were granted by consent. Despite this consent, the Applicant' s contention is that Tayob's appointment as business rescue practitioner of the Corporation was invalid and therefore all steps taken by him are invalid and should fall like a row of dominoes, including the winding-up order and all liquidation proceedings.

[4] Ad the business rescue practitioner's appointment.

4.1 The Applicant's first contention regarding the improper appointment of Tayob is that the notice of his appointment in terms of section

129(4)(a) was only filed on 21 July 2015 whilst the last day for filing was 20 July 2015.

4.2 As already referred to earlier, the second or primary complaint is however that Tayob was only ce11ified as business rescue practitioner

on 26 August 2015. He had to have been so licenced in terms of Section 138 (l)(b) read with Section 138 (2) to qualify as a business

rescue practitioner. He was, however, at all relevant times a member in good standing of a profession mentioned in section 138 (a). There is some ambiguity on the papers and the regulations as to whether the CIPC in 2015 considered it necessary to exercise its permissible licensing function in terms of Section I 38(2) in respect of persons qualifying in terms of Section 13 8 (I)(a) and some ambiguity fu1ther as to which professional bodies had been accredited and at what stage it had been done.

4.3 It is rather cynical of the Applicant to complain about a one day late filing of Tayob' s appointment when this was occasioned by the Applicant himself as sole member of the Corporation. It also appears that the complaint about Tayob's licensing occurred at a very late stage during the almost five years of attempted business rescue. It is also not clear what triggered the dispute between the Applicant and Tayob and whether this was as a result of the attempted collection by Tayob (and the subsequent withholding) of rentals collected by the Applicant from MultiFurn during the period of business rescue or the unsuccessful business rescue process itself.

4.4 In view of the conclusion I have reached in respect of the liquidation itself as more fully set out hereunder, I need not resolve these issues and neither do I have to determine whether the shortcomings in Tayob's appointment, such as they are, fall within the category of those which are of little consequence as alluded to in Panamo Properties (Pty)Ltd v Nel N.O 2015 (5) SA 63 (SCA) at para [29].

[5] Should the winding- up / liquidation be set aside?

5.1 Section 354 of the Companies Act, 61 of 1973 provides that "the Court may at any time after the commencement of a winding-up , on the application of any liquidator, creditor or member, and upon proof to the satisfaction of the Court that all proceedings in relation to the winding up should be stayed or set aside. make an order staying; or setting aside the proceedings or for the continuance of any voluntary winding-up on such terms and conditions as the Court may deem fit".

5.2 As set out in the commentary on this section in meskin, Henochsberg on the Companies Act, this section accords a court a discretion whether to set aside a winding-up order or not. This is irrespective of whether the basis

for such setting aside is the contention that the winding -up order should never have been granted or whether the basis is that

subsequent events to the granting of the order justifies such setting aside[2].

5.3 A distinction should however, be made between circumstances where it is contended, as the Applicant does, that the order should never have been granted (in the words of Meskin (above): "should not have occurred") and circumstances where setting aside is sought by reason of subsequent events. In the former case, the application should only be granted in exceptional circumstances[3].

5.4 In deciding whether or not to set aside winding-up proceedings, a court should have regard to the wishes of the creditors and members . In this regard (similar as when considering a stay of proceedings), a court has to consider whether the rights of creditors have been protected, such as where "satisfactory provision (has been made) for them to be paid in full", and where the liquidators' "special position has been fully safeguarded, either by paying (them) the proper amount for (their) expenses or by sufficiently securing payment[4]".

5.5 The solvency or not of the Corporation is also a factor to be considered[5].

5.6 The factors relevant to this decision can be summarized as follows :

- In July 2015 , the sole member of the Corporation, being the person with the most intimate knowledge of the Corporation's business, deposed to an affidavit confirming that the Corporation was in financial distress.

- The reasons for the distress appear to be the follow ing: during February 2015 another close corporation of which the Applicant was also the sole member, ISY Motors CC, borrowed monies from Standard Bank. The Corporation in this application was bound by the Applicant in favour of Standard Bank as surety and co-principal debtor for these loans. On 16 July 2015 the Applicant placed ISY Motors CC in voluntary liquidation . This resulted in the Corporation becoming liable to Standard Bank for R2, I million and R 550 765, 63 plus interest at variable rates on these amounts . In addition the Corporation owes Standard Bank R58, 900 together with interest from 29 February 2016 in respect of a separate home loan.

- The suretyship amounts are secured by three mortgage bonds over the business premises owned by the Corporation situated in Modimolle. The home loan is secured by a bond over a derelict property, being a residential erf.

-

Prior to the commencement of the business rescue proceedings of the Corporation, the Applicant has, on its behalf, negotiated a lease with MultiFurn in respect of the business premises or a part thereof. This continued to exist for some time after the commencement of the business rescue proceedings and there are allegations that the Applicant has continued to collect rent form MultiFum. This had resulted in Tayob obtaining judgment against the Applicant of R652 750 plus interest.

- Since the cancellation of the MultiFurn-lease, and the appointment of the liquidators, the Applicant still continued to collect rentals from the tenants of the business premises of an undisclosed amount. Of this, some rather trivial sum has been paid into the Applicant's attorney ' s trust account (should the winding-up order stand, he has tendered payment thereof to the liquidators).

- The Applicant (irrespective of his membership of the Corporation) claims that he has a loan account due to him of some R700 000.

5.7 As to the solvency of the Corporation, very little is said by the Applicant. He alleged that Tayob has prevented him from settling the matter with Standard Bank and that, had it not been for Tayob, Standard Bank would have been paid "long ago". He failed to take the court, the bank or the liquidators into his confidence as to where the funds would have come from. There is no evidence as to the Corporation's income or expenditure, the extent of the rental income, the value of its properties or its factual solvency.

5.8 What we do know, is that the Corporation was in financial distress in 2015, the amounts mentioned above due to Standard Bank have not only remained unpaid, but have increased substantially due to the arrears and unpaid interest and that the Corporation's sole source of income has largely, if not exclusively, been retained by the Applicant.

5.9 On a balance of probabilities, if the Corporation was commercially insolvent in 2015 , the odds are that it is now also factually

insolvent.

5.10 The wish of the Corporation's principal creditor , Standard Bank, is that the liquidation order should stand and that the winding-up process be completed.

5.11 Notably, where the Applicant himself was previously of the same view, he does not set out sufficient facts which justify a turn-around of this position. His bald and sweeping statements regarding the corporation's ability to continue doing business are devoid of facts and particularity and do not in any way disturb the summary set out in paragraph 5.6 above.

5.12 I therefore find that the Applicant has failed to satisfy the onus on him. The winding-up order should stand (and equally so, the order terminating the business rescue proceedings ).

[6] The consequences of the above is that the relief seeking a setting aside of the appointment of Tayob becomes irrelevant. Insofar as he alleges he may be entitled to costs, I have been informed by the liquidators' counsel that it is an issue the liquidator's will deal with[6]. The same applies to the recovery of rentals from whomsoever are or may have been in possession thereof. As to the orders obtained by Tayob against the Applicant in the Limpopo Division, this court has no jurisdiction over those.

[7] Costs:

Having regard to the facts that this case, 1 find no cogent reason to depart from

the customary rule that costs should follow the event.

[8] Order:

The application is dismissed and the Applicant is ordered to pay the Third, Fourth and Fifth Respondents' costs.

N DAVIS

Judge of the High Court

Gauteng Division , Pretoria

Date of Hearing: 25 March 2020

Judgment delivered: 14 April 2020 (electronically)

APPEARANCES:

For the Applicant:

Adv J. K Berlowitz

Attorney for Applicant:

Mohamed Seedat Attorneys,

Pretoria

For 3rd , 4th & 5th Respondent:

Adv Y Coertzen

Attorney for 3rd, 4th& 5th Respondent: Newtons Inc., Pretoria

[1] Ex parte Bobat: In re Kathorian Trading Co (Pty) Ltd 1965 (2) SA 291 (D) at 293 - 294.

[2] Aubrey M . Cramer Ltd v Wells NO 1965 (4) SA 304 (WLD) at 305

[3] Ward v Smit: in re Gurr v Zambia Airways Corporation Ltd 1998 (3)SA 175 (SCA) at 180. I a, bound by this Supreme Court of Appeal judgment and not the latter contrary decision of a lower court in Storti v Nugent 2001 (3) SA 783 (W).

[4] Re Calgary & Edmonton Land Co Ltd [1975] All ER 1046 (Ch) at 1052

[5] Ex parte De Villiers NNO: In re Carbon Developments (Pty) Ltd (in liquidation) 1992 (2) SA 95 (W).

[6] See also Diener NO v Minister of Justice and Correctional Services and others 2019 (4) SA 374 (CC).