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[2020] ZASCA 162
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Tayob and Another v Shiva Uranium (Pty) Ltd and Others (336/2019) [2020] ZASCA 162 (8 December 2020)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case no: 336/2019
In
the matter between:
MAHOMED
MAHIER
TAYOB
FIRST APPLICANT
EUGENE
JANUARIE
SECOND APPLICANT
and
SHIVA
URANIUM (PTY) LIMITED
FIRST RESPONDENT
(IN
BUSINESS RESCUE)
CHRISTOPHER
KGASHANE MONYELA
SECOND RESPONDENT
JUANITO
MARTIN
DAMONS
THIRD RESPONDENT
Neutral
citation:
Tayob and Another v Shiva
Uranium (Pty) Ltd and Others
(Case no
336/2019)
[2020] ZASCA 162
(8 December 2020)
Coram:
CACHALIA, SALDULKER, VAN DER MERWE and SCHIPPERS
JJA and POYO-DLWATI AJA
Heard
:
18 November 2020
Delivered
:
This judgment was handed down electronically by circulation to the
parties’ legal representatives by email. It has been
published
on the Supreme Court of Appeal website and released to SAFLII. The
date and time for hand-down is deemed to be 14h00
on 8 December 2020.
Summary:
Company law – business rescue
supervision under
Companies Act 71 of 2008
– business rescue
practitioner appointed by board of company in terms of
s 129(3)
(b)
– resignation of practitioner – board’s power to
appoint substitute under
s 139(3)
not subject to authority or
approval of practitioner.
ORDER
On
appeal from:
Gauteng Division of the
High Court, Pretoria (Mosopa AJ sitting as court of first instance):
1 The applications for
condonation are granted and the applicants are directed to pay the
costs thereof on an unopposed basis.
2 The application for leave to
appeal is granted and the costs thereof are costs in the appeal.
3 The appeal is upheld.
4 The order of the court a quo
is set aside and replaced with the following:
‘
(a) It
is declared that the applicants were validly appointed as business
rescue practitioners of the first respondent.
(b) The second and third
respondents are jointly and severally directed to pay the costs of
the application.’
5 The second and third
respondents are jointly and severally directed to pay the costs of
the appeal.
JUDGMENT
Van der Merwe JA (Cachalia,
Saldulker and Schippers JJA and Poyo-Dlwati AJA concurring)
[1]
The principal issue in this matter is whether the board of directors
of the first respondent, Shiva Uranium (Pty) Ltd (in business
rescue)
(Shiva), validly appointed the first applicant, Mr Mahomed Mahier
Tayob, and the second applicant, Mr Eugene Januarie,
as business
rescue practitioners (practitioners). The Gauteng High Court,
Pretoria (the high court) held that it had not and refused
leave to
appeal to this court. The applicants’ application for
condonation for their delay and for leave to appeal was referred
for
oral argument in terms of
s 17(2)
(d)
of the
Superior Courts Act 10 of 2013
. The parties were also directed
to be prepared to address this court on the merits of the appeal.
They were called upon to do so
at the hearing before us.
[2]
The material facts of the matter are the following. On 20 February
2018, the board of directors of Shiva (the board) resolved
in terms
of s 129(1) of the Companies Act 71 of 2008 (the Act) to place Shiva
under business rescue supervision. Shiva is a ‘large
company’
as defined in reg 127 of the Companies Regulations, 2011
[1]
as amended (the regulations). In terms of reg 127, only a ‘senior
practitioner’
[2]
may be appointed as the practitioner for a large company. The board
simultaneously appointed Mr Louis Klopper and Mr Kurt Knoop
as the
practitioners for Shiva. Both qualified as senior practitioners.
[3]
On 23 March 2018, however, the Industrial Development Corporation of
South Africa Limited (IDC), a creditor of Shiva, launched
an
application in the high court for the removal of Messrs Klopper and
Knoop and for the appointment of Mr Cloete Murray in their
stead. The
application came before Ranchod J, who made an order on 31 May 2018.
The order recorded that Messrs Klopper and Knoop
had resigned as the
practitioners of Shiva on the same date. The court appointed Mr
Murray as the substitute senior practitioner.
It also directed the
Companies and Intellectual Property Commission (the Commission) to,
within 48 hours, appoint an additional
practitioner, subject thereto
that the appointment was acceptable to the IDC. Pursuant hereto, the
Commission appointed the second
respondent, Mr Christopher Kgashane
Monyela, on 1 June 2018. In terms of reg 127, Mr Monyela was a
‘junior practitioner’
[3]
and could only act for a large company as an assistant to a senior
practitioner.
[4]
On 18 September 2018, Messrs Murray and Monyela resolved, apparently
in anticipation of the resignation of Mr Murray, to appoint
the third
respondent, Mr Juanito Martin Damons, as his substitute. Mr Murray
resigned the following day. In terms of a resolution
passed on 22
September 2018, however, the board appointed the applicants as
practitioners for Shiva together with Mr Monyela.
[4]
[5]
In terms of s 129(4)
(a)
of the Act, notice of the appointment of a practitioner by a company
has to be given by filing a prescribed form with the Commission.
[5]
As a result of the foregoing, a prescribed form in terms of
which Messrs Murray and Monyela gave notice of the appointment
of Mr
Damons, was presented to the Commission for filing. A director of
Shiva, in turn, submitted the prescribed notification of
the
appointment of the applicants. The Commission, in essence, accepted
the notification of the appointment of the applicants and
refused to
accept the notification in respect of Mr Damons.
[6]
This caused Mr Monyela, purportedly also acting for Shiva, to
urgently approach the Companies Tribunal
[6]
to overturn the decisions of the Commission. On 27 November 2018
it directed the Commission to accept the filing of the notification
in respect of Mr Damons and, in effect, to remove the notification in
respect of the applicants from its register. The applicants,
in turn,
approached the court a quo on an urgent basis for an order
interdicting the Commission from ‘implementing, enforcing
and/or adhering to’ the aforesaid order of the Companies
Tribunal, pending the determination of an application, to be
instituted
within ten days of the order, for the following relief:
‘
2.1
The Companies Tribunal of the Republic of South Africa’s
decision dated 27 November 2018 is reviewed and set aside; and
2.2
A declaratory order in terms of
Section 21(1)(c)
of the
Superior
Courts’ Act, 10 of 2013
declaring the applicants and the second
respondent the duly and lawfully appointed business rescue
practitioners of the first respondent.’
[7]
The applicants cited several respondents in the application,
including Shiva, Mr Monyela, Mr Damons, the Commission and the
Companies Tribunal. Mr Monyela and Mr Damons opposed the application
and purported to do so also on behalf of Shiva. For reasons
that
shall become apparent, I hereafter refer to Mr Monyela and Mr Damons
collectively as the respondents. As I have indicated,
the court a quo
(Mosopa AJ) dismissed the application with costs.
[8]
It was rightly common cause that the court a quo erred in refusing
leave to appeal on the ground that its order was not appealable.
It
is trite that an order refusing (as opposed to granting) an interim
interdict is generally appealable. The respondents accepted
that the
delay in launching the application for leave to appeal had been
satisfactorily explained. It follows that the merits of
the proposed
appeal would be determinative of the application for leave to appeal.
[9]
It is unnecessary to consider the order of the Companies Tribunal.
This is so for two reasons. The first is that the issues
before the
Companies Tribunal related only to whether proper notification had
been given in terms of the regulations. In its judgment,
the
Companies Tribunal made it clear that it could not and did not
determine the substantive validity of the respective appointments.
Secondly, the order was rendered moot by subsequent developments.
During argument before us, the respondents sensibly proposed
that
this court issue a declaratory order, in accordance with its
conclusion on the validity of the appointment of the applicants,
rather than issue an interim interdict pending an application to be
instituted. The applicants accepted the proposal with appreciation.
We are satisfied that it is in the interest of justice to give effect
to this agreement.
[10]
In the result, the merits turn on the source of the power to appoint
a substitute in the event of the death, resignation or
removal from
office of a practitioner. The respondents correctly accepted that the
Act does not confer any power on a practitioner
to appoint another
practitioner. It follows that Messrs Murray and Monyela had no
authority to appoint Mr Damons and that his purported
appointment was
invalid
ab initio.
[11]
In the answering affidavit the respondents contended in the court a
quo that in appointing a substitute, the board had to act
with the
approval of the practitioner of Shiva and that such approval had not
been obtained. In the main, the contention was based
on the
provisions of s 137(2) of the Act. The court a quo based the
dismissal of the application on the acceptance of this contention.
[12]
Before us the respondents raised a new argument. They submitted that
only the IDC had the power to appoint a substitute for
Mr Murray, to
the exclusion of the board. The argument was based thereon that the
IDC had recommended the appointment of Mr Murray.
As I have said,
however, the central question is whether the applicants are correct
that only the board had the power to appoint
them as practitioners
for Shiva.
[13]
There are two pathways to business rescue supervision under the Act.
A company may voluntarily begin business rescue proceedings
by
adopting a resolution in terms of s 129(1). In the absence of such a
resolution, an affected person may apply to a court for
an order
placing the company under supervision and commencing business rescue
proceedings. The Act defines ‘affected person’
and it
includes a creditor.
[7]
[14]
Section 129(3)
(b)
of the Act provides that within five days of the adoption and filing
(with the Commission) of a resolution under s 129(1), the
company
must appoint a business rescue practitioner who satisfies the
requirements of s 138 and who has consented in writing to
accept the
appointment. If the board fails to comply with this provision, its
resolution to begin business rescue proceedings lapses
and is a
nullity.
[8]
There is no doubt that such an appointment must be made by the board
of a company.
[15] On the other hand, when the court
makes an order placing a company under business rescue in terms of s
131(4)
(a)
, s 131(5) applies. It provides:
‘
If
the court makes an order in terms of subsection (4) (
a
),
the court may make a further order appointing as interim practitioner
a person who satisfies the requirements of section
138, and who
has been nominated by the affected person who applied in terms
of subsection
(1), subject to ratification by
the holders of a majority of the
independent creditors’ voting interests at the first meeting of
creditors, as contemplated
in section 147.’
[16] Section 130 of the Act deals with
objections to a resolution under s 129. In terms of s 130(1)
(b)
,
an affected person may apply to a court for an order setting aside
the appointment of a practitioner on the grounds that he or
she: does
not satisfy the requirements of s 138; is not independent of the
company or its management; or lacks the necessary skills,
having
regard to the company circumstances. Section 130(6)
(a)
provides:
‘
If,
after considering an application in terms of subsection
(1) (
b
)
,
the court makes an order setting aside the appointment of a
practitioner—
(a)
the court must
appoint an alternate practitioner who satisfies the requirements
of section 138, recommended by, or acceptable
to, the holders of
a majority of the independent creditors’ voting interests who
were represented in the hearing before the
court.’
[17] In terms of s 139(1) of the Act,
a practitioner may only be removed from office by a court order in
terms of s 130 or as provided
for in s 139. Section 139(2) provides
that upon the request of an affected person, or on its own motion,
the court may remove a
practitioner from office on any of the grounds
tabulated in subsecs 139(2)
(a)
-
(f)
. Section 139(3)
reads:
‘
The
company, or the creditor who nominated the practitioner, as the case
may be, must appoint a new practitioner if a practitioner
dies,
resigns or is removed from office, subject to the right of an
affected person to bring a fresh application in terms of section
130 (1) (
b
) to
set aside that new appointment.’
[18]
In my opinion s 139(3) does not apply when the court sets aside the
appointment of a practitioner under s 130(1)
(b)
.
The language of s 130 and s 139(3) in the context of s 139(1) makes
it quite clear that s 130 provides for separate procedures
which, in
a case of the setting aside of the appointment of a practitioner,
oblige the court to appoint an alternate practitioner
in terms of s
130(6)
(a)
.
This is underscored by the punctuation in s 139(3), as well as the
phrase ‘the creditor who nominated the practitioner’.
No
nomination takes place in terms of s 130(6). Such a nomination is
made under s 131(5). Professors Piet Delport and Quintus Vorster
correctly point out that the word ‘creditor’ in s 139(3)
should be read as ‘affected person’.
[9]
[19]
In context the two options indicated by the phrase ‘as the case
may be’, relate to the appointments under ss 129
and 131
respectively. In the result I hold that if a practitioner dies,
resigns or is removed from office under s 139(2), a substitute
must
be appointed by the board of a company or by the affected person that
made the nomination in terms of s 131(5), whichever
is applicable. It
is a fresh appointment by a company in terms of s 139(3) that is
(again) subject to objection under s 130(1)
(b)
.
Therefore, quite apart from the factual obstacles in its way,
[10]
the respondents’ new argument in this court is untenable.
[20]
The final question is whether the board had to act ‘subject to
the authority of the practitioner’ in appointing
a substitute.
In my view the question must be answered in the negative. Unless
indicated otherwise, ‘company’ must
bear its ordinary
meaning and the same meaning as in s 129, that is, the company
represented by its board. There are no indications
to the contrary.
In fact, as I shall show, the context strongly supports the
conclusion that s 139(3) provides a board with the
unfettered power
to appoint a substitute practitioner.
[21]
It must be emphasised that s 139(3) also makes the appointment of a
new practitioner obligatory in the envisaged circumstances.
In many
cases only one practitioner is appointed for a company. If two or
more are appointed, they have to act jointly, in the
same manner as
joint trustees and liquidators. It follows that if a practitioner
dies, resigns or is removed from office, there
would either be no
practitioner in office to authorise a board to act under s 139(3) or
the remaining practitioner(s) would have
no authority to act. The
remaining practitioner may be a junior practitioner in respect of a
large company. Thus, the interpretation
of the court a quo that a
board is to act in terms of s 139(3) with the approval of the
practitioner of the company, would render
the provision quite
unworkable.
[22] Section 66(1) of the Act
provides:
‘
The
business and affairs of a company must be managed by or under the
direction of its board, which has the authority to exercise
all of
the powers and perform any of the functions of the company, except to
the extent that this Act or the company’s Memorandum
of
Incorporation provides otherwise.’
This
wide provision clearly includes the power or function to appoint a
substitute practitioner. It was not suggested that Shiva’s
Memorandum of Incorporation was in any way relevant.
[23]
During (temporary) business rescue supervision, therefore, a board
retains all its powers and functions except to the extent
that the
Act expressly or by necessary implication provides otherwise. This
may be contrasted with the position pertaining to voluntary
and
involuntary winding-up of an insolvent company. There the powers and
duties of the directors are terminated.
[11]
The main object of the business rescue process, after all, is to
render the company a successful concern under the management or
direction of its board. The power of the board under s 139(3) is not
expressly qualified. Thus, the narrow question is whether
any
provision of the Act by necessary implication requires the approval
of the practitioner for the appointment of a substitute
practitioner.
[24] Section 140(1)
(a)
of the
Act provides:
‘
During
a company’s business rescue proceedings, the practitioner, in
addition to any other powers and duties set out in this
Chapter—
(a)
has full management
control of the company in substitution for its board and pre-existing
management.’
The
word ‘management’ is not defined in the Act.
Consequently, it must be ascribed its ordinary meaning, that is, to
be in charge of or to run a company, particularly on a day-to-day
basis. To appoint a substitute practitioner (who will then be
in full
management control of the company) is rather a function of governance
and approval thereof is not in my view a management
function.
[25]
As I have said, the court a quo based its decision to dismiss the
applicants’ application essentially on the provisions
of s
137(2)
(a)
of
the Act. It provides that during a company’s business rescue
proceedings, each director of the company must continue to
exercise
the functions of a director, ‘subject to the authority of the
practitioner’.
[12]
Subsection 137(2)
(a)
must, of course, be read with the provisions of Chapter 6 of the Act
and those of s 140 in particular. They circumscribe the ambit
of the
authority of the practitioner. Any function of a director that falls
outside of that ambit, cannot be subject to the approval
of the
practitioner. It follows that s 137(2)
(a)
only affects the exercise of the functions of a director in respect
of matters falling within the ambit of the authority of the
practitioner. As I have shown, the appointment of a practitioner does
not fall within the powers or authority of a practitioner.
[26]
For these reasons I hold that the finding of the court a quo that the
absence of the approval of the practitioner rendered
the appointment
of the applicants void, was wrong.
[13]
It follows
that the application for leave to appeal must be granted and the
appeal upheld. The applicants are entitled to their
costs in the
court a quo and in this court. As Mr Monyela and Mr Damons had no
authority to act for Shiva in either court, costs
should not be
ordered against it. The respondents did not oppose the applicants’
applications for condonation.
[14]
The applicants must bear the costs of these applications on an
unopposed basis.
[27] The following order is issued:
1 The applications for
condonation are granted and the applicants are directed to pay the
costs thereof on an unopposed basis.
2 The application for leave to
appeal is granted and the costs thereof are costs in the appeal.
3 The appeal is upheld.
4 The order of the court a quo
is set aside and replaced with the following:
‘
(a) It
is declared that the applicants were validly appointed as business
rescue practitioners of the first respondent.
(b) The second and third
respondents are jointly and severally directed to pay the costs of
the application.’
5 The second and third
respondents are jointly and severally directed to pay the costs of
the appeal.
_______________________
C H G VAN DER MERWE
JUDGE OF APPEAL
Appearances:
For
applicants:
P
F Louw SC (Heads prepared by S J van
Rensburg
SC)
Instructed
by:
Aphane Attorneys, Pretoria
Honey Attorneys,
Bloemfontein
For
respondents:
M v R Potgieter SC
Instructed
by:
Smit Sewgoolam Inc., Saxonwold
McIntyre Van der
Post, Bloemfontein
[1]
The Companies Regulations, 2011 were made in terms of s 223 of the
Act and published under GN R351,
GG
34239, 26 April 2011.
[2]
In terms of reg 127(2)
(c)
(i)
‘senior practitioner’ means a person who is qualified to
be appointed as a business rescue practitioner in terms
of s 138(1)
and who, immediately before being appointed as practitioner for a
particular company, has actively engaged in business
turnaround
practice before the effective date of the Act, or as a business
rescue practitioner in terms of the Act, for a combined
period of at
least ten years.
[3]
In terms of
reg 127(2)
(c)
(ii)
‘junior practitioner’ means
a
person who is qualified to be appointed as a business rescue
practitioner in terms of s 138(1) and who, immediately before being
appointed as practitioner for a particular company, has either not
previously engaged in business turnaround practice before
the
effective date of the Act, or acted as a business rescue
practitioner in terms of the Act; or has actively engaged in
business
turnaround practice before the effective date of the Act,
or as a business rescue practitioner in terms of the Act, for a
combined
period of less than 5 years.
[4]
The record contains the signed board resolution, as well as the
confirmatory affidavits of the directors of Shiva. In the papers
in
the court a quo and (faintly) in argument before us, it was
nevertheless questioned whether the resolution had been taken.
In
terms of the well-known applicable rules this clearly did not raise
a genuine dispute of fact.
[5]
In terms of reg 123(3), which provides: ‘A Notice of
Appointment of a Business Rescue Practitioner by the company, as
contemplated in section 129(3), must be in Form CoR 123.2, and filed
in accordance with section 129(4)
(a)
.’
[6]
Established in terms of s 193 of the Act.
[7]
Section
128(1)
(a)
:
‘
(1) In
this Chapter—
(
a
)
“
affected person”,
in relation to a company,
means—
(i)
a shareholder or creditor of the company;
(ii)
any registered trade union representing employees of the company;
and
(iii)
if any of the employees of the company are not represented by a
registered trade union, each of those employees or their
respective
representatives.’
[8]
Section 129(5)
(a)
.
[9]
P Delport
and Q Vorster
Henochsberg
on the Companies Act 71 of 2008
(2018)
Vol 1 at 491.
[10]
As I have indicated, the order of Ranchod J did not in terms remove
Mr Klopper and Mr Knoop from office and there was no evidence
that
the IDC complied with the requirements of s 130(6)
(a)
in respect of voting interests.
[11]
Henochsberg
Vol 2 APPI-94(10) and 99.
[12]
It is noteworthy that s 137(2)
(a)
refers to the exercise of the functions of a director not the powers
and functions of the board of directors.
[13]
The dictum in
Van Jaarsveld
NO v Q-Civils (Pty) Ltd
[2017]
ZAFSHC 53
para 20 therefore also went too far.
[14]
Apart from the application for condonation of the late filing of the
application for leave to appeal the applicants also applied
for
condonation for the late filing of their replying affidavit and
heads of argument.