Suidwes Landbou (Pty) Ltd v Wynlandi Boerdery CC and Other (1510) [2014] ZANWHC 5 (20 March 2014)

IN THE HIGH COURT OF SOUTH AFRICA

NORTH WEST DIVISION, MAHIKENG

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

APPLICATION FOR LEAVE TO APPEAL

DATE OF HEARING : 07 MARCH 2014

DATE OF JUDGMENT : 20 MARCH 2014

COUNSEL FOR THE APPLICANT : ADV PISTOR SC

With ADV ACKERMAN

COUNSEL FOR THE FIRST TO FIFTH: ADV KRUGER

RESPONDENTS

JUDGMENT ON APPLICATION FOR LEAVE TO APPEAL

HENDRICKS J

Introduction:-

[1] This is an application for leave to appeal to the Supreme Court of Appeal (SCA), alternatively to the Full Bench of this division,

against the judgment by this Court handed down on 19 December 2013, dismissing the Applicant’s urgent application with costs on a punitive scale.

[2] It is incumbent upon an applicant in an application of this nature to prove the existence of reasonable prospects of success on appeal. Put differently, the Applicant must show that a reasonable possibility exist that another court, as court of appeal, may come to a different decision on the facts than what this Court, as court of first instance, had arrived at. Similarly, must it be shown that the matter is of substantial importance to either or both parties.

See:- United Plant Hire (Pty) Ltd v Hills and Others 1976 (1) SA 717 (A).

[3] The application for leave to appeal is premised on the following grounds of appeal, which is hereunder repeated for the sake of convenience and completeness, namely:

“[1] the Learned Judge erred on fact and in law (paragraphs 2 to 7 of the Judgment) by finding that the Applicant lacks locus standi “to bring this application” and in respect of this finding:-

[1.1] the Learned Judge further erred (in paragraph 6 of theJudgment) by finding that a systematic interpretation of Section 133 of the Company’s Act Number 71 of 2008 (the Act) makes it clear “that the Applicant does not have the locus standi to bring this application”. In this regard the Learned Judge should have concluded that such an interpretation indeed requires a finding that the Applicant was entitled to approach the Honourable Court for the relief set out in the notice of motion and that the Applicant did have locus standi to do so.

[1.2] the Learned Judge further erred by finding (in paragraph 7 of the Judgment) that reference in section 133(1)(b) of the Act to a court granting leave on such terms as the court considers suitable, was intended to be a reference to a court during proceedings pursuant to an application in terms of Section 130 of the Act.

[1.3] the Learned Judge also erred by concluding (in paragraph 7 of the Judgment) that “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.”

[1.4] the Learned Judge further erred (in inter alia paragraphs 7 and 23 of the Judgment) by finding that the applicant should have complied with section 130 of the Act and that section 130 of the Act provides for a remedy “which is specifically applicable in the instances currently relied upon by the Applicant in this application”.

[1.5] The Learned Judge should have found that a failure by the applicant to file an application in terms of section 130 of the Act constitutes no bar to the filing by the applicant of an application in terms of section 133 of the Act and to a court granting leave in terms of Section 133 of the Act for the institution of legal proceedings other than those contemplated in Section 130.

[1.6] the Learned Judge further erred by finding (paragraph 7 of the judgment) that “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.”

1.7The Learned Judge should have concluded in this regard that the Applicant was indeed entitled to approach the Honourable Court and to attack the validity of the adoption of the Business plan.

1.8 The Learned Judge failed to take into into account the fact that the offer to buy the voting interest of the applicant, constitutes an abuse of the process, provided for by the Act, alternatively it constitutes non compliance with the relevant provisions of the Act, and that the applicant does have locus standi in terms of the principles of the common law, alternatively in terms of section 34 of the Constitution (Act 108 of 1996) to approach the Court for relief to prevent such abuse, alternatively non compliance. In this regard the Learned Judge should have also taken note of and considered:-

(a) The fact that the proposed business plan was initially rejected at the relevant meeting when the plan was considered in terms of section 152 of the Act and therefore, and by virtue of the provisions of section 152(3), could only have been considered further in terms of section 153 of the Act;

(b) The fact that the provisions of section 153 have in inter alia the following respects not been complied with:-

(I) The Fifth Respondent failed to adjourn the meeting in accordance with the provisions of section 153(4)(a) after the said offer was made;

(ii) The Fifth Respondent failed to make the necessary revisions to the plan to appropriately reflect the results of the offer in accordance with the provisions of section 153(4)(a);

(i) The Fifth Respondent failed to cause a valuation to be made of the applicant’s voting interest, “independently and expertly determined” in accordance with the provisions of section 153(1)(b)(ii)

(c) The fact that the offer was made on behalf of the Third Respondent (one of the members and a surety of the First Respondent) whilst the facts strongly indicate that Third Respondent was not in a position make the required payment in terms of the offer, and did not really intend to make such payment.

(d) No payment was made to the applicant for its voting interest.

(e) The business plan, prepared by the Fifth Respondent:-

(i) states (in paragraph 3 thereof) that there are reasonable prospects “of rescuing the company” whilst the facts indicated that the First Respondent was hopelessly insolvent and whilst the plan does not reflect facts on which such reasonable prospects can be based. On the contrary, the plan does not provide for a process by which the First Respondent could be rescued but in fact suggests that all the assets of the First Respondent be sold and that the business of that respondent be wound up;

(ii) suggests that the livestock of the First respondent be sold by April 2014 but does not provide for operational costs in respect of the animals untill they are sold.

(f) The Fifth Respondent failed to explain how the said operational costs would be catered for when he was given an opportunity to do so ( in paragraph 29 of the letter of 2 August 2013 – on page 246 of the record).

[2] The Learned Judge erred in failing to consider the merits of the Applicant’s application and in failing to grant such

application with costs. The Learned Judge should have considered the merits of the Applicant’s application and should have granted the application with costs including the costs occasioned by the employment of two Counsel.

[3] In particular the Learned Judge erred in failing to find that, even if the applicant did not have locus standi to bring the application against the First Respondent close corporation, the Applicant does have locus standi to bring the application against the Second and Third Respondents, being the sureties of the First Respondent close corporation.

[4] With regard to urgency the Learned Judge erred on fact by finding (in paragraph 8 of the judgment) that the application was contemplated for more than a month prior to 20 August 2013. The Learned Judge in this regard should have taken into account the fact that during the period prior to 20 August 2013 the Applicant, through its attorneys, corresponded with the legal representatives of the respondents in an attempt to avoid the filing of the Application.

[5] The Honourable Judge failed to take due notice of the fact that the life span of a business rescue proceeding is intended (in terms of inter alia Section 132 (3) of the Act) not to exceed a period of 3 months and that it was therefore necessary for the Applicant to file its

application on an urgent basis in order to obtain appropriate relief before the expiry of the said period.

[6] The Learned Judge further erred factually by not taking into account that on 28th August 2013 (a day or two before the Application was filed) invoices were made available to the Applicant by the Fifth Respondent from which it appears-:

(a) that assets of the First Respondent were not correctly reflected in the business plan and that such invoices required the urgent filing of the Application.

(b) that creditors of the First Respondent were not correctly reflected in the business plan, that the Ninth Respondent should have been reflected as a creditor as well, and that such fact required the urgent filing of the Application.

(c) That purchase and sale transactions in respect of the livestock of the First Respondent were made between the First and Ninth Respondents during the period 17 April 2013 and 30 July 2013 whilst such transactions were not referred to in the said plan and that such facts required the urgent filing of the Application.

(d) That some of the latter purchase transactions were made by the First Respondent on credit under circumstances where the First Respondent should not have been granted credit, that such fact was not referred to in the said plan and that such fact required the urgent filing of the Application.

(e) That payment was made by the First Respondent in respect of the said purchase transactions at a stage when the First Respondent was insolvent and when such payments would have amounted to undue preference in favour of one creditor of the First Respondent, that such fact was not referred to in the said plan and that such fact required the urgent filing of the Application.

[7] The Learned Judge further erred factually by failing to take into account the fact that despite the time periods provided in the notice of motion for the filing of answering affidavits, the respondents ignored such periods and only filed their answering affidavit on 11th September 2013 instead of filing same on 4th September 2013.

[8] The Learned Judge further failed to take into account that the application was initially postponed at the request of the respondents

(against an undertaking that assets would not be alienated), the purpose of such postponement being to provide more time to the

respondents to file their answering affidavits, but that despite the postponement, the respondents did not make use of the opportunity to file such affidavits.

[9] The Learned Judge further erred in law and on fact by finding (in paragraph 11 of the judgment) that since the Applicant was convinced, that business rescue proceedings had no prospects of succeeding, the applicant should have brought an application in terms of Section 130 after 31st May 2013 and before the plan was adopted. In this regard the Learned Judge should have concluded that even if the Applicant was convinced that business rescue proceedings had no prospects of proceeding the Applicant could have waited to see whether the proposed business plan would not be rejected at the meeting of creditors.

[10] The Learned Judge erred in law and on fact by making a punitive costs order against the applicant.

In the light of the afore stated grounds of appeal, Applicant respectfully maintains that there are good prospects that another

court might find in favour of the Applicant on the issues stated herein before and that there are therefore good prospects of success

on appeal.”

[4] Counsel acting on behalf of the First to Fifth Respondent eloquently and succinctly summarized this Court’s decision as contained in its judgment as follows in his heads of argument:-

“2.1.1 When interpreting the intended meaning of section 133(1)(b) of the Companies Act 71 of 2008 (“the Act”), a systematic

interpretation should be followed and such an approach

makes it clear that the Applicant lacked locus standi to bring the main application;

2.1.2 The Applicant failed to make out a case for urgency and the main application could therefore have been brought in the normal cause. This state of affairs amounts to the Applicant’s flagrant disregard of the Court Rules and Practice Directives and consequently justifies the granting of a punitive cost order against the Applicant;

2.1.3 The Applicant chose not to pursue the remedy it had in terms of the provisions of section 130 of the Act when it could have done so and this remedy is no longer available to the Applicant. The main application can therefore not be in compliance with section 130 of the Act.”

[5] As can be seen, the basis upon which the judgment and order is arrived at is:-

that the Applicant had no locus standi to bring the main application; that the Applicant had failed to make out a case that the main application should be heard on an urgent basis; that the Companies Act 71 of 2008 (“the Act”) does not provide for an intervention by an affected person on the execution

of an adopted business rescue plan and makes no provision to terminate business rescue proceedings once a business rescue plan

had been adopted.

[6] As far as locus standi is concerned, this aspect had been comprehensively dealt with in the judgment dated 19 December 2013. For the sake of convenience

and to summarize:-

Section 130 (1)(a) of the Act provides that an affected person may, within the limited period of time and on certain grounds, apply to a Court for an order setting aside the resolution to begin business rescue proceedings, whereafter such an affected person will no longer have locus standi to do so; Section 130 of the Act provides for the instances where and when an affected person will automatically have legal standing to approach a court by way of an application for the specific relief envisaged therein; Section 133 (1)(b) of the Act however, expressly provides that once a business rescue plan has been adopted, no legal proceedings may be commenced or proceeded with in any form, except with the leave of the court and in accordance with any terms the court considers suitable; Section 133 of the Act can never be interpreted to afford an affected person legal standing to approached a court with an application such as the main application. This can never be the intention of the legislature. On the contrary, Section 133 of the Act expressly

deprives such an affected person thereof. By the same token, the Act does not provide for an intervention by an affected person on the execution of an adopted business rescue plan and makes no provision to terminate business rescue proceedings once a business rescue plan had been adopted. Section 132 (2)(a)(i) of the Act expressly limits a court’s powers to the setting aside of the resolution or the order that began business rescue proceedings.

[7] Therefore, the Act does not provide for an intervention by an affected person on the execution of an adopted business rescue plan and makes no provisions to terminate business rescue proceedings once a business rescue plan had been adopted and implemented.

Consequently, the Applicant had no legal standing to bring the main application.

[8] In addition thereto, had the Applicant also failed to make out a case that the main application should be heard on an urgent basis. As far as the lack of urgency is concerned, same was comprehensively dealt with in the judgment of this Court dated 19 December 2013 and need not be repeated herein.

[9] Insofar as the question of costs is concerned, it was likewise dealt in that judgment. The reasons why a punitive cost order was granted also appears in that judgment.

Conclusion:-

[10] Having carefully considered all the oral and written submissions by both counsel and having studied the contents of the court file and the main judgment afresh, I am of the view that there are no reasonable possibility that another court, be it either the SCA or the Full Bench of this division, will come to a different decision than what this Court had arrived at. The application for leave to appeal should therefore fail. There is also no plausible reason why the costs of this application should not follow the result.

Order:-

[11] Consequently, the following order is made:-

[i] The application for leave to appeal to either the Supreme Court of Appeal (SCA) or the Full Bench of this division is dismissed.

[ii] The Applicant is ordered to pay the costs of this application.

R D HENDRICKS

JUDGE OF THE HIGH COURT

ATTORNEYS FOR THE APPLICANT:- NIENABER & WISSING