Mouton v Park 2000 Development 11 (Pty) Ltd and Others

• Jurisdiction: South Africa
• Citation: 2019 (6) SA 105 (WCC)

Mouton v Park 2000 Development 11 (Pty) Ltd and Others
2019 (6) SA 105 (WCC)

2019 (6) SA p105

Citation	2019 (6) SA 105 (WCC)
Case No	1070/19, 8488/16 and 2535/19
Court	Western Cape Division, Cape Town
Judge	Sher J
Heard	July 23, 2019
Judgment	July 23, 2019
Counsel	Counsel in case 1070/19; T Dicker SC (with M McChesney) for the applicants.; P van Eeden SC (with R Appoles) for the respondents.; Counsel in case 8488/16; P van Eeden SC (with R Appoles) for the applicants.; T Dicker SC (with M McChesney) for the respondents.; Counsel in case 2535/19; L Zazeraj for the applicants.; T Dicker SC (with M McChesney) for the respondents.

Flynote : Sleutelwoorde

Company — Business rescue — Liquidation proceedings already initiated — Liquidation proceedings 'initiated' by causative conduct that sets them in motion, not by their formal 'commencement' — Relevant causative conduct being adoption of resolution to launch liquidation proceedings — Company may not thereafter adopt resolution to begin business rescue proceedings C — Companies Act 71 of 2008, s 129(2)(a).

Headnote : Kopnota

The question in the present case was whether business rescue proceedings in respect of Park 2000 were defective because they were launched when liquidation proceedings against it had already been 'initiated'. Answering it D required interpretation of s 129(2)(a) of the Companies Act 71 of 2008, under which a resolution to 'begin' business rescue proceedings cannot be adopted if liquidation proceedings have already been 'initiated' by or against the company.

Here the central issue was, which came first: business rescue or liquidation E proceedings? It implicated factual and legal commencement, which do not necessarily refer to the same moment in time (see [19] – [20]). Park 2000's case was that since business rescue proceedings were commenced (by the adoption of the necessary resolution) before the liquidation proceedings were 'initiated' (by the issuing of the papers in the application), they could not be assailed for want of compliance with s 129.

Park 2000, keen to show that the business rescue proceedings came first, argued F that the liquidation proceedings were 'initiated' only when the application was issued out of the High Court. For this it relied on s 348 and s 353 of the old Companies Act 61 of 1973, which refer to the 'commencement' of liquidation proceedings. Citing FirstRand Bank Ltd v Imperial Crown Trading 143 (Pty) Ltd 2012 (4) SA 266 (KZD), it argued that the word G 'initiated' in s 129(2)(a) had to be taken to mean the same thing (see [24]). Thus business rescue proceedings 'began', by way of adoption of the necessary resolution a few days before the liquidation proceedings were 'commenced' by the issue of the relevant papers out of the High Court (see [25]).

Held H

It was clear from its wording that s 129(2)(a) applied not only where liquidation proceedings were initiated against a company, but also where they were initiated by the company itself (see [78]). 'Initiate' in s 129(2)(a) meant the (factual) putting into motion of liquidation proceedings by the adoption of an appropriate resolution, not their (formal) 'commencement' by the lodging of the application with the court (see [78], [81]). A contrary I interpretation would allow a company to frustrate liquidation by adopting a resolution to place it under business rescue after liquidation proceedings were already set in motion (see [80]).

Since 'initiated' in s 129(2)(a) therefore did not — and was never intended to — bear the same meaning as 'commenced' in s 348 and s 352 of the old Act, FirstRand Bank was wrongly decided (see [58] – [59], [71]). J

2019 (6) SA p106

In A the present case, therefore, the liquidation proceedings were not 'initiated' when the liquidation application was lodged with the court, but when the resolution to launch them was taken, and before the subsequent resolution to place the company under business rescue (see [83], [104]). It followed that the business rescue resolution was adopted in breach of s 129(2)(a), and that the applicant in the principal application, Mouton, was entitled to B an order setting it aside (see [104]).

In closing, the court pointed out that the business rescue resolution was in any event not passed in good faith, in the sense that there was no genuine intention to attain the objectives of business rescue, but as a stratagem to frustrate the enforcement of a judgment obtained by Mouton (see [105]).

Cases cited

Alderbaran (Pty) Ltd and Another v Bouwer and Others C 2018 (5) SA 215 (WCC): compared

FirstRand Bank Ltd v Imperial Crown Trading 143 (Pty) Ltd 2012 (4) SA 266 (KZD): criticised and not followed

Griessel and Another v Lizemore and Others D 2016 (6) SA 236 (GJ) ([2015] 4 All SA 433): compared

Kalil v Decotex (Pty) Ltd and Another 1988 (1) SA 943 (A) ([1987] ZASCA 156): dictum at 961H – 962I applied

Lief NO v Western Credit (Africa) (Pty) Ltd 1966 (3) SA 344 (W): dictum at 347C applied

Natal Joint Municipal Pension Fund v Endumeni Municipality E 2012 (4) SA 593 (SCA) ([2012] 2 All SA 262; [2012] ZASCA 13): dictum in para [18] applied

Panamo Properties (Pty) Ltd and Another v Nel and Others NNO 2015 (5) SA 63 (SCA) ([2015] 3 All SA 274; [2015] ZASCA 76): referred to

Plascon-Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd F 1984 (3) SA 623 (A) ([1984] ZASCA 51): dictum at 634E and 635B – C applied

Room Hire Co (Pty) Ltd v Jeppe Street Mansions (Pty) Ltd 1949 (3) SA 1155 (T): dictum at 1163 applied

Sulzer Pumps (South Africa) (Pty) Ltd v O & M Engineering CC 2016 (1) SA 503 (KZP) ([2015] ZAGPPHC 59): referred to

Wightman t/a JW Construction v Headfour (Pty) Ltd and Another G 2007 (2) SA 128 (C): referred to

Wightman t/a JW Construction v Headfour (Pty) Ltd and Another 2008 (3) SA 371 (SCA) ([2008] 2 All SA 512; [2008] ZASCA 6): dictum in para [13] applied.

Legislation cited

The H Companies Act 71 of 2008, s 129(2)(a): see Juta's Statutes of South Africa 2018/19 vol 2 at 1 – 421.

Case Information

Counsel in case 1070/19

T Dicker SC I (with M McChesney) for the applicants.

P van Eeden SC (with R Appoles) for the respondents.

Counsel in case 8488/16

P van Eeden SC (with R Appoles) for the applicants.

T Dicker SC J (with M McChesney) for the respondents.

2019 (6) SA p107

Counsel in case 2535/19 A

L Zazeraj for the applicants.

T Dicker SC (with M McChesney) for the respondents.

Three related applications, one for a declaratory order (case No 1070/19) and two for an interim interdict (cases 8488/16 and 2535/19).

Order B

Ad the application under case 1070/19

1.

In terms of ss 130(1)(a)(iii) and 130(5)(a)(i) – (ii), read with ss 130(5)(c), 132(2)(a)(i) and 129(2)(a) of the C Companies Act 71 of 2008, the resolution which was adopted, in terms of which the first respondent (Park 2000 Development 11 (Pty) Ltd) was placed under business rescue, is declared to be invalid and is set aside, and the company is discharged from business rescue on the grounds that it has come to an end, and insofar as may be necessary the appointment of fourth respondent as business rescue practitioner is D discharged.

2.

The sale in execution on 12 December 2018 of the immovable property known as Erf 541, being a portion of Erf 539, The Fisheries, Hessequa Municipality, Division Riversdale (Western Cape), E held by virtue of deed of transfer T39566/2005, is declared to be valid and enforceable.

3.

The sale in execution on 12 December 2018 of the immovable property known as Erf 4513, Stilbaai West, being Portion 60 (remaining extent) of Farm Plattebosch 485, in the Hessequa Municipality (Western Cape), held by virtue of deed of transfer F T19355/1977, is declared to be valid and enforceable.

4.

Transfer of the properties referred to in the two preceding subparagraphs shall be effected as soon as possible, as against due payment of any amounts which may be owing in respect thereof (including any fees, disbursements, charges and taxes) and/or the discharge of G any obligation(s) which may be outstanding in lieu of such payment.

5.

First, third and fourth respondents shall be liable for the costs of the application (including the costs of two counsel where so employed) jointly and severally, the one paying the other to be absolved.

Ad the applications under cases 8488/16 and 2535/19 H

6.

The applications are dismissed.

7.

The applicants shall be liable for the costs of the applications on the scale as between attorney and client (including the costs of two counsel where so employed) jointly and severally, the one paying the other to be absolved. I

Judgment

Sher J:

[1] I have before me three related applications. In the main application (the Mouton application), which precipitated the other two, an order is J

2019 (6) SA p108

Sher J

principally A sought [1] declaring that a resolution which was adopted on 11 December 2018 by the first respondent company (Park 2000) to commence business rescue proceedings, is invalid, and consequently that such resolution and the proceedings which followed it, including the appointment of fourth respondent (Stewart) as the business rescue practitioner, should be set aside. In the alternative an order is sought B declaring that the resolution was null and void from the outset.

[2] In the remaining applications an interim interdict is sought by Stewart and certain intervening parties whereby the transfer of two immovable properties (which are registered in the name of Park 2000) to certain of the respondents, pursuant to an auction sale in execution at C which they were purchased, is to be restrained pending the outcome of the main application.

[3] The principal questions which arise for determination are whether or not the business rescue proceedings are defective...