Tjeka Training Matters (Pty) Ltd v KPPM Construction (Pty) Ltd and Others

• Jurisdiction: South Africa
• Judge: Sutherland J
• Judgment Date: 21 June 2019
• Citation: 2019 (6) SA 185 (GJ)
• Docket Number: 19661/2019
• Hearing Date: 21 June 2019
• Counsel: R Dorning for the applicant. C van der Linde for the respondents.
• Court: Gauteng Local Division, Johannesburg

Tjeka Training Matters (Pty) Ltd v KPPM Construction (Pty) Ltd and Others
2019 (6) SA 185 (GJ)

2019 (6) SA p185

Citation	2019 (6) SA 185 (GJ)
Case No	19661/2019
Court	Gauteng Local Division, Johannesburg
Judge	Sutherland J
Heard	June 21, 2019
Judgment	June 21, 2019
Counsel	R Dorning for the applicant.; C van der Linde for the respondents.

Flynote : Sleutelwoorde

Company — Business rescue — Liquidation proceedings — Whether issue or service of liquidation papers was 'initiation' of liquidation proceedings — Companies Act 71 of 2008, s 129(2)(a).

Headnote : Kopnota

In this matter a creditor issued liquidation papers against a company. Some time C later the directors of the company, unaware of the issue of the papers, filed a resolution to begin business rescue proceedings. The creditor then served the papers (see [2]).

In this application, apparently prompted by an imminent meeting in the business rescue process, the creditor challenged the validity of the resolution (see [4] D at note 1).

The question was whether issue of the liquidation papers was 'initiation' of liquidation proceedings as intended in s 129(2)(a) of the Companies Act 71 of 2008 (see [3]). It reads:

'(2) A resolution [by the board of a company to begin business rescue proceedings] . . . E

(a)

may not be adopted if liquidation proceedings have been initiated by or against the company; . . . .'

The court's holding was that mere issue would not constitute 'initiation' as contemplated by the section, but that service of the liquidation papers was required (see [22]). F

Ordered, accordingly, that the resolution was valid (see Order).

Cases cited

Absa Bank Ltd v Newcity Group (Pty) Ltd and Other Cases [2013] 3 All SA 146 (GSJ): referred to

Cool Ideas 1186 CC v Hubbard and Another 2014 (4) SA 474 (CC) (2014 (8) BCLR 869; G [2014] ZACC 16): dictum in para [28] applied

Finishing Touch 163 (Pty) Ltd v BHP Billiton Energy Coal South Africa Ltd and Others 2013 (2) SA 204 (SCA) ([2012] ZASCA 49): considered

FirstRand Bank Ltd v Imperial Crown Trading 143 (Pty) Ltd 2012 (4) SA 266 (KZD): considered

Marine and Trade Insurance Co Ltd v Reddinger 1966 (2) SA 407 (A): dictum at 413D H applied

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

Plascon-Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd 1984 (3) SA 623 (A) ([1984] ZASCA 51): applied I

Republikeinse Publikasies (Edms) Bpk v Afrikaanse Pers Publikasies (Edms) Bpk 1972 (1) SA 773 (A): applied

Sibakhulu Construction (Pty) Ltd v Wedgewood Village Golf Country Estate (Pty) Ltd (Nedbank Ltd Intervening) 2013 (1) SA 191 (WCC): referred to

Standard Bank of South Africa v A-Team Trading CC 2016 (1) SA 503 (KZP) ([2015] ZAKZPHC 43): considered J

2019 (6) SA p186

Sulzer Pumps (South Africa) (Pty) Ltd v O & M Engineering CC A [2015] ZAGPPHC 59: referred to

Van der Merwe v Duraline (Pty) Ltd [2013] ZAWCHC 213: referred to

Legislation cited

The B Companies Act 71 of 2008, s 129(2)(a): see Juta's Statutes of South Africa 2018/19 vol 2 at 1-141.

Case Information

R Dorning for the applicant.

C van der Linde for the respondents.

A C challenge to the validity of a resolution to begin business rescue proceedings.

Order

(1)

Section 129(2)(a) of the Companies Act 71 of 2008 contemplates that the liquidation proceedings referred to therein be initiated by D service thereof on the debtor company.

(2)

The resolution of the first respondent of 15 May 2019 is valid and effective against the liquidation application served on the first respondent on 28 May 2019.

(3)

E The applicant shall bear the costs of this application.

Judgment

Sutherland J:

Introduction

[1] F The critical controversy in this matter concerns the interpretation of s 129(2) of the Companies Act 71 of 2008 (the 2008 Act). The relevant portion of the section reads:

'Company resolution to begin business rescue proceedings

(1) Subject to subsection (2)(a), the board of a company may resolve G that the company voluntarily begin business rescue proceedings and place the company under supervision, if the board has reasonable grounds to believe that —

(a)

the company is financially distressed; and

(b)

there appears to be a reasonable prospect of rescuing the company.

(2) A resolution contemplated in subsection (1) —

(a)

H may not be adopted if liquidation proceedings have been initiated by or against the company; and

(b)

has no force or effect until it has been filed.'

[2] The point of dispute arises from these few facts:

[2.1]

On 18 April 2019 the applicant in these proceedings (Tjeka) I obtained the issue of a liquidation application in the High Court.

[2.2]

On 15 May 2019 the first respondent (KPPM) filed a resolution as contemplated in s 129(2) of the 2008 Act.

[2.3]

On 28 May 2019 the liquidation application was served on J Tjeka.

2019 (6) SA p187

Sutherland J

[3] The question is simply whether the resolution trumps the liquidation A application which, though issued before the resolution was filed, was not yet served; ie does the mere issue of the liquidation application satisfy the meaning to be attributed to the phrase 'proceedings have been initiated . . . against the company'?

[4] Tjeka is a creditor of KPPM. The third and fourth respondents are the B business rescue practitioners appointed pursuant to the resolution, who are the de facto controlling mind for the time being of KPPM. [1]

[5] The rival interpretations of s 129(2) producing antithetical results are examined. Plainly the remarks in Cool Ideas 1186 CC v Hubbard and Another 2014 (4) SA 474 (CC) (2014 (8) BCLR 869; [2014] ZACC 16) C para 28 inform the appropriate approach. [2]

[6] It is argued on behalf of Tjeka that the word 'initiated' is the point of departure. Its dictionary meaning is alluded to as being getting something started, ie the Oxford English Dictionary describes 'initiated' as to 'cause a process or action to begin'. Taken literally, the 'first move' in D any process seems a likely candidate for 'initiate'. It is insinuated in the argument that the word 'commence' could be a synonym. The authority of Marine and Trade Insurance Co Ltd v Reddinger 1966 (2) SA 407 (A) (Reddinger) is marshalled to fortify this perspective. I was referred to a passage at 413D where it was argued that the court held that: E

'Although an action is commenced when the summons is issued the defendant is not involved in litigation until service has been effected . . . .' [3] [Emphasis supplied.]

Upon this premise it is argued that the phenomenon of 'litigation' is distinguished from the juridically cognisable event of the 'issue' of a matter, its literal true beginning. F

2019 (6) SA p188

Sutherland J

[7] A The difficulty which is encountered with such textual treatment is that most words can be turned to fit meanings that can be attributed to them. What cannot be stressed enough is that a word can never be interpreted on its own, because it exists only as a part of a greater whole, whether a phrase, a sentence or an entire section, not to mention a whole B statute. Moreover the duty to interpret language purposively compels a court to cast a wider net over what must be explored. [4] Accordingly, it is the work that the phrase or sentence performs in the context of the whole that must be examined.

[8] C The text of s 129(2)(a) must be read as a whole. Whatever 'initiated' means, it must be understood to be 'by or against the company'. To omit this aspect is to not do justice to this part of the sentence. It is plain that the liquidation proceedings which are initiated, must be cognisable by reference to its effect upon the company, otherwise the notion of it being 'by' or 'against' the company is mere verbiage. Thus, it can be asked: if D a deed (ie the issue of an application) which is juridically cognisable occurs, but without the company being in the least aware of its existence,

2019 (6) SA p189

Sutherland J

can that deed be said to be an example of a deed initiated against the A company? [5] At the levels of both grammar and logic this seems doubtful.

[9] The next argument invoked the decision in FirstRand Bank Ltd v Imperial Crown Trading 143 (Pty) Ltd 2012 (4) SA 266 (KZD) (Crown Trading). The passage in para 17 is relied on; the relevant passages are: B

'[16] It is clear, however, that Act 71 of 2008 draws a distinction between the inter-relationship of business rescue proceedings and liquidation proceedings, depending upon whether the source of business rescue proceedings lies in the resolution of the board of a company to begin such proceedings in terms of s 129(1), or whether the source of such proceedings lies in an application brought by an "affected C person" in terms of s 131(1), for an order placing the company under supervision and commencing business rescue proceedings.

[17] In the former case, as pointed out, in terms of s 129(2)(a) such a resolution may not be adopted "if liquidation proceedings have been initiated by or against the company". The reference to liquidation D proceedings by or against the company, is clearly a reference to a voluntary winding-up of a company in terms of s 352 of Act 61 of 1973, as well as a reference to a winding-up of a company by the court in terms of s 348 of Act 61 of 1973. In this regard, the authors of the work Davis et al Companies and other Business Structures in South Africa 2 ed at 229 n6 express the view that it is unfortunate that it is unclear E whether the word "initiated" (which is not defined) is intended to have the same meaning as the word "commenced" contained in the aforesaid sections of Act 61 of 1973, and which is clearly defined in Act 61...