Mtolo v Guilder Investments 10 (Pty) Ltd

• Jurisdiction: South Africa
• Judge: Kruger J
• Judgment Date: 02 March 2017
• Docket Number: 8706/2016
• Court: KwaZulu-Natal Division, Durban
• Hearing Date: 21 February 2017
• Citation: 2017 JDR 0440 (KZD)

Kruger J:

[1]

The applicants seek an order, in terms of Section 131(1) of the Companies Act, 71 of 2008 ("the Act"), placing the first respondent ("Guilder") under supervision and commencing business rescue proceedings. In this regard, the applicants also seek an order that Ms Simi Maharaj be appointed as the business rescue practitioner. The application is opposed by the second respondent ("the Land Bank").

[2]

This matter has a long and chequered history. I will attempt to briefly summarise same. During or about June 2006, the Land Bank agreed to lend Guilder the sum of R100 000 000,00. Pursuant to the conclusion of this agreement, the Land Bank advanced various amounts to Guilder. As at 2nd July 2007, the amount advanced to Guilder was the sum of R45 672 674,00. In terms of the agreement, Guilder was required to repay all amounts advanced to it, by the Land Bank, within twenty four months of the first advance. The first advance was made on the 20th September 2006. Therefore, the entire amount advanced by the Land Bank to Guilder was payable on the 20th September 2008.

[3]

Guilder did not repay the sum of R45 672 674,00 on the 20th September 2008. Following negotiations, an agreement was reached, on or about the 26th February 2009, in terms of which the Land Bank agreed to accept payment of the sum of R53 000 000,00 in full and final settlement of Guilder's indebtedness to the Land Bank. (as at 31st January 2009, this indebtedness was the sum of R66 135 455,68). Payment of the agreed amount was to be secured by a guarantee to be furnished by ABSA Bank Limited, in favour of the Land Bank. The said guarantee was duly furnished by ABSA Bank Limited but was subsequently cancelled and withdrawn by ABSA Bank allegedly upon failure by Guilder to procure the fulfilment of the conditions precedent stipulated therein.

2017 JDR 0440 p4

Kruger J

[4]

During March 2012, summons was issued and served on Guilder by the Land Bank, in respect of the amount due. This summons/action was withdrawn on or about 8th March 2016. On or about 1st April 2015 the Land Bank instituted an application in the KwaZulu-Natal Division of the High Court of South Africa, Durban, (Case No. 3548/2015) for the provisional liquidation of Guilder. This liquidation application was opposed by Guilder.

[5]

The liquidation application was enrolled for hearing on the 12th May 2016. On that day, the parties sought and obtained the following order by consent:

"1.

The application is postponed sine die.

2.

The respondent shall pay the wasted costs occasioned by the postponement which shall include the costs of the employment of senior counsel.

3.

The respondent shall deliver to the applicant by 7th June 2016 an unconditional and irrevocable bank guarantee for payment of the sum of R53 000 000,00 (Fifty three million rand) payable upon cancellation of the mortgage bond registered against the immovable properties of the respondent in favour of the applicant with the Registrar of Deeds, under Mortgage Bond No. B06/57473.

4.

Should the respondent fail to deliver the bank guarantee referred to in paragraph 3 above, on the date mentioned in paragraph 3 above, then by agreement the respondent consents to the applicant taking a provisional winding up order against the respondent on an unopposed basis."

[6]

On the 7th June 2016 Guilder sought, and was granted an indulgence until the 30th June 2016 to deliver the guarantee foreshadowed in the aforesaid court order. However the guarantee was not furnished by the 30th June 2016.

[7]

Acting in terms of the provisions of paragraph 4 of the court order, the Land Bank enrolled the liquidation application, on the unopposed roll, for

2017 JDR 0440 p5

Kruger J

hearing on the 6th September 2016. On the day of the hearing, the present application for business rescue was served on the Land Bank.

[8]

One of the purposes of the Act is to "provide for the efficient rescue and recovery of financially distressed companies, in a manner that balances the rights and interests of all relevant stakeholders". (Section 7(k) of the Act). Business rescue is defined in Section 128(1)(b) of the Act as:

""Business rescue" means proceedings to facilitate the rehabilitation of a company that is financially distressed by providing for –

i.

The temporary supervision of the company, and of the management of its affairs, business and property;

ii.

A temporary moratorium on the rights of claimants against the company or in respect of property in its possession; and

iii.

The development and implementation, if approved, of a plan to rescue the company by restructuring its affairs, business, property, debt and other liabilities, and equity in a manner that maximises the likelihood of the company continuing in existence on a solvent basis or, if it is not possible for the company to so continue in existence, results in a better return for the company's creditors or shareholders than would result from the immediate...