Kurt Robert Knoop and Others v Tegeta Exploration and Resources (Pty) Ltd and Others (312/2024) [2025] ZASCA 96 (30 June 2025)

80 Reportability

Brief Summary

Business Rescue — Authority of Directors — Whether directors of a company in business rescue have the authority to appoint attorneys — The appellants, as business rescue practitioners (BRPs), contested the authority of directors to appoint attorneys on behalf of companies under business rescue, following an application initiated by the directors to remove the BRPs. The High Court found that the directors had such authority, which the appellants disputed, arguing that the Companies Act limits directors' powers during business rescue. The Supreme Court of Appeal held that directors do not have the authority to appoint attorneys without the BRPs' approval, as the BRPs hold full management control during business rescue proceedings. The appeal was upheld, and the High Court's order was set aside.

Comprehensive Summary

Summary of Judgment


Introduction


The proceedings were an appeal to the Supreme Court of Appeal against a declaratory order made by the Gauteng Division of the High Court, Pretoria. The appeal concerned a Uniform Rule 7 authority dispute within broader business rescue litigation, namely whether a firm of attorneys was authorised to represent a company in business rescue in an application seeking, among other relief, the removal of business rescue practitioners.


The appellants were the appointed business rescue practitioners of four companies (the first to fourth respondents). The fifth and sixth respondents were directors of some of those companies and had purported to act on their behalf in the underlying proceedings. The second respondent, Koornfontein Mines (Pty) Ltd, was the relevant company for purposes of this appeal because the high court had found that the attorneys’ authority was established only in respect of Koornfontein.


Procedurally, the directors launched an application in the high court on 21 October 2022 seeking (among other relief) the removal of the first and second appellants as business rescue practitioners, and declarators that the third and fourth appellants were not properly appointed. The appellants disputed the authority of the attorneys appointed by the directors to act for the companies and invoked Rule 7. The high court made differing findings in relation to the authority to represent the various companies, and in particular declared that the attorneys were authorised to represent Koornfontein in the removal application. Leave to appeal to the Supreme Court of Appeal was granted on 20 February 2024 in respect of that declaratory order only.


The general subject-matter of the dispute was the allocation of authority between business rescue practitioners and company directors during business rescue, specifically whether directors retain the power to appoint attorneys to litigate on behalf of the company without the business rescue practitioners’ authority, and whether a declaratory order determining such authority is appealable.


Material Facts


It was common cause that the first to fourth respondents (the companies) were under business rescue, and that the appellants were the appointed business rescue practitioners of those companies. It was also common cause that the fifth respondent (Ms Ragavan) was a director of the first and second respondents, and the sixth respondent (Mr Archery) was a director of the third respondent.


On 21 October 2022, Ms Ragavan and Mr Archery, purporting to act on behalf of the companies, launched an application in the high court seeking relief that included (a) leave under s 133(1)(b) of the Companies Act 71 of 2008 to institute the proceedings, (b) the removal of the first and second appellants as business rescue practitioners of certain companies, and (c) declaratory relief that the third and fourth appellants were not properly appointed as business rescue practitioners.


The companies were joined as co-applicants in that application. Acting in their capacity as directors, Ms Ragavan and Mr Archery appointed Van der Merwe and Van der Merwe Attorneys (VDM) to act for the companies in the application.


The appellants disputed VDM’s authority to act for the companies and delivered a notice in terms of Uniform Rule 7 on 2 November 2022. In response, on 21 November 2022, the respondents filed resolutions and powers of attorney, issued by Ms Ragavan, purportedly authorising VDM to act for the companies. The appellants also disputed the validity and effect of these documents, maintaining that the directors lacked authority during business rescue to appoint attorneys to act for the companies.


The high court ultimately found that VDM was not authorised to represent the first, third and fourth respondents but was authorised to represent the second respondent, Koornfontein. The appeal to the Supreme Court of Appeal was confined to the declaratory order in paragraph 78(c) of the high court judgment, declaring that VDM’s authority had been established to represent Koornfontein in the removal application.


Legal Issues


The central legal questions before the Supreme Court of Appeal were whether the high court erred in granting a declaratory order that VDM was authorised to represent Koornfontein in the main removal application, and whether, as a matter of law under the Companies Act business rescue regime, a director of a company in business rescue has the authority to appoint attorneys to litigate on behalf of the company without the approval or authority of the business rescue practitioner.


A preliminary issue was whether the declaratory order constituted a “decision” appealable under s 16(1)(a) of the Superior Courts Act 10 of 2013, given the respondents’ contention that the order was merely interlocutory and not appealable under the principles articulated in Zweni.


The dispute was primarily one of law, namely statutory interpretation and the legal consequences of business rescue for corporate authority and litigation conduct, with an application of those legal principles to the established procedural facts concerning the Rule 7 challenge and the directors’ appointment of attorneys.


Court’s Reasoning


Appealability


The Supreme Court of Appeal first addressed the contention that the declaratory order was not appealable because it was interlocutory. The respondents relied on the general test in Zweni v Minister of Law and Order 1993 (1) SA 523 (A); [1993] 1 All SA 365 (A), as reaffirmed and discussed in DRDGOLD Ltd and Another v Nkala and Others [2023] ZASCA 9; 2023 (3) SA 461 (SCA), which describes the usual attributes of an appealable “judgment or order”, including final effect, definitiveness of rights, and disposal of a substantial portion of relief.


They also invoked Unica Iron and Steel (Pty) Ltd and Another v The Minister of Trade and Industry and Another (1332/21) [2023] ZASCA 42 (31 March 2023) for the proposition that where an order is not final or definitive, and does not dispose of any portion of the main relief, it is not appealable.


The Court distinguished Unica on the basis that the issue there had become academic. In the present matter, the Court accepted the appellants’ submission that the effect of the high court’s order was final in the relevant sense because it permitted the company to proceed with unauthorised litigation, and the order was definitive of the parties’ rights on that issue. The Court held that unauthorised litigation should not be permitted to proceed and concluded that the order was appealable.


Rule 7 and the requirement of authority


The Court then addressed the Rule 7 dispute. It set out Rule 7(1), which allows a party to dispute the authority of a person acting on behalf of another party and requires that person to satisfy the court that they are authorised to act.


The respondents’ interpretive submission was that production of a power of attorney sufficed and that a court could not look beyond it to determine whether the person who gave the instruction had authority. The Court rejected this as inconsistent with the text and purpose of Rule 7, emphasising that the person claiming authority must satisfy the court that they are authorised to act, which necessarily entails that the power of attorney must originate from someone vested with authority to grant it. If the grantor lacks authority, the power of attorney does not establish the attorney’s authority. In reaching this conclusion, the Court relied on Unlawful Occupiers, School Site v City of Johannesburg [2005] 2 All SA 108 (SCA); 2005 (4) SA 199 (SCA).


Statutory allocation of power during business rescue


The Court considered the Companies Act framework. It accepted that outside business rescue, s 66 establishes the board’s authority to exercise corporate powers, but noted that s 66 operates unless the Act provides otherwise. The Court treated Chapter 6 of the Companies Act as providing such a qualification once business rescue commences.


In particular, the Court relied on s 137(2)(a)–(b), which requires directors to continue to exercise functions subject to the authority of the practitioner and to perform management functions in accordance with the practitioner’s express instructions or directions (to the extent reasonable). This statutory subordination of directors’ functions was treated as a clear limitation on directors’ ability to act independently in ways that implicate management and the company’s assets.


The Court further relied on s 140(1)(a), which provides that the practitioner has full management control of the company in substitution for its board and pre-existing management, and on s 140(1)(b), which permits delegation by the practitioner to a director or former management. The Court treated these provisions as indicating that authority to control the company’s affairs, including decisions with financial implications, resides centrally in the practitioner unless delegated.


In addressing litigation specifically, the Court endorsed the reasoning in National Director of Public Prosecution v Sharma and Others [2021] ZAFSHC 172; 2022 (1) SACR 289 (FB). It accepted that instituting or defending legal proceedings entails committing company resources to legal costs, which bears directly on the practitioner’s statutory role to manage the company’s property and financial resources and to prepare and implement a business rescue plan. Litigation authorised by directors without practitioner approval would undermine the statutory scheme by diverting control of resources away from the practitioner.


The Court also referred to its own earlier decision in Ragavan and Others v Optimum Coal Terminal (Pty) Ltd (in Business Rescue) and Others [2023] ZASCA 34; 2023 (4) SA 78 (SCA), noting the connection between the business rescue moratorium and control over the company’s property and resources, including the financing of legal proceedings that could interfere with the proper conduct of business rescue.


The high court’s governance/management distinction and removal of practitioners


The high court had upheld VDM’s authority in relation to Koornfontein on the basis that directors have the power to appoint and remove practitioners and that this power is not subject to practitioner authority. Its reasoning included the view that it would be illogical to require directors to seek a practitioner’s approval to remove the practitioner, and it raised a hypothetical case of practitioner death.


The Supreme Court of Appeal held that this reasoning conflated distinct statutory mechanisms. It examined s 139, which regulates removal and replacement of practitioners. The Court stressed that s 139(2) permits removal by a court only “upon request of an affected person” (or on the court’s own motion), and it treated the statutory definition of “affected person” in s 128(1)(a) as excluding the company and its directors, with the result that directors (and the company) lack authority to bring an application to remove the practitioner under s 139(2).


By contrast, the Court recognised that s 139(3) provides for appointment of a new practitioner where a practitioner dies, resigns, or is removed. However, it treated the s 139(3) replacement power as context-specific and, in line with the Court’s discussion of Tayob v Shiva Uranium (Pty) Ltd 2020 JDR 2672 (SCA) and Ragavan, emphasised that Tayob addressed a narrow issue about who represents “the company” when appointing a new practitioner in voluntary business rescue. The present dispute, by contrast, concerned directors’ authority to appoint attorneys and to prosecute litigation to remove practitioners, which engages management control and the statutory restriction in s 139(2).


The Court also considered and rejected the framing of the issue as one of “governance” (retained by directors) as opposed to “management” (held by practitioners). Relying on Islandsite Investment (Pty) Ltd v The National Director of Public Prosecutions and Others [2023] ZASCA 166; 2024 (5) SA 20 (SCA), the Court treated the management/governance distinction as unhelpful to the enquiry, which turns on whether the business rescue provisions create an exception to s 66(1). Islandsite was treated as confirming that directors cannot represent companies in litigation and cannot authorise attorneys to do so, and as emphasising that practitioner supervision is “in every respect” for purposes of business rescue.


Costs and personal liability of directors


On costs, the Court accepted the submission that Ms Ragavan and Mr Archery should bear costs personally. It relied on the principle articulated in Islandsite that if unauthorised persons purport to appoint attorneys for a company, it cannot be expected that the company bears the costs arising from such unauthorised action.


Outcome and Relief


The Supreme Court of Appeal upheld the appeal. It set aside the high court order declaring that Van der Merwe and Van der Merwe Attorneys were authorised to represent Koornfontein in the removal application.


The Court replaced the high court order with an order dismissing the application in respect of prayers 1 to 4 (as framed in the underlying application).


Costs were awarded against the fifth and sixth respondents personally, jointly and severally, including the costs of two counsel where employed. The appeal was awarded with costs, including the costs of two counsel where so employed.


Cases Cited


Zweni v Minister of Law and Order 1993 (1) SA 523 (A); [1993] 1 All SA 365 (A)


DRDGOLD Ltd and Another v Nkala and Others [2023] ZASCA 9; 2023 (3) SA 461 (SCA)


Unica Iron and Steel (Pty) Ltd and Another v The Minister of Trade and Industry and Another (1332/21) [2023] ZASCA 42 (31 March 2023)


Unlawful Occupiers, School Site v City of Johannesburg [2005] 2 All SA 108 (SCA); 2005 (4) SA 199 (SCA)


Ragavan and Others v Optimum Coal Terminal (Pty) Ltd (in Business Rescue) and Others [2023] ZASCA 34; 2023 (4) SA 78 (SCA)


Prinsloo v S [2015] ZASCA 207; [2016] 1 All SA 390 (SCA); 2016 (2) SACR 25 (SCA)


Tayob v Shiva Uranium (Pty) Ltd 2020 JDR 2672 (SCA)


National Director of Public Prosecution v Sharma and Others [2021] ZAFSHC 172; 2022 (1) SACR 289 (FB)


Islandsite Investment (Pty) Ltd v The National Director of Public Prosecutions and Others [2023] ZASCA 166; 2024 (5) SA 20 (SCA)


Legislation Cited


Companies Act 71 of 2008 (as amended)


Superior Courts Act 10 of 2013


Rules of Court Cited


Uniform Rules of Court, Rule 7(1)


Held


The Court held that the declaratory order granted by the high court determining the authority of attorneys to represent Koornfontein was appealable because it was final and definitive in effect on the question whether the company could proceed with litigation represented by attorneys purportedly appointed without authority.


The Court held that, under the Companies Act business rescue regime, directors remain in office but exercise their functions subject to the authority and instructions of the business rescue practitioner, and the practitioner has full management control of the company in substitution for the board and pre-existing management. Because litigation entails the commitment of company resources and implicates management of the company’s property and affairs, directors do not have the authority during business rescue to appoint attorneys to litigate on behalf of the company without practitioner authority.


The Court further held that Rule 7 requires that authority be established by a power of attorney issued by a person with the requisite authority; a power of attorney does not suffice if it emanates from a person lacking authority under the statutory scheme.


LEGAL PRINCIPLES


Rule 7 authority disputes require the court to be satisfied that the legal representative is authorised to act, and this entails scrutiny of whether the power of attorney originates from a person legally empowered to confer such authority; a power of attorney issued without underlying authority does not establish authorisation.


Under the Companies Act 71 of 2008, once business rescue commences, directors’ powers are qualified by the business rescue provisions. Directors continue to function but do so subject to the business rescue practitioner’s authority under s 137(2), while the practitioner enjoys full management control under s 140(1)(a), including control over decisions affecting the company’s property and financial resources.


The decision to institute, defend, or conduct litigation on behalf of a company in business rescue is treated as a matter that implicates management control and the use of company resources; accordingly, absent delegation or authority from the practitioner, directors lack competence to bind the company by appointing attorneys to litigate in the company’s name.


The statutory mechanism for removal of a business rescue practitioner under s 139(2) is confined to applications by “affected persons” (or the court acting on its own motion), and the statutory definition of “affected person” excludes directors and the company, with the consequence that directors do not have standing under s 139(2) to seek removal in that capacity.





THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case No : 312/2024

In the matter between:
KURT ROBERT KNOOP FIRST APPELLANT
JOHAN LOUIS KLOPPER SECOND APPELLANT
JUANITO MARTIN DAMONS THIRD APPELLANT
KGASHANE CHRISTOPHER MONYELA FOURTH APPELLANT
and
TEGETA EXPLORATION
AND RESOURCES (PTY) LTD FIRST RESPONDENT
KOORNFONTEIN MINES (PTY) LTD SECOND RESPONDENT
OPTIMUM COAL MINE (PTY) LTD THIRD RESPONDENT
OPTIMUM COAL TERMINAL (PTY) LTD FOURTH RESPONDENT
RONICA RAGAVAN FIFTH RESPONDENT
DHANASEGARAN ARCHERY SIXTH RESPONDENT

Neutral citation: Kurt Robert Knoo p and Others v Tegeta Exploration and
Resources (Pty) Ltd and Others (312/2024 ) [2025] ZASCA
96 (30 June 2025)
Coram: HUGHES , WEINER , UNTERHALTER and BAARTMAN
JJA and MOLITSOANE AJA
Heard: 19 May 2025

2

Delivered : This judgment was handed down electronically by circulation to the
parties’ representatives by email, publication on the Supreme Court of Appeal
website and released to SAFLII. The time and date for hand -down is deemed to
be 11h00 on 30 June 2025.
Summary: Uniform Rule s of Court – Rule 7 – whether the court a quo erred in
issuing a declaratory order that the attorneys for the second respondent were
authorised to represent such respondent in the main application – business rescue
– whether a director has power to appoint attorneys on behalf of a company in
business rescue – whether the declaratory order is a ‘decision’ within the meaning
of s 16(1) (a) of the Superior Courts Act 10 of 2013 – whether the ‘decision’ is
appealable.

3

____________________________________________ _
ORDER
_____________________________________________
On appeal from: Gauteng Division of the High Court , Pretoria (Phooko AJ
sitting as court of first instance ):
1 The appeal succeeds with costs including the costs of two counsel where
so employed .
2 The order of the high court is set aside and replaced with the foll owing :
‘(a) The application in respect of prayers 1, 2, 3 and 4 are dismissed .
(b) The fifth and sixth respondents are to pay the costs personally,
including the costs of two counsel where so employed , jointly and
severally .’

_________________________________________
JUDGMENT
_________________________________________
Weiner JA (Hughes , Unterhalter and Baartman JJA and Molitsoane AJA
concurring ):

Introduction
[1] The appellants are the appointed business rescue practitioners (the BRPs)
of the first to fourth respondents ( the companies ). The fifth respondent, M s
Ragavan, is a director of the first and second respondents, and the sixth
respondent, Mr Archery, is a director of the third respondent. This appeal
concerns whether or not a director of a compan y under business rescue has the
authority to appoint attorneys to act on behalf of the compan y.


4

Background
[2] On 21 October 2022, M s Ragavan and Mr Archery, purporting to act on
behalf of the companies, launched an application in the Gauteng Division of the
High Court, Pretoria (the high court) for, inter alia , the removal of the first and
second appellants as the BRPs of the companies . They also sought a declarator
that the third and fourth appellants were not properly appointed as BRPs. The
companies were joined as co -applicants . Purporting to exercise their powers as
directors of the companies , Ms Ragavan and Mr Archery appointed Van der
Merwe and Van der Merwe Attorneys (VDM) to act for the companies in the
application.

[3] The BRPs disputed the authority of VDM to act for the companies. They
delivered a notice in terms of Rule 7 of the Uniform Rules of Court on 2
November 2022. On 21 November 2022 the respondents filed resolutions and
powers of attorney from Ms Ragavan as the director of the companies,
purportedly authorising VDM to act for the companies. The BRPs also disputed
these documents and the authority of VDM .

[4] The respondents sought the following relief:
‘1. That, insofar as it may be necessary, that leave be granted in terms of section 133(1)(b) of
the Companies Act, 71 of 2008 (as amended) ("the Companies Act”), for the Applicants to
bring this application;
2. That the First Respondent be removed as Business Rescue Practitioner of the First to Fourth
Applicants;
3. That the Second Respondent be removed as Business Rescue Practitioner of the First to
Third Applicants;
4. That it be declared that the Third Respondent is not a Business Rescue Practitioner of the
Second to Fourth Applicants;
5. That it be declared that the Fourth Respondent is not a Business Rescue Practitioner of the
Second and Third Applicants;
6. That Companies and Intellectual Property Commission be ordered to update their records to
reflect the orders in prayers 2 to 5 above;
5

7. That the First to Fourth Respondents, and any other Respondent who opposes the application,
pay the costs of the application on an attorney and client scale including the costs of two
counsel .’

[5] The high court found that VDM was not authorised to represent the first,
third and fourth respondents but was authorised to represent the second
respondent (Koornfontein). On 11 December 2023, the BRPs applied for leave to
appeal against the order in relat ion to Koornfontein . On 20 February 2024, the
high court granted leave to appeal to this Court. The appeal is only in relation to
the order contained in paragraph 78(c) of the judgment, which states :
‘It is declared that the authority of Van der Merwe and Van der Merwe attorneys have been
established and that Van der Merwe and Van der Merwe attorneys are authori zed to represent
the Second Applicant [Koornfontein] in the removal application .’

Appealability
[6] The respondents firstly raised the issue of appealability of the judgment,
stating that the decision was not final but interlocutory and accordingly did not
pass the test set out in Zweni v Minister of Law and Order1. In DRDGOLD Ltd
and Another v Nkala and Others (DRDGOLD ),2 this Court referred to the
judgment of Harms AJA in Zweni where he held:
‘…“The expression ‘judgment or order’ in s 20(1)3 of the Act has a special, almost technical,
meaning; all decisions given in the course of the resolution of a dispute between litigants are
not ‘judgments or orders’ . . ..”4

Harms AJA famously concluded at 532I -533A:
“A ‘judgment or order’ is a decision which, as a general principle, has three attributes, first, the
decision must be final in effect and not susceptible of alteration by the Court of first instance;
second, it must be definitive of the rights of the parties; and, third, it must have the effect of
disposing of at least a substantial portion of the relief claimed in the main proceedings”.’

1 Zweni v Minister of Law and Order 1993 (1) SA 523 (A) ; [1993] 1 All SA 365 (A) (Zweni ).
2 DRDGOLD Ltd and Another v Nkala and Others [2023] ZASCA 9; 2023 (3) SA 461 (SCA).
3 The previous iteration of s 16 which provides ‘An appeal from a judgment or order of the court of a provincial
or local division in any civil proceedings or against any judgment or order of such a court given on appeal shall
be heard by the appellate division or a full court as the case may be.’
4 Zweni para 532C -D.
6


[7] The respondents sought to rely on this Court’s judgment in Unica Iron and
Steel (Pty) Ltd v Minister of Trade and Industry (Unica ),5 where this Court
referring to Zweni , held that if ‘t he order is not final nor definitive of the rights of
the parties to the action and does not have the effect of disposing of any portion
of the relief claimed in the main proceedings’ it is interlocutory and not
appealable .

[8] In Unica, the question raised had become academic and it was therefore
not susceptible to an appeal . That position is clearly distinguishable from the
situation in this case. The appellants, however, contended that, in any event, the
issue went beyond simply whether or not the power of attorney was valid. The
effect of the judgment is final in that the order granted by the high court allows
the company to proceed with unauthori sed litigation in terms of s 139. It is not an
interlocutory application. It is definitive of the party's rights in this regard.
Unauthorised litigation cannot be permitted to proceed. Thus, I am of the view
that the order of the high court is appealable.

Legislative regime
Rule 7(1)
[9] Rule 7 (1) provides:
‘7 Power of Attorney
(1) Subject to the provisions of subrules (2) and (3) a power of attorney to act need not be
filed, but the authority of anyone acting on behalf of a party may, within 10 days after it has
come to the notice of a party that such person is so acting, or with the leave of the court on
good cause shown at any time before judgment, be disputed, wherea fter such person may no
longer act unless he satisfied the court that he is authorised so to act, and to enable him to do
so the court may postpone the hearing of the action or appli cation.’


5 Unica Iron and Steel (Pty) Ltd and Another v The Minister of Trade and Industry and Another (1332/21)
[2023] ZASCA 42 (31 March 2023) para 11 ( Unica ).
7

[10] The respondents’ submissions turned on the interpretation of Rule 7. It is
their view that all that is required to satisfy the requirements of the rule is the
production of a power of attorney. A court, it contended, cannot go behind the
power of attorney to enquire whether the person who instructed the attorney, had
the power or authority to do so.

[11] However, Rule 7 specifically states that the person claiming the right to act
on behalf of the companies (VDM in this case), must satisfy the court that he is
authorised so to act . To be so satisfied, the power of attorney must issue from a
person vested with the authority to give the power of attorney. If the person lacks
the authority to do so, the power of attorney does not evidence that its bearer is
authorised to act.6 The respondents’ submission cannot be accepted.

The Companies Act
[12] Prior to business rescue, and in terms of s 66 of the Companies Act 71 of
2008 (the Act), the board of directors is the only organ of a company with
authority to exercise all powers and perform any functions of the company.
However, s 66 states that it operates unless the Act provides otherwise .7

[13] The appellants contend ed that Chapter 6 of the Act contains provisions
which ‘provide otherwise’ in that , after business rescue commences, the board of
directors is substituted by the BRPs. Section 137(2) (a) and (b), provide that :
‘137 Effect on shareholders and directors
(2) During a company's business rescue proceedings, each director of the company -
(a) must continue to exercise the functions of director, subject to the authority of the
practitioner;
(b) has a duty to the company to exercise any management function within the company in
accordance with the express instructions or direction of the practitioner, to the extent that it is
reasonable to do so;’ (Emphasis added .)

6 Unlawful Occupiers, School Site v City of Johannesburg [2005] 2 All SA 108 (SCA); 2005 (4) SA 199 (SCA)
para 16.
7 All sections referred to in this judgment are references to the Act, unless otherwise stated.
8


[14] It is thus clear that, in terms of s 137(2), the directors are obliged to
continue to exercise their functions but can only do so subject to the authority or
express instruction of the BRPs. This is one of the provisions which qualif y the
powers of directors contained in s 66(1).

[15] The Act grants explicit powers to the BRPs in terms of s 140, which
provides:
‘(1) 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;
(b) may delegate any power or function of the practitioner to a person who was part of the
board or pre -existing management of the company;

(3) During a company's business rescue proceedings, the practitioner -

(b) has the responsibilities, duties and liabilities of a director of the company, as set out in
sections 75 to 77.’

[16] The BRPs are thus accorded ‘full management control of the company’ in
place of the board and management of the company but may delegate any of their
powers and functions to the directors or erstwhile management. The BRP s have
the duty to run and manage the company on a day -to-day basis and ha ve full
management control over the company's property, including its financial
resources.8

[17] The director ’s powers and functions are subservient to the practitioner ’s
authority, instruction, or direction in terms of the Act. This issue was dealt with

8 Ragavan and Others v Optimum Coal Terminal (Pty) Ltd (in Business Rescue) and Others [2023] ZASCA 34 ;
2023 (4) SA 78 (SCA) para 7 -27 (Ragavan ); Prinsloo v S [2015] ZASCA 207 ; [2016 ] 1 All SA 390 (SCA ); 2016
(2) SACR 25 (SCA ) para 46; Tayob v Shiva Uranium (Pty) Ltd 2020 JDR 2672 (SCA) para 24 (Tayob ).
9

in National Director of Public Prosecution v Sharma and Others ,9 (Sharma )
where Musi JP held that ‘ [i]t is correct that the directors remain directors, but ,
importantly , they operate under the authority of the business rescue
practitioners .’10

[18] Musi JP found that, instituting or defending legal proceedings has
financial implications for the company in business rescue. The appellants rel ied
on the reasoning in Sharma that the directors cannot commit any of the
company’s property and assets to the payment of legal fees because this would
undermine the statutory scheme of business rescue. The BRPs would be divested
of control of that portion of the company's money needed to pay the legal fees.
This would result in the BRPs being unable to manage the company in terms of s
140(1) (a). In relation to the business rescue plan, the BRPs would either be unable
to prepare a plan in accordance with s 15011 that identifies the property and assets
of the company available to pay creditors; or would be unable to put any plan to
creditors for adoption in terms of s 150; or would be unable to implement such a
plan when it had already been prepared, voted on and adopted by creditors. As
Musi JP stated:
‘This on its own is more than enough reason why the business rescue practitioners must be
centrally involved when litigation on behalf of the company in business rescue is embarked
upon.’12

[19] Musi JP found that the directors of the company had no right to authorise
attorneys to oppose proceedings on its behalf, without the authority of the BRPs ,
and that the decision to appoint the attorneys was void for lack of approval by the

9 National Director of Public Prosecution v Sharma and Others [2021] ZAFSHC 172; 2022 (1) SACR 289 (FB)
(Sharma ).
10 Ibid pa ra 29.
11 Section 150 provides: ‘Proposal of business rescue plan
(1) The practitioner, after consulting the creditors, other affected persons, and the management of the company,
must prepare a business rescue plan for consideration and possible adoption at a meeting held in terms of section
151.’
12 Sharma para 30.
10

BRPs. The only persons who have the power to bind a company in business
rescue , in such circumstances are the BRPs.

[20] This Court in Ragavan and Others v Optimum Coal Terminal (Pty) Ltd (in
Business Rescue) and Others13 (Ragavan ) held that s 133(1) (a) prohibits
enforcement action against the company in relation to any property belonging to
it. This reflects the practitioner's control in relation to the claims by third parties
to the property of the company. This has an effect on the assets of the company
being used to finance legal proceedings which would interfere with the proper
control of the company under business rescue .

The high court
[21] The high court found that Ms Ragavan could validly appoint VDM to act
on behalf of Koornfontein in the main application. It found that directors have the
power to appoint and remove practitioners and that the power is not subject to the
authority of the BRPs.

[22] Phooko AJ’s reasoning was that it would make no sense for the directors
to first seek approval from the practitioner to remove him or her from office , and
further that , if the BRP had died, there would be no practitioner to approve the
process to replace him or her. The appellants submitted that this reasoning
conflates two different issues – the appointment of a substitute practitioner in the
event of death, resignation or removal, on the one hand, and the removal of a
practitioner in terms of s 139(2) .

Discussion
[23] The removal and replacement of a BRP are dealt with in s 139 , which
provides :
‘139 Removal and replacement of practitioner
(1) A practitioner may be removed only -

13 Ragavan Op cit fn 1.
11

(a) by a court order in terms of section 130; or
(b) as provided for in this section.
(2) Upon request of an affected person, or on its own motion, the court may remove a
practitioner from office on any of the following grounds:
(a) Incompetence or failure to perform the duties of a business rescue practitioner of the
particular company;
(b) failure to exercise the proper degree of care in the performance of the practitioner's
functions;
(c) engaging in illegal acts or conduct;
(d) if the practitioner no longer satisfies the requirements set out in section 138 (1);
(e) conflict of interest or lack of independence; or
(f) the practitioner is incapacitated and unable to perform the functions of that office, and is
unlikely to regain that capacity within a reasonable time.
(3) 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.’

[24] When a company by resolution, places itself under voluntary business
rescue , its board has the power in terms of s 139(3 ), to appoint a substitute
practitioner in the event of the practitioner's death , resignation or removal . But
s 139(2) does not permit the company, the board or a director to bring an
application to remove a practitioner. It only permits an ‘affected person’14 to bring
such application. The definition of ‘affected person’ specifically excludes the
company and directors which therefore do not have the authority to make the
application referred to under s 139(2). Alternatively, the court can mero motu
make such an order, in certain circumstances.

[25] Subsequent to Sharma and the decision of the high court in the present
matter , this Court confirmed in Islandsite Investments (Pty) Ltd v The National

14 An affected person as defined in s 128(1) (a) is ‘(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 .’
12

Director of Public Prosecutions and Others15 (Islandsite ) that directors cannot
represent companies in litigation and cannot authori se an attorney to do so.
Gorven JA in Islandsite held that the nature of the supervision that the BRPs
exercise over the company:
‘…is not the supervision which must be demonstrated, at every point, to advance the
rehabilitation of the company. That would be a recipe for contestation for every decision and
would result in the paralysis of the process of business rescue. It is supervisi on in every respect.
In addition, the management of the company's affairs, business and property are part of the
process. It is implicit in the definition that the BRPs are the persons engaged in the supervision
of the company. ’16
Gorven JA stated further that:
‘... What must be borne in mind is that both the directors and the BRPs are enjoined to act in
the best interests of the company. The first resort would be to explore whether the directors and
the BRPs are able to agree on the conduct of the POCA litigation. If agreement cannot be
reached, and if it can be shown that the BRPs had acted or were about to act in a manner which
could be shown to prejudice the company, there are remedies available to interested parties
such as directors.17

In the light of the provisions of the [Companies] Act, there is no warrant for finding that the
directors have the requisite authority to appoint attorneys to litigate on behalf of the company.
The clear interpretation of the Act affords the BRPs that authority i n the POCA litigation. This
is, in particular, because property of the company is implicated in the POCA litigation. It
follows that the order of the High Court cannot be faulted. As a result, the appeal must be
dismissed. ’18

[26] The high court distinguished between governance and management and
found that the BRPs had management control but did not have control over
governance. In this regard, t he directors relied on the dictum in Tayob v Shiva
Uranium (Pty) Ltd19(Tayob ) that the board retains power on strategic matters of
the company during business rescue. According to Gorven JA in Islandsite,

15 Islandsite Investment (Pty) Ltd v The National Director of Public Prosecutions and Others [2023] ZASCA 166;
2024 (5) SA 20 (SCA) (Islandsite ).
16 Ibid para 15 .
17 Ibid para 22.
18 Ibid para 23 .
19 Tayob para 2 3.
13

‘…that does not properly understand the dictum in Ragavan. It simply recogni sed
a category of decision -making power but found it unnecessary to decide who
enjoyed this power.’20

[27] In Islandsite , Gorven JA, in construing the provisions of the Act
concerning the respective authority of the BRPs and the directors during business
rescue , referred to the unitary approach of interpretation and stated as follows:
‘Whilst the starting point remains the words of the document, which are the only relevant
medium through which the parties have expressed their contractual intentions, the process of
interpretation does not stop at a perceived literal meaning of those word s, but considers them
in the light of all relevant and admissible context, including the circumstances in which the
document came into being. The former distinction between permissible background and
surrounding circumstances, never very clear, has fallen away. Interpretation is no longer a
process that occurs in stages but is essentially one unitary exercise .’21

[28] The goal of business rescue in s 128 is to rehabilitate the company. The
BRPs are the temporary supervisors of the company. The management of the
company’s affairs, business and property are part of the process of supervision.

[29] In Islandsite the directors contended that the authority of the BRPs must
be construed narrowly. However, the NDPP referred to the reasoning in Ragavan ,
which was that a court should construe the authority as having a wide meaning
and that BRPs are given full management control in the Act. This Court held that
the ‘ …facilitation of the rehabilitation of a company expressly includes
management of property. Everything that has to do with the company's debtors
clearly falls within the category of management. ’22

[30] In Tayob ,23 it was held that when a company was placed in voluntary
business rescue, through a resolution of the Board of Directors, the appointment

20 Islandsite para 11.
21 Islandsite para 14.
22 Ragavan para 18.
23 Tayob para 23 .
14

of a substitute practitioner does not fall within the powers or authority of a
practitioner. That matter however had to do with the situation where a practitioner
dies, resigns or is removed from office. Referring to Tayob , this Court in
Ragavan , stated as follows:
‘In that matter the court had to address a narrow issue of who of the board or an affected person
represented “the company ” in appointing a new practitioner in terms of section 139(3) of the
Act. In situations where a practitioner dies, resigns, or is removed from office. the court held
that the appointment of a practitioner did not fall within the “full management powers ” or
authority of a practitioner. In that case, the power of the board was found in s 139(3) and was
not expressly qualified. In other word s, the function fell outside the ambit of the authority of a
practitioner and could not be subject to the approval of a practitioner as contemplated in s
137(2) (a) of the Act .24

[31] In a voluntary business rescue, as in Tayob , the directors were empowered
in terms of s 139(3) to appoint a new BRP . But this does not apply in a business
rescue , which is not voluntary. Section 66 is thus restricted by s 139(2).

[32] The directors in the present matter also contended t hat the removal of a
BRP relate s to a strategic matter of the company and to governance rather than to
full management control. Governance matters are dealt with in the Act. They
relate to shareholders' rights and resolutions, the calling of meetings, directors'
powers and duties, eligibility, election and removal, the board and committees
and their meetings. The appellants contended that a decision to institute litigation
is a management power rather than one of governance. Gorven JA , in Islandsite ,
stated that, ‘ …the distinction sought to be drawn between powers of management
and governance of companies is unhelpful in the present enquiry. … [T]he
enquiry is whether the provisions in the Act relating to business rescue provide
an exception to the general provisions of s 66(1) regarding the powers of
directors.’25


24 Ragavan para 27 .
25 Islandsite para 21.
15

[33] It is a policy issue that the transfer of control and power from the Board to
the BRPs is part of the process of business rescue. The removal of a practitioner
can be done by a court order in terms of s 13026 or as provided for in s 139. As
stated above, t his can only be done upon request of an ‘affected person ’, or on the
court’s own motion , and the court may remove a practitioner from office on
various grounds.

[34] Contrary to the reasoning of the high court, i n essence, the Act provides
that even if a director has appointed the BRPs, such director does not have the
right to remove them. A director might have the right to replace them if one of
them dies, resigns, or is removed for another reason , but only where the business
rescue was voluntary .

[35] The directors have limited right s in their capacity as a director. They can
apply qua director for interdictory or declaratory remedies. The court can mero
motu remove a practitioner if the case for an interdict brought by a director makes
out a case for removal . But s 139 specifically precludes a director or the company
from removing a practitioner.

[36] There are other remedies that the directors enjoy . Some of the remedies are
contained, inter alia, in s 165 of the Act. In terms of s 165(2), a director may serve
a demand upon a company to commence or continue legal proceedings or take
related steps to protect the legal interests of the company. This also applies to a
company under business rescue. In such a case, the demand would be served upon

26 ‘130 Objections to company resolution
(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 -

(b) setting aside the appointment of the practitioner, on the grounds that the practitioner -
(i) does not satisfy the requirements of section 138;
(ii) is not independent of the company or its management; or
(iii) lacks the necessary skills, having regard to the company's circumstances; or
(c) requiring the practitioner to provide security in an amount and on terms and conditions that the court considers
necessary to secure the interests of the company and any affected person .’

16

the BRPs, and if the BRPs do not make an application contemplated in s ubsec 3,
the BRPs would appoint an independent and impartial person or committee to
investigate the demand and report to the board on it.

[37] Section 165 ensures that the directors cannot incur costs without the BRP’s
sanction and a court will not make an order in terms of s 165 unless the litigation
costs are provided for. But this is no answer to the question of the authority of the
directors. These powers of directors contained in s 165 are different to the power
in s 139, which specifically precludes a director or the company from removing
a practitioner .

[38] In regard to the declaratory relief sought in respect of the third and fourth
appellants, the leave to appeal relates only to prayer 78(c) of the high court’s
order. There is no cross -appeal by the respondents against the dismissal of the
declarations in respect of the third and fourth appellants.

[39] The NDPP submitted that the directors, Ms Ragavan and Mr Archery
should be directed to pay the costs of the appeal personally. They had no authority
to represent the compan ies, and instruct the attorneys to appeal the judgment of
the high court on their behalf. As stated in Islandsite : ‘If persons who are not
authorised to do so, purport to appoint attorneys to represent a company, it can
hardly be expected of the company to bear the costs flowing from that action. ’27

[40] Accordingly, the following order is made:

1 The appeal succeeds with costs including the costs of two counsel where
so employed .
2 The order of the high court is set aside and replaced with the following:
‘(a) The application in respect of prayers 1, 2, 3, and 4 are dismissed.

27 Islandsite para 25.
17

(b) The fifth and sixth respondents are to pay the costs personally ,
including the costs of two counsel where so employed, jointly and
severally.’




_______ ___________
S WEINER
JUDGE OF APPEAL




















18

Appearances

For the appellant s: G Wickins SC with L Van Tonder
Instructed by: Smit Sewgoolam Inc , Johannesburg
McIntyre Van Der Post , Bloemfontein .

For the second respondent: P Louw SC with L Van Gass
Instructed by: Van Der Merwe and Van Der Merwe , George
Honey Attorneys Inc , Bloemfontein .