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[2021] ZAGPJHC 876
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Mango Pilots Association and Others v Mango Airlines SOC Limited and Another (21/35958) [2021] ZAGPJHC 876 (7 September 2021)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA,
GAUTENG
LOCAL DIVISION, JOHANNESBURG
CASE
NO: 21/35958
REPORTABLE:
YES
OF
INTEREST TO OTHER JUDGES:
YES
7/09/2021
In
the matter between:
MANGO
PILOTS
ASSOCIATION
First Applicant
SOUTH
AFRICAN CABIN CREW ASSOCIATION
Second Applicant
NATIONAL
UNION OF METAL WORKERS SOUTH AFRICA
Third Applicant
and
MANGO
AIRLINES SOC
LIMITED
Respondent
COMPANIES
& INTELLECTUAL PROPERTY COMMISSION
Third Party
JUDGMENT
ANTONIE AJ:
[1]
The application and counter application
were argued before me on 6 August 2021. Having regard to the urgency
of the matter, I made
an order on 10 August 2021 and indicated that I
would furnish reasons for my decision at a later date. Those reasons
follow.
[2]
The
applicants, representing a range of persons employed by the
respondent, Mango Airlines Soc Limited (
Mango
),
launched an urgent application pursuant to the provisions of section
131 of the Companies Act
[1]
(
the
Act
)
for an order placing Mango under supervision and commencing business
rescue proceedings. The applicants are affected persons as
contemplated in section 128(1)(a) of the Act and, accordingly, have
locus
standi
to have instituted the application.
[3]
Mango is a wholly owned subsidiary of South
African Airways SOC Limited (
SAA
).
It commenced business in 2006 as a low-cost domestic aviation company
and employs more than seven hundred employees. Prior to
1 May 2021,
when it suspended its operations, it operated five aircraft.
[4]
As a state owned company, Mango’s
shareholder representative is the Minister of Public Enterprises (
the
Minister
).
[5]
All parties agree that the matter is
urgent, that Mango is financially distressed and that there is a
reasonable prospect for rescuing
Mango.
[6]
Mango opposes the relief sought by the
applicants on the ground that it adopted and filed a resolution (
the
resolution
) under section 129(1) of the
Act which it asserts became effective from 28 July 2021. Mango
instituted a counter application and
third party proceedings which I
deal with in more detail below.
[7]
The primary dispute between the parties is
not whether Mango should be placed in business rescue but rather, the
mechanism by which
that should occur.
Third Party
proceedings and participation by liquidating creditors
[8]
The third party is the Companies &
Intellectual Property Commission (
the
Commission
). On 28 July 2021
Mango, through its attorneys, attempted to file through the
Commission’s E-Services platform (
the
platform
) the resolution it had adopted
accompanied by a sworn statement and the Commission Form CoR123.1,
together with the prospective
business rescue practitioner’s
declaration. The platform rejected the application on the basis that
Mango’s board resolution
had been adopted more than five
business days before the filing of the documents with the Commission
for the commencement of voluntary
business rescue proceedings. The
platform automatically generated a notification which recorded,
inter
alia
:
“
CoR123.1
and supporting documents must be filed within 5 business days from
date of resolution, else the resolution becomes a nullity.
…
Kindly submit a court
order.”
[9]
Despite Mango’s attorneys logging a
query and engaging with management of the Commission, the attorneys
were unable to obtain
any joy and ultimately advised that if the
Commission did not change its status to record that it was in
voluntary business rescue,
Mango reserved the right to approach the
court on an urgent basis. On 29 July 2021, the Commission
responded and refused to
accept Mango’s filing for voluntary
business rescue on the basis that:
[a]
The resolution taken on 16 April 2020 under
section 129 of the Act was adopted more than five days prior to the
filing of the statutory
documents with the Commission on 28 July
2021.
[b]
The resolution was of no force and effect
on the date on which it was adopted, on the basis that additional
requirements needed
to be fulfilled before the resolution could be
filed with the Commission and does not have retrospective
application.
[c]
The application had not been submitted via
the new platform in accordance with the notices issued by the
Commission.
[d]
The content of the resolution did not
comply with the Commission’s standard business rescue
resolutions.
[e]
The resolution was not validly passed in
accordance with the requirements of the Act.
[f]
Liquidation proceedings were pending before
the High Court against Mango.
[10]
When Mango filed its answering affidavit in
opposition to the applicants’ application, it simultaneously
delivered a third
party notice to the Commission and launched a
counter application for the relief sought in the third party notice.
Aside from seeking
urgent relief, Mango sought the following relief:
“
2.
That the Third Party’s (i) refusal to process the Respondent’s
board resolution, taken on
16 April 2021 under section 129 of the
Act, (“
BR Resolution”
),
and (ii) refusal to make a change to the Respondent’s
enterprise status to “in business rescue” once the
BR
Resolution was filed be declared invalid; (iii) that it be declared
that the Business Rescue proceedings of the Respondent became
effective from 28 July 2021; (iv) that it be directed that the Third
Party immediately change the Respondent’s enterprise
status to
“in business rescue”; (v) that the Applicant’s
application be dismissed with costs … “
[11]
On 2 August 2021 Lucinda Steenkamp, senior
legal adviser at the Commission recorded in correspondence to Mango’s
attorneys
that the Commission would not oppose being joined as a
third party and would abide the court’s decision. Subsequently,
Ms Steenkamp,
on behalf of the Commission, confirmed in writing
that if an order was made in favour of Mango, the Commission agreed
that the
five business day period contemplated in section 129(3) of
the Act would be extended to expire only five business days after a
final order, including one made in any appeal, was granted. That
concluded the Commission’s role in this dispute.
[12]
On 2 August 2021 Aergen Aircraft Four
Limited and Aergen Aircraft Five Limited (collectively,
Aergen
)
launched an application to postpone this application. They are
creditors of Mango and had, on 28 April 2021, launched an application
for its winding-up. That application was pending. Since Aergen were
affected persons they were entitled to participate in the
application. They sought a postponement until 17 August 2021 because
they required more time to properly assess whether the applicants’
proposed plan to rescue Mango had reasonable prospects of success.
[13]
Counsel appeared on behalf of Aergen when
the matter was called on 3 August 2021. He indicated that Aergen
persisted in its postponement
application. Counsel for the applicants
and Mango recorded that they would oppose the postponement
application. By the time the
matter was argued, Aergen had withdrawn
both the postponement and liquidation applications.
Chronology of
material events
[14]
On
16 April 2021 the board resolved that Mango voluntarily begin
business rescue proceedings as contemplated in section 129(1) of
the
Act. Mango contends that because its board was obliged to obtain the
approval of both the SAA board and the Minister, pursuant
to the
provisions of section 54(2) of the Public Finance Management Act (
the
PFMA
),
[2]
it did not file the resolution until such approval had been obtained.
I deal with section 54(2) of the PFMA later in this judgment
because
it has a material bearing on the final determination of these
proceedings and, in particular, whether Mango was entitled
to file
the resolution with the Commission more than three months after it
had been adopted.
[15]
On 19 April 2021 the board of SAA passed
two resolutions: (i) approving the Mango board resolution that it be
placed under business
rescue; and (ii) that the shareholder
(represented by the Minister) be informed of the decision and
urgently provide its concurrence.
It seems clear to me that the
boards of both SAA and Mango were cognisant of the fact that the
approval of the Minister was required
before Mango could be placed
under supervision. That is the only plausible explanation why the
resolution was not filed with the
Commission as soon as it was
adopted.
[16]
It is not in dispute that on 30 April 2021
the chairperson of the SAA board addressed a letter to the Minister,
the Director General
of the Department of Public Enterprises and the
Minister of Finance requesting formal approval to place Mango under
business rescue.
On 7 May 2021 the Minister responded that the
request was under consideration and that there were a number of
financial and legal
issues that needed to be finalized before a
decision could be made. On 7 June 2021 the Minister requested Mango
to urgently conduct
an assessment of its future sustainability and to
share same with him before 30 June 2021. On 22 July 2021, having
received a sustainability
assessment report from Mango, the Minister
addressed a letter to the chairperson of SAA (Mango’s sole
shareholder) advising
that he supports the board’s decision to
place Mango under business rescue.
[17]
On 28 July 2021 Mango attempted to file the
resolution and other documents, but the Commission’s platform
rejected same.
The proper
interpretation of section 129(2), (3) and (5) of the Act
[18]
The applicants, represented by
Mr
Hellens
, argue that the resolution was
a nullity and was of no force or effect, for two reasons:
[a]
First, that the resolution could not be
adopted because liquidation proceedings had been initiated by Aergen.
[b]
Second, the resolution was of no force or
effect, had lapsed and was a nullity because Mango had not filed same
within five days
of having adopted it.
[19]
In support of their first argument, the
applicants rely on section 129(2) which provides:
“
(2)
A resolution contemplated in subsection (1) –
(a)
may not be adopted if liquidation proceedings have been initiated by
or against the company; and
(b)
has no force or effect until it has been filed.”
[20]
The resolution was adopted on 16 April
2021. The liquidation proceedings were instituted by Aergen on 28
April 2021. A copy of Aergen’s
founding affidavit in the
liquidation proceedings, which was deposed to on 28 April 2021, was
attached its postponement application.
[21]
The
purpose of section 129(2)(a) is to prevent the board thwarting an
application to liquidate the company by adopting a business
rescue
resolution.
[3]
[22]
Neither counsel referred me to any
authority as to the meaning of
initiated
in the context of section 129(2)(a). I,
similarly, have been unable to locate direct authority on this point.
As to the ordinary
meaning of
initiated
,
the Oxford Dictionary definition is
to
cause a process or action to begin
.
[23]
The
decision in
A-Team
Trading
[4]
is
useful in determining this issue. In that matter Standard Bank
launched an application for the provisional liquidation of
A-Team
Trading
on the basis that it was unable to pay its debts. After the
application was launched, but before it was heard, an application was
launched in the Local Division in Durban for an order placing the
respondent under supervision and commencing business rescue
proceedings in terms of section 131 of the Act. The only issue which
was argued was whether it was competent to grant a provisional
liquidation order in light of the business rescue application. Ploos
Van Amstel J found that it was not, and made an order suspending
the
application for liquidation pursuant to the provisions of section
131(6) which provides:
“
(6)
If liquidation proceedings have already been
commenced
by or against the company at the time an application is made in terms
of subsection (1), the application will suspend those liquidation
proceedings until –
(a)
the Court has adjudicated upon the application; or
(b)
the business rescue proceedings end, if the Court makes the order
applied for.” (my emphasis)
[24]
During
the course of his reasoning, the learned judge referred to two
decisions in
Summer
Lodge
.
[5]
In the first
Summer
Lodge
decision, three applications for provisional liquidation orders were
pending. Before the hearing, applications were launched for
orders
placing the respondents under supervision and commencing business
rescue proceedings in terms of section 131 of the Act.
Van der Byl AJ
held that the business rescue applications did not suspend the
liquidation applications because, in his opinion,
liquidation
proceedings
commenced
by the granting of a provisional or final liquidation order. He
granted the provisional liquidation orders. On the return day of
the
provisional orders, the same issue was argued before Makgoba J. He
reached the same conclusion as Van der Byl AJ.
[25]
In
A-Team
Trading
, the learned judge disagreed
with the reasoning of both judges in
Summer
Lodge
on the grounds that they had
overlooked the fact that liquidation proceedings
commenced
by the launching of an application and not by an order of provisional
or final liquidation. I agree.
[26]
In
my view, reliance by the learned judges in
Summer
Lodge
and
Makuna
Farm
[6]
on section 348 of the 1973 Companies Act, is misplaced. Its purpose
is aimed at an attempt by a dishonest company, or directors,
or
creditors or others, to snatch some unfair advantage during the
period between the presentation of the application for liquidation
and the granting of that order by a court.
[7]
It retrospectively avoids transactions that may have been perfectly
legitimate at the time they were entered into.
[8]
In my opinion, reliance on the interpretation of section 348 is
singularly unhelpful in determining the proper interpretation of
commenced
in section 131(6) of the Act.
[27]
The provisions of section 131(6) would be
subverted if an application to court to place a company in business
rescue first had to
await a liquidation order before liquidation
proceedings could be suspended. During that period, a company which
is genuinely financially
distressed and has a reasonable prospect of
being rescued, would have to wait for months before its application
for business rescue
can be determined. That could not have been the
intention of the legislature.
[28]
In
my view,
A-Team
Trading
correctly distinguished the reasoning of Swain J in
Imperial
Crown Trading
.
[9]
In that case, whilst finding that it would be anomalous if what was
meant by liquidation proceedings being
initiated
by
or against the company for purposes of section 129(2)(a) differed
from what was meant by liquidation proceedings being
commenced
by or against the company for purposes of section 131(6), Swain J did
not conclude that liquidation proceedings being
commenced
meant that a liquidation order had been granted. In
Imperial
Crown Trading
the bank sought an order for provisional liquidation. At the hearing
before Swain J the respondent sought a postponement to enable
it to
investigate the advisability of launching an application for business
rescue. In granting the provisional order of liquidation
Swain J
pointed out that any affected person was at liberty to launch an
application to court under section 131(1) to have the
company placed
in business rescue.
Imperial
Crown Trading
is not authority for the proposition that
commenced
means that a liquidation order has been granted. In those
circumstances, the reliance on
Imperial
Crown Trading
by
the respective judges in
Summer
Lodge
,
was misplaced.
[29]
In my opinion,
initiated
,
begin
and
commenced
must
have the same meaning as applied in sections 129(2)(a), 129(6) and
131(6) of the Act, namely
that a
liquidation application has been issued by the registrar and, at the
very least, is pending.
[30]
Since the liquidation application launched
by Aergen was initiated twelve days after the Mango board resolution
had been adopted,
section 129(2)(a) is inapplicable and the
applicants’ first argument must fail.
[31]
The
applicants’ argument that even though the resolution may have
been adopted, it “
has
no force or effect until it has been filed
”
as contemplated in section 129(2)(b), has no merit. The Supreme Court
of Appeal has made it clear that once a resolution
is taken, it only
becomes effective when it is filed with the Commission.
[10]
All this means is that, whilst a resolution to commence business
rescue may have been adopted, the company cannot be regarded as
being
in business rescue until the resolution has been filed. To adopt the
applicants’ argument would negate the validity
of the
resolution adopted under section 129(1) and result in an absurd
outcome, thereby defeating the clear intention of the legislature.
[32]
The applicants’ second argument is
that the resolution lapsed and is a nullity because it was filed more
than five days after
it was adopted. In this regard it relies upon
sections 129(3) and (5)(a) of the Act. They provide:
“
(3)
Within five business days after a company has adopted and filed a
resolution, as contemplated in subsection
(1), or such longer time as
the Commission, on application by the company, may allow, the company
must –
(a)
publish a notice of the resolution, and its effective date, in the
prescribed manner to every affected
person, including with the notice
a sworn statement of the facts relevant to the grounds on which the
board resolution was founded;
and
(b)
appoint a business rescue practitioner who satisfies the requirements
of section 138, and who has consented
in writing to accept the
appointment.
…
(5)
If a company fails to comply with any provision of subsection (3) or
(4) –
(a)
its resolution to begin business rescue proceedings and place the
company under supervision lapses and
is a nullity; and …”
[33]
Whilst
in most cases, the resolution would be filed as expeditiously as
possible after its adoption, neither section 129(1) nor
(2) state
that the resolution must be filed within five business days of its
adoption. To do so, ignores the fact that state owned
entities, to
which the PFMA applies,
[11]
may not be able to promptly comply with section 129 to voluntarily
commence business rescue proceedings timeously. The reason is
obvious
– state owned entities must comply with additional requirements
in terms of the PFMA before filing an adopted resolution
with the
Commission. It is highly unlikely that the approval required could be
obtained within five business days of the adoption
of the resolution.
This is precisely what occurred in this instance.
[34]
In section 129(5) the failure to comply
with the provisions of subsections (3) or (4) must, properly
considered, refer to the procedural
requirements in subsection (3)(a)
or (b) or (4)(a) or (b). The five business day period recorded in
section 129(3) of the Act does
not govern the time between the
adoption and the filing of the resolution. It governs what must occur
within five business days
after
the filing of the resolution namely, the publication of the notice to
every affected person and the appointment of a business rescue
practitioner. The adoption and filing govern the date from which the
procedural requirements in 129(3)(a) and (b) must be satisfied.
This
conclusion is informed by the legislature’s use of the word
within
.
Since filing can only occur after a resolution has been adopted,
within five business days after
can only, sensibly, mean within five business days after a company
has filed a resolution.
[35]
My conclusion that the period of five
business days only commences once the resolution has been filed finds
additional support in
section 129(3) in the portion which reads “
…
or such longer time as the
Commission, on application by the company, may allow …
”
The only sensible interpretation of this portion of section 129(3) is
that the Commission may allow the extension of the
period for the
publication of the resolution or the appointment of a business rescue
practitioner. That, in turn, leads to the
ineluctable conclusion that
the period of five business days commences only when the resolution
is filed. There is no indication
in section 129 that the Commission
has the power to extend the time for the filing of a resolution.
[36]
There is a further reason why the period of
five business days commences to run only once the resolution is
filed. Section 129(2)(b)
provides that the resolution has no force or
effect until it has been filed. Allied to this, section 132(1)(a)(i)
provides that
business rescue proceedings begin when the company
files a resolution to place itself under supervision in terms of
section 129(3).
That is also the date when the general moratorium on
legal proceedings against a company commences as contemplated in
section 133(1).
The legislature saw fit to impose a strict time limit
within which a company must publish the notice of the resolution and
appoint
a business rescue practitioner once the resolution had been
filed. The reason for imposing such a time limit is manifest –
the legal status of the company is materially altered as soon as the
resolution is filed and the rights of all affected persons
will have
been significantly impacted by the company’s material change in
status.
[37]
In
my view, there is nothing in section 129 of the Act which could lead
to any other sensible interpretation.
[12]
[38]
The applicants argued that to adopt this
interpretation would allow companies to abuse the business rescue
procedure by adopting,
but not filing, a resolution. I disagree.
Whilst some companies may abuse the process, this factor should not
influence the proper
interpretation of section 129(3) of the Act. The
proper approach to interpreting a statute is set out in
Endumeni
.
Moreover, in those rare cases where a company does attempt to abuse
the process, an affected person has a remedy – it may
apply to
court for an order setting aside the resolution under section
130(1)(a) of the Act.
[39]
Whilst it is not strictly relevant to the
proper interpretation of section 129(3), I mention that the
Commission’s Form CoR
123.1, which is the statutory notice of
the beginning of business rescue proceedings, provides:
--
“
This notice must be published to
every affected person within 5 business days after –
(a)
It has been filed, in the case of a resolution; or
(b)
The date of the court order, in such a case.
--
If this Notice is issued following a board
resolution –
(a)
The company must appoint a business rescue practitioner within
5 business days after filing this
notice; and
(b)
Any affected person may apply to a court in terms of section 130 for
an order setting aside the resolution.”
[40]
It seems clear that the Commission, itself,
interpreted section 129(3) in the same manner that Mango did.
The impact of the
PMFA
[41]
Section 46 of the PMFA provides that the
provisions of Chapter 6 thereof apply to all public entities listed
in Schedule 2 or 3.
SAA is listed as a major public entity under
Schedule 2 which also provides that any subsidiary of a public
entity is, similarly,
a public entity. Mango, as a wholly owned
subsidiary of SAA, is therefore a public entity and subject to the
provisions of Chapter
6 of the PMFA.
[42]
Section 49(2) of the PMFA provides that a
public entity’s board constitutes its accounting authority. In
that capacity, the
board is bound by the fiduciary duties and general
responsibilities listed in sections 50 and 51.
[43]
Section 54 of the PMFA governs information
to be submitted by accounting authorities. More specifically, section
54(2)(e) provides:
“
(2)
Before a public entity concludes any of the following transactions,
the accounting authority for the public
entity must promptly and in
writing inform the relevant treasury of the transaction and submit
relevant particulars of the transaction
to its executive authority
for approval of the transaction:
…
(e)
commencement or cessation of a significant business activity;
[44]
It is not in dispute between the applicants
and Mango that, being placed under supervision and commencing
business rescue proceedings,
constitutes commencement or cessation of
a significant business activity.
[45]
It is common cause that Mango’s
executive authority was the Minister and that the relevant treasury,
applicable to Mango,
was the National Treasury.
[46]
On the face of it, Mango satisfied the
provisions of section 54(2). It obtained the approval of the SAA
board and the Minister,
and informed the Minister of Finance. The
applicants contend that subsequent approval by the Minister and/or
the board of SAA is
legally irrelevant because the Minister could not
ratify the resolution that had already been adopted.
Mr
Hellens
argued that Mango ought to have
sent a draft resolution to the Minister for approval and, once that
approval had been obtained,
the board could then adopt the resolution
under section 129(1).
[47]
As
authority for this proposition, the applicants relied upon
Swifambo
.
[13]
There, the applicant (
PRASA
)
had applied for the review and setting aside of its own decisions
awarding, and subsequently entering into, a contract with Swifambo
for the supply of locomotives. It was common cause that PRASA was a
public entity and that its board was required to obtain prior
approval of the Minister of Transport for the acquisition of a
significant asset or a large capital investment. During the course
of
his judgment, Francis J commented that there was no evidence before
him that any approval had been obtained under section 54(2).
[14]
[48]
In my opinion, the decision in
Swifambo
is distinguishable for two reasons:
[a]
First, since PRASA failed to obtain the
approval of the Minister of Transport, the question of ratification
by that Minister did
not arise. That was not the
ratio
of the judgment.
[b]
Second, in
Swifambo
,
the tender was awarded and partly implemented. There is little doubt
that, in those circumstances, the transaction had been
concluded
without approval as contemplated in section 54(2).
[49]
That is not the position in the present
matter. Here, the resolution was adopted but not
concluded
.
This finding is inescapable if one has regard to the provisions of
the Act to which I have already alluded. Section 129(2)(b)
expressly
states that a resolution contemplated in subsection (1) has no force
or effect until has been filed. Accordingly, Mango
did not go into
business rescue simply because it adopted the resolution. Its board
and that of SAA were alert to the requirements
of section 54(2). That
is why the resolution was not filed with the Commission after it had
been adopted. Rather, the SAA board
immediately approached the
Minister for approval of the transaction. Section 132(1)(a)(i)
provides that business rescue proceedings
begin when the company
files a resolution to place itself under supervision in terms of
section 129(3). That is the moment when
the transaction is concluded.
[50]
To be clear, Mango did not suggest that the
Minister ratified the conclusion of the transaction and, for the
reasons already stated,
there is no basis to find that he did.
[51]
I cannot agree with the applicants’
submission that Mango ought to have obtained the Minister’s
approval before it adopted
the resolution. In the peculiar
circumstances of this dispute, and for the reasons set out above,
that was unnecessary.
[52]
Having said that, this portion of my
judgment must not be understood to mean that boards of public
entities may conclude transactions
without prior approval of the
relevant executive authority. In most instances (unlike the present),
prior approval will be required
before a transaction is concluded.
The decision in
Swifambo
constitutes a perfect example.
[53]
In the circumstances, the applicants’
argument on this ground must fail.
The competence of
the applicants’ application
[54]
On 15 July 2021 the first applicant
addressed a letter to the Minister, SAA, Mango and others. Amongst
other issues raised in the
letter, the first applicant highlighted
the pending liquidation proceedings which had been instituted by
Aergen. It stressed that
the option of business rescue had become
urgent and that it was incumbent upon either the first applicant, the
board of Mango or
the Minister to launch a counter application for
business rescue. The first applicant concluded that if it did not
receive confirmation
on 16 July 2021 that the Mango board intended
launching a counter application for business rescue on an urgent
basis, it would
have no choice but to intervene in the liquidation
application and apply for business rescue.
[55]
On 16 July 2021 the acting CEO of Mango
addressed a letter to each of the applicants advising that the Mango
board had taken a resolution
on 16 April 2021 to put Mango into
business rescue and that, amongst other things, the board was
awaiting the Minster’s approval.
It is clear that the
applicants were aware on 16 July 2021 that the resolution had been
adopted.
[56]
On 22 July 2021 the Minister approved that
transaction and, on 26 July 2021, the applicants launched their
application.
[57]
Mango contends that the applicants’
application is legally incompetent having regard to the express
provisions of section
131(1) of the Act which provides:
“
131(1)
Unless a company has adopted a resolution contemplated in section
129, an
affected person may apply to a court at any time for an order
placing the company under supervision and commencing business rescue
proceedings.”
[58]
This means that, if a company has adopted a
resolution contemplated in section 129, an affected person may not
apply for an order
placing the company under supervision. Having
regard to the chronology sketched above, that is precisely what
occurred here. The
applicants had knowledge of the resolution which
had been adopted by the Mango board ten days before it launched its
urgent application.
It was precluded by the provisions of section
131(1) from doing so. Its application is legally incompetent. Its
remedy, as correctly
pointed out by
Mr
Subel
was to have applied to court to
set aside the resolution (if it believed it had grounds to do so)
under section 130(1) of the Act.
[59]
The applicants could not simply conclude,
as they apparently did, that the resolution was of no force or
effect, or had lapsed.
They required a court order. This much is
clear from section 130(1)(a) which provides:
“
(1)
Subject to subsection (2), at any time after the adoption of a
resolution in terms of section 129, until the
adoption of a business
rescue plan in terms of section 152, an affected person may apply to
a court for an order –
(a)
setting aside the resolution, on the grounds that:
(i)
there is no reasonable basis for believing that the company is
financially distressed;
(ii)
there is no reasonable prospect for rescuing the company; or
(iii)
the company has failed to satisfy the procedural requirements set out
in section 129;”
[60]
Since the applicants contend that there is
a reasonable basis for believing that Mango is financially distressed
and that there
is a reasonable prospect for rescuing the company, its
only recourse was to apply to set aside the resolution on the grounds
that
Mango had failed to satisfy the procedural requirements set out
in section 129. Until such an order was granted, the resolution
remained valid and binding.
[61]
In the circumstances, the applicants’
application must be dismissed.
[62]
In the exercise of my discretion, I deem it
appropriate that the applicants and Mango should bear their own
costs. This was a matter
of significant public importance and, in my
view, even though the applicants were unsuccessful, they should not
be mulcted in further
costs.
I make the following
order:
1.
The applicants’ application is
dismissed.
2.
It is declared that the third party’s
refusal to (i) process the respondent’s board resolution
adopted on 16 April 2021
under section 129 of the Companies Act, 71
of 2008 (
BR Resolution
),
and (ii) make a change to the respondent’s enterprise status to
“
in business rescue”
once the BR Resolution was filed, is declared invalid.
3.
It is declared that business rescue
proceedings of the respondent became effective from 28 July 2021.
4.
The third party is directed to immediately
change the respondent’s enterprise status to “
in
business rescue”.
5.
As agreed by the third party, the five day
period contemplated in
section 129(3)
of the
Companies Act, 71 of
2008
is extended to expire five business days from this order or the
finalization of any appeal.
6.
All parties are to pay their own costs.
_____________________________
M
M ANTONIE
Acting
judge of the High Court
Gauteng
Local Division, Johannesburg
Date
of Hearing:
6 August 2021
Date
of Judgment:
7 September 2021
For
the Applicants:
Adv M R Hellens SC
Instructed
by:
Stein Scop Attorneys Inc
For
the Respondent:
Adv A
Subel SC
Instructed
by:
Werksmans Attorneys
Delivered:
This judgment was handed
down electronically by circulation to the parties’ legal
representatives by email. The date for the
hand down is deemed to be
7 September 2021.
[1]
71
of 2008
[2]
1
of 1999
[3]
Sulzer
Pumps (South Africa) (Pty) Ltd v O&M Engineering CC
[2015] JOL 32825
(GP), para 29
[4]
Standard
Bank of South Africa Limited v A-Team Trading CC
2016 (1) SA 503 (KZP)
[5]
Absa
Bank Ltd v Summer Lodge (Pty) Ltd
2014 (3) SA 90
(GP) for the provisional winding-up orders and
2013
(5) SA 444
(GNP) for the final orders.
[6]
Absa
Bank Ltd v Makuna Farm CC
2014 (3) SA 86 (GJ)
[7]
Vermeulen
& Another v CC Bauermeister Edms Bpk & Others
1982 (4) SA 159
(TPD) at 161F - G
[8]
Development
Bank of Southern Africa Limited v Van Rensburg & Others NNO
2002 (5) SA 425
(SCA), para 8
[9]
FirstRand
Bank Ltd v Imperial Crown Trading 143 (Pty) Ltd
2012 (4) SA 266 (KZD)
[10]
Panamo
Properties (Pty) Ltd & Another v Nell & Others NNO
2015 (5) SA 63
(SCA), para 9
[11]
Section
5(4)(b)(ee) of the Act provides that if the
Companies Act and
the
PFMA cannot be applied concurrently, the PFMA shall take precedence.
[12]
See
the principles enunciated by Wallace JA
Natal
Joint Municipal Pension Fund v Endumeni Municipality
2012
(4) SA 593
, para 18 where the judge emphasized that a sensible
meaning is to be preferred to one that leads to insensible or
unbusinesslike
results or undermines the apparent purpose of the
document (statute). In
Panomo
Properties
(paragraph 27), Wallace JA emphasized this point and stated that
such an approach would avoid anomalies in interpreting a statute.
[13]
Passenger
Rail Agency of South Africa v Swifambo Rail Agency (Pty) Ltd
2017 (6) SA 223 (GJ)
[14]
para
70