Bothomley N.O. and Others v Emontic Investments (Pty) Ltd and Others (5473/2017) [2022] ZAGPPHC 506 (6 July 2022)

IN THE HIGH COURT OF SOUTH AFRICA GAUTENG PROVINCIAL DIVISION, PRETORIA CASE NO: 5473/2017 Delete whichever is not applicable (1 )Reportable : No.

(2) Of interest to other judges: No.

(3) Revised. 06 July 2022 Date In the matter of: Bothomley, Peter Charles N.0. Ganie Salim Ismail N.O. Van Wyk, Ethne Mary N.O. Montie Dairy (Pty) Ltd (In liquidation) (Registration Number: 1949/035587/07) And Emontic Investments (Pty) Ltd (Registration Number 1992/005240/07) First Applicant Second Applicant Third Applicant Fourth Applicant First respondent

Kopano Auctioneers (Pty) Ltd (Registration Number 1992/ 158730/07) The Master of the High Court, Pretoria (Master's Reference: T1185/16) Second Respondent Third Respondent This Judgment has been electronically delivered and shall be circulated to the parties by way of email. Its date and time of delivery shall be deemed to be 06 July 2022.

Judgment

Munzhelele J

Introduction

[1] This is an application for payment of money due to the liquidators of the fourth applicant, Montie Dairy (Pty) Ltd, a company in liquidation (Montie Dairy) following the sale in execution of its assets by the second respondent. The first , second and third applicants are the liquidators of Montie Diary . They brought this application to recover the proceeds of the sale of the fourth appl icant's movable properties, which the first respondent claims that it is entitled to because of the post-liquidation rent.

[2] Alternatively , the applicants want the first respondent to be ordered to render a complete account , supported by vouchers as contemp lated in section 85(5) of the Insolvency Act, 1936 , read with section 339 of the Companies Act 1and item 9(1) of Schedu le 5 of the Companies Act2 , for the sale of the property of Monti e Dairy by the first respondent on 8 November 2016 . The applicants also want to debate the said account and payme nt to the applicants as contemplated in section 83(10) of the Insolvency Act3 read with section 339 of the Companies Act, 1973 and item 9(1) of Schedule 5 of the Companies Act , 2008 , of whateve r amount appears to be due to the applicant s upon debate of the accoun ts. The 1 61 of 1973 2 71 of 2008 3 24 of 1936

app licants also wan t to claim interest tempore morae and want this court to determine the effective date of such payment. The applicants also sought an order for the costs of the application .

[3] The Montie Dairy Pty Ltd is a private company incorporated in terms of the Company Laws of the Republic of South Africa with registration number 1949/035587/07 , having its registered office at 42 Lebombo Street Ashley Gardens , Pretoria, Gauteng.

[4] The first respondent is a sister company and a creditor of Montie Dairy , as Montie Dairy was operating from the premises owned by the first respondent. The first respondent has a counter application against the app licants , which entails the followin g; 4.1. The applicants should be ordered to take any steps necessary to remove their remaining movables assets , records and books belonging to Montie Dairy Pty Ltd from the property known as Tamboekiesfontein within 15 calendar days fro m the date of the order. 4.2. The court should declare that the first respondent is entitled to admin istrative rental for the period between the date of Montie Dairy liquidation and the 30 Novembe r 2016. 4.3 . The court should declare that the first respondent was entitled to deduct administrative rental from the proceeds generated by the auction of the movab le assets belonging to Montie Dairy Pty Ltd following its invoices dated 2 Nove mber 2016.

[5] The Kopano Auctioneers Pty Ltd (Kopano) is the auctioneer engaged by the first respondent when they realised the movab le properties of Montie Dairy in a public auction. It is also a private company incorporated in terms of the laws of the Republic of Sout h Africa , with its registered office at 9 Spies Street, Annlin , Pretoria, Gauteng. No relief is sought against Kopano .

[6] The third respondent is the Master of the High Court , an official of this

honou rable court to serve the public in respect of Deceased Estates , Liquidations (Insolve nt Estates), Regi stration of Trusts , Tutors and Curators , as well as Adminis tration of the Guard ian's Fund (minors and mentally challenged persons ). No relief was sought against the third responden t since it only acted as an agent for the first respondent in selling Montie Dairy 's property pursuant to section 83(8) (d) of the Companies Act and by the Master's direction. Backgroun d

[7] The applicants subm it that they are entitled to the proceeds of the sale of Montie Dairy's movable propert ies, which are in the possession of the first respondent. The applicants sought to recove r the net proceeds of the movable property realised by the first respondent. In delivering its answering affidavit , the first respondent also launched a counterclaim against the applicant. The first respondent alleged that after Montie Dairy was placed under business rescue proceedings , the first respondent concluded two sepa rate agreement s for the provision of post-commencement finance in accordance with section 135 of the Companies Act , 2008.

[8] Furthermore , the first respondent alleges that a pre- liquida tion arrear renta l is owed to the first respondent because Montie Dairy failed to pay the monthly rental for a substantial period . Therefore , the first respondent was entitled to rely on the security provided by common law tacit hypothec over the movable assets of Montie Dairy. Furthermore , the first respondent contends that there is an obligation on the liquidators "to ensure that all remaining movable assets , records and books belong ing to Montie Dairy are removed from the immovable property of the first responden t".

[9] The facts of the case are taken from the pleadings of the applicants and the respond ents. The events leading to the present litigation began with Montie Dairy's liquidation and being placed under a winding-up order by this honourabl e court on 14 June 2016. Prior to Montie Dairy 's liquidation , the company conducted business as a dairy from the premis es owned by the first respond ent, farm Tamboekiesfont ein. Wayne Dirk van Biljon ("Mr. van Biljon") and Karl Hans

Kerbert ("Mr. Kebert ") were the directors of Montie Dairy , and they are also the directors of the first respondent. On 2 November 2015 , Montie Dairy adopted a resolution to voluntarily enter into business rescue proceedings in terms of section 129 of the Companies Act, 2008 (the New Act) . [1 O] The business rescue was ultimately unsuccessful, and the business rescue practitioners acco rdingly applied to convert the business rescue proceedings into liquidatio n proceedings. The final order of liquidation was granted by this honourable Court on 14 June 2016. At the time of liquidation, Montie Dairy was substantia lly indebted to the first respondent due to failure to pay rent. The first respondent proved a pre-liqu idation claim in terms of section 44 of the Insolven cy Act , 36 of 1944 (the Insolvency Act ) for an amount of R 5 674 536,19 (five million six hundred and seventy-four thousand five hundred and thirty-si x rand and nineteen cents) . Claims above R 112 000 000 (hundred and twelve million rand) were proved against Montie Dairy by the creditors . [1 1] The app licants did not terminate the lease agreement after Montie Dairy was liquidated. The applicants event ually gave notice that the lease would terminate at the end of Novembe r 2017. The first respondent alleges that due to continued occupation of the leased premises , it was entitled to receive additional rental payments for the period after the effective date of liquidation . Prior to the second cred itors' meet ing, the first respondent gave notice in terms of section 83 of the Insolvency Act to the applicants and the Master of its intent ion to sell the movable assets over which security is held.

[12] The liquidators did not take over the property as contemplated in section 83(3). The first responden t then appointed the second respondent as its agent to sell the movab le assets over which it held security in execution. The first respondent then elected to realize the property in a manner contemplated and , on the conditions mentioned in sections 83(3) and 83(8) of the Insolvency Act. On 25 October 2016, the first respondent's attorneys addressed a letter to the liquidators in which they advised , among other things, that the first respondent has engaged the services of the seco nd respondent. Significantly, in the letter, the first respondent's attorneys advised as follows:

"My client entered into a written lease agreement with Montie Dairies (Pty) Limited and is an amount of [siic} R 5 67 4 536. 19 outstanding in terms of the outstanding rental payable to the date of liquidation. My client is also owed administrative rental, which we will deal with separately for the period referred in the insolvency Act, post liquidation ". An auction was arranged for 8 November 2016 by Kopano. (13] On 25 October 2016 , the first respondent addressed a furt her letter wherein they advised of the details for the proposed auction and significantly advised that the author of the letter has advised both (his] client and the auctioneer about the provis ions of section 83(10) of the Insolvency Act. The auct ion generated a VAT inclusive income reflected in the statements issued by the second respondent , wh ich is R 5 970 438 ,00 (five million nine hundred and seventy thousand four hundred and thirty-eight rand ). This amount was paid over to the first respondent by the second respondent. The first respondent then realized its security in section 83(8)(d) of the insolvency act.

[14] The liquidators requested the first respondent to pay over the proceeds of the liquidat ion and the first respondent refused to pay the net proceeds from the sale to the liquidators. Instead, the first respondent purported to account to the liquidators for the sale of the properties in terms of section 83(10) of the Insolvency Act. In a letter addressed to the liquidators from the first respondent's attorneys dated 30 November 2016 where it was stated that the first respondent: (a)"Had applied set-off in terms of the admin rental" purportedly supported by invoices attac hed to the letter from the date of liquidation until 30 November

(b)Has also, as per the instructions of van Biljon, retained an additional amount regarding an entirely separate issue relating to Lucky Acres (Pty) Ltd;" The first respondent's attorneys knew that they were not authori zed to apply for the set-off unless the app licants consented to it. The first respondent then , therefore , requested the applicants to provide their instru ctions in this regard .

(15] On the same day , the first respondent paid an amount of R 2 420 000,05 (two million four hundred and twenty thousand rand and five cents) to the bank account of Montie Dairy . On 6 December 2016 , the applicants ' attorney replied to the letter of 30 November 2016 and advised the first respondent that the set-off was impermissible and that the applicants did not consent to it. They further advised the first respondent that it was unlawful for the first respondent to deduct the amounts from the net proceeds of the realizat ion of the property . It was also noted that the administrative renta l claimed by the first respondent did not accord with the terms of the lease agreement and that only in the event of the liquidation being satisfied that the amounts claimed were due then payment would be made to the first respondent. (16] The first respondent insisted on refusing to pay the balance of the net proceeds to the liquidators . According to the applicants , the net amount paid by the secon d respondent was R 6 745 561 ,78 (six million seven hundred and forty five thousand five hundred and sixty-one rand and seventy-eight cents ). Of this amount , the first respondent paid R 2 420 000 ,05 (two million four hundred and twenty thousand rand and five cents ) on 30 November 2016 and R 139 536 ,00 (one hundred and thirty-n ine thousand five hundred and thirty-s ix rand ) on 26 January 2017 . Based on the calculations provided by the second respondent and the first respondent, this leaves a balance of R 4 186 026, 73 (four million one hund red and eighty-six thousand twenty-si x rand and seventy-three cents ) payable to the applicant. The applicants claim an amount of R 4 186 026, 73 from the first responde nt as net proceeds. The Iss ues (17] In light of the facts of this case and the parties' submission, the primary issue is whether the first respondent is entitled to post-liquidation rent in terms of the lease agreement signed with Montie Dairy. Suppose the answer to the previous quest ion is in the affirmative . In that case , the second issue will be whether the first respondent was entitled to set off the amount with the net proceed of the sale of Montie Dairy's movable assets consider ing that Montie Dairy is under liquidat ion. There are other cred itors who proved their claims against it.

[18] Whether the applicants should be paid the net proceeds in the amount of R4 186 025 , 73 which was realized after the auction by Kopano or should the first respondent retain the proceeds as set off for the payment of administrative rental after the liquidation of Montie Dairy. Secondly , whether the first respondent is entitled to administrative rental or was there a failure to vacate the premises of the first respondent by Montie Dairy or are the liquidators failing to remove Montie Dairy 's property from the first respondent's premises . Thirdly does the word net proceeds in section 83 includes the administrative rental? Submiss ions by the parties [19) The applicants submit that they are entitled to receive payment of the proceeds (less the commission of the second respondent and advertising costs ) generated by the sale of Montie Dairy 's movable assets . The first responden t has no objection to the applicants ' claim and entitlement. But would like to deduct their post-liquidation rental that accrued between the period of May 2016 and November 2016 before paying the net proceeds to the liquidators . According to Adv. Butler SC , the first respondent seeks final relief on the motion . The fina l relief can be granted if the facts stated by the applicants (being the first respondents in the counter application) and the facts alleged by the first respondent (being the applicant in the counter application) are admitted or common cause facts.

[20] The applicants submit that under the relevant provisions of the Insolvency Act and Case laws , the first respondent is not entitled to deduct any amounts from the net proceeds but was obliged to pay over the net proceeds to the liquidators after Kopano realized the movable property . The first respondent never raised a defence to the applicants' claim , and its counter application , in so far as it deals with the proceeds from the sale, therefore, must fail for the same reason as it is against section 83 of the insolvency act. According to the applicants , the relief sought in the counterclaim regarding the removal of the company 's property cannot be granted by court in light of the facts presented by the appl icants , which demonstrates that the applicant has made several attempts to resolve the outstanding issues with the first respondent, but the directors have refused to

cooperate .

[21] The applicants further argued , denying the first respondent's claim regarding rent, saying that the first respondent is painting a picture through the select correspondence annexed to its answering affidavit that the liquidators have failed to remove their movables assets at the premises , whereas that is not correct. Further , on behalf of the applicants , Adv. Butler SC submits that the liquidators are not satisfied that any rent is due to the first respondent in terms of section 37(3) for a number of the following reasons: (a) From the statement made by Mr. van Biljon at the meeting held on 10 October 2016 (and confirmed in the email dated 14 October 2016) that there was a sale of the business and confirmed that the new owner (Vorster) "had affective control of the site and operations and the benefit thereof '. (b) Although Mr. Kerber baldly denies that Montie Dairy was evicted from the premises and that Voster was in control thereof, no explanation whatsoever is provided as to why Mr. van Biljon made the statements he did at the meeting on 10 October 2016 , which were confirmed in his email of 14 October 2016. (c) Mr. Kerber also contends that the eviction did not occur because certain assets of Montie Dairy remained on the premises. To this statement , the applicants submit that Mr. van Biljon's obstructive attitude resulted in the liquidators not finalizing the outstanding issues with the first respondent, including removing the company 's goods from the premises. In any event, the applicants submit that the fact that property remained on the premises is not evidence that the company was not evicted and did not address the statements that emanated from Mr. van Biljon himself (in his email) and the fact that the company was evicted from the premises long before November 2016. (d) Mr. van Biljon had refused the liquidators to remove the properties from the