Ex parte Liquidator, Vautid Wear Parts (Pty) Ltd (In Liquidation)

• Jurisdiction: South Africa

Ex parte Liquidator, Vautid Wear Parts (Pty) Ltd (In Liquidation)
2000 (3) SA 96 (W)

2000 (3) SA p96

Citation	2000 (3) SA 96 (W)
Case No	00/6651
Court	Witwatersrand Local Division
Judge	Vorster AJ
Heard	May 2, 2000; May 5, 2000
Judgment	May 8, 2000
Counsel	B E Gradidge for the applicant.

Flynote : Sleutelwoorde B

Company — Scheme of arrangement in terms of s 311 of Companies Act 1 of 1973 — What constitutes — Whether scheme, in terms of which director and shareholder of company in liquidation proposing payment of R50 000 to liquidator for administration costs, fees and value-added tax and C R50 000 to creditors in exchange for liquidator's, contributories' and creditors' relinquishing right to seek declaration against proposer in terms of s 424(1), an arrangement within meaning of s 311 — Proposed arrangement not involving compromise of rights or obligations as between company and creditors — Arrangement involving company only to extent of creditors' claims against company being D reduced by net amount of payment by liquidator — Such reduction part of basic content of scheme and not merely ancillary or severable part thereof — Discharge or partial discharge of debt requiring concurrence of debtor (company) — Notwithstanding fact that company's role in proposed scheme not a very active one, proposed scheme an arrangement between company and its creditors within meaning of s 311. E

Headnote : Kopnota

For an 'arrangement' to be brought within the ambit of s 311 of the Companies Act 61 of 1973 it is not sufficient for it to result merely in a transfer of claims from one creditor to another. Something more is required that involves the company as a relevant and necessary F participant in a manner that elevates its relevance beyond the facilitation of its identification as the subject-matter of the claims concerned. Thus, the revival of a company in liquidation is a sufficient involvement, as is the cancellation of a material contract to which the company is a party; so, too, is a reduction of the company's liabilities. (Paragraph [8] at 102G - H/I.) G

The applicant sought leave to convene meetings of the creditors of a company in liquidation to consider an arrangement proposed by a director and shareholder of the company. In terms of the proposed arrangement the proposer would pay R100 000 to the liquidator, to be distributed as to R50 000 to the liquidator for administration costs, H fees and value-added tax and R50 000 to the creditors in return for which, inter alia, the liquidator, all creditors and contributories would relinquish their right to seek a declaration against the proposer in terms of s 424(1) of the Act. The proposed arrangement would not involve a compromise of any rights or obligations between the company and its creditors.

Held, that the following were relevant to the issue of whether the proposed arrangement sufficiently involved the company as a relevant participant in order to constitute the arrangement as one I between the company and its creditors: (1) Since a company had no rights under s 424(1) and no locus standi to launch proceedings under s 424, no one else could institute such proceedings on its behalf. (2) Section 424(1) contemplated relief to an applicant member or creditor or, whether proceedings were instituted by the Master or liquidator, to the creditor or creditors in respect of debts J

2000 (3) SA p97

concerning which the declaration was sought. A declaration under s 424(1) thus involved no order of payment to the company A for the benefit of the general body of creditors. The company would therefore not be involved, actively or passively, in a tender of payment either to the liquidator or directly to aggrieved creditors to stave off a threat of proceedings under s 424(1). (3) Given that what was sought to be achieved by the proposed arrangement was an undertaking by each creditor not to enforce such rights as each might B have against the proposer under s 424(1), the company had no role, active or otherwise, in such arrangement. (Paragraph [9] at 103A - J.)

Held, further, that the arrangement thus involved the company only to the extent that the claims of creditors against the company would be reduced by the net amount of the payment to be made by the proposer. (Paragraph [10] at 104A - B.) C

Held, further, as to whether that was sufficient to constitute the scheme as an arrangement within the meaning of s 311, since the reduction was part of the basic content of the scheme and not merely an ancillary or severable part thereof, and since the discharge or partial discharge of a debt required the concurrence of the debtor (the company), that, notwithstanding the fact that the company's D involvement would not be very active, the scheme was an arrangement between the company and its creditors. (Paragraph [11] at 104H/I - 105B.)

Cases Considered

Annotations

Reported cases E

Alberts v Bryson 1977 (1) SA 857 (RA): referred to

Alfred McAlpine & Son (Pty) Ltd v Transvaal Provincial Administration 1977 (4) SA 310 (T): referred to

Ex parte Cyrildene Heights (Pty) Ltd 1966 (1) SA 307 (W): considered

Du Preez and Another v Garber: In re Die Boerebank Bpk 1963 (1) SA 806 (W): referred to F

Fundstrust (Edms) Bpk (in Likwidasie) v Marais en Andere 1997 (3) SA 470 (C): dictum at 474B criticised

Ex parte Kaplan and Others NNO: In re Robin Consolidated Industries Ltd 1987 (3) SA 413 (W): discussed

Ex parte Millman and Others NNO: In re Multi-Bou (Pty) Ltd and Others 1987 (4) SA 405 (C): dictum at 411F not followed

Mutual Life Insurance Co of New York v Ingle 1910 TS 540: referred to G

Ex parte NBSA Centre Ltd 1987 (2) SA 783 (T): dictum at 802A - C applied

Namex (Edms) Bpk v Kommissaris van Binnelandse Inkomste 1994 (2) SA 265 (A): discussed and applied

Ex parte Provisional Liquidator Hugo Franco (Pty) Ltd 1958 (4) SA 397 (W): referred to

Re Savoy Hotel Ltd [1981] 3 All ER 646 (Ch): referred to H

Segal and Another v Segil 1992 (3) SA 136 (C): referred to

Ex parte Strydom NO: In re Central Plumbing Works (Natal) (Pty) Ltd; Ex parte Spendiff NO: In re Candida Footwear Manufacturers (Pty) Ltd; Ex parte Spendiff NO: In re Jerseytex (Pty) Ltd 1988 (1) SA 616 (D): referred to I

Union Free State Mining and Finance Corporation Ltd v Union Free State Gold and Diamond Corporation Ltd 1960 (4) SA 547 (W): dictum at 549C - E applied.

Statutes Considered

Statutes

The Companies Act 61 of 1973, ss 311, 424: see Juta's Statutes of South Africa 1999 vol 2 at 1-196, 1-217. J

2000 (3) SA p98

Case Information

Application in terms of s 311 of the Companies Act 61 of 1973. A For leave to convene meetings of creditors to consider a scheme of arrangement. The facts and the nature of the issues appears from the reasons for judgment.

B E Gradidge for the applicant.

Cur adv vult. B

Postea (May 8).

Judgment

Vorster AJ:

[1] This is an application by the liquidator of Vautid Wear Parts (Pty) Ltd (in liquidation) (the company) in terms of s 311 of the Companies Act 61 of 1973 (the Companies Act) for leave to convene C meetings of the secured, the preferent and the concurrent creditors of the company in order to consider an arrangement proposed by a director and shareholder of the company (the proposer). In the founding affidavit the liquidator correctly states that this is not a typical scheme of arrangement proposed by a party who wishes to compromise with D creditors for purposes of reviving the company. It is stated that it has been the intention of the liquidator to institute proceedings against the proposer with a view to a declaration pursuant to the provisions of s 424 of the Companies Act. It is contended that, prior to liquidation, the affairs of the company were carried on recklessly in that the company incurred substantial debts without any reasonable E expectation of being able to discharge those debts. It is further alleged that the proposer, and certain undisclosed others, were knowingly parties to the carrying on of the affairs of the company in this manner. No proceedings have been instituted against the proposer but negotiations have taken place between him and the liquidator, which F negotiations have culminated in an offer of settlement which is now before me as an 'arrangement' and which it is contended is within the ambit of s 311 of the Companies Act.

[2] The offer of settlement is on the basis that the proposer will pay an amount of R100 000 to the liquidator and that that payment will discharge the proposer from all liability under s 424 of the G Companies Act to the liquidator (in respect of administration costs, liquidator's fees and value-added tax, amounting in the aggregate to R50 000), to all creditors and contributories of the company (who will receive the sum of R50 000) and will, in addition, disentitle the Master of the High Court from exercising his powers under s 424 of the H Companies Act. It is stated in para 4.1.4 of the deed of arrangement that the settlement, if concluded, will constitute 'individual covenants by the liquidator and creditors [and presumably also the Master] not to sue'. It is intended that, in consideration for the receipt of the settlement sum,

'the liquidator, the...