Swart v Beagles Run Investments 25 (Pty) Ltd (Four Creditors Intervening)

• Jurisdiction: South Africa
• Judge: Makgoba J
• Judgment Date: 30 May 2011
• Citation: 2011 (5) SA 422 (GNP)
• Docket Number: 26597/2011
• Hearing Date: 26 May 2011
• Counsel: MMW van Zyl SC for the applicant. DM Leathern SC for the first and second intervening creditors. D Prinsloo for the third intervening creditor. R Raubenheimer for the fourth intervening creditor.
• Court: North Gauteng High Court, Pretoria

Makgoba J:

[1] The applicant brought this urgent application seeking an order:

[1.1]

That the non-compliance of the rules of this court with regard to J

Makgoba J

A form of service be condoned, and this matter be heard as an urgent application.

[1.2]

That the respondent be placed under supervision in terms of the provisions of s 131(4)(a) of the Companies Act 71 of 2008, and commencing business rescue proceedings.

[1.3]

B That Johannes Jacobus van Huyssteen be appointed as interim practitioner of the respondent in terms of s 131(5) of the Companies Act 71 of 2008.

[2] Subsequent to the filing of the application, first, second and third intervening creditors intervened as creditors, and are opposing the C application for business rescue. The first intervening creditor (FirstRand Bank Ltd) also seeks an order that a winding-up application it brought against the respondent under case No 8037/11 in this court, be heard urgently and simultaneously with this application, and that a winding-up order be granted.

D [3] During the course of the hearing of this application on 26 May 2011, the fourth intervening creditor gave notice of its intention to intervene as a creditor. The fourth intervening creditor has on this day concluded a written agreement with the first intervening creditor (FirstRand Bank), in terms whereof the fourth intervening creditor purchased FirstRand Bank's right, title and interest in the claim that FirstRand Bank had E against the respondent. As a result of this development the first intervening creditor withdrew the liquidation application it has brought against the respondent. Henceforth, the first intervening creditor ceased to be a party to the present proceedings.

F [4] On 30 May 2011 the fourth intervening creditor, after filing and serving a formal application, was granted leave to intervene as such, and duly joined as a party to the present proceedings. In its notice of motion the fourth intervening creditor seeks an order that the main application (that is, the present application) be postponed for a period of three months, alternatively that the respondent be placed under supervision in G terms of s 131(4)(a) of the Companies Act 71 of 2008, and commencing business rescue proceedings. In essence, the fourth intervening creditor supports the present application.

[5] The applicant is the sole director, and the only shareholder of the respondent. The respondent's business consists mainly of a chartering H concern, and dealing in exotic wildlife species. As far as the charter business is concerned, respondent is the owner of various aircraft, including a Beechcraft King Air 200 aeroplane and a Bell Textron 206L-3 helicopter. As a result of various reasons the financial affairs of respondent deteriorated to such an extent that respondent is currently I not in a financial position to meet its immediate financial obligations.

[6] The second intervening creditor obtained judgment against the respondent, pursuant to a provisional-sentence summons on 9 March 2011. The court order agreed upon by the parties provided inter alia for a period of 30 days for respondent to market and sell the two aircraft referred to above, which was unsuccessful, and eventually the aircraft J was put on auction on 6 May 2011, and sold for a total price insufficient

Makgoba J

to pay the outstanding judgment debt with interest. I am told that the A outstanding debt is presently estimated at R11 000 000, with interest accruing at 1% per week or approximately R14 000 per day.

[7] The third intervening creditor's claim against the respondent is estimated at R45 000, being in respect of legal costs incurred when it B opposed the applicant's application to stop the auction for the sale of the aircraft on 6 May 2011. The third intervening creditor acted as an auctioneer in the aforesaid sale.

[8] The fourth intervening creditor, having substituted the first intervening creditor, now has a claim against the respondent for an amount of R3 100 000. C

[9] Consequently, the second, third and fourth intervening creditors are the affected persons, as contemplated in s 128(a) of the Companies Act 71 of 2008. They have the necessary locus standi to participate as parties in these proceedings and as creditors of the respondent. D

[10] The applicant's case is that the respondent is currently financially distressed, in that it lacks the necessary cash flow in order to be able to pay E all debts as they become due and payable; that the respondent is financially distressed as envisaged in s 128(f) of the Companies Act 71 of 2008, as it is reasonably unlikely that the respondent will be able to pay all its debts as they become due and payable within the immediately ensuing six months. The applicant submits further that, if respondent is not placed under supervision, and the execution process of the second intervening creditor is to continue, there is no reasonable prospect that respondent can pay its debts as they become due, within the next six months. F

[11] The applicant further submits that, if the respondent is placed under supervision, the business rescue proceedings commence, and a business plan is implemented in order to rescue the affairs of the respondent, all the creditors of respondent would be fully paid in due course, and respondent would be granted the opportunity to proceed G with its business.

[12] The second and third intervening creditors oppose the application on the grounds that the application for business rescue is in itself an abuse of process, and is a culmination of a number of attempts to avoid H and postpone payment of the respondent's debts; that the applicant demonstrates in this application a complete negation of the rights of creditors, and has carried on the business of the respondent company under admittedly insolvent circumstances, recklessly, and under circumstances where a number of transactions ought to be set aside in terms of the Insolvency Act 24 of 1936 read together with the I Companies Act 61 of 1973, in turn read together with the Companies Act 71 of 2008.

[13] The opposing creditors submit that the applicant, Mr Swart, has used this company (respondent) as if it were his alter ego, and has conducted the affairs...