Du Preez and Another v Garber: In re Die Boerebank Bpk

• Jurisdiction: South Africa
• Judge: Trollip J
• Judgment Date: 06 November 1962
• Court: Witwatersrand Local Division

F Trollip, J.:

The first matter, which falls to be dealt with at the outset, is an application under sec. 103 of the Companies Act for the Court's sanction of an arrangement between a company and its creditors. The company is Die Boerebank Beperk (herein called 'the Bank'), a limited liability company which was incorporated and registered on the G 30th January, 1958, under the Companies Act. It carried on business as a 'deposit-receiving institution' within the meaning of that expression in sec. 1 of the Banking Act, 38 of 1942, as amended, and consequently became provisionally registered under secs. 5 and 6 of that Act as a banking institution. Initially its activities were confined to H Johannesburg, where its head office is located, but in course of time it opened branches in all the principal cities and towns, and became represented by agents in other places, in South Africa. It also ran a branch at Windhoek in South West Africa.

On the 2nd March, 1962, the Bank was placed under provisional judicial management at the instance of its then managing director by order of this Court. Thereafter on the 22nd May, 1962, that order was superseded by a provisional winding-up order which still subsists. That is the third matter mentioned above. The two applicants were first

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appointed provisional judicial managers and thereafter provisional liquidators in which capacity they make the present application.

An audited balance sheet of the Bank's affairs as at the 2nd March, A 1962, revealed the estimated value of the assets to be R2,150,461 and liabilities R3,315,698. The applicants' own valuation of the position as at that date and 2nd April, 1962, was R1,957,000 and R3,274,000 respectively. On those valuations there was a substantial deficit. The known creditors of the Bank numbered 4192. By far the majority of them were depositors of the Bank. That appears from the details of the B applicants' estimated valuation of their claims, which was as follows:

Depositors:
	Savings accounts	R245,000
	Subscription accounts	35,000
	Deposits at call	853,000
	Fixed deposits	1,063,000
	Deposits for indefinite periods	942,000
		3,138,000
	Other creditors	136,000
		R3,274,000

Most of the depositors are probably such in respect of small amounts. Many of them are probably Afrikaans speaking and a good proportion E probably live in rural areas. In addition it can be inferred from what one Giddey informed Mr. Hurwitz according to the latter's affidavit (which information was conceded by Mr. Coetzee who appeared for the applicants, as being correct) that many of the depositors were natives.

F On the 25th July, 1962, Suid-Afrikaanse Nasionale Trust en Assuransie Maatskappy Beperk (referred to as 'Santam') and Philip Hill Executor and Trust Company Ltd. (called 'the Philip Hill Company') and the applicants agreed upon a proposed arrangement (herein called 'the arrangement') for the realisation of the assets of the Bank and the distribution of the proceeds among its creditors. Under the arrangement it was proposed that G a private limited company should be incorporated (herein referred to as 'the Company') with a share capital of 50 cents divided into 50 shares of one cent each, of which one share would be allotted to each of 30 of the largest creditors of the Bank, and one share each to nominees, not exceeding 15, of the other creditors. The claims of all the creditors H would become ceded to the Company, which would also become vested with all the assets of the Bank. The Bank would be finally liquidated and dissolved but the Company would proceed to realise those assets. The proceeds would be utilised by the Company in paying the costs of the judicial management and liquidation, the Company's costs and expenses in conducting its business, secured creditors and preferent creditors, concurrent creditors, and members of the Bank, in that order. The Company would be managed jointly by Santam and the Philip Hill Company, who for their services would receive an amount equal to two-thirds of the remuneration payable

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to liquidators. Those are the features of the proposed arrangement. The Company was duly incorporated on the 28th July, 1962, under the name of Country Realisations (Pty.), Ltd.

A This arrangement was submitted to this Court which, on the 31st July, 1962, granted an order under sec. 103 for the summoning of separate meetings of the Bank's preferent and secured creditors and of its concurrent creditors for the purpose of considering the arrangement and, if thought fit, of accepting it with or without modification. One, Geoffrey William Cox, a practising accountant and auditor, was appointed B chairman of the meetings in the order of Court, and he was required therein to take all the necessary steps for convening the meetings.

The meetings were held in Johannesburg on the 5th September, 1962, the results of which have been reported by affidavit to the Court by the chairman.

C The Bank has, according to the applicant du Preez's replying affidavit, only two preferent or secured creditors, namely, the Receiver of Revenue and Trans-Africa Credit and Savings Bank Ltd. (herein called 'Trans-Africa') their total claims being R99,249. The value of Trans-Africa's claim according to the chairman's report is R92,712. At D the meeting of the preference and secured creditors, only two creditors attended. Both contended they had preferent claims but the chairman overruled their contentions and his ruling has not been challenged. Neither of the above-mentioned creditors attended, but Trans-Africa had previously given a proxy in favour of the chairman to vote for the E arrangement but when the meeting was held the chairman was not aware that Trans-Africa's claim was secured. The meeting was therefore closed with no vote having been taken or recorded on the arrangement. The chairman ascertained the following day, the 6th September, 1962, that Trans-Africa's claim was secured, and excluded its claim from the results of the voting by concurrent creditors. The applicants contended F that in fact, therefore, Trans-Africa as a secured creditor had agreed to the arrangement.

The meeting of concurrent creditors was attended by 112 creditors with claims totalling R381,669. The chairman held proxies from 907 creditors with claims totalling R1,382,130. Consequently 1,019 concurrent G creditors i.e. about 25 per cent in number, with claims totalling R1,763,799, i.e. about 54 per cent of all creditors claims, attended the meeting in person or by proxy.

Three modifications to the arrangement were proposed and carried at the meeting. The first was that creditors claims should carry interest at 6 per cent per annum; the second that the Company's managers should pay H the Bank's liquidators' remuneration out of the emoluments payable to them under the arrangement; and the third that the Bank's Liquidators should accede to any request by the Company to examine any questionable transactions by the Bank's directors and officers. (It was argued by Mr. Loewenthal that the last did not constitute a true permissible modification to the arrangement but he did not press the argument and I think that it is devoid of substance). The arrangement, as modified, was discussed at length at the meeting and was then put

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to the vote. 942 representing R1,642,480 voted in favour, and 20 representing R16,060 voted against it.

On those results the applicants have moved that the Court should now A sanction the arrangement as modified. That is opposed by certain concurrent creditors, who can be grouped as follows:

(a)

Andrew Leang Ho, and six others, who have made common cause with him. Each of them was a depositor of the Bank for R1,000 (total R7,000). They were represented on the 9th October, 1962, by Mr. Oshry, Q.C. and Mr. Rosenthal, and thereafter by Mr. Schwarz.

(b)

B Mrs. Sarah Schneider, another depositor in the sum of R7,000, represented by Mr. Loewenthal.

(c)

Mrs. A. E. Dargan, presumably also a depositor, in the sum of R3,465, who was represented on the opening day of the case by Mr. Rosenthal, and thereafter by Mr. Loewenthal.

(d)

C Essop Mohamed Fakir, a creditor for R12,742.16, who was granted leave to intervene at a late stage of the proceedings, on the 12th October, 1962. He was represented by Mr. Morris.

In all, these creditors represent claims of R30,202 in value.

D The grounds relied upon by these creditors for opposing the sanctioning of the scheme raised a wide range of questions. As I have had full argument on each of them I shall try to deal with most of them, because although it might not be necessary to deal with many of them in view of the conclusion at which I have ultimately arrived, my view on them might assist the parties in deciding on what further course to pursue and might be relevant on the question of costs.

E As a preliminary point Mr. Rosenthal argued on behalf of Mrs. Dargan that sec. 103 did not apply to the Bank. His contention was that according to sub-sec. (5) thereof, as substituted by sec. 64 (b) of the Companies Amendment Act, 23 of 1939, the provisions only apply to a F 'company liable to be wound up under this Act', i.e. the Companies Act, whereas the Bank was liable to be wound up under the Banking Act and not the Companies Act. In support of his argument Mr. Rosenthal submitted that although the Bank was incorporated and registered under the Companies Act, it was governed by the Banking Act in regard to the carrying on of its banking business, and he referred to the provisions G of the latter Act (secs. 3, 4, 5, 6 and 7) which enact that a company like the Bank, although incorporated and registered under the Companies...