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[2023] ZAGPJHC 1234
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Wescoal Mining (Pty) Ltd and Another v Mkhambo NO and Others (2023-079991) [2023] ZAGPJHC 1234 (31 October 2023)
IN THE HIGH COURT OF
SOUTH AFRICA
(GAUTENG DIVISION,
JOHANNESBURG)
Case
No.
2023-079991
NOT REPORTABLE
NOT OF INTEREST TO OTHER
JUDGES
REVISED
31/10/23
In the matter between:
WESCOAL
MINING (PTY) LTD
First
Applicant
SALUNGANO
GROUP LTD
Second
Applicant
And
PHAHLANI
LINCOLN MKHOMBO NO
First
Respondent
ARNOT
OPCO (PTY) LTD
Second
Respondent
NDALAMO
COAL (PTY) LTD
Third
Respondent
MASHWAYI
PROJECTS (PTY) LTD
Fourth
Respondent
JUDGMENT
WILSON
J:
1
The first, second and fourth respondents, respectively Mr.
Mkhombo, Arnot, and Mashwayi, seek leave to appeal against my
judgment
of 2 October 2023, in which I concluded that a variant of a
plan to rescue Arnot under the provisions of Chapter 6 of the
Companies
Act 71 of 2008 (“the Act”) had been lawfully
adopted at a meeting of Arnot’s creditors on 28 July 2023. I
reached
that conclusion by interpreting the word “creditor”
in Chapter 6 of the Act to refer only to a person who is a creditor
of a company under business rescue at the point that the business
rescue process commences. That meant that the voting interests
of
“post-commencement creditors” (creditors whose claims
arose after the commencement of business rescue) should not
have been
counted when the plan to rescue Arnot was voted on at the 28 July
meeting. Those votes having been excluded, I found
that
the
statutory threshold set in section 152 (2) (a) of the Act had been
met at that meeting, and that the plan had been adopted.
2
The implementation of the plan would mean
the sale of Arnot to the third respondent, Ndalamo. Ndalamo does not
oppose the applications
for leave to appeal, but it seeks the interim
execution of my order under
section 18
(3) of the
Superior Courts Act
10 of 2013
.
3
I shall deal first with the applications
for leave to appeal, and then turn to the application for interim
execution.
The application for
leave to appeal
4
The interpretation of the Act that I adopted in my judgment
has far-reaching consequences, not just for Arnot, but for all
business
rescue proceedings undertaken in terms of the Act. Given
that the Act does not speak explicitly to the question of whether the
category of “creditor” includes post-commencement
creditors, the meaning I ascribed to the term was a reasoned
inference,
based on the language and purposes of the Act. Given the
nature of that interpretive exercise, I have no doubt that the
conclusion
I reached is one with which another court could reasonably
differ. I am also alive to the fact that an appellate court is likely
to benefit from submissions by other interested parties on the nature
of the business rescue process, and the role of post-commencement
creditors, which were not made before me, and which might take a
court of appeal’s interpretation of the Act on a different
course.
5
Aside from the point of statutory interpretation, Mashwayi
contended that the exclusion of post-commencement creditors would
have
made no difference to the outcome of the 28 July 2023 meeting,
and that my order was erroneous for that reason too. That contention
came as something of a surprise, since, as counsel agreed during the
leave to appeal hearing, that was not a point debated during
the main
application, which was argued by all parties on the basis that the
exclusion of post-commencement creditors would have
resulted in the
adoption of the business rescue plan. Had there been a dispute about
this issue, it is unlikely that I would have
reached the point of
statutory interpretation I ultimately decided, or that I would have
issued the order I did.
6
Still, Mr. Harris, who appeared for Mashwayi in the
application for leave to appeal, contended that the argument that the
exclusion
of post-commencement creditors from the voting tally would
have made no difference to the outcome of the 28 July meeting is
sustainable
on the papers. He confirmed that Mashwayi intends to
pursue it on appeal, if necessary with an application to introduce
new evidence.
Given that it was never argued before me, I am unable
to say what the prospects of success on that point are, but in light
of the
speed at which this matter was argued and determined
a quo
,
I am inclined to conclude that it is an issue that ought to be
ventilated on appeal.
7
Finally, Mr. Symon, who appeared for Mr. Mkhombo and Arnot,
argued that there is some prospect that a court of appeal might
conclude
that the appropriate remedy, on finding that
post-commencement creditors are not permitted to vote an interest at
meetings convened
under section 152 of the Act, was to refer the
issue back to Arnot’s creditors for a fresh vote after further
deliberation
in light of my judgment. When I decided the main
application, I could see no facts that would tend toward the
conclusion that such
further deliberation would make any difference
to the outcome, and I concluded that my overriding concern should be
to give effect
to the statute on the facts as they stood on 28 July
2023. However, I accept that, at least at the level of principle, the
remedial
alternative Mr. Symon proposed is one that another court
might reasonably adopt.
8
For all these reasons, leave to appeal should be granted.
Given the complexity and the stakes involved in the issue of
statutory
interpretation, the appeal should plainly lie to the
Supreme Court of Appeal.
The application for
interim execution
9
An applicant for interim execution must show that there are
exceptional circumstances justifying such an order, that the
applicant
would suffer irreparable harm if the judgment appealed
against is not immediately brought into effect, and that none of the
other
parties would suffer irreparable harm if it is.
10
I am prepared to accept that Ndalamo has shown that there are
exceptional circumstances in this case. However, I do not think that
I can conclude, on a balance of probabilities, that Ndalamo would
suffer irreparable harm unless my order is immediately executed.
11
The forthcoming appellate delay will only cause Ndalamo
irreparable harm if it means the collapse of Arnot’s sale to
it. The
only real likelihood that this would ensue is if the business
rescue process itself collapsed, and Arnot had to go into
liquidation.
This matter was initially argued before me on the basis
that the business rescue process would collapse on or about 15
October
2023, unless I heard and decided the case before then.
12
But things have since changed. Mr. Mkhombo now believes that
the business rescue process can endure for another four to six
months,
even if Arnot’s sale to Ndalamo is not proceeded with.
That, I am urged to find, is long enough to allow the Supreme Court
of Appeal to consider an appeal against my judgment on an urgent
basis. I have no reason to believe that the Supreme Court of Appeal
would not agree to hear and decide the matter within that time. Where
appropriate, it has entertained urgent appeals on shorter
timeframes
in the past.
13
Mr. Miltz, who appeared for Ndalamo, was not really able to
gainsay Mr. Mkhombo’s position, although he called attention to
the rather sober and conditional language in which it was expressed.
I am alive to the fact that Mr. Mkhombo’s views must
be
assessed in light of that fact that he is also an applicant for leave
to appeal, but there is no suggestion that his view on
the present
durability of the business rescue process is in any way self-serving
or contrived.
14
It seems to me that, on the probabilities, I must accept Mr.
Mkhombo’s forecast: that the business rescue process can endure
for another few months, and that this will be long enough to allow my
judgment to be reconsidered on appeal. Despite Ndalamo’s
critique, there are really no facts on the record that support a
contrary inference. It follows that I cannot presently find that
Ndalamo would suffer irreparable harm unless my order is executed
forthwith. The prospect of the collapse of Arnot’s business
rescue process is too remote, on the facts as they currently stand,
to justify interim execution.
15
Mr. Miltz also emphasised that, unless the sale goes through
immediately, Arnot’s mining activity will continue to deplete
the coal reserve, and that Ndalamo will receive less than it has
bargained for if it takes control of Arnot only after the appeal
process is exhausted. But I do not think the reduction in the coal
reserve constitutes irreparable harm. There is no suggestion
that the
reduction in the reserve is likely to be such that it would dissuade
Ndalamo from taking over the mine at all, and no
suggestion that the
terms of sale could not be varied by agreement were a reduction in
price warranted.
Prospects of success
on appeal
16
Whether or not the prospects of an appeal succeeding have any
role to play in an interim execution case has been a matter of some
debate in the cases. The Supreme Court of Appeal’s view is that
those prospects do play a role. However, it appears that
the Supreme
Court of Appeal has not yet had the opportunity to consider in what
way they affect the enquiry (see
University of the Free State v
Afriforum
2018 (3) SA 428
(SCA), paragraphs 14 and 15 and
Knoop
NO v Gupta (Execution)
2021 (3) SA 135
(SCA) paragraphs 49 and
50).
17
It is not strictly necessary for me to consider the strength
of Mr. Mkhombo’s, Arnot’s and Mashwayi’s prospects
of success in deciding the interim execution application, because I
have already found that Ndalamo has not demonstrated that it
would
suffer irreparable harm without interim execution. However, I think
that I should record that it weighs with me that, if,
as could very
well happen, the appeal against my order succeeds on the basis that I
was wrong to interpret the Act as I did, then
the effect of an order
for interim execution would be that I would have authorised a very
large commercial transaction, affecting
thousands of people and their
livelihoods, without any statutory basis for having done so. It was
submitted that I need not worry
too much about that because, if the
appeal succeeds, then the sale would be cancelled, and restitution
would have to take place.
18
In a context as complex as this, I cannot accept that
submission. The consequences of pushing the sale through, only for it
to be
undone a few months later, are unknowable. It seems ill-advised
to assume that they will all be reversible.
Costs
19
Given that the application for leave to appeal and the
application for interim execution were heard simultaneously, costs in
the
application for leave and in the application for interim
execution will be costs in the appeal.
Order
20
For all these reasons –
20.1 The first, second
and fourth respondents are granted leave to appeal to the Supreme
Court of Appeal against the whole of my
judgment and order dated 2
October 2023.
20.2 The third
respondent’s application for interim execution is refused.
20.3 The costs of the
application for leave to appeal, and the application for interim
execution, will be costs in the appeal.
S D J WILSON
Judge of the High Court
This judgment is handed
down electronically by circulation to the parties or their legal
representatives by email, by uploading
to Caselines, and by
publication of the judgment to the South African Legal Information
Institute. The date for hand-down is deemed
to be 31 October 2023.
HEARD ON: 30
October 2023
DECIDED ON: 31
October 2023
For the Applicants:
A Botha SC
SL Mohapi
Instructed by
Mkhabela Huntley
For the First and
Second Respondents:
S Symon SC
C Cremen
Instructed by
Cox Yeats
For the Third
Respondent
:
I Miltz SC
D Block
Instructed by Webber
Wentzel
For the Fourth
Respondent:
L Harris SC
JC Viljoen
Instructed by
Liebenberg Malan Mofolo
Inc