Marais v Leighwood Hospitals (Pty) Ltd

• Jurisdiction: South Africa
• Judge: Van Winsen AJ
• Judgment Date: 20 June 1950
• Citation: 1950 (3) SA 567 (C)
• Hearing Date: 15 June 1950
• Court: Cape Provincial Division

B Van Winsen, A.J.:

A company known as the Leighwood Hospitals (Pty.) Ltd. was placed under judicial management on the 22nd September, 1949, and a Mr. J. M. Borton was appointed judicial manager. The Court, when it issued the order, stayed all the actions against the company, save with the Court's consent. The company at the time it was placed C under judicial management owned certain property in Rondebosch, consisting of three pieces of land, on one of which the Leighwood Nursing Home was situated; on the other the nurses' quarters serving the home, and the remaining bit of land was a vacant erf. It appears that D the land on which the Leighwood Nursing Home is situate is bonded to a Mr. C. L. Marais for the sum of £10,500. At the time that the company was placed under judicial management there was arrear interest owing to the bondholder. In November, 1949, Mr. Marais applied on notice of motion to be given leave to institute proceedings against the company E under judicial management, to take judgment in respect of his bond and to execute on the property. He likewise sought judgment for an amount of £22 10s., being fire insurance premiums paid by him in terms of the said bond. The application was opposed by the judicial manager, with the concurrence of certain of the creditors and of certain of the F shareholders. At the time the application was argued, it appeared that the judicial management had only been in operation for a matter of 2½ months, and that not sufficient time had elapsed to enable it to be determined whether the judicial management would serve its object, G namely, to rehabilitate the company and to pay the creditors. It also appeared that creditors to the value of some £11,000 opposed the application of the bondholder. The granting of the application would of necessity have put an end to the judicial management, because the main asset, the nursing home, would have had to be sold and this would have to be done at a point of time when it was not yet certain whether the H judicial management would or would not achieve its purpose. It appears from the judgment of STEYN, J,. who dealt with the bondholder's application on that occasion, that his Lordship did not share the applicant's fear that the market value of his security would drop. It appeared at that time that the nett profit made by the company for two months, i.e., September and October, had been in the region of £300 per month, and in addition there were comprehensive bookings at the home for future months. As I read the judgment,

Van Winsen AJ

these factors which I have named, persuaded the Court to refuse the application, but the learned Judge reserved to the applicant the right to apply again on the papers then before the Court, and to place any other information he may wish before the Court. An appeal was noted A against this judgment, but was subsequently abandoned, and the bondholder instead followed the course of renewing his application to this Court on the original papers. In doing so, he applied for an order to give him leave to institute proceedings against the respondent company on the bond that I have referred to, and in addition to take B judgment and execute thereon. Similar application is made in respect of the £22 10s., fire insurance premiums paid by the bondholder, in terms of the bond. Alternatively, the bond holder applied for an order in terms of sec. 198 of the Companies Act for a cancellation of the judicial management order issued on the 28th September, 1949.

C Further facts have now been placed before the Court, which, in my opinion, show rather a different situation than that which appertained when the original application was brought. The judicial manager, (Annexure 'C') to the affidavit of Mr. Lomax, not been conspicuously successful. The £300 per month profit has not been maintained. In fact D according to the report of the judicial manager (Annexure 'C'), to the affidavit of Mr. Lomax, it would appear that in certain months there was actually a substantial loss incurred. Further, from this report, it seems that for the period of the judicial management, and up to the 31st March, 1950, the company showed a profit of only £604 10s. In this E report it is also stated that numerous prospective patients have cancelled their bookings, and it is expected that the company will be faced in the near future with some heavy expenditure for replacements. The judicial manager quite candidly says although he was originally of F opinion that the company could accumulate sufficient funds to make a substantial reduction in its liabilities, as at present advised he considered that some considerable time must elapse before a reasonable award could be made to creditors. It is clear, therefore, that the judicial management has not achieved the purpose for which it was G undertaken, namely, the paying of creditors within a reasonable time, and the rehabilitation of the company. To this application of the bondholder, the judicial manager replies with an application for leave to sell the Leighwood Nursing Home, together with the nurses' quarters and the adjoining vacant erf 'and all the equipment, furniture and other movable assets at present in or on the said premises in the judicial H management by public auction or private treaty, subject to the approval of the Master of this Honourable Court, and subject to the condition that if no such sale be effected within six months from the date of the order the said order shall lapse and cease to be of force and effect'. Alternatively, the judicial manager applies for an order placing the Leighwood Hospitals (Pty.) Ltd. into liquidation. This application, and the application of the bondholder were, by consent of

Van Winsen AJ

the parties, and concurrence of the Court, dealt with together and argued on the basis that they were inter-related applications.

Dealing first with the proposal by the judicial manager that he be given leave to sell the business of the company as a going concern, it is A apparent that if this course is followed it inevitably involves the continuation of the judicial management for a period possibly up to six months. The first question is whether such a course is justifiable. When once it has appeared from all the circumstances that the judicial management...