IN THE HIGH COURT OF SOUTH AFRICA
KWAZULU-NATAL DIVISION, PIETERMARITZBURG
In the matter between:
JBSA PROPS (PTY) LTD
WILMEG INVESTMENTS (PTY) LTD
and
THE COMMISSIONER FOR THE SOUTH AFRICAN
REVENUE SERVICES
NEDBANK LIMITED
INVESTEC BANK LIMITED
KURT ROBERT KNOOP N.O.
JOHAN LOUIS KLOPPER N.O.
JUDGMENT
Olsen J: CASE NO.: 5009/2023P
Reportable.
First Applicant
Second Applicant
First Respondent
Second Respondent
Third Respondent
Fourth Respondent
Fifth Respondent
[1] The first applicant , JBSA Props (Pty) Limited, is the sole shareholder of the
second applicant, Wilmeg Investments (Pty) Limited. The first applicant bought the
second applicant out of business rescue for a sum of about R600 million.
[2] The second applicant went into business rescue on 26th May, 2020. The
appointed business rescue practitioners (the fourth and fifth respondents in these
proceedings, who have taken no part in them) delivered a business rescue plan to
creditors on 14th December 2020, and a meeting was held to consider the plan on 23rd
Page 1 of 12
December 2020. The South African Revenue Services ("SARS"), the first respondent
in these proceedings, was at all material times a creditor of the second applicant in
respect of value added tax ("VAT"). SARS did not attend the meeting on 23rd
December 2020, and did not appoint a proxy to vote in favour of or against the approval
of the plan.
[3] The plan proposed two options, the first of which involved the purchase of the
shares in the second applicant by the first applicant. It received the overwhelming
support of the creditors who did vote.
[4] The business plan provided for conditions which had to be fulfilled before the
plan could be regarded as having been implemented, as a result of which the business
rescue of the second applicant only terminated on 13th Decembe r 2021. The second
applicant continued to conduct its business (principally the letting of immovable
property) throughout the period during which it was in business rescue. It was (and
remains) a VAT vendor. It rendered its VAT returns through the period of business
rescue. Almost all of its self-assessments for VAT reflected an obligation on its part to
pay SARS. However no payments were made, whether before or after the approval of
the business plan. The second applicant only resumed payment of the amounts of
VAT declared by it when its business rescue ended.
[5] The correspondence which has been put up with the papers reveals that after
the second applicant emerged from business rescue a dispute arose between the
second applicant and SARS over whether the former was obliged to pay the VAT
which had been generated as a result of trading during business rescue. (The
applicants ' founding papers suggest that the dispute extended to the question as to
whether the VAT debt owing at the commencement of business rescue was payable.
It is not clear to me that SARS ever contended that it was; but the issue can be ignored
as SARS has not pursued that contention in these proceedings.) The second applicant
contended that the effect of the business plan was that, save for an inconsequential
dividend, the claims of SARS for post-commencement VAT incurred up to 13th
December 2021 had been extinguished. SARS rejected that contention.
[6] In March 2023 SARS issued notices directed at each of Nedbank Limited and
Investec Bank Limited (the third and fourth respondents in these proceedings, who
Page 2 of 12
have taken no part in them) appointing them as agents in terms of section 179 of the
Tax Administration Act, 28 of 2011. As a result some R286 000 was extracted from
the second applicant's Nedbank account and paid to SARS, and R5000 was extracted
from the second applicant's Investec account and paid to SARS. That led to the launch
of the present application .
[7] The applicant seeks an order that, pending the final determination of
proceedings to be brought by SARS to set aside the second applicant's business
rescue plan, or pending the final determination of proceedings to be brought by the
first and second applicants seeking a declaratory order enforcing the business plan as
the applicants interpret it, SARS is interdicted from pursuing the VAT debt it claims
from the second applicant and from making any agency appointments entitling it to be
paid monies lodged in the second applicant's accounts with the second and third
respondents.
[8] SARS has made it clear that it has no intention of seeking an order setting aside
the approval of the business plan. In the circumstances the central issue in this case
is whether the applicants have established prima facie that the second applicant's
obligations to pay VAT generated by its trading during the course of business rescue
were compromised in terms of the approved business plan. Mr Bhana SC, who
appeared for the applicants , has argued that the low-level test for interim relief (a prima
facie case open to some doubt) applies. His submission is theoretically correct. But
where the facts relied upon by an applicant for interim relief are undisputed , and the
issue between the parties turns on the question as to whether, as a matter of law,
those undisputed facts generate or support the rights contended for by an applicant,
the benefit to an applicant of the low-level test may be more illusory than real. Upon
the assumption that the other requirements for an interim interdict are satisfied, where
the legal consequences of the admitted facts have been dealt with in argument, a court
asked to grant an interim interdict must grant the relief if it decides that the law supports
a conclusion that the right sought to be protected is established ; but, in my view, refuse
it if it decides that the law does not recognise the right asserted by the applicant. The
issue of what is to be done when pressing urgency, and a lack of time for full argument
on the law, is an obstacle to an immediate decision on the case does not arise here.
(See the discussion in Zulu v Minister of Defence and others 2005 (6) SA 446 (T) at
Page 3 of 12
paras 37 to 42.) SARS provided an interim undertaking, and the case proceeded at a
normal pace. The issues were fully argued.
[9] The provisions of the business plan which had a bearing on the position of
SARS were sparse indeed. They may be summarised as follows.
a) Paragraph 14.3 provided as follows.
"The sale of shares proposed herein contemplates a full extinction of all creditor
claims by payment and/or compromise against final adoption of this plan".
b) The situation post-commencement of the business rescue was dealt with in
paragraph 17 of the plan. Paragraph 17.4 recorded that the practitioners had
continued trading the business as a going concern and without interruption.
Paragraph 17.5 read as follows.
"All current expenses (save for the South African Revenue Service VAT liabi!ity)
have been paid for in the normal course of business."
c) It was apparent from various provisions of the plan that the fulfilment of a
number of conditions would delay the company's exit from business rescue.
d) Paragraph 15 recorded that the sale of shares option would result in the
outcome tabulated in paragraph 5.6.
e) Paragraph 5.6 recorded that the proposals would result in the payment of
dividends (expressed in cents in the Rand) reflected in the table incorporated
in the paragraph. The third row in the table is headed "PCF creditors ". It records
in the column dealing with the sale of shares option that SARS would receive
0.0265 cents in the rand.
f) Paragraph 5.7 reads as follows.
"Should the creditors vote for approval of this plan as envisaged bys 153 (2) of
the Act then the company will continue to trade and discharge the appropriate
dividend to the aforementioned creditors against the effective date."
[1 0] There is no evidence of any prior consultation by the applicants or the business
rescue practitioners with SARS on the subjects of the business rescue plan or the Vat
which had been, and would continue to be incurred during business rescue. The plan
was sent to creditors by email on 14th December 2020 and the meeting was held
remotely on 23rd December 2020.
Page 4 of 12
[11] The post-commencement VAT debt in issue in these proceedings amounts to
about R24 million. About R9 million was incurred between the commencement of
business rescue and the approval of the plan on 23rd December 2020. A further R15
million was incurred between the date of approval of the plan and the second
applicant's exit from business rescue on 13th December 2021.
[12] The case SARS was called upon to meet in the founding papers is that SARS
is precluded from claiming anything beyond the tendered dividend (which it rejected)
"by virtue of section 152(4) of the Companies Act 71 of 2008 read with section 154". (I
quote from the founding affidavit of Mr Alexander, the sole director of each applicant.)
Mr McCabe, the general manager of the second applicant, points out that the first
respondent did not react to any of the emails concerning the proposed plan sent to it
(as they were to all creditors) in advance of the meeting, and chose not to attend. He
says: "SARS by this conduct signified its consent to the business plan which was
implemented ".
[13] In his supplementary answering affidavit Mr Makhathini , who is employed by
SARS as an Operational Specialist: Business Rescue, answered these allegations by
pointing out that the amount now claimed against the second applicant did not include
monies owing before business rescue commenced, and denied that SARS
"acquiesced to the discharge , either in whole or in part, of the debt owing to it by the
applicant. "
[14] The issue to be decided in this case is accordingly confined. The cornerstone
of the applicant's argument is section 152(4) of the Companies Act, 2008 which reads
as follows.
"A business rescue plan that has been adopted is binding on the company, and
on each of the creditors of the company and every holder of the company's
securities, whether or not such a person-
(a) was present at the meeting;
(b) voted in favour of adoption of the plan; or
(c) in the case of creditors, had proven their claims against the company. "
Page 5 of 12
[15] Section 154 of the Companies Act, which must be read with s152(4), provides
as follows under the heading "Discharge of Debts and Claims".
"(1) A business rescue plan may provide that, if it is implemented in accordance with its
terms and conditions , a creditor who has acceded to the discharge of the whole or part
of a debt owing to that creditor will lose the right to enforce the relevant debt or part of
it.
(2) If a business rescue plan has been approved and implemented in accordance with this
Chapter, a creditor is not entitled to enforce any debt owed by the company
immediately before the beginning of the business rescue process, except to the extent
provided for in the business rescue plan."
[16] The facts of this case highlight a crucial difference between ss 154(1) and (2)
of the Companies Act. Subsection (1) speaks to any debt owing to a creditor.
Subsection (2) deals only with debts owed before the commencement of the business
rescue process.
[17] Both ss 154 (1) and (2) deal with the loss of a right to enforce a debt. The
automatic loss of the right dealt with in ss (2) is confined to pre-commencement debts.
Approval of the plan brings about that all pre-commencement creditors lose the right
to enforce their pre-commencement claims "except to the extent provided for in the
business rescue plan". A creditor does not have to accede or agree to that outcome.
It is imposed on a creditor even in the face of objection. Section 152(4) is to that effect.
[18] Section 154(1) operates quite differently. It applies to a specific creditor who
has acceded to the discharge of the whole or part of a debt owed to the creditor by the
company. The scope of its operation is not confined to pre-commencement debts.
Accordingly , if a creditor accedes to the discharge of the whole or part of a post
commencement debt the business rescue plan may provide that, if it is duly
implemented , the creditor will lose the right to enforce that debt or the relevant part of
it. The inevitable conclusion must be that a business rescue plan may not provide that
a creditor loses the right to enforce in whole or in part a post-commencement debt if
the creditor has not acceded to the discharge of that debt in whole or in part.
Page 6 of 12
[19) The applicants argue against this analysis of s 154, relying essentially on the
judgment in Tuning Fork (Ply) Limited tla Balanced Audio vs Greeff and another2014
(4) SA 521 (WCC) at paragraph 77.
"[77] Section 154(1) provides that a plan may stipulate that, if it is implemented in
accordance with its terms and conditions, "a creditor who has acceded to the discharge
of the whole or part of the debt owing to that creditor will lose the right to enforce the
relevant debt or part of it". Section 154(2) provides that if a plan has been approved
and implemented , "a creditor is not entitled to enforce any debt owed by the company
immediately before the beginning of the business rescue process, except to the extent
provided for in the business rescue plan". The two subsections appear to me to some
extent to overlap. Both of them, in turn, might be considered unnecessary in the light
of section 152(4), which states that a duly adopted plan is binding on the company and
on all of its creditors, whether or not the creditor was present at the meeting, voted for
or against the plan or proved a claim. The use of the word "acceded" in section 154(1)
also strikes me as inapt, because the lawmaker could surely not have intended that
the discharge contemplated in that subsection would depend on whether or not the
creditor had agreed to the term in question; that individual agreement is not necessary
appears from section 152(4)."
[20] However , in Van Zyl vs Auto Commodities (Pty) Limited 2021 (5) SA 171 (SCA)
the Supreme Court of Appeal reconsidered the analysis of s 154 of the Companies
Act in a judgment co-written by the learned Judge who penned the judgment in Tuning
Fork. The enquiry in Van Zyl concerned the liability of a surety for a compromised debt.
Nevertheless the analysis, especially of section 154(1 ), is significant in the present
context. I quote from paragraphs 22 and 24 of the judgment.
"[22] The subsection commences by saying that a business rescue plan 'may
provide' that, if it is implemented in accordance with its terms, a creditor who
has 'acceded' to the discharge of the whole, or part, of a debt owing to it will
lose the right to enforce the relevant debt. The permissive language, and the
fact that it is concerned with the terms that may be included in a business
rescue plan, is consistent with it being in the first instance an empowering
provision enabling the business rescue plan to contain a provision that operates
to discharge the company's indebtedness to particular creditors .... "
Page 7 of 12
"[24] It is unclear what is required for a creditor to 'accede' to the discharge of the
debt. Does it mean that they must have agreed to it? If so, is the agreement
constituted by voting in support of the plan, or merely by accepting the benefits
under the plan, or in some other way? The answers to these questions are by
no means clear-cut. The most obvious way for a creditor to 'accede' to the
discharge of a part or all of the company's indebtedness would be by voting in
favour of a business rescue plan providing for such discharge . We need not
explore whether there are other ways in which such accession may take place.
We are inclined to agree with Gorven J in DH Brothers [DH Brothers Industries
(Pty) Limited vs Gribnitz N.O. and Others 2014 (1) SA 103 (KZP)] that the
section contemplates a discharge brought about by the voluntary action of the
creditor, or consented to by way of an overt act, rather than a compulsory
deprivation of rights against the company. That approach would be consistent
with the principle that language is not ordinarily to be construed as depriving
people of their existing rights. It would also be consistent with the constitutional
protection against the deprivation of property."
[20] In my view the position is as follows.
(a) Section 152(4) deals generally with the provisions of a business plan. It
renders all the provisions of an approved business plan binding on all creditors
and all holders of the company's securities , irrespective of whether any of those·
persons do not support the plan. The section deals only with the enforceability
of an approved plan. It says nothing about the content of a plan.
(b) The subject of that section must be the enforcement of business plans
which have been drawn up in accordance with law, which do not contain
unlawful provisions, and which do not infringe the constitutional rights of any
affected person save to the extent that such a course is sanctioned by law.
(c) Section 154 of the Companies Act serves a different purpose. It
addresses the permissible content of a plan on the crucial issue of debt
enforcement.
(d) Section 154(2) allows a plan to provide for the deprivation of a creditor's
right to enforce its claim (in full or in part) against a company. But the deprivation
Page 8 of 12
of a creditor's right to enforce a debt through the compulsion exerted by a vote
in favour of a plan is expressly confined to pre-commencement debts.
(e) Otherwise the loss of a right to enforce a debt can only be included in a
business plan if the affected creditor accedes to such a measure. Section
154(1) is to that effect.
(f) Such provisions, which regulate what may lawfully be made part of a
business plan, do not contradict the general provision of section 152(4 ), that an
adopted business plan is binding.
(g) In the result, a proposed business plan which depends for its viability on
a compromise of post-commencement debts is futile unless all the affected
post-commencement creditors accede to the compromise required of them
under the plan.
[21) I am in respectful agreement with the proposition that at least some overt act
must be performed by the creditor in order to convey that it accedes to the discharge
of a post-commencement debt owed to it. There is no evidence of any such act, or of
any verbal expression of agreement , on the part of SARS.
[22] It will be recalled that it is the applicants case that the failure of SARS to attend
the meeting of creditors signified its acceptance of the business plan. That is a claim
of acquiescence . What section 154(1) requires is that the creditor should have
acceded to the discharge of the debt; not that it should have acquiesced in the
discharge of the debt. The term 'acquiesce ' is used more often than not to signify a
tacit acceptance . Be that as it may, in my view there is no room for a contention that
there was acquiescence in this case. At the time that the business plan was sent to
creditors, some nine days before the meeting, SARS had not received a request that
it should compromise its post-commencement claims. The absence of SARS from the
meeting was equally consistent with, for instance, its officers taking the view that what
was proposed with regard to its post-commencement claim was unenforceab le in law,
as a result of which it was not necessary to vote against the plan.
[23] Furthermore , SARS had played no part in the formulation of the plan. It had not
created a situation which rendered it duty-bound to register its dissent. The situation
was of the making of the business rescue practitioners and, presumably , the first
Page 9 of 12
applicant in its capacity as offerer for the shares. The principle is as stated in Collen v
Rietfontein Engineering Works 1948 (1) SA 413 (A) at 422.
"Quiescence is not necessar ily acquiescence and one party cannot, without the assent
of the other, impose upon such other a condition to that effect."
Neither does s 154(1) of the Act create an obligation to express dissent. It does not
provide that a creditor who fails to object shall be taken to have acquiesced in the
discharge of its claim.
[24] The above considerations aside, SARS is a special case. It is common cause
that at the time that the business plan was to be voted upon the second applicant owed
a post-commencement VAT debt to SARS. Section 154(1) required SARS to accede
to the compromise of that debt if it was to be rendered unenforceable and discharged
in terms of the business plan. Part D of chapter 14 of the Tax Administration Act lays
down the circumstances in which a senior SARS official may authorise the
compromise of a portion of a tax debt. The process is dealt with in sections 200 to 203
of the Tax Administration Act, and section 204 then provides that to compromise a tax
debt a written agreement must be signed by a senior SARS official and the taxpayer.
There is no evidence at all that any of this was done. What these provisions illustrate
is that there is no room for a contention that SARS tacitly acceded to the compromise
of the post-commencement tax debt which had accrued up to the date of the meeting
at which the business plan was approved.
[25] The situation with regard to the sum of R15 million which accrued thereafter up
to the date of termination of the business rescue process is more than a little different.
At the time the compromise was allegedly reached between the second applicant and
SARS (i.e. upon approval of the business plan) there was no post-compromise tax
debt. In reality what the applicants contend for is an agreement in terms of which the
second applicant could continue to collect VAT from its debtors as though it was legally
obliged to do so under the Value Added Tax Act, but keep 99.97 % of that money for
itself, instead of accounting to SARS for it. I was not referred to a provision of any law
which would permit that to be done by SARS. That is unsurprising for more than one
reason, amongst which is the fact that every tax invoice issued under such an
arrangement would be a false tax invoice.
Page 10 of 12
[26) There are perhaps other routes to the conclusion to which I have come, but
they have not been raised by SARS.
[27] For the reasons stated above I make the following findings.
(a) There could in law be no compromise of the claim against the second
applicant for post-commenceme nt VAT unless SARS acceded to that
compromise.
(b) On the evidence placed before me, which is undisputed save for the
inferences sought to be drawn from it, SARS did not accede to that
compromise.
(c) The applicants have accordingly failed to establish the prima facie case they
require in <?rder to justify the relief they seek.
[28] I make the following order.
1. The application is dismissed.
2. The costs of the application shall be paid by the applicants, their
liability being joint and several. Scale C shall apply to the taxation of
counsel's fees.
Olsen J
Page 11 of 12
Case Information:
Date of Hearing:
Date of Judgment:
Counsel for the 1st & 2nd Applicant:
Instructed by:
Counsel for the 1st Respondent:
Instructed by: 18 October 2024
1 0 January 2025
R Shana SC with B Casey
Messrs Asif Latib Attorneys Incorporated
319 Lilian Ngoyi Road
Morningside
Durban
Email: asif@asiflatiblaw .co.za
Ref: Mr Latib/KS
c/o Ayoob Attorneys
email: ayoobattorneys@gmai l.com
I L Topping SC
Linda Mazibuko & Associates
Email: linda@ginet.co.za
c/o Sangham Inc
Email: sumira@sanqhaminc.co.za
Page 12 of 12