DISTRIBUTABLE

IN THE NORTH WEST HIGH COURT, MAFIKENG                                                                                                                       
                                                                                 CASE NO:  593/2012

In the matter between:-

JOHANNES HENDRIK NIEMAND                                              Applicant

and

SMITH’S DAIRY CC                                                       First Respondent
GEORGE NELL NO                                                  Second Respondent

CIVIL MATTER

DATE OF HEARING				:	27 SEPTEMBER 2012
DATE OF JUDGMENT				:	08 NOVEMBER 2012
	
COUNSEL FOR THE APPLICANT		:	ADV ZWIEGELAAR
COUNSEL FOR THE 2ND RESPONDENT	:	ADV DIAMOND

JUDGMENT

HENDRICKS J

[A]	Introduction:-

[1]	The Applicant launched the present application in two parts.  Part A thereof was heard on 26th April 2012 and the following order was granted:-

“1.THAT:	Leave be and is hereby granted to the Applicant to give notice of the application for the relief as set out in Part B of the notice of motion herein by the delivery of the letter of which a pro forma copy is attached to the accompanying affidavit of the Applicant as Annexure “JHN1” to the creditors of the First Respondent close corporation referred to in the proposed business rescue plan and the list of creditors of the First Respondent close corporation, Annexures “JHN2” and “JHN3” to the aforesaid affidavit by the delivery thereof in accordance with the provisions of section 6(10) and (11) of the Companies Act, Number 71 of 2008, Regulation 7 of the Companies Regulations, 2011 promulgated in terms of section 223 of the aforesaid Act by Notice R 351 in Government Gazette No 34239 of 26 April 2011 and Annexure 3 to the aforesaid Regulations, a copy of which is attached to the said affidavit as Annexure “JHN13” as well as by means of a publication thereof in (a) newspaper(s) circulating in the area where the creditors of the First Respondent close corporation are.

2. THAT:	The Second Respondent is directed to furnish the Applicant with the electronic mail and facsimile numbers as well as the postal addresses of:
	
	2.1	Mrs Louise Johanna Smith referred to in the proposed business plan of the First Respondent close corporation as one of the secured creditors of the First Respondent close corporation;

	2.2	the representatives of the 69 employees of the First Respondent close corporation whose names appear on Annexure “G” to the proposed business rescue plan of the First Respondent close corporation as statutory preferent creditors of the latter;  and

	2.3	the persons and entities whose names are listed as numbers 16, 20, 34, 43, 50, 76 and 88 as well as those listed as numbers, 5, 25 and 41 on Annexure “F” to the proposed business rescue proposal of the First Respondent close corporation as concurrent creditors of the First Respondent close corporation.

3.  THAT:	The Applicant has to cause a copy of this order to be delivered to the creditors of the First Respondent close corporation referred to in paragraph 1 (supra) together with the aforesaid letter.

4.  THAT:	The Applicant’s attorney has to file (an) affidavit(s) dealing with the issue of the service of the said letter and the order on the creditors of the First Respondent close corporation.

5.  THAT:	The application for the relief as set out in Part B of the notice of motion herein is postponed to Thursday, 31 May 2012 for the hearing thereof.

6.  THAT:	The costs of this application are to be costs in the application in Part B hereof.”   
     
[2]	Part B of the notice of motion reads:-

“1.	The forms and service provided for in the Rules of this Honourable Court are dispensed with and the matter is to be heard on an semi-urgent basis in terms of Rule 6(12).

2.	Leave is granted to the Applicant to proceed with the actions instituted by the Applicant against the First Respondent close corporation in this Honourable Court under case numbers 1958/2011 and 128/2012 and the application for summary judgment lodged on behalf of the Applicant against the First Respondent close corporation in respect of the first-mentioned action to the First Respondent close corporation being placed under supervision and in the event of it being granted and/or upheld to satisfy the judgments granted against the First Respondent close corporation by effecting execution against the property of the First Respondent close corporation or the property lawfully in the possession of the First Respondent close corporation pending the business rescue proceedings of the First Respondent close corporation.

3.	The costs of this application are to be paid by the First Respondent close corporation and the Second Respondent in the event of them opposing same as well as by those creditors of the First Respondent close corporation who unreasonably oppose the application.

4.	Further and/or alternative relief.”        

[3]	This application is premised upon actions which the Applicant instituted in this Court under case numbers 1958/2011 and 128/2012 for the recovery of certain monies which the Applicant avers the First Respondent in owing to him.

[B]	Background:-

[4]	The Applicant is a dairy farmer, who is conducting his business as a sole proprietary at Koster, in the North West Province.  He is one of a hundred concurrent creditors of the First Respondent.  The First Respondent is a close corporation which conducts business as a milk depot and also the distribution of dairy products under the name and style of Smith's Dairy. 

[5]	By virtue of a resolution taken by its only member, Mr lvan Smith ("Smith") on 15 February 2012, the Applicant has instituted actions against the First Respondent close corporation under case numbers 1958/2011 and 128/2012 on 23 November 2011 and 31 January 2012 respectively, and lodged an application for summary judgment in respect of the first mentioned action on 13 December 2011, for the recovery of the amount of R736 873.12 from the First Respondent.

[6]	The Applicant applies in Part B of the notice of motion in terms of the provisions of section 133(1)(b) of the Companies Act, Act 71 of 2008, read with Schedule 3 thereto and section 66 (1A) of the Close Corporations Act, for leave to proceed with these actions and the application for summary judgment and avers that in the event of it being granted and/or upheld, to satisfy the judgment granted against the First Respondent close corporation by effecting execution against the property of the First Respondent close corporation or the property lawfully in the possession of the First Respondent close corporation pending the business rescue proceedings of the First Respondent close corporation.

[7]	The Second Respondent, who has been appointed as the business rescue practitioner of the First Respondent on 15 February 2012 (to oversee the First Respondent close corporation during the business rescue proceedings thereof) has despite a written request to grant the Applicant consent to proceed with the aforesaid actions and application for summary judgment refused to do so and opposes the application.

[C]	Lack of Locus Standi:-

[8]	It is quite evident that this application is an application in which the Applicant request this Court for permission for him to proceed with the aforementioned actions, and, if successful, to proceed with execution of judgment so obtained, despite the moratorium on legal proceedings, provided for in section 133 of the Act.  The Applicant relies on the stipulations of section 133 (1)(b) of the Act with a contention that he is entitled to approach this honourable court by way of application.

[9]	Section 133 of the Act stipulates as follows:-

"133 	General moratorium on legal proceedings against company
(1) 	During business rescue proceedings, no legal proceeding, including enforcement action, against the company, or in relation to any properly belonging to the company, or lawfully in its possession, may be commenced or proceeded with in any forum, except-
(a) 	with the written consent of the practitioner;
(b) 	with the leave of the court and in accordance with any terms the court considers suitable."

[10]	Section 133 of the Companies Act provides for a general moratorium on legal proceedings against a company during business rescue proceedings.  Section 133 (1)(a) and (b) of the Companies Act read with Schedule 3 thereto and section 66 (1A)(a) of the Close Corporations Act provides that during business rescue proceedings no legal proceeding, including an enforcement action, against the close corporation, or in relation to any property belonging to the close corporation, or lawfully in its possession may be commended or proceeded with in any forum except with the written consent of the business rescue practitioner (paragraph (a)) or the leave of the court and in accordance with any terms the court considers suitable (paragraph (b)).
	See:-		Investec Bank Ltd v Bruyns 2011 JDR 1563 (WCC).

[11]	The Second Respondent contended that, by reason of the business rescue plan (which was unanimously adopted by affected persons) having been adopted, the Applicant lacks the necessary locus standi to bring this application and, furthermore lacks the locus standi to proceed with the litigious process which had commenced under the afore-mentioned case numbers. The Second Respondent furthermore avers that the Applicant failed to make the averments necessary to support or sustain the relief claimed in the Notice of Motion.

[12]	When interpreting the intended meaning of section 133 (1)(b), a systematic interpretation of the particular section should be used:-

"Systematic interpretation is an instance of contextualisation. First, it calls for the interpretation of individual legislative provisions in relation to and in the light of other provisions and components of the legislated text of which they form part, drawing on the "system" or "logic" or "scheme" of the text as a whole.

and,

Secondly. systematic interpretation requires cognisance of the ("extra-textual") macro-text as well, that is, of meaning-generative signifiers in the textual environment.”
See:-	The Law of South Africa (LAWSA) Volume 25 (1) at paragraph 357.
and

	Department of Land Affairs v Goedgelegen Tropical v Fruits (Pty) Ltd 2007 (6) SA 199 (CC).

If the aforementioned approach be used to interpret section 133 (1)(b), it immediately becomes clear that the Applicant does not have the locus standi to bring this application.

[13]	Whenever an affected person (an "affected person" being defined by section 128 of the Act, and the Applicant averring that he is such an affected person) is granted the right to obtain the relief from the court, it is explicitly provided in the act, that such an affected person has the right to approach the court on application.  No such a stipulation is contained in section 133 (1).   lf the text of chapter 6 of the act and the purpose and macro context of the act is taken into consideration, the only reasonable interpretation of section 133 in my view is that:-

•	given the fact that business rescue proceedings can be commenced with in two ways, viz. firstly by way of company resolution intended in section 129 of the Act and, secondly, by way of court application as envisaged in section 130 of the Act, it was the intention that the reference to the court granting leave with any terms the court considers suitable (see Section 133 (1)(b)) refers a court during the proceedings of an application to place the company under business rescue in terms of section l30.

•	a wide and general access to the court for the purposes of an application which the Applicant is currently bringing could never have been the intention of the legislature, given the purpose of chapter 6 of the Act, to wit, to protect the assets of the company by means of:-

"a temporary moratorium on the rights of claimants against the company or in respect of properly in its possession."

•	chapter 6 of the Companies Act explicitly provides for a remedy which is specifically applicable in the instances currently relied upon by the Applicant in this application, viz, Section 130 (1), which stipulates as follows:-

“Objections to company resolution:-	

(1)	Subject to subsection (2), at any time after the adoption of a resolution of section 129, until the adoption of a business rescue plan in terms of section 152, an affected person may apply to a court for an order:-

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

(i)	there is no reasonable basis for believing that the company is financially distressed;
(ii)	there is no reasonable prospects for rescuing the company;  or
(iii)	the company has failed to satisfy the procedural requirements set out in section 129.”

•	it could never have been the intention of the legislature to provide for the above-mentioned remedy in section 130 (1), yet, at the same time, provide for the possibility of a single creditor to pursue its claim outside the ambit of the business rescue plan adopted in terms of section 150.

I consequently find that the Applicant lacks the necessary locus standi to bring this application and that the application should fail for this reason alone.
	
[D]	Lack of Locus Standi to proceed with litigation:-

[14]	The Second Respondent furthermore contended that the Applicant lacks the locus standi to proceed with the litigious process which he commenced with under the above-mentioned case numbers.  In order to consider this submission by the Second Respondent, the stipulations of section 154 of the Companies Act are important:-

“(2)	If a business rescue plan has been approved and implemented in accordance with this chapter, a creditor is not entitled to enforce any debt owed by the company immediately before the beginning of the business rescue process, except to the extent provided for in the business rescue plan.” 

[15]	In my view, a creditor lose the right to enforce any debt due and payable before the beginning of the business rescue process, once the business rescue process has finally been implemented, and a certificate of substantial implementation of the business rescue plan has been filed by the business rescue practitioner in terms of section 152 (8) of the Companies Act.  Therefore, once implementation of the business rescue plan has commenced, the explicit provisions of section 154 shall then become operative.

[16]	The word “implement” in section 154 can never mean anything other than the commencement of implementation, since the section explicitly provides for the right of a creditor to enforce any debt due and payable to the creditor, to the extent provided for in the business rescue plan.
See:-	Firstrand Bank Ltd v Imperial Crown Trading 143 (Pty) Ltd 2012 (4) SA 266 (KZD).  

[17]	The last-mentioned underlined words only makes sense should this stipulation be understood to provide for the commencement of business rescue otherwise, should the intention have been to refer to the final implementation of the business rescue plan, the last mentioned underlined words would be superfluous and nonsensical.

[18]	In my view, once implementation of a business plan has been commenced with, a creditor then loses his right to proceed to recover any debt due to such a creditor, before the commencement of the business rescue process, by virtue of the stipulation of section 154.  Since it could not be disputed that the business rescue plan of the First Respondent has been properly adopted and that the implementation of the business plan has commenced, the Applicant has lost the right to proceed with the litigation by virtue of the stipulations of section 154 of the Act.

[19]	As was already pointed out above, the Applicant purports to bring this application in terms of section 133 of the Act, and not section 131 of the Act.  The Applicant, the only concurrent creditor (and for that matter also the only creditor) which is dissatisfied with the contents and the implementation of the business rescue plan, wish to pursue its claim outside the ambit of the business rescue plan.
	See:-	
•	A G Petzetakis International Holdings Ltd v Petzetakis Africa (Pty) Ltd & Others [2012] JOL 28598 (GSJ);
•	Koen and Another v Wedgewood Village Golf & Country Estate (Pty) Ltd and Others 2012 (2) SA 378 (WCC);
•	Swart v Beagles Run Investments 25 (Pty) Ltd (Four Creditors Intervening) 2011 (5) SA 422 (GNP);
•	Oakdene Square Properties (Pty) Ltd and Others v Farm Bothasfontein (Kyalami) (Pty) Ltd and Others 2012 (3) SA 273 (GSJ);
•	Cape Point Vineyards (Pty) Ltd v Pinnacle Point Group Ltd and Another (Advantage Projects Managers (Pty) Ltd Intervening) 2011 (5) SA 600 (WCC).

[20]	Should the Applicant be permitted to pursue with his claim, and to enforce the judgment as envisaged in this application, it would most probably lead to the First Applicant not being rescueable within the context of the definition of “Business Rescue” stipulated in section 128 of the Companies Act (namely the possibility for the company to proceed as a going concern on a liquid basis or the disposal of all the assets of the company in such a way that the creditors will be better off than under liquidation proceedings), and that under such circumstances, the Second Respondent will probably be forced to apply for the liquidation of the First Respondent.  

[21]	It was contended that should this happen, the implication is clear that all the creditors (including the Applicant) will be in a worse position than what they would have been under business rescue proceedings.  This is properly explained by the Second Respondent in paragraph 5 of its answering affidavit and it was submitted that the Applicant did not provide any significant challenge to the contents of paragraph 5 of the answering affidavit, in his replying affidavit.  The Second Respondent explains, with reference to Annexures “H1”, “H2”, “H3 to the Business Rescue Plan, that liquidation of the company would lead to a probable dividend to concurrent creditors of R0.04 and that implementation of the business rescue plan will most probably result in a dividend of R0.23.  All creditors (including the Applicant) are much better off under Business Rescue, than under liquidation of the First Respondent, quite apart from the fact that the business rescue plan envisages the possible continuation of business activities.

[22]	The Second Respondent contended that should the court exercise its discretion in favour of the Applicant, the exercising of such discretion in such a way would destroy the possibility of a business rescue and would place the body of creditors in a much worse position and that, for that reason, the court should not exercise its discretion in favour of the Applicant (the court should consequently adopt the same approach as was adopted in Western Bank Limited v Lourie Fossati Construction (Pty) Ltd (under judicial management) 1974 (4) SA 607 (ECD).  I fully agree with this proposition.    
   
[23]	The long title of the Companies Act inter alia reads that the aforesaid Act has been enacted to provide for the efficient rescue of financially distressed companies whilst paragraph (k) of section 7 of the said Act provides that one of its purposes 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.

[24]	ln my view, this Court has to take the rights and interests of the Applicant as creditor of the First Respondent into account and balanced it against those of the First Respondent, all the other creditors, and the employees of the First Respondent.

[E]	Conclusion:-

[25]	It seems to me that what the Applicant is urging this Court to do, is the following – to allow him to proceed with his claims, and to execute the assets of the First Respondent to meet the full extent of his claims, while at the same time, holding all the other creditors to the Business Rescue Plan (in other words denying them the opportunity to proceed to recover their full debt as it existed prior to the Business Rescue).  This approach is, with the greatest respect, untenable and could never have been the intention of the legislature.   

[F]	Order:-

Consequently, the following order is made:-

	[1]	The application is dismissed with costs.

R D  HENDRICKS
JUDGE OF THE HIGH COURT

ATTORNEYS FOR THE APPLICANT:  HERMAN SCHOLTZ ATTORNEYS