Griessel and Another v Lizemore and Others

• Jurisdiction: South Africa
• Citation: 2016 (6) SA 236 (GJ)

Griessel and Another v Lizemore and Others
2016 (6) SA 236 (GJ)

2016 (6) SA p236

Citation	2016 (6) SA 236 (GJ)
Case No	2015/24751
Court	Gauteng Local Division, Johannesburg
Judge	Spilg J
Heard	July 15, 2015; July 17, 2015; July 22, 2015; July 31, 2015
Judgment	August 26, 2015
Counsel	KR Lavine for the applicants.; CP Wesley for the first to third respondents.

Flynote : Sleutelwoorde B

Company — Business rescue — Aims — Companies Act 71 of 2008, s 128(1)(b).

Company — Business rescue — Resolution — Requirement that board act in good faith in adopting resolution — Companies Act 71 of 2008, ss 129(1) C and 130(5)(a)(ii).

Company — Business rescue — Practitioner — Time periods for filing and publishing notice of appointment — Commission has no power to extend — Companies Act 71 of 2008, s 129(4).

Company — Business rescue — Practitioner — When liable for costs — D Companies Act 71 of 2008, s 140.

Company — Business rescue — Moratorium on legal proceedings against company — Not barring shareholders instituting proceedings against third parties to recover company's property — Companies Act 71 of 2008, s 133.

Headnote : Kopnota

E The company in this case had three shareholders at the time proceedings were instituted. They were Mr Griessel, Mr Zeman and Mr Lizemore, of whom Lizemore was also the company's sole director. The events precipitating the proceedings were a decline in the company's fortunes and the outbreak of a dispute between Griessel and Zeman, on the one hand, and Lizemore, on the other. In the course of this dispute Lizemore, without informing Griessel and Zeman, adopted a resolution placing the company in business rescue and appointed a business rescue practitioner. When F Griessel and Zeman came to hear of this they applied for an order that the resolution was null and void; that it be set aside; that Lizemore be removed as a director; that they be appointed as directors; and that Lizemore return property to the company.

G The following issues were considered:

(1) The aims towards which ch 6 of the Companies Act 71 of 2008 might be put. (Chapter 6 concerns, in the main, business rescue proceedings.) Held, that the primary aim toward which ch 6's provisions could be put was the rehabilitation of a company. But if it were not possible to achieve this, then H the provisions could be used for the secondary aim. This was the realising of a better return for creditors and shareholders than would result from immediate liquidation (see [75] and [78] – [79]).

The alternative aim could be sought if:

•

The company were financially distressed;

•

it were not reasonably likely it could continue in existence on a solvent I basis; and

•

developing and implementing a business rescue plan would achieve a better return for creditors and shareholders than if the company were immediately liquidated (see [79]).

(2) The role of good faith in the adopting of a s 129 resolution to begin business rescue proceedings. Held, that the board of directors had to act in J good faith in adopting the resolution (see [82]). Following from this was

2016 (6) SA p237

that good or bad faith was a significant factor in determining whether it was A just and equitable to set aside the resolution under s 130(5)(a)(ii). Good or bad faith was to be inferred from the facts (see [84] – [86]).

(3) When a business rescue practitioner representing a company in litigation could be held personally liable for costs, rather than the company. Held, that a court could make such an order if the practitioner had acted contrary to his duties in s 140, and in the other provisions of ch 6 (see [95]). B

(4) Whether s 133 barred the applicant shareholders from compelling the return to the company of its property held by a third party. This was where the practitioner, an ally of the third party, had failed to recover the property. (Section 133(1) provides that 'during business rescue proceedings, no legal proceeding . . . in relation to any property belonging to the company . . . may be commenced or proceeded with in any forum, except — C

(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; . . . .')

Held, that it did not. This was on the bases that:

•

The purpose of the section was to protect the company and its property from claims by third parties — it did not deal with proceedings against D third parties to protect or recover the property of the company, for the company's benefit (see [104]);

•

the interests of the practitioner were aligned with those of the third party;

•

the matter was urgent;

•

there was no defence to the claim for return of the property; and

•

the court, if asked, would have granted leave to the applicants to proceed E (see [105]).

(5) Whether the Companies and Intellectual Property Commission had the power to extend the time periods in s 129(4) (see [106]). (The section states that after a company appoints a practitioner it has two days in which to file a notice of his appointment. Thereafter it has five days in which to publish a copy of the notice to each affected person.) Held, that it did not. Section 129(3) expressly gave such a power to the Commission; s 129(4) did not. F Given the proximity of the sections the omission in ss (4) must have been advertent rather than inadvertent (see [109]).

The court ultimately ordered that:

•

The resolution had lapsed and was null, owing to the company's failure to comply with the time limits in s 129(4); G

•

the resolution had to be set aside, on the grounds that: there was no reasonable basis to believe the company was financially distressed; the procedural requirements of s 129 had not been complied with; and it was just and equitable to do so;

•

Griessel and Zeman were to be appointed as directors; H

•

Lizemore was to return the company's property; and

Lizemore and the practitioner were to pay the costs of the application (see [142]).

Cases Considered

Annotations

Case law I

Advanced Technologies & Engineering Co (Pty) Ltd (in Business Rescue) v Aeronautique et Technologies Embarquées SAS GNP 72522/11: referred to

Fakie NO v CCII Systems (Pty) Ltd 2006 (4) SA 326 (SCA) ([2006] ZASCA 54): dictum in para [55] applied

Nedbank Ltd v Bestvest 153 (Pty) Ltd; Essa v Bestvest 153 (Pty) Ltd 2012 (5) SA 497 (WCC): referred to J

2016 (6) SA p238

Oakdene Square Properties (Pty) Ltd and Others v Farm Bothasfontein (Kyalami) (Pty) Ltd and Others 2012 (3) SA 273 (GSJ): referred to A

Oakdene Square Prop (Pty) Ltd v Farm Bothasfontein (Kyalami) (Pty) Ltd 2013 (4) SA 539 (SCA) ([2013] ZASCA 68): referred to

Panamo Properties (Pty) Ltd and Another v Nel and Others NNO 2015 (5) SA 63 (SCA): dictum in para [31] applied

Plascon-Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd 1984 (3) SA 623 (A): dictum at 634 – 635 applied B

Swissborough Diamond Mines (Pty) Ltd and Others v Government of the Republic of South Africa and Others 1999 (2) SA 279 (T): referred to.

Statutes Considered

Statutes

C The Companies Act 71 of 2008, ss 128(1)(b), 129(1), 129(4), 130(5)(a)(ii), 133 and 140: see Juta's Statutes of South Africa 2015/16 vol 2 at 1-360 – 1-363 and 1-365.

Case Information

KR Lavine for the applicants.

CP Wesley for the first to third respondents.

D An application to declare that a resolution to begin business rescue had lapsed.

Order

1.

In terms of s 129(5) read with s 129(4) of the Companies Act 71 of 2008 E (the Act) it is declared that the resolution to begin business rescue proceedings and place the company under supervision (the resolution) has lapsed and is a nullity.

2.

In terms of s 130(5)(a) of the Act the said resolution is set aside on the grounds set out in terms of s 130(1)(a)(i) and (iii) read F with s 129(4) and it being just and equitable to do so as contemplated in s 130(5)(a)(ii) thereof; with the result that, as a matter of law under s 132(2)(a)(i) of the Act, the business rescue proceedings are ended.

3.

In terms of s 163(2)(f) of the Act the first and second applicants are appointed directors of the company in addition to the first respondent. G

4.

The first respondent is directed to forthwith return to the company all the plugs and patterns that he removed from the company's premises, and failing compliance within five days of this order the sheriff or his lawful deputy is authorised and instructed to require H the first respondent to point out where such items are and to there and then seize them and return them to the company.

5.

The first and second respondents are to pay the costs of the application, jointly and severally, the one paying the other to be absolved.

Judgment

Spilg J: I

Application

[1] The first applicant is Quintin Griessel. He is the son of the original founder of the company, Jaco Griessel. The father will be referred to as J Griessel and the son as Quintin. The second applicant is Ronald Zeman

2016 (6) SA p239

Spilg J

who is also a shareholder in the company. The applicants hold together A 67% of the shareholding in Mining and Slurry Technologies (Pty) Ltd (the company), with Quintin the 34% shareholder. The first respondent, Edward Lizemore, holds the remaining 33% of the company's issued share capital.

[2] On 2 July 2015 Lizemore passed a resolution on behalf of the board B of directors placing the company under business rescue pursuant to which Matheus Schlechter, the second respondent who is also a practising attorney, was nominated by Lizemore and was subsequently appointed the business rescue practitioner (practitioner).

[3] The practitioner relies on s 140(1)(a) of the Companies Act 71 of 2008 (the Act) to represent the company in...