Lazenby v Lazenby Vervoer VV and Others (M328/2014) [2014] ZANWHC 41 (4 September 2014)

“IN THE HIGH COURT OF SOUTH AFRICA”

NORTH WEST HIGH COURT, MAHIKENG

CASE NO. M.28/2014

In the matter between:

JACOB WYNAND LAZENBY

APPLICANT

and

LAZENBY VERVOER CC 1ST RESPONDENT

D.M BOTHA N.O 2NDREPONDENT

C.B ST CLAIRE COOPER N.O 3RD REPONDENT

T. MOLEFE N.O 4TH REPONDENT

SOUTH AFRICAN REVENUE SERVICE 5TH REPONDENT

JUDGMENT

GUTTA J.

A. INTRODUCTION

[1] The applicant, who is also a member of the first respondent, launched an application in terms of section 131(4)(a) of the Companies Act 71 of 2008 (“the Act”) to place the first respondent (Lazenby Vervoer) under supervision and commencing business rescue proceedings, and for the appointment of Mr H.E. Vorster (“Mr Vorster”) as the interim business rescue practitioner.

[2] Before the commencement of the proceedings, I raised the following with counsel representing the parties, namely, that business rescue proceedings were initially brought in terms of section 129 of the Act, where the company resolved to begin business rescue proceedings. Pursuant thereto, a business rescue practitioner, Mr J.P. Jordaan (“Mr Jordaan”), was appointed and he ultimately filed, with the Commissioner, a notice of termination of business rescue proceedings in terms of section 132(2)(b) of the Act on the grounds that there are no longer reasonable prospects of rescuing the company. The question I posed to both counsel was whether in the circumstances the applicant could launch a fresh application in terms of section 131 of the Act.

[3] Both counsel made submissions to Court and furnished this Court with written heads of argument.

B. THE FACTS

[4] The facts were succinctly summarised by counsel for the fifth respondent in the heads of argument, and are repeated hereinbelow.

[5] The applicant, Mr J.W. Lazenby, and his wife, Mrs Yolande Lazenby (“Mrs Lazenby”), are the only members of Lazenby Vervoer. On 31 May 2013, they adopted a resolution to commence business rescue proceedings in terms of section 129 of the Act.

[6] Mr Jordaan was appointed as business rescue practitioner and he proceeded to publish a business rescue plan.

[7] At the second meeting of the creditors, when the plan was considered, a motion was carried to postpone the meeting, but prior to the plan being revised, a creditor of the first respondent, namely, Suidwes Landbou, brought an urgent application to have the business rescue proceedings set aside and placing the first respondent under liquidation. The fifth respondent intervened in the application by Suidwes Landbou and all the parties agreed to postpone the application to 07 November 2013.

[8] Subsequent thereto, the fifth respondent discovered that whilst Lazenby Vervoer was under business rescue, it transferred R2 194 000.00 from its ABSA Bank account and a further R1 525 000.00 from its Standard Bank account to the personal Nedbank account of Mrs Lazenby.

[9] The aforesaid caused the fifth respondent to withdraw its application to intervene in the application of Suidwes Landbou and to approach this Court, under Case No. 1640/2013, on 23 September 2013 on an urgent ex-parte basis for an order preserving the funds in the Nedbank account, (Part A of the application) pending an application to set aside the business rescue proceedings of the first respondent and for its liquidation (Part B of the application). The urgent application was granted on 23 September 2013.

[10] Pursuant thereto, on Monday, 30 September 2013, the fifth respondent approached Court again, in terms of Part B of its application, for an order setting aside the business rescue proceedings and for a provisional liquidation order. The matter was postponed to 07 November 2013. An undertaking was however obtained from Mr Jordaan that he would provide security of R5 000 000.00 to the fifth respondent.

[11] Before Mr Jordaan could provide the security, he terminated the business rescue proceedings and the fifth respondent, under Case No. 1640/2013, applied, by agreement between the parties, for the winding up of the first respondent.

[12] On 10 October 2013, the first respondent was provisionally wound up and the second to fourth respondents were appointed provisional liquidators. The provisional liquidators applied, and were granted an order to extend their powers in terms of section 384(6) of the old Companies Act 61 of 1973 (“the old Act”) and an insolvency enquiry was held on 09 December 2013 in terms of the provisions of sections 417 and 418 of the old Act.

C. THE LAW & ANALYSIS

[13] To return to the issue that I raised at the commencement of the proceedings, the law relevant thereto is set out hereinbelow.

[14] Section 131(1) of the Act reads:

“(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.”

(Own emphasis)

[15] Section 129, which deals with a company resolution to begin business rescue proceedings, provide as follows:

“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:

(a) the company is financially distressed; and

(b) there appears to be a reasonable prospect of rescuing the company.”

[16] The word ‘unless’ as used in a section of a statute serves to constitute an exception, exemption or qualification to the provisions of the section. See Rex v Zondagh 1931 AD 8 at 14.

[17] It is assumed that statutory language as it stands, on condition that it is clear and unambiguous, is a reliable expression of legislative intent. Clear language is identified with plain or ordinary language that is language in the sense that the normal speaker of a language will understand it. The paramount rule of statutory interpretation is that the real intention of the legislature, once discerned, must be given effect to. See Re-interpretation of Statutes, L. du Plessis, Butterworths, p. 93.

[18] In Poswa v Member of the Executive Council for Economic Affairs, Environment and Tourism, Eastern Cape 2001 (3) SA 582 (SCA) at paragraphs [10] and [11], quoted with approval Bhyat v Commissioner for Immigration 1932 AD 152 at 129, held as follows:

“[10] The literal meaning of an Act (in the sense of strict literalism) is not always the true one, but escaping its operation is usually not easy, most often impossible for:

‘the cardinal rule of construction of a statute is to endeavor to arrive at the intention of the lawgiver from the language employed in the enactment . . . in construing a provision of an act of Parliament the plain meaning of its language must be adopted unless it leads to some absurdity, inconsistency, hardship or anomaly which from a consideration of the enactment as a whole a court of law is satisfied the legislature could not have intended.’ (Per Stratford JA in Bhyat v Commissioner for Immigration 1932 AD 152 at 129).

[11] The effect of this formulation is that the Court does not impose its notion of what is absurd on the legislature’s judgment as to what is fitting, but uses absurdity as a means of difining what the legislature could not have intended and therefore did not intend, thus arriving at what it did actually intend.”

[19] In casu, the language used is clear and unambiguous. According to the Concise Oxford English Dictionary, Oxford University Press, 10th Ed. revised 2002, the word ‘unless’ means ‘except when’ or ‘is not’. The words ‘unless a company has adopted a resolution contemplated in section 129’, thus defines the exception to this right. Hence, the only qualification to an affected person’s right to apply to court in terms of section 131 is in circumstances where the company had already adopted a resolution contemplated in section 129.

[20] A company has a choice to proceed either in terms of section 129 or section 131 when considering business rescue proceedings. Section 129 provides for a voluntary commencement of business rescue proceedings where those proceedings are initiated by the company itself through the adoption of a resolution, while section 131, provides for any affected person to approach Court in order to commence business rescue proceedings.

[21] Section 129(7) provides that if the board of a company has reasonable grounds to believe that the company is financially distressed, but the board has not adopted a resolution to commence business rescue proceedings, the board must deliver a written notice to each affected person, setting out the criteria why the company is financially distressed and its reasons for not adopting a resolution to commence business rescue proceedings. The only reason for the enactment of section 129(7) is to give an affected person an opportunity to approach Court in terms of section 131 of the Act, in circumstances where no resolution was adopted. (Own emphasis)

[22] It is common cause that Mr and Mrs Lazenby, the only members of the first respondent, resolved to commence business rescue proceedings, in terms of section 129 of the Act, on 31 May 2013.

[23] A board of a company bears knowledge that a company is financially distressed and is best equipped to pass a resolution that a company be placed under business rescue and to initiate the business rescue proceedings, as was done by the applicant and Mrs Lazenby in casu. Hence, the applicant, who elected to proceed in terms of section 129, cannot in the circumstances apply to this Court under section 131.

[24] The above view is fortified when one also considers the provisions of sections 130 and 139 of the Act, hereinbelow.

“130. Objections to company resolutions.

(1) Subject to subsection (2), at any time after the adoption of a resolution in terms of section 129, until the adoption of a business rescue plain in terms of section 152, an affected person may apply to a court for an order–

(a) setting aside the resolution, on the grounds that–

(i) there is no reasonable basis for believing that the company is financially distressed;

(ii) there is no reasonable prospect for rescuing the company; or

(iii) the company has failed to satisfy the procedural requirements set out in section 129;

(b) setting aside the appointment of the practitioner, on the grounds that the practitioner–

(i) does not satisfy the requirements of section 138;

(ii) is not independent of the company or its management; or

(iii) lacks the necessary skills, having regard to the company’s circumstances;

. . .

(2) An affected person who, as a director of a company, voted in favour of a resolution contemplated in section 129 may not apply to a court in terms of–

(a) subsection (1)(a) to set aside that resolution; or

(b) subsection (1)(b) to set aside the appointment of the practitioner appointed by the company, unless that person satisfies the court that the person, in supporting the resolution, acted in good faith on the basis of information that has subsequently been found to be false or misleading.”

“139. Removal and replacement of practitioner.–

(1) A practitioner may be removed only–

(a) by a court order in terms of section 130; or

(b) as provided for in this section.

(2) Upon request of an affected person, or on its own motion, the court may remove a practitioner from office on any of the following grounds–

(a) Incompetence or failure to perform the duties of a business rescue practitioner of the particular company;

[Para. (a) substituted by s.89 of Act No. 3 of 2011.]

(b) failure to exercise the proper degree of care in the performance of the practitioner’s functions;

(c) engaging in illegal acts or conduct;

(d) if the practitioner no longer satisfies the requirements set out in section 138(1);

(e) conflict of interest or lack of independence; or

(f) the practitioner is incapacitated and unable to perform the functions of that office, and is unlikely to regain that capacity within a reasonable time.

(3) The company, or the creditor who nominated the practitioner, as the case may be, must appoint a new practitioner if a practitioner dies, resigns or is removed from office, subject to the right of an affected person to bring a fresh application in terms of section 130(1)(b) to set aside the new application.”

[25] Hence, a practitioner can only be removed or replaced by a court in terms of section 130 or section 139 as set out supra. In casu, Mr Jordaan was not removed from office, nor did he die or resign.

[26] In other words, the business rescue practitioner can be appointed by the Court in circumstances where the practitioner dies, resigns or is removed from office and only in voluntary business rescue proceedings under section 129. See Henochsberg on Companies Act, 71 of 2008 Commentary on section 139(3), Vol. 1, Issue 8 pg. 489.

[27] Hence, the rights of an affected person to approach Court for an order to commence business rescue proceedings is excluded in circumstances where the board of the company has already adopted a resolution to begin business rescue proceedings and neither the resolution nor the business rescue practitioner has been set aside in terms of section 130 of the Act.

[28] During argument, it was contended on behalf of the applicant that he had no other remedy in law than to approach Court in terms of section 131 of the Act. That the business rescue practitioner did not properly apply his mind and failed to consider relevant facts at the time when he terminated the business rescue proceedings. That being the case, the applicant’s remedies lies in an application to review the business rescue practitioner’s decision to terminate the business rescue proceedings and not to begin business rescue proceedings afresh.

[29] The legislature’s intention to exclude an application in terms of section 131 where a company has adopted a resolution to begin business rescue proceedings is not absurd and does not lead to an anomaly.

[30] In casu, a resolution in terms of section 129 of the Act to begin business rescue proceedings was adopted. The resolution has not been set aside in terms of the provisions of section 130 or section 139 of the Act or on any other ground, and as such the applicant’s right as an affected person to approach Court in terms of section 131 of the Act for an order to again begin business rescue proceedings is excluded.

D. ORDER

[31] In the circumstances, I make the following order:

a) The application is dismissed with costs.

_________________

N. GUTTA

JUDGE OF THE HIGH COURT

APPEARANCES

DATE OF HEARING

: 31 JULY 2014

DATE OF JUDGMENT

: 04 SEPTEMBER 2014

COUNSEL FOR APPLICANT

: ADV P. SMIT

COUNSEL FOR 5TH RESPONDENT : ADV P.J.J. ZIETSMAN

ATTORNEYS FOR APPLICANT

: D C KRUGER ATTORNEYS

(Instructed by E A L MULLER ATTORNEYS)

ATTORNEYS FOR 2ND, 3RD&4TH RESPONDENTS: SMIT STANTON INC.

(Instructed by HONEY ATTORNEYS)

ATTORNEYS FOR 5TH RESPONDENT : THE STATE ATTORNEY