CHEDA
AJ: This is an application for an amendment of a provisional
draft order issued on 21 September 2011 placing Birdland Trading (Pvt) Ltd (the
company) under Provisional Judicial Management and other relief. The
particular part targeted by this application is paragraph 4 of the provisional
order which reads as follows:
“4.
Pending the return date all actions and proceedings and the execution of all
writs, summons and other process against the company and its guarantors
(my emphasis) be and are hereby stayed and shall not be proceeded without the
leave of this court.”
What gave rise to this application is that on 8 September 2011, under case
number HC 2226/11 the applicant got a judgment against Birdland Trading (Pvt)
Ltd, Neil William Rix, Francois Van De Zee and Alco Forest Industries (Pvt) Ltd
who are 2nd, 3rd and 4th respondents in this
application. The judgment was for the four respondents to pay the
applicant
US$794 860,54 and costs on a legal practitioner and client scale jointly and
severally, the one paying the others to be absolved, and interest at the rate
of 31.8% per annum from May 2011 to day of payment.
The liability of the other respondents in that judgment is because they signed
suretyship agreements for the company's debt. After this judgment was
granted, on 21 September 2011 Birdland Trading (Pvt) Ltd, applied for, and got
an order for it to be placed under Provisional Judicial Management and other
relief. It is this provisional order which included all its guarantors in
the proceedings to be stayed. The provisional draft order was duly
advertised in the Chronicle Newspaper and the Government Gazette of 14 October
2011.
The applicant is now unable to execute against the guarantors of the company
because of their inclusion in the provisional draft order. This
application now seeks the deletion of that part of the order so that the
applicant can proceed against the guarantors of the company. Applicant
contends that there was no basis for the provisional order to protect anyone
other than the company concerned. It says the court was not told why the
order relating to Birdland Trading (Pvt) Ltd should apply to the respondents
and there is no legal basis for them to enjoy the same protection as they were
not party to the application by the company and they made no request to be
included in the suspension of execution. They are not insolvent.
They signed as guarantors so that the applicant can fall back on them in the
event that the company was unable to pay its debt. This is what has now
happened and they must now pay. The court is now asked to delete them
from the provisional draft order.
The application is opposed by the respondents. In his opposing affidavit,
Neil William Rix, one of the respondents, says he and 2nd respondent
were co-directors of the company until the date of the provisional order
placing it under judicial management. They stood as guarantors for
various loans that were advanced to the company by the applicant and they
signed suretyship agreements in their individual capacities and also on behalf
of the 3rd respondent. The agreements did not contain any
renunciation clauses or renunciation of benefits “exclusion and division”.
The agreement contains the following on clause 8:
Default
“If
the borrower should fail to make payment by due date of any amount due in terms
of the facilities or any other facilities that the Bank has accorded the
Borrower or may offer to the Borrower, or breaches any term, representation,
warranty, undertaking or condition of the Facility Letter or any other facility
the bank may grant to the Borrower or any other facility between the Borrower
and Standard Bank Group Limited or any other subsidiary or associate company of
the Bank, or become insolvent, or be provisionally sequestrated, or be
provisionally or finally wound up or be unable to pay its debts as they become
due, or be placed under provisional or final judicial management, … then in any
such event the full amount of the Facilities and any other facilities accorded
to the Borrower by the bank, then the outstanding, and all charges accrued
thereon, together with additional interest as defined … shall immediately
become due and payable.”
In
addition the suretyship documents signed by the respondents provide as follows
on clause 5.
“5. Insolvency of debtor or the sureties
If
the debtor or sureties or their estates are provisionally or finally placed in
or under liquidation, judicial management or sequestration -
5.1
and Stanbic does not prove any claim against the Debtor or any other sureties
in full or in part or abandon all or part of its claim this shall not affect
its right to recover from the Sureties the full amount of its indebtedness
under this suretyship.”
This clause shows that the provisional judicial management order should not
have the effect of barring the applicant from proceedings to recover against
the respondent. The respondents in this case are not just directors of
the company they are sureties. They signed these documents clearly
appreciating what was intended. They agreed to bear the liability of the company
should it be placed under judicial management. They meant that if the
company fails to pay they will pay. The company has now failed to pay and
has been placed under judicial management, the very same situation for which
the suretyships were made. They should not now be allowed to hide behind
the judicial management order. The judicial management provisional order
has not been confirmed. There is nothing to show that they have moved for
its confirmation.
The judgment granted against them is still intact. It was obtained before
the order for judicial management. It would appear the provisional order
was obtained to protect them. It has no finality so far.
The provisional order provides on paragraph 4 as follows:
“4.
Pending the return date all actions and proceedings and the execution of all
writs, summons and other processes against the company and its guarantors be
and are hereby stayed and shall not be proceeded without the leave of this
court.”
Clearly this paragraph gives the court discretion to allow the proceedings
against the guarantors if the court deems it necessary on good cause
shown. In this case I am satisfied that a good case has been made out for
me to exercise any discretion in favour of the applicant. I am also not
persuaded by the argument for the respondents that the court is not supposed to
interfere with or review the provisional order. The parties themselves
agreed that the court can exercise its discretion as far as executing against
the sureties is concerned.
I agree with the submission by the applicant that the application for judicial
management was intended to protect the company, and no foundation was laid for
the need to grant the respondents the same protection. It seems this was
done to shield them from liability and stall the judgment already granted
against them.
The respondents question why the applicant has not opposed the confirmation of
the provisional order, yet they too have not taken any steps to have it
confirmed. It has also been submitted that the application for the
Provisional Judicial Management order was not cited in this application as it
is its order that will be affected. That may appear to be so, but the
part of the order to be deleted does not affect the company or prejudice it in
any way. The order will affect only the respondents.
In my view the applicant has made out a proper case for the relief sought in
terms of the draft. The relief sought by the applicant is clear from its
founding affidavit and is stated as follows:
“As
a result of that portion of the order, applicant has been unable to proceed
with the execution against the respondents.”
I am satisfied that in view of the above I can exercise my discretion in favour
of the applicant and authorize execution against the respondents, a discretion
which is also granted to me by the provisional order itself where it says,
“…
pending the return date all actions and proceedings and execution of all writs
and summons and other processes against the company and its guarantors be and
are hereby stayed and shall not be proceeded without the leave of this court.”
This shows that the court can in its discretion grant such leave. I am
satisfied that the applicant has made out a case that justifies my exercising
my discretion in its favour.
Order
- Paragraph 4 of the provisional
order issued by this honourable court in HC 2616/11 and dated 21 September
2011 is amended by the deletion of “and its guarantors”
- The applicant is granted leave
to execute on the judgment granted in its favour against the 1st,
2nd and 3rd respondents which was issued against the
respondents on case number 2226/11 and dated 8th September
2011.
- The costs of this application
shall be costs in the cause in HC 12523/11 and shall be paid by the
respondents on the legal practitioner and client scale.
Calderwood,
Bryce Hendrie & Partners
applicant's legal practitioners
Messrs Moyo & Nyoni respondents' legal practitioners
