Ladybrand Hotel (Pty) Ltd v Segal and Another

• Jurisdiction: South Africa
• Judge: Erasmus J
• Judgment Date: 05 December 1974
• Citation: 1975 (2) SA 357 (O)
• Hearing Date: 14 November 1974
• Court: Orange Free State Provincial Division

Ladybrand Hotel (Pty) Ltd v Segal and Another
1975 (2) SA 357 (O)

1975 (2) SA p357

Citation	1975 (2) SA 357 (O)
Court	Orange Free State Provincial Division
Judge	Erasmus J
Heard	November 14, 1974
Judgment	December 5, 1974

Flynote : Sleutelwoorde

Company — Judicial management — Application based on scanty information — Effect — Factors to be taken into account in confirming rule nisi in such an application — Act 61 of 1973, secs. 427 (2), 432 — Provisional judicial B manager — Duties of — Not his duty to submit uncalled for reports to foster application for final judicial management order — Court not to consider such report — Secs. 429 (b) (ii), 430, 432 (2).

Headnote : Kopnota

An applicant basing its case for a judicial management order, which is a special concession and only granted in exceptional C circumstances, on scanty information and generalisations does so at its own peril. Moreover, when merely the confirmation of the rule nisi is opposed on the return day a postponement in order to submit further information may be more readily granted than in a case where in addition there is a counter-application that the company be placed in liquidation.

The factors which a Court is called upon to take into D consideration in confirming, in terms of section 432 of Act 61 of 1973, a rule nisi issued in terms of section 427 (2), detailed.

Section 430 (c) of Act 61 of 1973 enjoins a provisional judicial manager to prepare and lay before the meeting of creditors convened under section 429 (b) (ii) a report containing the information mentioned in section 430 (c). Sub-section (c) (vi) gives him the right to express his considered opinion as to the prospects of the company becoming E a successful concern and of the removal of the facts or circumstances which prevent the company from becoming a successful concern. The Act gives him this right only in respect of his report which must be submitted to the creditors at the meetings concerned and it is no business of his to submit, if and when he prefers, further uncalled for reports or opinions and facts exclusively to an applicant company with a view to fostering its application (for a judicial management order). Neither is the Judge called upon by the Act to consider F such further ill-conceived reports by the provisional judicial manager. Section 432 (2) of the Act prescribes what must be considered by the Judge on the return day.

Case Information

Return day of a rule nisi. Facts not material to this report have been omitted.

H. P. Viljoen, for the applicant.

E. K. W. Lichtenberg, for the respondents. G

Cur adv vult.

Postea (December 5). H

Judgment

Erasmus, J.:

On 11 June 1974 the applicant obtained in its favour a rule nisi by which it was placed under a provisional judicial management order and on 14 November 1974 it applied for a final judicial management order in terms of sec. 432 (2) of Act 61 of 1973, i. e. the new Companies Act. The application is opposed by two intervening creditors, Maurice Segal and Dora Jacobson, hereinafter referred to as "the respondents". I might mention that the respondents also filed an application on 3 September 1974

1975 (2) SA p358

Erasmus J

asking for a winding-up order against the applicant, which will be considered at a later stage in this judgment.

As I see the application for a provisional judicial management order there are three aspects involved which will be considered A in turn; firstly, the dearth of information laid before the Court in the application; secondly, the merits of the application on such information as may be gathered from the papers and thirdly, the affidavit of the provisional judicial manager attached to the replying affidavit of the applicant.

Regarding the first aspect then, sec. 428 (1) of the Act reads:

"The Court may on an application under sec. 427 (2) or (3) B grant a provisional judicial management order, stating the return day, or dismiss the application or make any other order that it deems just."

The section under which the present rule nisi has been issued is sub-sec. (2) of sec. 427. That sub-section reads:

"An application to Court for a judicial management order in respect of any company may be made by any of the persons who C are entitled under sec. 346 to make an application to Court for the winding-up of a company, and the provisions of sec. 346 (4) (a) as to the application for winding-up shall mutatis mutandis apply to an application for a judicial management order."

It may therefore be convenient also to cite sec. 346 (4) (a) in so far as it is relevant. It reads:

"Before an application for the winding-up of a company is D presented to the Court, a copy of the application and every affidavit confirming the facts shall be lodged with the Master..."

Although sec. 428 (1) is the only section that refers explicitly to the granting of a provisional judicial management order, there is no doubt in my mind that sec. 427 also contemplates such an order. Sub-sec. (1) states:

"Where any company by reason of mismanagement or for any other cause -

(a)

E is unable to pay its debts or is probably unable to meet its obligations; and

(b)

has not become or is prevented from becoming a successful concern,

and there is a reasonable probability that, if it is placed under judicial management, it will be enabled to pay its debts or to meet its obligations and become a successful concern, the Court may, if it appears just and equitable, grant a judicial management order in respect of that company."

F If the above section had not contemplated such an order, the wording in the concluding sentences of sec. 432 (2) dealing with a final judicial management order would not have differed from that of sec. 427 (1) and sec. 432 (2) would have reiterated the sentence,

"there is a reasonable probability that... it will be enabled to pay its debts...".

With regard to a provisional judicial management order possibly G leading to a final order there must also be a reasonable probability that the company will be enabled to pay its debts whereas in the case of a final order it must only appear to the Court that the company will be enabled to become a successful concern apart from it being just and equitable that it be placed under judicial management.

"Every affidavit confirming the facts," to which reference is made in sec. 346 (4)(a), constitutes a part of the application and the Court will have to judge the application by those facts in order, inter alia, to ascertain whether there is a reasonable probability that the company will be enabled to pay its debts before it grants a provisional judicial management order and if the facts presented to Court are but meagre or insufficient, the Court may not grant such an order.

In unopposed matters of this nature, it stands to reason that it invariably happens that a Court grants a rule nisi on general...