Lanarco Home Owners Association v Prospect SA Investments 42 (Proprietary) Limited (In Business Rescue) and Others (9381/14) [2014] ZAKZDHC 44 (29 October 2014)

IN THE HIGH COURT OF SOUTH AFRICA

KWAZULU-NATAL LOCAL DIVISION, DURBAN

In the matter between:

9381/14

LANARCO HOME OWNERS ASSOCIATION..............................................................................Applicant

and

PROSPECT SA INVESTMENTS 42 (PROPRIETARY)

LIMITED (IN BUSINESS RESCUE)

(Registration Number: 2002/004330/07..................................................................................First Respondent

THE REGISTRAR OF DEED PIETERMARITZBURG................................................Second Respondent

AMC HUNTER INCORPORATED.....................................................................................Third Respondent

SHEPSTONE & WYLIE ATTORNEYS............................................................................Fourth Respondent

JUDGMENT

KOEN J:

[1] Prior to be being placed under business rescue, the First Respondent launched an application against the Applicant which resulted in Kruger J granting an order1 on 30 June 2014:

(a) dismissing the First Respondent’s claim for a declaratory order that as the developer of the Lanarco Estate it was not a member of the Applicant and consequently not liable to the Applicant for the payment of levies;

(b) refusing the First Respondent’s claim for an order compelling the Applicant to furnish clearance certificates and/or consents as required by the transferring attorneys in respect of the individual properties within that development;

(c) granting an order in terms of the counter application declaring the First Respondent liable for payment of all levies imposed in respect of each immovable property owned by it within the boundaries of the Lanarco development during the period which it was the owner thereof.

In that application the First Respondent had described the Applicant as an ‘association incorporated under s 21’.

[2] The First Respondent was subsequent thereto placed under business rescue pursuant to the provisions of chapter 6 of the Companies Act No. 71 of 2008 (‘the Act’) and Mr Werner Cawood and Mr Johan Beer were appointed to administer its business whilst in business rescue.

[3] In a letter dated 28 July 2014 the First Respondent advised that in the opinion of the business practitioners the Applicant’s consent to each and every transfer, being a requirement by the Registrar of Deeds, was not dependent upon payment of levies that may be due to it by the First Respondent. It demanded that the required consent be provided in respect of two pending transfers, and any future transfers, within seven days in order to allow the Third Respondent’s conveyancing attorneys to proceed with the transfer of the properties. It also confirmed that it would forward a copy of the letter to the Third Respondent with instructions to proceed with the two pending transfers.

[4] As a result of inter alia the aforegoing, the Applicant as an affected person on an urgent basis on the 8th July 2014 requested from the First Respondent inter alia:

'4.1 ...

4.2 A copy of the sworn statement contemplated by s 129(3)(a) of the Companies Act;

4.4 ...’

The First Respondent did not respond to this request. The documents requested and referred to in s 129(3)(a) were requested, I was advised, also to obtain the names and addresses of every affected person.

[5] An application was thereafter prepared and issued out of this court on 7 August 2014 in which the following relief was claimed:

‘1. This application is heard as one of urgency as contemplated by uniform rule 6(12) and the ordinary time periods and forms of service, prescribed in the uniform rules, are dispensed with.

2. The applicant be and is hereby granted leave to institute and continue this application in terms of section 133(1 )(b) of the Companies Act 2008.

3. A rule nisi do issue, calling upon the respondents and other persons to whom notice of this application is given as provided for below, to show cause, if any, before this Court on the...... day of...............2014, at 09h30, or so soon thereafter as counsel may be heard, why an order in the following terms should not be granted:

3.1 It is ordered that the first respondent is required to procure the consent of the applicant, in writing, prior to transferring ownership of properties in the Lanarco Estate developed on Portion 4 of Erf 137 Kingsburgh, Registration Division ET, Province of KwaZulu-Natal (“Lanarco Estate”), or causing such transfer to take place.

3.2 The first respondent is interdicted from causing the transfer of ownership of any immovable property situate in Lanarco Estate, or instructing conveyancing attorneys to effect such transfer of such properties, save and unless the applicant has consented to such transfer in writing.

3.3 The third and fourth respondents are interdicted from transferring ownership of any immovable property situate in Lanarco Estate save and unless the applicant has consented to such transfer in writing.

3.4 The first respondent is directed to pay the costs of this application.

4. The relief in paragraphs 3.2 and 3.3 above shall operate as an interim order with immediate effect pending the return day.

5. Within seven days of the issue of the rule nisi contemplated in paragraph 3 above, the first respondent is ordered to furnish to the applicant in writing the names, physical addresses and email addresses, if known to the first respondent, of all affected persons falling within section 144(3), 145(1) and 146 of The Companies Act 2008 and if any suc h details are not known to the first respondent, the first respondent is required to state that under oath within the time period aforesaid.

6. Within seven days of compliance by the first respondent with the order in paragraph 5 above, the applicant is directed to give notice of this application, and any order granted herein, to all persons identified pursuant to paragraph 5 above, as required by the Companies Act 2008’.

[6] A copy of the papers was sent by email to Mr Cawood and the transferring attorneys, drawing attention to the fact that the matter

had been enrolled and set down for 12 August 2014 at 09h30. The papers were furthermore also served by the Sheriff on 8 August 2014 at 105 Club Avenue, Waterkloof Heights, ‘being the principle (sic) place of business of Prospect SA Investments 42 (Pty) Limited upon Mr R P Badenhorst - auditor’.

[7] On 12 August 2014 the Applicant’s attorney received a letter dated 7 August 2014 from the First Respondent. The First Respondent has argued that this letter was only sent at 5:35 pm on the 12 August 2014 whereas the Applicant contends that it had been sent at 8:20 am on that day. The latter appears more probable as there is an email dated 12 August 2014 at 8:51 am from the Applicant’s attorneys responding specifically to the First Respondent's statement that should the Applicant persist with the application on the current basis, the First Respondent will proceed to place its version before the court and will seek a punitive costs order. The Applicant responded by stating that it did not intend to withdraw the application and that in the absence of a commercial resolution the Applicant persisted with the relief it claimed. Mr Lombard, the attorney of the Applicant, on the morning of 12 August 2014 and before the application was heard telephoned Mr Cawood and advised him that the application was standing down and enquired whether the First Respondent’s legal representatives wished to appear at court. During that discussion Mr Cawood said that the First Respondent did not intend opposing the interim interdict and would consider its position after the granting of the order.

[8] Henriques J thereafter granted an order in the terms sought, the rule nisi being returnable on 15 October 2014.

[9] The First Respondent subsequently filed a notice of set down enrolling the matter for reconsideration pursuant to the provisions of rule 6(12)(c) of the uniform rules. This is the application which served before me upon the return date of the rule nisi. In this application

for reconsideration the First Respondent raises a plethora of objections to the order granted.

[10] Rule 6(12)(c) provides that:

‘A person against whom an order was granted in his absence in an urgent application may by notice set down the matter for reconsideration of the order’.

[11] It has been stated that ‘the absence of the aggrieved party’ is ‘the underlying pivot’ to which the exercise of the power under the sub-rule is coupled.2 A wide discretion is intended. Furthermore it was observed that:

‘Factors relating to the reasons for the absence, the nature of the order granted and the period during which it has remained operative would invariably fall to be considered in determining whether a discretion should be exercised in favour of the agreed party. So too, will questions relating to whether an imbalance, oppression or injustice has resulted and, if so, the nature and extent thereof, and whether redress is open to attainment by virtue of the existence of other or alternative remedies. The convenience of the protagonists must inevitably enter the equation. These factors are by no means exhaustive. Each case will turn on its facts and the peculiarities

inherent therein'.3

[12] The interim interdict was granted with the full knowledge of the First Respondent, in circumstances where it was given an opportunity to oppose it, and where it had indicated that it did not intend opposing the relief but would consider its position after the granting of the order. The application was accordingly not granted ex parte, but more correctly, by default. That in my view is the end of the enquiry and the application for reconsideration.

[13] However insofar as I may be incorrect in that regard and a reconsideration would be competent, the application also falls to be dismissed for failing to raise any grounds which could result in injustice.

[14] I deal very briefly below wi;h objections that were raised.

[15] The main thrust of the argument was that this court lacks jurisdiction to have granted the order. Stripped to its bare essentials the complaint here appears to be specifically against the order granted in paragraph 2, that is that the Applicant be granted leave to institute and continue the application in terms of s 133( 1 )(b) of the Act. The First Respondent does not appear to take issue with this court having jurisdiction to grant the rule nisi or the interdictory relief on an interim basis provided such proceedings are first authorised by obtaining the requisite leave in terms of s 133(1 )(b) of the Act from the court where the registered and/or principal place of business of the First Respondent is situated, being the North Gauteng Court in Pretoria. In support of that contention the First Respondent relies inter alia on the judgment of Binns-Ward J in Sibakhuiu Construction (Pty) Ltd v Wedgewood Village Golf Country Estate (Pty) Ltd (Nedbank Ltd Intervening),4 the definition of ‘court’ in s 128(1 )(e) and s 133 of the Act, and the principle that the general scheme of business rescue is to establish a moratorium on claims.

[16] Section 133(1) provides:

‘(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 commenced or 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) ...’

Section 128(1)(e) defines ‘court’ to mean:

‘Court’, depending on the context means either -

(i) the High Court that has jurisdiction over the matter; or

(ii) either -

(aa) a designated Judge5 of the High Court that has jurisdiction over the matter, if the Judge President has designated any judges in terms of sub-section (3);

(bb) a judge of the High Court that has jurisdiction over the matter, as assigned by the Judge President to hear the particular matter, if the Judge President has not designated any judges in terms of subsection (3)’.

[17] The Sibakhulu matter dealt with status. It has, in any event, also not been followed in De Bruyn v Grand-select 101 (Pty) Ltd & another6 nor in Lonsdale Commercial Corporation v Kimberly West Diamond Mining.7 In the Lonsdale matter Lacock J declined to follow the judgment in Sibakhulu which he had described as:

‘tantamount to a finding that the legislature intended to limit or oust a local and provincial divisions jurisdiction derived from the common law and/or section 29 of the Supreme Court Act in respect of the liquidation and/or business rescue proceedings of a company that “resides” or has its principal place of business within that Courts area of jurisdiction, but not also its registered address. I am not persuaded that the reasons advanced by the learned judge justifies such a drastic limitation of a Court’s jurisdiction’.

Further he held that:

‘Had the legislature intended to limit a Court’s jurisdiction as suggested by Binns-Ward J, I would have expected the legislature to have made provision for such drastic limitations in clear and unambiguous terms. This was not expressly done when the 2008 Act was promulgated or since’.

I fully agree with those sentiments.

[18] This Court in the ordinary course clearly would have jurisdiction to grant the interdict that has been claimed. It is, for the purpose of the definition, the High Court that ‘has jurisdiction over the matter’8. There is no reason why, as an ancillary aspect thereto, this court would not have authority to grant the leave required by s 133(1 )(b). That is also consistent with s 21(2) of the Superior Courts Act 10 of 2013. If the legislature intended that only the court where the First Respondent has its registered office, or possibly also its principal

place of business, would have jurisdiction, then it would have stated that in more precise and express terms and not left it to inference. I am unable to find any room for such an inference in the wording employed in the Act.

[19] If the First Respondent was right, on the facts relating to the First Respondent, in each instance where an interdict or any other urgent relief was sought against the First Responoent in any division of the High Court other than the Gauteng North Division, the particular application would always have to be preceded by a separate application for leave in terms of s 133(1 )(b) in the Gauteng North Division. That would create an absurd situation which would not have been countenanced by the legislature. If it was what was intended, then the Legislature would have made it clear that it is only the court where the company under business rescue has its registered office (and possibly also where it has its principal place of business) which could grant such leave.

[20] The only possible criticism that could remain against the order of Henriques J was that the order relating to the granting of such leave was granted outright and not as part of interim relief pending the return date. Apart from notice that such leave would be asked for, having been given to the First Respondent which chose not to oppose that relief, it also seems to me that the order properly relates to and should be granted in that form as authority to the issue of the provisional order contained in the rule nisi with the interim relief to operate. It does not seem to me to be a matter of such injustice, even if I was wrong in that regard, as to justify a reconsideration of the substantive relief granted.

[21] The other objections raised by the First Respondent were of a highly technical nature. Complaints were raised relating to the citation of the First Respondent, that is that it was cited as the company (in business rescue) as opposed to the two business rescue practitioners being cited nomine officii. It is permissible to cite the First Respondent in either form and no prejudice results from the manner in which it has been cited.

[22] The First Respondent also raised the failure of the deponent to the founding affidavit to allege his authority to bring the application on behalf of the Applicant. It is now trite law that a witness who deposes to an affidavit need not be authorised. It is the attorneys who launch the application who need to be authorised and if there is to be any challenge, such challenge to their authority must be pursuant to the provisions of rule 7. No such chalienge was raised.

[23] The First Respondent also raised the alleged incorrect description of the Applicant. The Applicant should have been cited, it seems, according to a Windeed search as Larnaco Home Owners Association. There is no doubt that there is no confusion in the mind of the First Respondent that the correct Applicant is the Home Owners Association of the development where it owns property, the very entity against which relief was claimed before Kruger J. The different spelling of the name is simply a typographical error. At all times the Applicant was intended to be the Home Owners Association in respect of the Larnaco Estate. The Home Owners Association is the entity the First Respondent prior to it being placed under business rescue intended to proceed against and indeed proceeded against in seeking the judgment before Kruger J. It can hardly now complain that there is no such entity. It seems that the name of the Applicant has been incorrectly spelt in the application and that it should be corrected.9 That correction can be dealt with in a supplementary or further affidavit to be filed. The point is highly technical and not deserving of further consideration.

[24] The First Respondent has also raised the failure to give notice to employees and creditors of the First Respondent. These details have been requested prior to the application being launched but had not been furnished. These details have apparently now become available to the Applicant. In paragraph 66 of the founding affidavit the Applicant had indicated that when these particulars become available notice of the application would be given to those entities prior to the grant of any final order. The parties were agreed that the rule nisi issued on the 12 August 2014 be extended further. During that time such steps as may be required for the joinder of any of the interested and affected parties can be achieved.

[25] Taking into account the aforesaid, I am not persuaded that a case has been made out for the reconsideration of the order granted on 12 August 2014.

[26] The application for reconsideration is accordingly dismissed with costs.

DATE OF HEARING: 15 October 2014

DATE OF DELIVERY: 29 October 2014

APPLICANT’S COUNSEL: MR BOULLE (Respondent in reconsideration application)

APPLICANT’S ATTORNEYS: EDWARD NATHAN SONNENBERGS INC.

Tel: 031 536 8620

REF: A LOMBARD/A DA LA IS/ 0335921

RESPONDENT’S COUNSEL: LK VAN DER MERWE (Applicant in reconsideration application)

RESPONDENT’S ATTORNEYS: KOSTER ATTORNEYS

C/O PATHER & PATHER ATTORNEYS

Tel: 031 -304 4212/3

REF: Koster/5P001

1 This order has not been taken on appeal.

2 ISDN Solutions (Pty) Ltd v CSDN Solutions CC & others 1996 (4) SA 484 (W) at 486H.

3 Ibid at 487B-C.

4 2013 (1) SA 191 (WCC).

5 The ‘designated’ Judges are Judges designated by the Judge President of a High Court as specialist to determine issues relating to commercial matters, commercial insolvencies and business rescue.

6 [2014] ZANCHC 3 (5 March 2014)

7 [2013] ZANCHC 11 (17 May 2013) para 6.2

8S128(1)(e)(i) of the Act.

9 There is no confusion as to which entity is intended.