IN THE HIGH COURT OF SOUTH AFRICA 

Case No: 12746/2011

In the matter between:

and

THE COMPANIES AND INTELLECTUAL 

and
ADVANTAGE PROJECTS 

JUDGMENT

OWEN ROGERS AJ

Costs of business rescue application

[3] In the case of liquidation proceedings the petitioning creditor recovers its costs from the insolvent company by virtue of s342 of the Companies Act 61 of 1973 read with s97 of the Insolvency Act 24 of 1936. In terms of these provisions the petitioning creditor's taxed costs are part of the costs of the liquidation ranking ahead of claims of pre-liquidation creditors. (The liquidation provisions in the 1973 Act, which form part of Chapter XIV of that Act. remain in force despite the repeal of the 1973 Act - sec item 9 of schedule 5 to the 2008 Act.)

[7] Conversely there is every reason why a person that brings an unmcritorious rescue application which is successfully opposed by the company or by an affected party should in general be ordered to pay the other part's costs.

[8] I thus consider that the court's inherent jurisdiction in regard to costs applies to proceedings under sl31. The costs that arc in issue here exclude those occasioned by AMP's intervention. Essentially, therefore, the costs are those of bringing the application on an unopposed basis. The application is aimed at providing an opportunity for PPG to be restored to financial health for the benefit of the company and thus for its creditors and shareholders. CPV is not seeking to advance its own exclusive interests. It would thus be fair to direct that such costs be paid by PPG. The latter. 1 may add. docs not resist such an order.

[9] In liquidation proceedings the costs recoverable from the debtor are the petitioning creditor's costs as taxed by the registrar (s97(3) of the Insolvency Act). I consider that a similar qualification should be included in business rescue proceedings. In the nature of things, the court granting a business rescue order will not know what costs the applicant has incurred and whether they are reasonable. The court should thus not grant an order which would entitle the applicant to recover all its costs, whatever they might be. On the other hand, in general I see no reason why the costs should not be taxed on the scale as between attorney and client.

[10] I shall thus order that CPV's costs as taxed on the attorney and client scale, but excluding costs occasioned by APM's intervention, shall be payable by PPG.

Service anil notification

[15] Notification to shareholders is more problematic. PPG is a listed company. It has a large number of shareholders. In terms of s50(l) a company must establish and maintain a register of its issued securities in the prescribed form. In terms of ss26(l)(e) and (2) an applicant for a business rescue order would (subject to considerations of urgency) be able to inspect and obtain a copy of the company's securities register. The prescribed form for the register is set out in regulation 32. The register must contain the shareholder's address and an email address if available (unless the shareholder has declined to provide an email address). The evidence in this case did not disclose whether PPG had as yet brought its register into the form required by regulation 32. (It was not a requirement of the 1973 Act that the share register should contain email addresses.)

[19] In the present case there was no notification to trade unions or employees. PPG is a holding company. A supplementary affidavit was submitted disclosing that PPG itself has only eleven employees. They are not members of a trade union. They are all aware of the application. This was confirmed under oath by PPG's chief financial officer.

Intervention

Order

[22] The full order of the court, incorporating the orders granted on 28 July 2011 (paragraphs 1 to 4) and the costs order in accordance with these reasons (paragraph 5), thus reads as follows:
1. The applicant's non-compliance with the forms and service provided for in rule 6 of the Uniform Rules of Court he condoned and that this matter be heard as one of urgency in terms of rule 6(12) thereof.
2.	The first respondent is placed under supervision and that business rescue proceedings commence as envisaged in terms of the Companies Act 71 of 2008 ("the Act").
3.	Mr Michael John Lane be appointed as business rescue practitioner to conduct the business of the first respondent with all powers and duties entrusted to him in terms of the Act.

4.1.	by notifying creditors of the first respondent of this order, within five days of this order having been granted, by way of electronic mail;
4.2. by notifying shareholders of the first respondent, within five days of this order having been granted, by way of:

4.2.1.	electronic publication on the SENS publication service, provided by the Johannesburg Slock Exchange; and
4.2.2. electronic mail, to such shareholders whose electronic mail addresses arc known to the applicant:

Parktown, Johannesburg, 2193, within five days of this order having been granted.
4.4.	by notifying the employees of the first respondent, by way of attaching a copy of this order to the first respondent's notice board, alternatively a prominent and visible place at the offices of the first respondent situated at its principal place of business at Ground Floor. Travers House, Boundary Terraces. 1 Mariendahl Lane, Newlands. Cape Town, within five days of this order having been granted.

5. The applicant's costs, taxed on the scale between attorney and client and including the costs of two counsel where employed, shall be payable by the respondent, such costs to be confined to the costs of the founding papers issued on 27 June 2011, the supplementary founding papers filed on 8 July 2011. the affidavits of service filed on 8 and 12 July 2011, the giving of notice to affected persons and the appearance on 28 July 2011.

OWEN ROGERS AJ 
11 AUGUST 2011