SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Not Reportable
Case No: 624/2016
In the matter between:

KRANSFONTEIN BELEGGINGS (PTY) LTD             APPLICANT

and

CORLINK TWENTY FIVE (PTY) LTD       FIRST RESPONDENT
JOHANNES FREDERICK
KLOPPER NO

SECOND RESPONDENT
ANTHONY NORMAN FLYNN NO                THIRD RESPONDENT
WEISS & PARTNERS
INCORPORATED

FOURTH RESPONDENT
ABSA BANK LTD

FIFTH RESPONDENT
GRIEKWALAND WES
KORPORATIEF BPK

SIXTH RESPONDENT
GERT VAN DER WALT JOUBERT NO
SANDRA ANN JOUBERT NO
HENDRIK JOHAN JOUBERT NO
In their capacities as trustees for the time being of
THE GERT TRUST

SEVENTH RESPONDENT
REGISTRAR OF DEEDS,
BLOEMFONTEIN

EIGHTH RESPONDENT

Neutral citation:   Kransfontein Beleggings (Pty) Ltd v Corlink Twenty
Five (Pty) Ltd, (624/2016) [2017] ZASCA 131
(29 September 2017)

Coram:
Lewis, Bosielo and Saldulker JJA and Mokgohloa and
Rogers AJJA

Heard:
07 September 2017

Delivered: 29 September 2017

Summary: Application to set aside business rescue proceedings –
creditors have direct and substantial interests – non-joinder of creditors is
fatal to the relief sought in the application.

________
ORDER

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Application for leave to appeal referred in terms of s 17(2)(d) of the
Superior Courts Act 10 of 2013:
The application for leave to appeal is dismissed with costs.

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JUDGMENT

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Mokgohloa AJA (Lewis, Bosielo and Saldulker JJA and Rogers AJA
concurring):

[1] The application for leave to appeal in this matter was referred by
the direction of this court for oral argument in terms of s 17(2)(d) of the
Superior Courts Act.1 The parties were forewarned that they should be
prepared, if called upon, to address this court on the merits. As a result,
arguments were heard on both the application for leave to appeal and the
merits of the matter.

[2] The applicant is the registered bondholder of a general and special
notarial bond (the notarial bond) in terms of the Security by Means of
Movable Property Act2 registered over certain movable property owned
by the first respondent (Corlink). Rights under the bond were ceded to the
applicant and the cession registered at the Deeds Office on 19 November
2014. The movable property specially pledged in terms of the notarial
bond comprised assets listed in annexures to the bond, including

1 10 of 2013
2 57 of 1993

irrigation and other farming equipment, livestock and, purportedly, water
rights pertaining to three farms. The water rights were rights in terms of s
21(a) of the National Water Act.3 I say these rights were ‘purportedly’
pledged because it was accepted at the hearing of the application before
us that the water rights were incorporeal property and thus not capable of
being pledged by way of the notarial

[3] As a result of the dire financial position in which Corlink found itself,
three farms registered in its name and some of its movables were sold by
public auction to the seventh respondent (the Gert Trust) on 28 August
2014. Deeds of sale between Corlink and the Gert Trust were
subsequently executed on 1 October 2014. The farming operations were
sold as going concerns, the sales including, so it appears, some of the
movable items that had been pledged to the applicant. The water rights
supposedly pledged to the applicant pertained to these three farms. The
fifth respondent (Absa) and sixth respondent (GWK) held first and
second mortgage bonds respectively over the farms. They consented to
the sales.

[4] On 30 October 2014, Corlink’s sole director passed a resolution
placing it in business rescue proceedings in terms of s 129(1)(b) of the
Companies Act,4 on the basis that it was financially distressed. Pursuant
to this, the second and third respondents were appointed as business
rescue practitioners (the practitioners).  The applicant’s attorney informed
the practitioners on 20 January 2015 that the applicant was a secured
creditor of Corlink by virtue of the notarial bond. They were requested to
include the applicant as such in the business rescue plan.

3 36 of 1998
4 71 of 2008

[5] In the meanwhile, the practitioners had prepared a business rescue
plan which was considered at a creditors’ meeting on 30 January 2015.
We may infer that the applicant’s claim was not reflected in this plan. The
creditors resolved to adjourn the meeting. They also resolved that the
practitioners should implement the sale of the farms to the Gert Trust.
On 13 March 2015 the practitioners published a revised plan (the plan).
This plan did not reflect the applicant as a creditor, secured or otherwise.
The plan was approved and adopted on 22 April 2015 at the creditors’
meeting. The applicant attended the meeting and its representative voted
against the acceptance of the plan.

[6] In terms of the plan as adopted, the lion’s share of the proceeds of
Corlink’s assets was to go to Absa and GWK as secured creditors –
R46 265 000 and R24 236 100 respectively. Their concurrent shortfall
was calculated at R3 637 360 and R4 281 365 respectively. The claims of
concurrent creditors, including Absa and GWK, totaled R35 401 876. The
plan stated that if there were a liquidation, the concurrent creditors would
receive nothing. In terms of the plan they were offered a ‘sweetener’ of
1.58 cents in the rand. The total amount available for division among
concurrent creditors was R560 000.

[7]   On 9 June 2015, the applicant launched an urgent application in the
Free State Division of the High Court, Bloemfontein to interdict the
transfer of Corlink’s immovable properties and the implementation of the
business rescue plan pending determination of a rule nisi to have the plan
declared invalid. The only creditors cited as respondents were Absa and
GWK, both of whom opposed the application. GWK delivered a notice of
opposition in terms of Uniform Rule 6(5)(d)(iii) and raised, among other

points, the non-joinder of Corlink’s other creditors.

[8] At the hearing on 10 June 2015, the parties reached an agreement
which was recorded in a court order as follows (the formatting is not
reproduced here):

‘By agreement between the applicant, the fifth and sixth respondents:
1.  The applicant’s application for and insofar as it pertains to final relief (‘the
main application’) is postponed sine die.
2. Further affidavits in the main application shall be delivered by the above
parties in terms of the Rules of Court, as if notice(s) of opposition had been
delivered on 10 June 2015.
3. The applicant shall pay the fifth and sixth respondents’ taxed party and party
costs of the proceedings on 10 June 2015.
4. It is recorded that:
4.1 The sixth respondent and its attorneys have given an undertaking to,
pending the final adjudication of the main application, hold in trust the sum of
R7 217 500.00 being the portion of the proceeds of the sales of the three
immovable properties referred to in the founding affidavit and to which the
applicant lays claim on the strength of the Notarial Bond upon which it relies.
4.2 This undertaking does not constitute or imply an admission or a
concession that such amount or any part thereof is due or owing to the
applicant and that the applicant has any rights thereto (which aspect shall be
determined in the adjudication of the main application).
5. The second and third respondents, not having entered appearance to oppose
the relief sought, are ordered to provide details to the applicant as to the
whereabouts of the proceeds of the movable assets sold by public auction on
28 August 2014 and 24 September 2014 respectively, insofar as those assets
are included in the Special Notarial Bond BN 8134/2011 dated 1 December
2011, within ten (10) days of the date of service of this order.”

[9] The amount of R7 217 500 (the ringfenced amount) was the
maximum amount at which the applicant valued its security under the
notarial bond. As a result of the agreement incorporated in the court
order, transfer of the three farms to the Gert Trust was registered and
Absa received the full amount to which it was entitled in terms of the plan
(this was less than its full legal entitlement).

[10] The postponed application was heard on 22 October 2015. On the
day of the hearing, the applicant’s counsel handed up a draft order which
modified the relief sought in the notice of motion by asking (i) that the
plan be set aside only to the extent that it failed to reflect the applicant as
a secured creditor of Corlink; (ii) that the plan be amended by reflecting
the applicant as a creditor in an amount not exceeding R7 217 500 in
respect of specified movable property including the water rights; and (iii)
that the ringfenced amount remain in trust pending the final determination
of the amount payable to the applicant under the notarial bond.

[11] The court a quo dismissed the application with costs on the basis
that the applicant had failed to join the other creditors of Corlink.

[12] The test whether there has been a non-joinder is whether a party
has a direct and substantial interest in the subject matter of the litigation
which may prejudice the party that has not been joined.5

[13] The applicant submitted that the issue of joinder was considered
prior to the hearing on 22 October 2015, and that its legal team concluded
that it was not necessary to join any other creditors because the amended

5 Absa Bank Limited v Naude NO & others [2015] ZASCA 97; 2016 (6) SA 540 (SCA) para 10;
Golden Dividend 399 (Pty) Ltd & another v Absa Bank Ltd (569/2015) ZASCA 78 (30 May 2016)

relief which the applicant sought did not affect any creditor except GWK.

[14] If the applicant had persisted in the relief set out in the notice of
motion, that is, interdicting the implementation of the plan and having it
set aside as invalid, there is no doubt that it would have been necessary to
join all the creditors.6  However by 22 October 2015, the applicant had
abandoned that relief and confined itself to the amended relief reflected in
the draft order. By design the amended relief was intended to affect only
GWK.

[15] However, the amendment to the plan which the applicant sought
would inevitably have affected concurrent creditors. If GWK’s secured
entitlement under the plan were reduced by R7 217 500, its concurrent
claim would increase by the same amount. Since the applicant did not
allege any basis on which GWK could be required to forfeit this
concurrent claim, the dividend payable to concurrent creditors out of the
surplus of R560 000 would have reduced from 1.58 cents to 1.31 cents.
While one may speculate that this modest reduction would not have
affected how creditors voted, the fact remains that the amendment did
affect their rights under the plan.

[16] As stated in Absa v Naude, if the creditors who voted for the
business rescue plan are not joined, their position would be prejudicially
affected in that a business rescue plan would be set aside, money that they
had anticipated they would receive would not be paid and the money that
they had received would have to be repaid. It thus follow that the non-
joinder of Corlink’s other creditors was fatal to the amended relief sought
by the applicant for non-joinder.  Since the question of joinder had been

6 Above

raised at the previous hearing and since the applicant had taken a
deliberate decision not to join other creditors, I do not think that the court
a quo was required to afford the applicant a further opportunity to join the
other creditors.

[17] However, and even if non-joinder was not a sufficient basis for
dismissing the application, the application was in any event doomed to
fail for the reasons elaborated below. Because the applicant did not
persist in the relief originally claimed, it is unnecessary to investigate on
what grounds a court may set aside an adopted business rescue plan and
whether such relief ceases to be competent once the plan has been
implemented. The question is whether a court can partially set aside and
amend an adopted plan so as to alter its operation in relation to one or
more of the creditors. In my view the answer is no.

[18] A business rescue plan can only be implemented if approved by the
prescribed majority of creditors in terms of s 152 of the Companies Act.
The court has no power to foist on creditors a plan which they have not
discussed and voted on at such a meeting. This is what the applicant was
asking the court a quo to do. The plan which the creditors discussed and
voted on was one in terms of which the applicant was  not reflected as a
creditor and a specified amount from the proceeds of the farms was to be
paid to GWK in settlement of its secured claims. If the applicant was
granted the relief it seeks, the plan would become one in which the
applicant receives its full secured claim up to a maximum of the
ringfenced amount while GWK receives proportionately less. And as I
have explained, concurrent creditors would also receive slightly less than
the plan promised them. The creditors have not discussed or voted on
such a plan. Quite conceivably GWK would have voted against it.

Creditors may have taken the view that the plan could not be finalized
and put to a vote until the value of the applicant’s secured claim was
established.

[19] We do not have enough information to determine whether GWK on
its own could have defeated the plan or whether other creditors might
have voted differently and in any event I do not think it matters. A court
cannot be asked to delve into these matters. The simple point is that the
only plan which practitioners can implement is one adopted by creditors
in accordance with s 152 of the Companies Act.

[20] The applicant’s counsel submitted that, by consenting to the order of
10 June 2015, GWK had agreed that the applicant, if it proved the
existence and value of its security, would be entitled to receive such value
from the ringfenced amount, in which event GWK would receive
proportionately less. No such case was made out on the papers. As at 10
June 2015, the applicant was seeking to have the entire plan set aside.
This is the case which Absa and GWK proceeded to answer. It was only
on 22 October 2015 that the applicant changed course. Even then, the
applicant did not claim that GWK had agreed to a two-way fight in which
the ringfenced amount would either go to the applicant or to GWK
depending on an adjudication of the applicant’s legal rights. The
applicant’s modified case was that it was entitled to a partial setting aside
and amendment of the plan.

[212] I therefore find that the court a quo was correct in dismissing the
application. The applicant has failed to show that there are prospects of
success in the appeal.

[223] In the circumstances, the following order is made:
The application for leave to appeal is dismissed with costs.

__________________
FE MOKGOHLOA

ACTING JUDGE OF APPEAL

APPEARANCES

For the Applicant:           J H Roux SC (with him P S Van Zyl)
Instructed by:
Bill Tolken Hendrikse Incorporated, Belville

Matsepe Inc, Bloemfontein

For the Respondent:
M H Wessels SC (with him S Tsangarakis)
Instructed by:
Symington & De Kok, Bloemfontein

Phatshoane Henney Attorney, Bloemfontein