Suidwes Landbou (Pty) Ltd v Wynlandi Boerdery CC and Others (1510/13) [2013] ZANWHC 73 (19 December 2013)

IN THE NORTH WEST HIGH COURT, MAFIKENG

CASE NO: 1510/13

In the matter between:-

SUIDWES LANDBOU (PTY) LTD.......................................................Applicant

and

WYNLANDI BOERDERY CC....................................................First Respondent

LAZENBY VERVOER CC.....................................................Second Respondent

JACOB WYNAND LAZENBY.................................................. Third Respondent

YOLANDE LAZENBY..............................................................Fourth Respondent

JP JORDAAN..............................................................................Fifth Respondent

ABSA BANK LIMITED................................................................Sixth Respondent

FNB LIMITED / WESBANK.....................................................Seventh Respondent

THE RECEIVER OF REVENUE.....................................................Eight Respondent

KAROO OSCHE VRYBURG (PTY) LTD........................................Ninth Respondent

THE COMPANIES AND INTELLECTUAL

PROPERTY COMMISSION OF SOUTH AFRICA............................Tenth Respondent

CIVIL MATTER

DATE OF HEARING: 07 NOVEMBER 2013

DATE OF JUDGMENT: 19 DECEMBER 2013

COUNSEL FOR THE APPLICANT: ADV J PISTOR SC

With ADV ACKERMAN

COUNSEL FOR THE FIRST TO FOURTH:ADV BADENHORST SC

AND FIFTH RESPONDENTS With ADV KLOPPER

JUDGMENT

HENDRICKS J

[A] Introduction:-

[1] This is an application in which the Applicant applies for the following relief as set out in the Amended Notice of Motion:-

“1.1 directing that the application be heard as one of urgency and condoning the failure of the applicant to comply with the Uniform

Rules of Court;

1.2 granting leave to the applicant in terms of Section 133(1)(b) of the Companies Act, 71 of 2008 (“the Act”) to institute this application and the further proceedings referred to herein after;

1.3 to declare void the “binding offer” of the third respondent, to purchase and acquire the voting interests of the applicant and the seventh respondent, alternatively the voting interests of the applicant, on 29 July 2013 in terms of section 153(1)(b)(ii) of the Act and set it aside;

1.4 to set aside the third respondents “proposal to approve” and the “subsequent approval” of the business rescue plan by the fifth respondent (in respect of the first respondent) on 29 July 2013, following the “acquisition of the voting interest”, as set out in paragraph 1.3 above;

1.5 to confirm the rejection of the business rescue plan by the applicant and the seventh respondent in respect of the first respondent on 29 July 2013, in terms of Section 152(3)(a) of the Act;

1.6 to terminate the business rescue proceedings of the first respondent with immediate effect in terms of Section 132 of the Act;

1.6A alternatively to paragraph 1.3 to 1.6:

1.6A.1 to set aside the “binding offer” of the third respondent to purchase and acquire the voting interests of the applicant and the seventh respondent, on 29 July 2013 in terms of Section 153(1)(b)(ii), because of the failure of the fifth respondent and/or the third respondent, to comply with the provisions of Section 153(4) of the Act at all;

1.6A.2 to set aside the “subsequent approval” of the business rescue plan on 29 July 2013 as proposed by the third respondent,

after the “acquisition” of the voting interests of the applicant and the seventh respondent, because of the failure of the fifth respondent, to comply with the provisions of Section 153(4) of the Act at all;

1.6A.3 alternately to 1.6A.1 and 1.6A.2, to set aside the “binding offer” and “subsequent approval” of the business rescue plan, in terms of Section 153(7) of the Act;

1.6B to declare that:-

1.6B.1 any moratorium placed in terms of Section 154(2) of the Act on the applicant is lifted, because of the failure by the fifth and/or third respondents to comply with the provisions of Section 153(4) of the Act;

1.6B.2 the applicant is entitled to take the steps necessary to enforce its claim against the first respondent, including the institution of liquidation proceedings herewith;

1.6C that leave is given to the applicant entitling the applicant to enforce legal proceedings against the third and fourth respondents as sureties of the first respondent in terms of Section 133(2) of the Act, on such terms the Court may consider just and equitable in the circumstances;

1.7 to issue a provisional liquidation order of the first respondent, calling on all interested parties, on THURSDAY 10 OCTOBER 2013 at 10h00 to show reasons, if any, why the provisional order of liquidation should not be made final;

1.8 authorising the applicant to serve a copy of this order by email to each of the respondents and any other creditor that may become known;

1.9 ordering that the order be published once in the Government Gazette and the Beeld newspaper;

1.10 ordering that the fifth respondent is not entitled to any remuneration in terms of the Act in respect of the business rescue proceedings of the first respondent, after 29 July 2013;

1.11 that the third respondent is ordered to pay the costs of this application on a scale between attorney and own client;

1.12 that the costs of the liquidation of the first respondent, be costs in the liquidation;

1.13 that should the fifth respondent oppose this application, the fifth respondent is ordered to pay the application jointly and severally with the third respondent on a scale between attorney and own client;

1.14 that any other respondent who opposes this application, be ordered to pay the costs of the application;

1.15 further and/or alternative relief.”

[B] Lack of locus standi:-

[2]The Respondents raised in limine the lack of locus standi on the part of the Applicant to launch this application. This argument is premised on the fact that Section 133 (1)(b) of the Companies Act 71 of 2008 (“the Act”) provide for a complete moratorium in terms of which no legal proceedings, including any enforcement action concerning the business under the rescue plan, is countenanced.The Applicant request from this Court leave or permission to institute this application which is in the form of final relief that:-

· the adoption of the business rescue plan in accordance with the provisions of section 153 of the Act be declared void;

· to confirm the rejection of the business rescue plan by the Applicant;

· to terminate the business rescue proceedings of the First Respondent with immediate effect;

· to grant a liquidation order.

[3] The Applicant relies on the stipulations of section 133 (1)(b) of the Act with a contention that it is entitled to approach this Court by way of application.

[4] Section 133 of the Act stipulates as follows:-

"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 properly 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."

[5] Section 133 of the Companies Act provides for a general moratorium on legal proceedings against a company during business rescue proceedings.Section 133 (1)(a) and (b) of the Companies Act read with Schedule 3 thereto and section 66 (1A)(a) of the Close Corporations Act provides that during business rescue proceedings no legal proceeding, including an enforcement action, against the close corporation, or in relation to any property belonging to the close corporation, or lawfully in its possession may be commended or proceeded with in any forum except with the written consent of the business rescue practitioner (paragraph (a)) or the leave of the court and in accordance with any terms the court considers suitable (paragraph (b)).

See:- Investec Bank Ltd v Bruyns 2011 JDR 1563 (WCC) / 2010 (5) SA 430 (WCC).

[6] When interpreting the intended meaning of section 133 (1)(b), a systematic interpretation of the particular section should be used:-

"Systematic interpretation is an instance of contextualisation. First, it calls for the interpretation of individual legislative provisions in relation to and in the light of other provisions and components of the legislated text of which they form part, drawing on the "system" or "logic" or "scheme" of the text as a whole.

and,

Secondly. systematic interpretation requires cognisance of the ("extra-textual") macro-text as well, that is, of meaning-generative signifiers in the textual environment.”

See:- The Law of South Africa (LAWSA) Volume 25 (1) at paragraph 357.

Department of Land Affairs v Goedgelegen Tropical v Fruits (Pty) Ltd [2007] ZACC 12; 2007 (6) SA 199 (CC).

If the aforementioned approach be used to interpret section 133 (1)(b), it immediately becomes clear that the Applicant does not have the locus standi to bring this application.

[7] Whenever an affected person (an "affected person" being defined by section 128 of the Act, and the Applicant averring that he is such an affected person) is granted the right to obtain the relief from the court, it is explicitly provided in the act, that such an affected person has the right to approach the court on application. No such a stipulation is contained in section 133 (1). lf the text of chapter 6 of the act and the purpose and macro context of the act is taken into consideration, the only reasonable interpretation of section 133 in my view is that:-

· given the fact that business rescue proceedings can be commenced with in two ways, viz. firstly by way of company resolution intended in section 129 of the Act and, secondly, by way of court application as envisaged in section 130 of the Act, it was the intention that the reference to the court granting leave with any terms the court considers suitable (see Section 133 (1)(b)) refers a court during the proceedings of an application to place the company under business rescue in terms of section l30.

· a wide and general access to the court for the purposes of an application which the Applicant is currently bringing could never

have been the intention of the legislature, given the purpose of chapter 6 of the Act, to wit, to protect the assets of the company by means of:-

"a temporary moratorium on the rights of claimants against the company or in respect of properly in its possession."

· chapter 6 of the Companies Act explicitly provides for a remedy which is specifically applicable in the instances currently relied upon by the Applicant in this application, viz, Section 130 (1), which stipulates as follows:-

“Objections to company resolution:-

(1) Subject to subsection (2), at any time after the adoption of a resolution of section 129, until the adoption of a business rescue plan 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 prospects for rescuing the company,or

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

· it could never have been the intention of the legislature to provide for the above-mentioned remedy in section 130 (1), yet, at the same time, provide for the possibility of a single creditor to pursue its claim outside the ambit of the business rescue plan adopted in terms of section 150.

I consequently find that the Applicant lacks the necessary locus standi to bring this application and that the application should fail for this reason alone.

[C] Lack of urgency:-

[8] The Applicant pursues the current application on grounds of urgency. The application was originally enrolled on 12 September 2013 and then postponed to 7 November 2013.The application was contemplated for more than a month prior to 20 August 2013 and generally, the Applicant in terms of its own evidence, should have brought an application for setting aside the business rescue proceedings, since the commencement thereof on 31 May 2013 and before a business plan had been adopted.

[9] It was contended by the First Respondent that the dates relevant to the issue of urgency which the Applicant does not explain in the application, are the following;

· the business rescue proceedings in respect of the First Respondent commenced on 31 May 2013;

· the first meeting of creditors took place on the 21st June 2013;

· the business rescue plan for the First Respondent was published to creditors on the 15th of July 2013;

· the second meeting of creditors were held on Monday, 29 July 2013.

[10] The Applicant’s attack in the application is directed squarely against the adoption of the business plan by the First Respondent at the second meeting of creditors where the Applicant was legally represented. However, the founding affidavit in support of the urgent application was signed approximately one (1) month later on 29 August 2013 and the application was set down as an urgent application to be entertained by this Court on the 12th of September 2013.

[11]In terms of the notice of motion, the Respondents were called upon to file their opposition on the 30th of August 2013 and file their opposing affidavits within three (3) days in an attempt to reply to an affidavit of some 78 pages (with annexures of approximately 150 pages) in an application seeking final relief as aforesaid, in the absence of proper notice as required by the Act, on employees as affected persons. The Applicant (allegedly being convinced since business rescue proceedings ensured that the proceedings was a sham that had no prospects of succeeding), should have brought the application in terms of section 130 of the Act, after 31 May 2013 and before the plan was adopted;

[12] The Applicant was entitled to approached the Court for an order setting aside the resolution for business rescue on the grounds that there is no reasonable prospect for rescuing the company as envisaged in section 130(1)(a)(ii). In other words, the Applicant was entitled since the 31st of May 2013 to approach this Court for setting aside the business rescue proceedings, but had failed to do so. After the publication of the business rescue plan on 15 July 2013 as aforesaid, the Applicant persisted to avail itself of the remedy to apply for the setting aside of the business rescue proceedings under section 130 of the Act.

[13] No explanation is furnished by the Applicant why the Applicant waited for approximately a month from 2 August 2013 to 31 August 2013 before launching the application and then calling upon the Respondents to reply to the application within a matter of three (3) days. On the 2nd of August 2013 and in writing the Applicant threatened with an urgent application to set aside the business rescue proceedings, should the practitioner fail to terminate the proceedings with immediate effect. However, the practitioner is precluded from terminating the business rescue proceedings after the adoption of a business rescue plan.The Applicant launched this urgent application on or about the 30th of August 2013, one (1) month later.

[14] After the application was served, the business rescue practitioner undertook in writing on 3 September 2013, not to sell any assets of the First Respondent, pending the outcome of the application.This undertaking the Applicant simply ignored and continued unabatedly to pursue the application on grounds of urgency. The application was postponed to the 7th day of November 2013 in terms of the order of this Court. In its further and replying affidavit the Applicant distinctly pursue the application on grounds of urgency and has set the matter down on the urgent Court roll.

[15] It was contended on behalf of the First Respondent that no urgency whatsoever had been made out pertaining to the current application

and there is no reason why the application could not be entertained in the normal course by enrolling the matter on the opposed motion roll. The application is voluminous and comprises more than 500 pages and is by the very nature thereof complicated.

[16] Moreover, the Applicant elected in its replying affidavit to refer to numerous correspondence which were exchanged between the parties after the opposing papers were filed, and the date for supplementation thereof expired. In the replying affidavit the Applicant attempted to bolster its case by directing numerous letters to the Fifth Respondent, the practitioner, all of which are incorporated into the replying affidavit and in respect of which the First and Fifth Respondents were not afforded an opportunity to reply to. The Respondents should have been granted the opportunity to reply to the new allegations in the replying affidavit which allegations are indiscriminately made throughout the replying affidavit with reference to the said correspondence.

[17] The Respondents contends that they are prejudiced by the allegations, the import of which are inter alia that the Fifth Respondent actively pursues an agenda prejudicial to the Applicant by abusing the business rescue proceedings. The Respondents contend that the allegations are groundless and comprises no more than surmise conjecture and speculation by the Applicant, a creditor of the First Respondent, who wants to derail the business rescue proceedings at all costs.

[18] In my view, there is no case for urgency made out by the Applicant. This matter could have been brought in the normal cause. The fact that it was instituted as an urgent application is in my view a flagrant disregard of the Rules and Practice Directives of this Court and amounts to an abuse of the court processes. I will demonstrate my disquiet in awarding a punitive costs order against the Applicant.

[D] The effect of the adoption of a business rescue plan:-

[19] After the adoption of a resolution by the board of directors to commence business rescue proceedings until the adoption of a business rescue plan in terms of section 152 of the Act, any affected person like the Applicant was free to apply to the Court for an order setting aside the board’s resolution(s). The provision in this regard appears in section 1301)(a)(i) – (iii) which provides for the setting aside of the resolutions under the following circumstances:-

· there is no reasonable basis for believing that the company is financially distressed;

· there is no reasonable prospect for rescuing the company;

·the company has failed to satisfy the procedural requirements set out in section 129 of the Act;

· an affected person like the Applicant was free to lodge an objection not only against the business rescue resolution, but also against the appointment of a business rescue practitioner on the grounds that the practitioner:

[i] does not satisfy the requirements of section 138(i.e. that the practitioner is not properly qualified in terms of the requirements and qualifications as set out in section 138);

[ii] is not independent from the company or its management;or

[iii] lacks the necessary skills, given the company’s circumstances;

[20] The provisions referred to above are some of the safeguards against the abuse of business rescue proceedings in terms of which an affected party can take appropriate measures, before the adoption of a business rescue plan, to attack the business rescue proceedings and the commencement thereof, in terms of section 129 of the Act.

[21] The court is given wide powers under section 130 in considering the application to set aside the company’s resolution to commence business rescue.In this regard the court will consider whether there is a reasonable basis for believing that the company is financially distressed or that there is no reasonable prospect of rescuing the company or if there is a failure to comply with the procedural requirements of section 129.In addition, the court may set aside a resolution simply on the grounds that, having regard to all the evidence, it is just and equitable to do so. When making an order to set aside the company’s resolution, it may make any further necessary and appropriate order, including an order placing the company under liquidation.

[22]Although the Applicant had the necessary standing pursuant to sections 130 and 131 (as an affected party), to apply to court for the necessary relief, the Applicant instead decided to pursue an attack on the procedure by way of correspondence, apparently with the intention to substantiate through correspondence sufficient grounds to derail the second meeting of creditors.

[23] The Applicant never pursued the remedy it had in terms of the provisions of section 130 of the Act. After the adoption of a

business rescue plan, when the redress afforded in section 130 was no longer available, the Applicant elected to launch the current urgent application for setting aside the entire procedure. The Applicant does not explain why it failed to pursue this remedy timeously. There was no compliance with section 130 of the Act and this remedy no longer befalls the Applicant after the business rescue plan had been adopted. The Applicant’s current urgent application cannot therefore be in compliance with section 130 of the Act.

[E] Conclusion:-

[24] I am of the view that there is no merit in the present application and it should therefore be dismissed. There is also no plausible

reason why costs should not follow the event. As already alluded to earlier on in this judgment, a punitive costs order is warranted

under the circumstances of this case to demonstrate the disquiet of the abuse of the processes of this Court. Undoubtedly, the employment of two counsel was necessary having regard to the complexity of the matter.

[F] Order:-

[25] Consequently the following order is made:-

[i] The application is dismissed.

[ii] The Applicant is ordered to pay the costs of the application on a scale as between attorney and client.

[iii] The costs should include the costs consequent upon the employment of two counsel.

R D HENDRICKS

JUDGE OF THE HIGH COURT

ATTORNEYS FOR APPLICANT: NIENABER AND WISSING