DH Brothers Industries (Pty) Ltd v Gribnitz NO and Others

• Jurisdiction: South Africa
• Citation: 2014 (1) SA 103 (KZP)

DH Brothers Industries (Pty) Ltd v Gribnitz NO and Others
2014 (1) SA 103 (KZP)

2014 (1) SA p103

Citation	2014 (1) SA 103 (KZP)
Case No	3878/2013
Court	KwaZulu-Natal Division, Pietermaritzburg
Judge	Gorven J
Heard	September 26, 2013
Judgment	October 21, 2013
Counsel	PJ Plsen SC (RM van Rooyen) for the applicant.; AM Annandale SC for the first and second respondents.

Flynote : Sleutelwoorde B

Company — Business rescue — Directors' resolution to begin — Setting-aside — Grounds — Section need be read to include ground that it is just and equitable to do so — Companies Act 71 of 2008, s 130(1)(a). C

Company — Business rescue — Business rescue plan — Failure to publish within allotted time — This terminating business rescue proceedings — Companies Act 71 of 2008, s 150(5).

Company — Business rescue — Business rescue plan — Time allotted for publication — Manner in which creditors can extend time — Meeting must be convened and vote taken to do so — Companies Act 71 of 2008, s 150(5). D

Company — Business rescue — Business rescue plan — Vote — Rejection — Responses — Binding offer to purchase voting interests of opponents of plan — Nature of offer explained — Companies Act 71 of 2008, s 153(1)(b)(ii).

Company — Business rescue — Business rescue plan — Content — Clause E depriving all creditors of part of their claims — Such only competent if creditors acceding to discharge of part of debts concerned — Companies Act 71 of 2008, ss 152(4) and 154(1).

Headnote : Kopnota

In this case the applicant applied to set aside a board of directors' resolution to F begin business rescue proceedings. This raised an anomaly between ss 130(1)(a) and 130(5)(a) of the Companies Act 71 of 2008. Under the former an affected person may apply to set aside a resolution on three grounds; under the latter a court may set aside a resolution on those three grounds, and in addition, on a fourth — that it is just and equitable to do so. Held that s 130(1)(a) had to be read to include the just-and-equitable ground. (Paragraphs [17] – [18] at 111F – 112H.) G

As to whether it was just and equitable to set aside the resolution, this entailed evaluating all the evidence, including the business rescue plan. This raised further questions. (Paragraph [19] at 112I – 113A.)

The first was the consequence of not publishing the plan in the allotted time. (This time is set by s 150(5)). The court held that this terminated the H business rescue proceedings. (Paragraphs [24] and [28] at 114D and 115G – 116D.)

The second question was how creditors could extend the time. The court held that a meeting had to be convened and a vote taken to do so. (Paragraphs [29] and [32] at 116D – F and 117B – C.)

A third question was the nature of the 'binding offer' that an affected person I could make for the voting interests of opponents of the plan. This was provided for in s 153(1)(b)(ii). The court held that a 'binding offer' was one that could not be withdrawn by the offeror and that could be accepted or rejected by an opponent of the plan. If accepted it gave rise to an agreement of sale — a sale for cash. The acceptance or rejection had only to take place after the value of the voting interests had been determined, and this J

2014 (1) SA p104

A determination had to take place within five days. Transfer of the voting interests took place on payment. (Paragraphs [34] and [60] at 118B – E and 129H – 130C.)

There was also the question of whether a clause in a plan, depriving a creditor of part of his claim, was competent. The court held on the basis of s 154(1) that this was only competent if the creditor concerned acceded to discharge B of the part of the debt concerned. (Paragraph [67] at 132E – 133A.)

Ultimately the court set aside the purported resolution and granted a provisional liquidation order. (Paragraph [72] at 133G/H – 134C.)

Cases Considered

Annotations

Case law C

Absa Bank Ltd v Kernsig 17 (Pty) Ltd 2011 (4) SA 492 (SCA) ([2011] ZASCA 97]: referred to

African Banking Corporation of Botswana Ltd v Kariba Furniture Manufacturers (Pty) Ltd and Others 2013 (6) SA 471 (GNP) ([2013] ZAGPPHC 259): criticised and not followed

Cape Point Vineyards (Pty) Ltd v Pinnacle Point Group Ltd and Another (Advantage Projects Managers (Pty) Ltd Intervening) 2011 (5) SA 600 (WCC): referred to D

Casely NO v Minister of Defence 1973 (1) SA 630 (A): referred to

Ese Financial Services (Pty) Ltd v Cramer 1973 (2) SA 805 (C): referred to

Ex parte Minister of Justice: In re R v Bolon 1941 AD 345: dictum at 359 – 360 applied E

Ex parte Voysey Bond Property Investments Ltd 1978 (2) SA 134 (D): referred to

Executive Council, Western Cape v Minister of Provincial Affairs and Constitutional Development and Another; Executive Council, KwaZulu-Natal v President of the Republic of South Africa and Others 2000 (1) SA 661 (CC) (1999 (12) BCLR 1360; [1999] ZACC 13): referred to

Fundstrust (Pty) Ltd (in Liquidation) v Van Deventer 1997 (1) SA 710 (A) ([1997] 1 All SA 644): referred to F

Gandhi v SMP Properties (Pty) Ltd 1983 (1) SA 1154 (D): dictum at 1157G – H applied

Hatch v Koopoomal 1936 AD 190: dictum at 209 applied

Incorporated General Insurances Ltd v Cement Distributors (South Africa) (Pty) Ltd 1990 (1) SA 132 (A): dictum at 136J – 137A followed

Koen and Another v Wedgewood Village Golf & Country Estate (Pty) Ltd and Others 2012 (2) SA 378 (WCC): referred to G

Lendalease Finance (Pty) Ltd v Corporacion De Mercadeo Agricola and Others 1976 (4) SA 464 (A): dictum at 490E – F applied

Louw and Others v Nel 2011 (2) SA 172 (SCA) ([2010] ZASCA 161): referred to

MEC for Education, Gauteng Province, and Others v Governing Body, Rivonia Primary School and Others 2013 (6) SA 582 (CC): referred to H

Millman NO v Twiggs and Another 1995 (3) SA 674 (A): referred to

Natal Joint Municipal Pension Fund v Endumeni Municipality 2012 (4) SA 593 (SCA) ([2012] 2 All SA 262; [2012] ZASCA 13): dictum in para [18] applied

Nedbank Ltd v Bestvest 153 (Pty) Ltd; Essa and Another v Bestvest 153 (Pty) Ltd and Others 2012 (5) SA 497 (WCC): referred to I

Oakdene Square Properties (Pty) Ltd and Others v Farm Bothasfontein (Kyalami) (Pty) Ltd and Others 2013 (4) SA 539 (SCA): referred to

Pizani and Another v First Consolidated Holdings (Pty) Ltd 1979 (1) SA 69 (A): referred to J

2014 (1) SA p105

Principal Immigration Officer v Bhula 1931 AD 323: dictum at 333 applied A

Rose's Car Hire (Pty) Ltd v Grant 1948 (2) SA 466 (A): referred to

Skjelbreds Rederi A/S and Others v Hartless (Pty) Ltd 1982 (2) SA 739 (W): referred to

Van Heerden and Others NNO v Queen's Hotel (Pty) Ltd and Others 1973 (2) SA 14 (RA): referred to.

Statutes Considered

Statutes

The Companies Act 71 of 2008, ss 130(1)(a), 150(5), 152(4), B 153(1)(b)(ii) and 154(1): see Juta's Statutes of South Africa 2012/13 vol 2 at 1-345 and 1-352 – 1-354.

Case Information

PJ Olsen SC (with RM van Rooyen) for the applicant.

AM Annandale SC for the first and second respondents. C

An application to set aside a board of directors' resolution to begin business rescue proceedings. The order is in para [72].

Judgment

Gorven J:

[1] Goods and services are the lifeblood of an economy. Business D entities, in providing goods and services, generate this lifeblood. Regulatory provisions are geared to assist the lifeblood to flow as efficiently as possible. Companies are the main business entities which provide the goods and services in the South African economy. The Companies Act 71 of 2008 (the Act) regulates companies. It deals with how they come into existence, how they function, how they can be revived when E distressed and how they demise. How they are revived is regulated by the provisions in ch 6 of the Act concerning business rescue (business rescue proceedings). This is a new feature of South African company law. It replaces the failed system of judicial management which was provided for in the Companies Act 61 of 1973 (the 1973 Act). Unfortunately, a F number of the business rescue provisions in the Act are less than clear. Some of these have surfaced in this application.

[2] A basic history is necessary. A resolution dated 16 November 2012 was filed with the third respondent on 22 November 2012, placing the second respondent (Dowmont) under business rescue. At the time, there G were two directors of Dowmont. The applicant is a creditor of Dowmont arising from sales concluded between September and November 2012 totalling R3 420 696,30. No payment emerged. The directors stood surety for the due performance of Dowmont's obligations to the applicant. In the affidavit by one of the directors furnished in support of H the resolution, it was stated that Dowmont was solvent but illiquid. It owed more than R30 million to its creditors and would not be able to pay them as the amounts became due and payable within the next six months. The current value of the assets exceeded the value of the liabilities 'based on the director's valuation'.

[3] The first respondent (Mr Gribnitz) was appointed as business rescue I practitioner on 16 November 2012. It is common cause that a business rescue plan (a plan or the plan) was not published within 25 business days of his appointment, as is required under s 150(5) of the Act. He sent circular letters by email to creditors on a number of occasions requesting an extension of time to publish a plan. No response was J

2014 (1) SA p106

Gorven J

A invited or received, either positive or negative. A plan was eventually published on 25 March 2013. A meeting was convened for 3 April 2013 to consider it. On that date, one of the creditors objected to the notice given and the meeting was accordingly adjourned to 10 April 2013.

B [4] Between 3 and 10 April 2013 the applicant launched the present application...