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IN THE HIGH COURT OF SOUTH AFRICA

GAUTENG DIVISION, PRETORIA

 

                                                                                                            CASE NUMBER:  28444/2021

                                                                                                            DATE:   19 August 2021

 

WILLEM MASANGO                                                                                               First Applicant

ABRAM MASANGO                                                                                                 Second Applicant

MAPHOYISENI JOHNSOM MEIGA                                                                      Third Applicant

 

V

 

DNA AMMONIAK DIENSTE CC                                                                            First Respondent

(UNDER BUSINESS RESCUE)

 

ATTIE SCHLECHTER N.O.                                                                                     Second Respondent

(In his capacity as the appointed business rescue practitioner

of DNA Ammoniak Dienste CC)

 

COMPANIES AND INTELLECTUAL PROPERTY COMMISSION                   Third Respondent

And

BENNIE KEEVY N.O.                                                                                      First Intervening Party

OLKERS CHOPOLOGE KOIKANYANG                                                     Second Intervening Party

 

 

JUDGMENT

MABUSE J

[1]      This came before me as an urgent application in terms of which the Applicants seek an order that the resolution adopted by the members of the First Respondent on 6 December 2019 to commence business rescue proceedings in terms of s 129 of the Companies Act 71 of 2008 be set aside in terms of s 130(1)(a) and in terms of which, furthermore, they sought an order that the business rescue proceedings of the First Respondent be terminated in terms of s 132(2)(a)(i) of the Companies Act 71 of 2008. 

 

[2]      When the Applicants launched this matter on 20 July 2021, they did not ask for an order for costs because they did not anticipate that the matter would be defended.  Now that the matter is defended by the First and Second Intervening Parties, the Applicants seek an order of costs against them. 

 

[3]      THE PARTIES

          [3.1]   The Applicants are all major males and general workers in the permanent employ of the First Respondent with their residential addresses situated at portion 53 of the Farm Witklipbank, Delmas. 

          [3.2]   The First Respondent is DNA Ammoniak Dienste CC (under business rescue), a close corporation duly incorporated and registered as such in terms of the Close Corporations Act 69 of 1984 with its registered place situated as HS Van Coller & Kie Delchip Building, 19 4^th Street, Delmas.

          [3.3]   The Second Respondent, Attie Schlechter, is a major male business rescue practitioner and an attorney cited in this matter in his representative capacity as the appointed business rescue practitioner of the First Respondent practising as such under the name of Copper Lake Business Rescue CC and AS Incorporated Attorneys with business address situated at 26 Pretorius Avenue, Lyttleton Manor, Pretoria.

          [3.4]   The Third Respondent in this matter is the Companies and Intellectual Properties Commission with its principle place of business at the DTI Campus, Block F, 77 Meintjies Street, Sunnyside, Pretoria.

 

[4]      This application is opposed by the First and Second Intervening Parties (the trustees) in their

          capacities as the joint insolvent trustees in the joint estate of the late Daniel Frederik Broekman Senior (the deceased) and his surviving spouse Annette Broekman (Mrs Broekman).

 

          BACKGROUND FACTS

[5]      The First Respondent is a commercial farming entity which conducts such business from one immovable property which it owns as well as on three other immovable properties which are owned by two of the members of the First Respondent.  The First Respondent’s major client is McCains which purchases most of the yearly crops harvested by the First Respondent in its business activities.  The First Respondent is a family business, and the members were the deceased”) who held 30% member’s interest, his wife and surviving spouse, Mrs Broekman, who also holds 30% member’s interest in the First Respondent.  The remaining members of the family business are Daniel Frederik Broekman, (Daniel) and his sister, Ms Almé Broekman, (Alme) who each holds 20% member’s interest respectively.  Daniel and Almé are both the children of the deceased and Mrs Broekman.

 

[6]      The Applicants are permanent employees of the First Respondent and are employed as general farm workers.  As indicated above, the primary objective of this application is to have the resolution which commenced the business rescue proceedings of the First Respondent set aside in terms of s 130(1)(a) of the Companies Act 71 of 2008 (“the Act”).  This section provides that any affected person may apply to Court to have the resolution set aside.  As the employees of the First Respondent, the Applicants are affected persons as envisaged and defined in s 128(1)(a)(iii) of the Act.  Accordingly, the Applicants have the requisite locus standi to approach the Court for the relief sought.

 

[7]      The farming activities of the First Respondent were mainly the responsibilities of both the deceased and Daniel.  The deceased normally took responsibility of the business affairs but slowly introduced Daniel to that portion of the business. 

 

[8]      Mrs Broekman was, and still is, mainly responsible for the administration of the business activities.  Almé was mostly a silent member of the close corporation and never participated in the business activities.  The deceased and Mrs Broekman were married in community of property to each other.  They signed sureties in their personal capacities on behalf of the First Respondent and therefore, all the creditors of the deceased and Mrs Broekman and the First Respondent are the same creditors. 

 

[9]      Throughout the years the First Respondent was trading successfully and was very profitable.  However, during 2019 the business of the First Respondent became financially distressed due to the repayments on debts and high interest rates which affected the cash flow of the First Respondent negatively.  Debts could not be paid in time and the creditors became anxious.

 

[10]    As a consequence thereof, and on 6 December 2019, the members of the First Respondent adopted a resolution to place the business under business rescue.  When the business rescue proceedings commenced on the aforementioned date, a certain Mr De Louw Le Roux (“Mr Le Roux”) was appointed as the business rescue practitioner of the First Respondent.  Subsequent thereto Mr Le Roux resigned as the business rescue practitioner and on 11 December 2019 a Mr Bennie Keevy (“Mr Keevy”), also the First Intervening Party, was appointed as the business rescue practitioner for the First Respondent.  Mr Keevy appointed the Second Respondent from AS Incorporated Attorneys as the attorney to assist him in the business rescue proceedings.  The Second Respondent is currently the business rescue practitioner.

 

[11]    Due to the fact that the deceased and Mrs Broekman signed as surety for all the First Respondent’s debts and because of the First Respondent being under business rescue, Absa Bank applied for the sequestration of the deceased and Mrs Broekman’s joint estates due to the unpaid debts of the First Respondent. The deceased and Mrs Broekman were subsequently provisionally sequestrated on 6 July 2020 and finally sequestrated on 20 August 2020.  Surprisingly Mr Keevy was appointed by the Master of the High Court as the joint trustee in the insolvent joint estate of the deceased and Mrs Broekman.

 

[12]    The deceased unfortunately passed away on 30 September 2020 and thereafter the deceased’s estate was reported to the Master of the High Court, Pretoria, and Daniël was appointed as the executor of the deceased estate in terms of the Administration of Estates Act 66 of 1965 (the AEA).  During his lifetime the deceased had several life policies taken out in his name to the total of approximately R40,000,000.00.  Upon the death of the deceased all the policies paid out in the approximate amount as per attached schedule as Annexure ‘FA9’ prepared by Delkor.  The payment of the life insurance policies brought along supervening factors that created special, unusual, and exceptional circumstances that in the joint estate of the deceased and Ms Annette Broekman, but also impacted directly on the creditors of the First Respondent. 

 

          BRIEF DESCRIPTION OF THE BUSINESS MODEL OF THE FIRST RESPONDENT

[13]    As pointed out above, the First Respondent conducts business as a commercial farming entity and its major client is McCains. McCains purchases most of the yearly crops harvested by the First Respondent in its business activities.  The First Respondent only plants its crops on prior orders received from its clients to minimise its risks.  McCains places by far the most orders with the First Respondent whose crops are used in the various products of McCains.

 

[14]    Apart from McCains, there are various other farmers who order in advance animal feeds products which are used in their respective businesses.  The main business partner of the First Respondent is Cape Agri, which is an agricultural corporation and McCains.  Cape Agri is a financial institution which supplies the necessary finance to the First Respondent to plant and to maintain the crops until it can be harvested.

 

[15]    As security, the First Respondent cedes the proceeds of the harvest to Cape Agri.  The First Respondent and Cape Agri have entered into a cession agreement. A copy of the said cession agreement is annexed to the founding affidavit as Annexure ‘FA10’. It was entered into between the First Respondent and Cape Agri on 12 June 2017. 

 

[16]    Once the crops have been harvested those harvests are delivered to McCains and the proceeds thereof are paid to Cape Agri, which in turn deducts the amount which has been financed and pays the remaining amount to the First Respondent.  The input costs for the pre-ordered animal feed ordered by the other farmers are financed and paid for by the First Respondent until the animal feed is delivered to the farmers whereafter it receives payment.

 

          THE CONDUCT OF THE BUSINESS RESCUE PRACTITIONERS

[17]    The Applicants point out that it is important for this Court to take cognisance of the conduct of the Second Respondent and his predecessor, Mr Keevy, as the business rescue practitioners of the First Respondent.  Mr Keevy was appointed by the Third Respondent as the BRP of the First Respondent on 11 December 2020.  Nothing of any substance was however done by Mr Keevy since his appointment.  On 25 March 2020 a meeting was held between Mr Keevy, the Second Respondent, the deceased and Daniël.  After this meeting an email was sent to Daniël on 31 March 2020 by the Second Respondent, then acting as attorney for Mr Keevy.  A copy of the said email is attached to the founding affidavit as Annexure ‘FA11’.  Of particular importance for purposes of this judgment (see paragraph 10 of the email), the Second Respondent proposed a remuneration structure for himself and Mr Keevy in the amount of R25,000.00 per month.  In the said paragraph 10, the Second Respondent wrote as follows: 

          “Ons bevestig ook dat skrywer met u ooreengekom het dat skrywer en Mnr Keevy ‘n vaste fooi van R25,000.00 elke maand sal aanvaar as vergoeding vir die bestuur van hierdie business rescue proses.”

 

[18]    On 2 July 2020 the Second Respondent sent a further email to Daniël in which he further sought to arrange that the remuneration of Mr Keevy, now the appointed trustee in the insolvent estate of the deceased and Mrs Broekman, also be paid into the Second Respondent’s account.  A copy of the relevant email marked ‘FA12’ is annexed to the founding affidavit.   The relevant email reads as follows: 

          “Goeie middag Tannie,

          Ek het vroeër in die maand ‘n epos gestuur waarin ek aangedui het dat ons die betalings reeling moet verander.  In plaas van dat die rekening op die 7de van die maand betaal word vir daardie betrokke maand, het ek aangedui dat dit voor of op die 27ste van elke maand vooruit betaal moet word vir die daarop volgende maand.

          Die betaling vir Augustus was dus betaalbaar op die 27ste Julie.  Sal julle asseblief toesien tot die betaling.  Neem asseblief ook kennis dat ek met Bennie ‘n reëling getref het dat die geheel van die twee betalings, myne en syne (R50,000.00), by my inbetaal moet word.

          Ek wag ook nog op die state soos bespreek vroëer in die week bespreek.

          Ek ontvang graag dringend die betaling soos hierbo uiteengesit.

          Groete/Regards

          Attie Schlechter

          A S Loc Attorneys.”

 

[19]    On 24 August 2020 the Second Respondent sent an email to Daniël in which the Second Respondent confirmed his appointment, now as the BRP of the First Respondent, since Mr Keevy was appointed as the provisional trustee in the insolvent estate of the deceased and Mrs Broekman on 17 July 2020.  On September 2020 the Second Respondent demanded payment of the amount of R100,000.00 with immediate effect of which R25,000.00 must be paid to Mr Keevy directly, at that stage already resigned as BRP and acting as a trustee of the insolvent estate.  See Annexure ‘FA13’ which states as follows:

          “Bennie het my laat weet hy het ‘n aanbod van R700,000.00 vir die woonstel ontvang en hy gaan dit aanvaar.  Die aanbod is meer as waarvoor die woonstel gewaardeer is.”

 

[20]    This is strictly prohibited by the provisions of the Insolvency Act to remunerate a trustee of an insolvent estate other than as provided for in the Insolvency Act 24 of 1936 (“the Insolvency Act”).  On the date the deceased passed away, that is 30 September 2020, the Second Respondent sent the deceased a Whatsupp message demanding money.  On the same date the Second Respondent sent a Whatsupp message to Daniël in which he advised that there would not be a deceased estate as everything will be attended to by Mr Keevy.  Quite obviously, the Second Respondent demanded more money for himself and for Mr Keevy in this message.

 

[21]    At this stage Daniël and his mother expressed serious concerns pertaining to the conduct of Mr Keevy and the Second Respondent, as enormous amounts were paid from a company which was financially distressed, to them.  All the payments that were made to the Business Rescue Practitioners or to the Second Respondent and Mr Keevy are captured in documents annexed to the founding affidavit and marked ‘FA17’.  The total amount paid according to Annexures ‘FA17’ is R150,000.00.  Despite the amount of R150,000.00 having been paid to both Mr Keevy and the Second Respondent, there was no progress made by them in the Business Rescue Process since no meeting of creditors was held and many more troublesome issues came to the fore. 

 

[22]    As a result, Daniël, Mrs Broekman and Almé, approached Attorneys NJ van Rensburg for advice.  They were advised that the deceased estate of the deceased must be reported to the Master of the High Court in terms of the AEA.  They were further advised that the best interest of the concursus creditorum must be determined with the facts of each matter and that there are no set rules of what the best advantage of concursus creditorum was and that the best interest of the beneficiaries of the deceased estate must also be adhered to.

 

[23]    The remuneration of the business rescue practitioners is provided for by the provisions of s 143(1) of the Companies Act 71 of 2008 (“the Act”) and Regulation 128(1) of the Regulations thereto. Accordingly, the BRP could only be remunerated on an hourly basis for services rendered and not on a fixed fee. Section 143(1) of the Companies Act states as follows:

          “143(1)       The Practitioner is entitled to charge an amount to the Company for the remuneration and expenses of the Practitioner in accordance with the tariff prescribed in terms of subsection (6).  Subsection (6) provides as follows:

                            The Minister may make regulations prescribing a tariff or fees and expenses for the purpose of subsection (1).”

          Regulation 128(1) of the Companies Regulations provides as follows:

          “The basic remuneration of a business rescue practitioner, as contemplated in s 143(1), to be determined at the time of the appointment of the practitioner by the Company, or the Court, as the case may be, may not exceed –

          (a)              R1250.00 per hour, to a maximum of R15 625.00 per day, (inclusive of VAT) in the case of a small company;

          (b)              R1500,00 per hour, to a maximum of R18,750.00 per day, (inclusive of VAT) in the case of a medium company; or

          (c)              R2000,00 per hour, to a maximum of R25,000.00 per day, (inclusive of VAT) in the case of a large company, or a State-owned company.”

          Sub-regulation (2):

          “Sub-regulation (1) does not apply to, limit or restrict any “further remuneration” for a business rescue practitioner, as contemplated in s 143(2) to (4).”

          Sub-regulation (3):

          “In addition to the remuneration determined in accordance with subsection 143(1) to (4), and this regulation, a practitioner is entitled to be reimbursed for the actual cost of any disbursement made by the practitioner, or expenses incurred by the practitioner to the extent reasonably necessary to carry out the practitioner’s functions and facilitate the conduct of the company’s business rescue proceedings.”

          Accordingly, in terms of the said section a business rescue practitioner will only be allowed to claim remuneration for work done on an hourly basis.  It is however clear from the exorbitant amounts claimed by Mr Keevy and the Second Respondent that this is not in accordance with the Act.  It was unlawful for the Second Respondent and Mr Keevy to demand payment of substantial amounts as remuneration for themselves. 

 

[24]    Section 143(2) provides as follows:

          “The Practitioner may propose an agreement with the company providing for the remuneration, additional to that contemplated in subsection (1), to be calculated on a basis of a contingency related to –

          (a)              the adoption of a business rescue plan at all, or within a particular time, or the inclusion of any particular matter within such plan; or

          40(b)                  the attainment of any particular result or combination of results relating to business rescue proceedings.”

 

[25]    Accordingly, according to subsection 143(2), a business rescue practitioner may propose an agreement for alternative remuneration.  This is done on a contingency basis.  An agreement in terms of s 143(2) of the Companies Act must be approved in terms of s 143(3).  The said section provides that:

          “Subject to subsection (4) an agreement contemplated in subsection (2) is final and binding on the company if it is approved by –

          (a)     the holders of the majority of the creditors holding interests, as determined in accordance with s 145(4)(2) to (6), present and voting at a meeting called for the purpose of considering the proposed agreement; and

          (b)     the holders of a majority of the voting rights attached to any shares of the company that entitle the shareholder to a portion of the residual value of the company on winding-up, present and voting at a meeting called for the purpose of considering the proposed agreement.”

          In casu, there is no such agreement before the Court, and it is submitted that exorbitant remuneration amounts as demanded and taken is contrary to the provisions of the Companies Act and indicates a severe overreaching.

 

[26]    The Second Respondent did not show how all the amounts that he demanded from the First Respondent, and which were paid by the First Respondent, were calculated nor did he show that they were time-based or daily maximum amounts.  The fee that the BRP can charge is also dependent upon the size of the company.  In demanding payment from the First Respondent, the Second Respondent did not show that the demand was based on the size of the First Respondent. 

 

[27]    The business rescue practitioner or the Second Respondent made all those unlawful demands because he had not acquitted himself with the provisions of s 143(1) of the Act.

 

[28]    In addition to the fee structure set out in s 143(1) of the Act read with Regulation 128(1) of the Regulations to the Act under s 143(2), the BRP may also be entitled to a contingency fee which the legislature has built into this section as an incentive to encourage the adoption of a workable and therefore a successful business plan.  Now the amounts that the Second Respondent demanded from the First Respondent were not contingency fees because they were not stated to be such. 

 

[29]    According to Henochsberg on the Companies Act 71 of 2008 at page 498, a BRP shall be entitled to be paid his remuneration after he has filed a notice of substantial implementation of the business rescue plan if one has been adopted and implemented.  At the time the Second Respondent demanded payment of those monies from the First Respondent, the BRP had not filed any notice of substantial implementation of a business rescue plan.  In fact, no business rescue plan has been filed.  The Second Respondent has furnished reasons why he demanded such monies. He called them “vergoeding vir die bestuur van hierdie business rescue proses.”.  Nothing shows that it was done for the benefit of the First Respondent.  In my view, the Second Respondent did act in the best interests of the First respondent and of the creditors.

 

 

FAILURE BY THE BRP’S TO COMPLY WITH THE STATUTORY REQUIREMENTS

[30]    There has been a serious disregard by the Second Respondent of his duties and a complete disregard with the time periods set out by the Act.  According to s 147(1) of the Act:

          “Within 10 business days after being appointed, the practitioner must convene and preside over a first meeting of creditors, at which –

            (a)        the practitioner –

                            (i)     must inform the creditors whether the Practitioner believes that there is a reasonable prospect of rescuing the Company; and

                            (ii)    may receive proof of claims by creditors; and

                   (b) the creditors may determine whether or not a committee of creditors should be appointed and, if so, may appoint the members of the committee.” 

          No such meeting was convened. There is no proof that there were creditors present at any meeting.

 

[31]    According to s 148(1):

          “Within 10 business days after being appointed, the practitioner must convene, and preside over, a first meeting of employees’ representatives, at which –

          (a)          the practitioner must inform the employees’ representatives whether the practitioner believes that there is a reasonable prospect of rescuing the company; and

          (b)          the employees’ representatives may determine whether or not an employees’ committee should be appointed and, if so, may appoint the members of the committee.”

         

[32]    Up to date hereof, no such meeting has been held and no explanation why such a meeting was never held has been tendered.  It seems it serves no purpose to leave the Second Respondent in charge of the business rescue process of the First Respondent while no progress is made.  He is not a fit and proper person, in my view, to oversee the rescue process of the Second Respondent.  Judging from his failure to comply with the provisions of the law relating to his duties to comply with the requirements of the law, he is not fit to remain in that position. Section 132(3) of the Act states as follows:

          “(3)         If a company’s business rescue proceedings have not ended within three months after the start of those proceedings, or such longer time as the court, on application by the practitioner, may allow, the practitioner must –

                   (a) prepare a report on the progress of the business rescue proceedings, and update it at the end of each subsequent month until the end of those proceedings; and

                   (b) deliver the report and each update in the prescribed manner to each affected person …”

          It is the Applicants’ case that in terms of s 132(3) of the Act:

          “If a company’s business rescue proceedings have not ended within three months after the start of the proceedings, or such longer time as the Court, on application by the practitioner, may allow, the practitioner must:

(a)  prepare a report on the progress rescue proceedings, and update it at the end of each subsequent month until the end of those proceedings; and   

(b)  deliver the report and each update in the prescribed manner to each person, and to the-

(i)            court, if the proceedings have been the subject of a court order; or

          The business rescue proceedings have not commenced, even though the Second Respondent was appointed as a business rescue practitioner on 24 August 2020.  If they have started, then the Second Respondent has not prepared the relevant report for such a long time after his appointment on 24 August 2020.  The Applicants have not received the relevant report referred to in s 132(3)(b) of the Act.

 

[33]    Section 150 of the Act compels the Second Respondent, as the business rescue practitioner, to publish, within 25 days of his appointment or such longer period as the creditors may determine or a Court may allow a rescue business plan.  The Second Respondent has failed to comply with the statutory requirements of s 150 of the Act.  To exacerbate matters, he has failed to explain his inability or failure to do so. 

 

[34]    Quite clearly the Second Respondent has failed to comply with all the statutory requirements that the Act requires him to do as a duly appointed business rescue practitioner of the First Respondent.  Despite his failure to comply with the requirements of the Act as a business rescue practitioner, the Second Respondent was not shy to demand substantial amounts of money monthly.

 

[35]    That the Second Respondent was not acting in the best interest of the creditors of the First Respondent and the First Respondent is clear from the Second Respondent’s refusal to accept a reasonable proposition made by Attorneys NGVR dated 23 November 2020 in which they proposed, inter alia, that the creditors of the estate and of course of the insolvent estate be paid from the estate.  The advantage of the implementation of such a proposition would have been as follows.  It is common cause between the parties that the insolvent estate of the deceased and the business rescue process of the First Respondent were intertwined; that the creditors of the insolvent estate and of the First Respondent were the same; the Second Respondent should, in my view, have accepted the proposition of the said attorneys.  The advantage of that proposition was that all creditors would have been paid in full from the deceased estate.  Payment of the creditors from the estate would mean that creditors were paid in full and not so many cents in a Rand as the provisions of the Insolvency Act require.  The payment from the estate would mean that the insolvent estate of the deceased and his widow became solvent and the need for a business rescue process would fall by the wayside.  These results were set out in paragraph 9 of the said letter.  This is the proposition that the Second Respondent should have explored if he honestly wanted to act in the best interest of the First Respondent. 

 

[36]    Section 150(5) of the Act requires that the company must publish within 25 business days after the date on which the business rescue practitioner was appointed, or such longer period as the Court may allow on application by the company or holders of most of the creditors’ voting interest.  No such business plan was published by the company notwithstanding the fact that the business rescue practitioner, in other words, the Second Respondent was appointed on 24 August 2020.  No reason has been furnished for such a failure.  There is no court order allowing the extension of the period of 25 days set out in the section nor is there a resolution extending the said period of 25 days taken by most of the creditors’ voting interest.

 

[37]    As pointed out somewhere supra, it is now clear that there is no intention on the side of the Second Respondent to rescue the First Respondent.  The intention was clearly to make cash from a distressed company.  It is also clear that the Second Respondent did not act in the best interest of the concursus of the creditors.  The Second Respondent shamefully admits that he demanded payment from the family of the First Respondent.  He states that he was entitled to such payment.  The question is not whether he could account fully for the funds but whether in demanding such payments he complied with the provisions of s 143 of the Act.  He claims that he had entered into an agreement with the members of the First Respondents.  He has produced no agreement concluded in terms of s 143(2) of the Act.  There is therefore no such agreement. 

 

[38]    The Second Respondent has not disputed the Applicants’ averments that he has not complied with the requirements of the Act.  He also has not responded to the allegation by the Applicants that he has done nothing to advance the business rescue process of the First Respondent, despite demanding substantial amounts as remuneration from the First Respondent while he was fully aware that the First Respondent was in financial distress.

 

[39]    In his heads of argument, Adv FW Botes (SC), referred the Court to the unreported judgment of Absa Bank Ltd v Caine NO & Another in re Absa Bank Ltd v Caine NO & Another (3813/2013, 3915/2013) [2014] ZAFSAC 46 (2 April 2014) at para 56 where the Court stated that:

          “Although there is cogent authority for the viewpoint that the business rescue proceedings of both entities have lapsed or became a nullity due to non-compliance with the procedural requirements set out in s129 and/or s 150, I am of the view that in casu, the better approach would be to issue a declaratory order based on the non-compliance with several other requirements.  In doing so I shall have regard to the just and equitable grounds stated in s 130(3).  A serious waste of time occurred during the time that Gagiano acted as business rescue practitioner.  The two entities must be blamed for doing nothing until end of December 2012.  Thereafter the practitioner was appointed but he also dragged his feet, but certainly not to the extent of Gagiano.  The first meetings of creditors were held late as was the case with the presentation of the business plans.  It took nearly 5 months instead of 25 days.  The practitioner should have utilised ss141(2) and applied for discontinuous of the business rescue when it became clear that he adopted plan of valuations could not be implemented, but he decided to proceed on a wrong path.  Pertaining to properties the only way out under the circumstances was to immediately file a notice of termination of business rescue in terms ss 153(5), but he failed to act accordingly.  Govern J is of the view that if the time limit of 25 days is not adhered to, provided no extension was granted, the business rescue proceedings come to an end automatically for the reasons advanced.  This appears to be an attractive viewpoint.  No application for extension was sought at any stage in casu.  On a conspectus of the Act, chapter 6 in particular, and the extraordinary delays that occurred herein together with the conduct of the practitioner that the business rescue proceedings should be declared to have terminated.”

 

[40]    The Court has not been asked for a declaratory order that the business rescue proceedings terminated.  But from the following factors or circumstances it is highly likely that by operation of the law the business rescue proceedings have terminated or may be deemed to have terminated automatically:

          [40.1]      Section 129(4) of the Act provides that:

            “After appointing a practitioner as required by subsection (3)(b), a company must –

                            (a)   file a notice of the appointment of the practitioner within two business days after making the appointment; and

                            (b)   publish a copy of the notice of appointment to each affected person within 5 days after the notice was filed.”

          [40.2] Section 129(5) states that:

                   If a company fails to comply with any provision of subsection 3 or 4 –

                            (a)   its resolution to begin business rescue proceedings and place the company         under supervision lapses and is a nullity.”

               These subsections speak for themselves.  Judging by the failures of the Second Respondent to comply with the statutory requirements the chances are very high that there was no compliance with s 129(3) and (4) in which case the resolution to begin business rescue proceedings and place the company under supervision are a nullity after the resolution has lapsed. 

          [40.3] Section 153(4) provides that:                                        

               “If no person takes an action contemplated in subsection (1), the practitioner must promptly file a notice of termination of the business rescue proceedings.”

               Subsection (1) refers to a situation where a business rescue plan has been rejected as envisaged in s 152(3)(a) or (c)(ii) (bb).  I am of the view that the section may be made applicable where no business rescue plan has been published all together. 

 

THE INSOLVENT JOINT ESTATE HAS NOW BECOME SOLVENT

[41]    As already pointed out, the creditors in the joint estate are at the same time the creditors of the First Respondent.  Accordingly, if the creditors are paid by either the deceased’s insolvent estate or by the First Respondent, they will receive their full payment.  If the creditors are paid by the deceased estate, they will have been paid in full for the purposes of the First Respondent.  The insolvent estate will therefore become solvent.  The Applicants have set out the financial position of the insolvent estate as follows to show that it has now become solvent:

          Assets of the joint estate                                                                                               R25,865,000.00

          According to the Applicants this amount has been confirmed

          by the appraiser’s valuation by JJ Pretorius, a professional valuer.

          Value of the joint estate:

          60% member’s interest in DNA Ammoniak as per valuation               R 7,560,000.00

          Life Insurance paid to joint estate                                                                                 R28,800,559.00

          Total Assets                                                                                                                   R62,225,559.00

          Less Total Liabilities                                                                                                     R12,544,097.73

          Total left for beneficiaries                                                                                             R49,671,401.27

 

[42]    It must be recalled that the sum of R28,800,559.00 vests, in terms of the provisions of the Insolvency Act, in the trustee, and therefore in the insolvent estate, for the benefit of the creditors.  In terms of s 20 of the Insolvency Act:

          “The effect of the sequestration (on 6 July 2020) of the Estate of an Insolvent (i.e., the joint estate of the deceased and Annette) shall be –

          (a)     to divest the insolvent of his estate and to vest it in the Master until a trustee has been appointed, and upon the appointment of the trustee, to vest the estate in him.”

          Once a provisional sequestration order has been issued, the insolvent debtor has no right to use his estate monies or encumber his assets.  Accordingly, it was correct for Adv Gibson (“Mr Gibson”) to point out in his heads of argument that:

          “All the assets of the deceased and Annette fall into the joint insolvent estate.”  This is perfect.

 

[43]    For purposes of this judgment, this Court will accept that the insurance policies were not protected policies and that the proceeds thereof were designed to be paid into the insolvent estate as argued by Mr Gibson.  In addition, Mr Gibson in his heads of argument stated that:

          “The funds must be collected by the joint trustees of the estate and administered by the trustees and the creditors of the joint insolvent estate must be paid by the trustees.”

          There is no doubt that the scenario sketched out by the Applicants in paragraph [42] supra of this judgment resonates perfectly with the decision of Wentzel v Discovery Life Ltd 2020 JDR 2073 (SCA), as argued by Mr Gibson in his heads of argument.

 

[44]    If the amount of R2 million from McCains still must be paid to the First Respondent, I am satisfied that that will go a long way towards settling the First Respondent’s debts.

 

[45]    I must point out here that if both Mr Keevy and the Second Respondent were to pay back the sum of R150,000.00 that they claimed contrary to the provisions of s 143(1) of the Act, that amount will increase the value of the assets of the First Respondent available for distribution to the creditors.  Both Mr Keevy and the Second Respondent are free to prepare their accounts or their claims for services rendered as business rescue practitioners to the First Respondent in accordance with the provisions of s 143(1) of the Act, in particular Regulation 128(1) of the Regulations of the Companies Act and submit them to the company for payment.  It is the company that is obliged to pay them from its assets. 

 

THE COMMON LAW COMPROMISE

[46]    It is the Applicants’ case that all the creditors of the deceased’s estate have accepted the common law compromise in terms of which they will all receive payments in full.  This common law compromise was concluded by the executor in respect of the deceased estate. This is clear from Annexure ‘FA21’ to the founding affidavit.  Quite clearly the whole liability to the creditors, in other words, the R12,544,097.73 can be paid from the proceeds of the life insurance policies of R28,800,559.00 and leave more than R16 million for the benefits of the beneficiaries.  The decision of the creditors, as to what should happen to the assets of the insolvent estate, is of paramount importance.  For that reason, it was imperative for the trustees, at the second meeting of the creditors, to obtain a resolution of creditors about the common law compromise.  The creditors may also give directions.  This was not done.

 

[47]    The Second Respondent contends that the Applicants have referred to a common law compromise in their papers.  He contends furthermore that this common law compromise was not suggested and agreed to by all the creditors.  What is of supreme importance is the decision of most of the creditors and whether the creditors of the insolvent estate will benefit from such decision. 

 

[48]    He contends furthermore that s 155 of the Act sounds a death knell to the compromise.  It states that a company can enter into a compromise with its creditor unless it is engaged in business rescue proceedings in terms of chapter 6 of the Act.  The compromise was in the best interest of the creditors of the deceased estate.  Section 155(1) of the Act clearly and unambiguously states that a company can enter into a compromise with its creditors unless it is engaged in business rescue proceedings in terms of Chapter 6 of the Act. Because the company is engaged in business rescue proceedings, it may not enter into compromise agreements, so they argued. 

 

[49]    This statement was made by the Second Respondent and the First Intervening Party.  It is incorrect to characterise the compromise that the executor of the deceased estate entered into a compromise in terms of s 155(1) of the Companies Act.  Firstly, the executor of the deceased estate is not a business rescue practitioner.  At the time he concluded the said compromise with the creditors of the deceased estate or some of them, he was not acting on behalf of the company but as the executor of his late father’s estate.  He was not acting at that stage as a company nor a board of a company nor a liquidator of the First Respondent.  For these reasons there is no merit in referring to the said compromise as one envisaged by s 155(1) of the Companies Act.

 

[50]    Lest we forget, an executor may compromise a claim against the estate provided the arrangement is a fair one and is not at the expense of the estate.  See in this regard Snyman & Snyman v Basson NO 1915 TPD 368.  The executor can, however, only compromise a debt which is due by the estate and not a debt which was never actually owed by the estate.  See Waiter V Estate Waiter 1913 TPD 1.  There is very little doubt that the claims by the creditors in the deceased estates in the compromise agreement are known by the executor and are genuine.  The executor has accepted them.  The compromise arrangement is a fair one to the estate and has been accepted by the beneficiaries.

 

[51]    This advice by Mr Japie van Deventer that the First Respondent was no longer financially distressed was, in my view, a fair and justified one. It was based on undisputed facts.  In giving that advice he was assisting the executor of the deceased estate.  Therefore, it related to the deceased estate and not the First Respondent.  He had all the relevant facts before him.  So, he was not incorrect, as contended by the Second Respondent. 

 

[52]    The Second Respondent complains that suddenly, Mr van Deventer started corresponding with several creditors of the First Respondent without his knowledge in what appeared to be a concerted effort to side-line him.  In the first place, it must be borne in mind that Mr van Deventer was acting for the executor of the deceased estate.  He did not need the permission of the Second Respondent to communicate directly with the creditors of the deceased estate.  After all it is known that the creditors of the deceased estate were at the same time the creditors of the First Respondent and insolvent estate.

 

[53]    After all, it is the duty of an executor, immediately after being issued with the letters of executorship, to take into his custody or in his control all property, books, and documents in the estate of the deceased which are not in possession of any person who claims to be entitled to retain it under contract or a right of retention or attachment.

 

[54]    It is furthermore the duty of the executor, as soon as possible, after his appointment to publish in the government gazette and in one or more newspapers circulating in the area where the deceased was resident, a notice in terms of s 29(1) of the AEA, calling upon all persons having claims against the deceased to lodge such claims with the executor within such period as may be stipulated in the notice.  In terms of s 29(2) of the AEA, all claims which would be capable of proof in case of insolvency of the estate may be lodged with the executor.  It is therefore in terms of the said s 29 that the executor was empowered and had the right to communicate with the creditors of the deceased estate.  It is furthermore for that reason that he did not need any permission of the Second Respondent to do so.  As an attorney representing the executor he was authorised and empowered to communicate directly with the creditors because they were the creditors of the deceased estate.

 

[55]    There was a more important duty that fell upon him after the expiry of the period referred to in s 29(1) of the AEA.  That duty is imposed on him by the provisions of s 34(1) of the AEA.  In terms of that section, after the expiry of the advertised period in which creditors are called upon to lodge their claims, the executor must satisfy himself as to the solvency of the estate.  He must compare the assets of the estate with its liabilities.  In determining the solvency of the estate, the executor must consider claims that have been lodged or that are known to him.

 

[56]    If he considers the estate to be insolvent, he must forthwith by notice in writing report the position to the creditors and the Master.  As a result, the letter ‘MJS3’ attached to the founding affidavit must be seen in the light of s 34(1) of the AEA and not as an intrusion on the powers of Mr Keevy or the Second Respondent.  Now, if at this stage he considers the deceased estate to be solvent, he must immediately apply for its rehabilitation.  Mr van Deventer was merely doing his duty in terms of the AEA.  So, in terms of s 34(1) of the AEA he determined that, based on the information before him, the deceased estate was solvent.  The attorney acted in good faith and legally.  At all times, the executor acted under the supervision of the Master of the High Court.  There is therefore no known reason why this Court should not accept his assessment that the deceased estate was solvent.

 

[57]    This application was brought in terms of the provisions of s 130(1) of the Act.  It is predicated on the fact that the First Respondent is no longer in financial distress since an amount of R2 million still must be paid by McCains to the First Respondent.  S 130(1)(a) of the Companies Act provides that:

          “Subject to subsection (2) at any time after the adoption of a resolution in terms of s 129, until the adoption of a business rescue plan in terms of s 152, an affected person may apply to Court for an order –

          (a)          setting aside the resolution, on the grounds that –

            (i)         there is no legal basis for believing that the company is financially distressed;

            (ii)        there is no reasonable prospect for rescuing the company; or

            (iii)       the company has failed to satisfy the procedural requirements set out in s 129.”

 

[58]    In his answering affidavit Mr Keevy informs the Court that the First Respondent is “hopelessly insolvent” and that if the First Respondent’s business rescue proceedings be terminated, all the debts would become due and payable, and the creditors would be able to act against the First Respondent.  In the first place, Mr Keevy is not the business rescue practitioner of the First Respondent.  Therefore, nothing empowers or authorises him to make this statement on behalf of the First Respondent.  This is a statement that should have been made by the Second Respondent. Secondly, and more importantly, Mr Keevy has attached no documentary proof to this affidavit to substantiate his statement that the First Respondent is “hopelessly insolvent”.  It is difficult to accept Mr Gibson’s argument that Mr Keevy considered the financial position of the First Respondent and determined that the First Respondent could not be saved without referring to a document containing his determination.  Mr Keevy filed no document in support of his determination.  Informing creditors and employees of the status of the First Respondent does not mean that it can simply be done by word of mouth.  It is not sufficient for Mr Keevy to make a sweeping statement that the First Respondent is “hopelessly insolvent”. 

 

[59]    It is the Applicant’s case that the First Intervening Party has not disclosed all the material facts to this Court in the opposing affidavit.  According to the Applicants, the Intervening Parties have placed before Court a distorted version on record or elected to ignore the relevant and important factors in their opposing affidavit, which are known to them.  The Intervening Parties have, to confuse this Court regarding the factual position of the creditors of the First Respondent and the assets, been selective with regards to the factors deposed to or answered by them.  The trustees were at all material times aware of the following facts:

          [59.1] the value of the immovable and movable assets of the deceased and surviving spouse;

          [59.2]      the value of the immovable and movable assets of the First Respondent;

          [59.3]      the value of life insurance policies paid after the passing of the deceased;

          [59.4] that the payment of the life insurance policies from the insurers changed the status of the insolvent estate from the insolvent circumstances to solvent circumstances;

          [59.5] the fact that the creditors in the deceased estates and the insolvent estate of late DF Broekman and surviving spouse, and the First Respondents are the same;

          [59.6] the deponent also made no averments to give reasons why the Insolvency Act processes will be to the best advantage of the creditors and beneficiaries of the deceased estate, considering all the facts;

          [59.7] the creditors of the First Respondent and the deceased and surviving spouse …

 

[60]    SUPPORT FOR THE APPLICATION BY SOME OF THE CREDITORS OF THE FIRST RESPONDENT

          [60.1.1] Mr Keevy and the Second Respondent failed to have regard to the fact that some of          the creditors of the First Respondent are supportive of this application. For         instance,         the Applicants’ attorneys have received a letter of support for this current application     from Odendaal & Kruger Attorneys, the attorneys of GDD Diesel Verspreiders, a creditor        of the First Respondent.  In the said letter, attached to the replying affidavit as RA4, the   said attorneys state, firstly, that they have perused the application and have taken note   of the allegations made regarding the conduct of the Second Respondent and Mr Keevy      and state, in that regard, that such conduct is           deplorable. 

 

          [60.1.2] Furthermore, they state that:

               “We trust that the application will be successful as it has become quite ridiculous trying to explain to our client, a creditor, why they have not been paid, notwithstanding the factual it appears that sufficient cash is on hand to do so.”

               Furthermore, the Applicants’ attorneys have received an email from Van Coller and Co, the accountant of the First Respondent and creditors thereof, wherein they state that:

             “We also confirm that we support you in the application.”

             A copy of the said email is attached to the replying affidavit as ‘RA5’.

 

          [60.2] In a further email received from Landbank, one of the First Respondent’s largest creditors, it is stated that they also support this application and have no objection thereto.  A copy of their email is attached to the replying affidavit as ‘RA6’.

 

[61]    Mr Keevy and the Second Respondent appear to speak on behalf of the creditors without considering the wishes of the creditors or some of them.  On the other hand, nothing has been placed by both Mr Keevy or the Second Respondent or both to demonstrate to this Court that the First Respondent is “hopelessly insolvent” and would not be able to pay its debts.

 

[62]    There is an argument put forward by Mr Gibson that the Applicants are required to place before Court the financial statements of the First Respondent which show that the First Respondent is solvent.  In support of his argument, he has referred the Court to Agri Operations Ltd v Hamba Fleet (Pty) Ltd 2017 JDR 0558 (SCA).  This judgment dealt primarily with the issue whether the Respondent should be liquidated or wound-up or not upon the application of an unpaid creditor.  In casu, the First Respondent is already under business rescue proceedings.

 

[63]    In my view, it is not always necessary to place before Court the financial statements of the company to show that it is solvent.  It is sufficient to place before Court the admissible evidence to show that the First Respondent is solvent. In my view, the Applicants have done so.  Neither Mr Keevy nor the Second Respondent has disputed the facts set out by the Applicants in their evidence, in particular, in paragraph [42] of this judgment. 

 

[64]    It is common cause between the parties that no business rescue plan has been adopted and consequently the Applicants are not precluded from s 130(1)(a) from setting aside the resolution adopted by the First Respondent on 6 December 2019. 

 

[65]    In terms of s 128(1)(f) financial distress has been defined as follows:

          “In reference to a particular company at any particular time, means that –

          (i)      it appears to be reasonably unlikely that the company will be able to pay all of its debts as they fall due and payable within the immediately ensuing 6 months; or

          (ii)      it appears to be reasonably likely that the company will become insolvent within the immediately ensuing 6 months.”

 

[66]    In his heads of argument Adv Botes (SC) has referred this Court to Henochsberg on Companies Act 71 of 2008, where it is stipulated that when considering whether a company is financially distressed, the following should be considered:

          “… whether the debt of creditors is or can be subordinated, whether creditors are willing to extend their credit and whether there is additional funding available, externally or internally.”

          When considering the determination that a company is financially distressed, the abovementioned factors are to be considered objectively.

 

[67]    I have carefully considered all the contentions urged in support of the relief sought. I consider that there are sufficient reasons to make a finding that the First Respondent is now no longer financially distressed, and that good cause exists to terminate the business rescue proceedings.

 

 

[68]    Now, in the light of the order I contemplate making in respect of the application, I do not deem it necessary to deal with the application of the intervening parties.  Apart from their participation in this application in which they lack the necessary authority to intervene and to oppose this application, they have attracted an order of costs against themselves.

 

[69]    The application is therefore granted, and the following order is hereby made:

          [69.1] The resolution adopted by the members of the First Respondent on 6 December 2019 to commence business rescue proceedings in terms of section 129 of the Companies Act 71 of 2008, is hereby set aside in terms of section 130(1)(a) of the Companies Act.

          [69.2] The business rescue proceedings of the First Respondent are hereby terminated in terms of section 132(2)(a)(i) of the Companies Act 71 of 2008.

          [69.3] The Intervening parties and the second Respondent are hereby ordered to pay   the costs of this application debonis propiis, the one paying the other or others   to be absolved;

         

 

 

                                                                                                            PM MABUSE

                                                                        JUDGE OF THE HIGH COURT

 

 

 

Appearances:

Counsel for the Applicants:                                                      Adv FW Botes (SC)

Instructed by:                                                                            NJ Van Rensburg Attorneys

                                                                                                   

Counsel for the 1^st and 2nd Intervening Parties:                    Adv C Gibson

Instructed by:                                                                          Senekal Simmonds Inc

                                                                                                C/o MP Koekemoer Attorney

                

Date on the opposed roll before Mabuse J:                            22 July 2021

Date of Judgment:                                                                  19 August 2021

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