Standard Bank of South Africa v A-Team Trading CC

• Jurisdiction: South Africa
• Judge: Ploos Van Amstel J
• Judgment Date: 17 November 2015
• Citation: 2016 (1) SA 503 (KZP)
• Docket Number: 7233/15
• Counsel: AJ Rall SC (with H van der Merwe) for the applicant. S Alberts for the respondent.
• Court: KwaZulu-Natal Division, Pietermaritzburg

Ploos van Amstel J:

[1] This is an application for the provisional winding-up of a close corporation (the respondent) on the basis that it is unable to pay its I debts. After the application was launched, but before it was heard, an application was brought in the Local Division in Durban for an order placing the respondent under supervision and commencing business rescue proceedings in terms of s 131 of the Companies Act. [1] The issue

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before me was whether the effect of the business rescue application was A to suspend the liquidation application in terms of s 131(6). [2]

[2] The background is briefly as follows. The applicant, Standard Bank, [3] entered into 17 instalment-sale agreements with the respondent during the period 2010 – 2013 relating to vehicles, plant and equipment. The bank's case is that the respondent fell into arrears with the instalments B and that, in spite of several written demands, it continues to be in arrears, which amounted to some R927 490 when the liquidation application was launched. The respondent does not dispute that it is in arrears, but challenges the calculation of the amount outstanding and the bank's entitlement to cancel the agreements. On any basis it seems clear that the respondent is currently commercially insolvent as it is unable to C pay its debts as they fall due.

[3] The only issue which was argued before me is whether it is competent to grant a provisional winding – up order in the light of the business rescue application. Counsel for the respondent submitted that D the effect of the business rescue application was to suspend the liquidation application in terms of s 131(6). Counsel for the bank contested this and submitted that what is suspended in terms of the section is not the liquidation application, but the liquidation process which follows upon a liquidation order, until either of the events referred to in section 131(6)(a) and (b) occurs. The answer to these competing contentions lies in the proper interpretation of s 131(6). E

[4] In Natal Joint Municipal Pension Fund v Endumeni Municipality [4] the court dealt with the current approach to statutory interpretation and said: [5]

'Interpretation is the process of attributing meaning to the words used in F a document . . . consideration must be given to the language used in the light of the ordinary rules of grammar and syntax; the context in which the provision appears; the apparent purpose to which it is directed and the material known to those responsible for its production. Where more than one meaning is possible each possibility must be weighed in the light of all these factors . . . . A sensible meaning is to be preferred to G one that leads to insensible or unbusinesslike results or undermines the apparent purpose of the document. Judges must be alert to, and guard against, the temptation to substitute what they regard as reasonable, sensible or businesslike for the words actually used . . . . The inevitable point of departure is the language of the provision itself, read in context and having regard to the purpose of the provision and the background to the preparation and production of the document.' H

[5] In Panamo Properties (Pty) Ltd and Another v Nel and Others NNO [6] Wallis JA said business rescue is a process aimed at avoiding the

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A liquidation of a company if it is feasible to do so. Section 7 sets out the purposes of the Act, which includes [7] 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'.

[6] Section 131(1) reads as follows:

B 'Unless a company has adopted a resolution contemplated in section 129, an affected person may apply to a court at any time for an order placing the company under supervision and commencing business rescue proceedings.'

Section 131(6) reads as follows:

C 'If liquidation proceedings have already been commenced by or against the company at the time an application is made in terms of subsection (1), the application will suspend those liquidation proceedings until —

(a)

the court has adjudicated upon the application; or

(b)

the business rescue proceedings end, if the court makes the order applied for.'

D [7] In support of his argument that 'liquidation proceedings' in ss (6) do not include an application for a provisional winding-up order, counsel for the bank submitted that it was held in FirstRand Bank Ltd v Imperial Crown Trading 143 (Pty) Ltd [8] that liquidation proceedings only commence after a provisional winding-up order is granted, and that I am E bound by this decision unless I am satisfied that it is clearly wrong. I do not think this is what was decided in that case.

[8] In Imperial Crown Trading a bank sought an order for the provisional liquidation of the respondent company on the ground that it was unable to pay its debts. At the hearing before Swain J the respondent sought a F postponement of the matter so as to enable it to investigate the advisability of launching an application for business rescue. Counsel for the bank urged the court to grant a provisional winding-up order with an extended return date so as to give the respondent sufficient time to bring a business rescue application if it were so advised. Counsel for the G respondent asked the court not to grant a provisional order as, he...