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[2026] ZAGPJHC 79
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White Rivers Exploration (Pty) Ltd and Others v Polsun Limited (2025,001669) [2026] ZAGPJHC 79 (6 February 2026)
IN THE HIGH COURT OF
SOUTH AFRICA
GAUTENG DIVISION,
JOHANNESBURG
CASE
NUMBER:
2025/001669
(1)
REPORTABLE: YES
(2)
OF INTREST OF OTHER JUDGES: YES
(3)
REVISED: NO
In
the matter between:
WHITE
RIVERS EXPLORATION (PTY) LTD
First
Applicant
LEXINGTON
GOLD LTD
Second
Applicant
LEXINGTON
GOLD SOUTH AFRICA (PTY) LTD
Third
Applicant
MARK
GARETH CREASY
Fourth
Applicant
YANDAL
INVESTMENTS (PTY) LTD
Fifth
Applicant
SUNSWELL
HOLDINGS (PTY) LTD
Sixth
Applicant
and
POLSUN
LIMITED
Respondent
Summary:
Application
for security of costs in respect of proceedings brought by former
peregrine shareholder of a company previously under
business rescue
and business rescue had been terminated, seeking to set aside
cancellation of its shares to invalidate the business
rescue process
and to be reinstated as a shareholder.
Court
assessing prospects of success in a main application and holding
that:
1.
Section 137
of
the
Companies Act 71 of 2008
read with
section 152(6)
expressly
authorises a business rescue practitioner to cancel shares in
accordance with a duly adopted business rescue plan;
2. Constitutional
challenge founded on section 25(1) of the Constitution impermissible
in the light of section 137;
3. Since business
rescue proceedings had terminated in terms of sections 132(2)(b) read
with section 132(2)(c)(ii) with the
result that relief sought was
incompetent, no extant business rescue to be set aside and nothing
capable of implementation;
4. Statutory
structure and legislative requirements of Chapter 6 of
Companies Act
in
relation to procedure in business rescue proceedings discussed.
Finality of business rescue plan on adoption under
section 152(4)
and
termination of proceedings once substantial implementation has
occurred discussed;
5. Reliance on
section 172(1)(a) of the Constitution (if available) without any
engagement of the just and equitable remedial
framework contemplated
in section 172(1)(b) inappropriate given the fact that business
rescue process was fully implemented and
the lapse of time to
institution of the main application;
6. Failure to join
interested shareholders and creditors fatal.
JUDGMENT
FINE
AJ
:
INTRODUCTION
[1]
The present application for security for costs arises as an adjunct
to a substantive application instituted by the respondent
(
Polsun
),
a foreign peregrini of this court and former minority shareholder of
WRE, in which it sought the following relief, namely:
a
The cancellation of the shares
in the first respondent (WRE) pursuant
to the business rescue plan prepared by the second and third
respondent (the BRPs) is declared
unlawful and unconstitutional; (
the
first issue
)
b
The business rescue of the first
respondent (WRE) is set aside; (
the
second issue
)
c
The first respondent (WRE) is ordered
to effect the necessary changes
to the share register and share certificates so as to reflect the
shareholding in the first respondent
(WRE) as it was prior to the
cancellation of shares in the first respondent pursuant to the
business rescue plan prepared by the
BRPs. (
the third issue
)
(
the
main application
)
[1]
[2]
The
application for security of costs does not arise in isolation. Proper
appreciation of both the issues in this application and
the
justification for security is best understood or approached after
identifying the key role players, outlining the background
to the
business rescue and considering the salient features of the business
rescue and the issues which arose in relation thereto.
[2]
BACKGROUND,
HISTORICAL EVENTS AND THE GROUP STRUCTURE OF WRE
[3]
The principle business of WRE prior to its business rescue was
mineral exploration and development. It held substantial
tenement
interests on the Witwatersrand gold fields extending over a large
piece of land which were estimated to contain significant
potential
gold resources suitable for exploration and development. Those
tenement interests comprised prospecting rights, all of
which
constituted valuable assets with significant value to the potential
exploration company.
[4]
WRE’s
share capital was divided into Class A and Class B shares.
[3]
[5]
On 6
January 2023, the board of directors of WRE adopted a resolution in
terms of section 129(1) of the Companies Act
[4]
(
the
Companies Act
>)
placing WRE under business rescue.
[6]
The course
of the business rescue proceedings is neither controversial nor in
dispute. The convening of meetings of creditors, shareholders
and
employees, the circulation of the explanatory statement and the
voting process culminating in the adoption of the business
rescue
plan are all expressly recorded in the plan itself and the documents
before the court. There is no challenge to the procedural
regularity
of those steps. On the contrary, the common cause facts demonstrate
full compliance with the statutory framework, and
that the plan was
duly adopted in accordance with the prescribed majorities. It is
equally clear from the plan itself that WRE
was financially
distressed and incapable of continuing on a solvent basis absent
intervention. The plan expressly records a need
for a restructuring
of WRE’s affairs together with an immediate capital injection.
Provision is accordingly made for fresh
funding through the payment
of a capital sum of £300 000
[5]
,
to be used to pay existing creditors and other parties referred to in
the plan. These facts are not disputed and form the basis
upon which
the plan was proposed and approved.
[7]
A central and indispensable feature of the plan was the cancellation
of all the existing issued shares of the shareholders
and the
allotment and issue of 100 new ordinary shares to the proposer
coupled with the agreed capital contribution. That mechanism
lies at
the very heart of the restructuring and constitutes the commercial
quid pro quo
for the funding required to rescue WRE. The fate
of existing shareholders is therefore squarely addressed in the plan
presented
to all affected parties prior to the vote.
[8]
In short, the plan adopted in April 2023 occurred with the requisite
statutory majorities and following compliance with
the procedural
mechanisms prescribed in Chapter 6 of the
Companies Act.
[9]
Pursuant to
the adopted plan and in accordance with the process, all shares held
by the erstwhile shareholders of WRE, including
Polsun, were
cancelled and 100 new shares were issued and allotted in favour of
Lexington Gold South Africa. In effect, there was
a recapitalisation
facilitated by the payment of a capital sum of £300 000 as
provided for in the business rescue plan
dated 31 March 2023
[6]
which was used to pay creditors, employees and SARS.
[7]
[10]
In the main
application, Polsun challenged the constitutionality of this
cancellation, relying on section 25 of the Constitution
[8]
and contends that
section 137
of the
Companies Act – which
permits “an alteration in the classification or status of any
issued securities of the company other than by way of transfer
of
securities in the ordinary course of business, either on direction of
the court or contemplated in a business rescue plan”
–
does not authorise the cancellation of the Polsun shares (and indeed
all the other shares) by the BRP.
[11]
On that basis, Polsun contends that it is entitled to the relief
sought in the notice of motion as outlined earlier in
this judgment.
THE
CONDUCT OF THE BUSINESS RESCUE PROCEEDINGS
[12]
The outcome of the business rescue proceedings is central to an
understanding of the issues presently before the Court
in the main
application and this application. The relief sought by Polsun is
premised on a wholesale undoing of the consequences
flowing from a
duly adopted and implemented business rescue plan. Any assessment of
Polsun’s prospects of success in the
main action therefore
necessarily begins with the statutory architecture of Chapter 6 of
the
Companies Act and
the structure of sequence of events it
prescribes from commencement through to adoption of the plan to
implementation and termination
of the rescue and the chronological
structure it prescribes.
[13]
Against that backdrop, it is convenient to set out the legislative
sequence, mechanics and consequences of business rescue
as prescribed
in Chapter 6. This framework demonstrates both the finality accorded
to an adopted plan and the limited scope for
collateral challenge
once implementation has occurred. It also provides the necessary
prism through which Polsun’s claims
must be evaluated including
whether a legally cognisable basis exists to disturb the completed
rescue proceedings and whether the
main proceedings discloses any
realistic prospects of success.
[14]
In broad outline, the
Companies Act establishes
a structured
sequential process which confers defined rights and obligations on
affected parties at each stage, culminating in
a binding collective
outcome once the prescribed majorities are achieved. An appreciation
of the framework is essential because
the remedies available to
aggrieved parties are circumscribed and the consequences of adoption,
implementation and termination
of business rescue are dispositive of
the main contention advanced in this application.
[15]
Business rescue commences either by way of board resolution in terms
of
section 129
or by a court order under
section 131
whereupon a
business rescue practitioner is appointed in terms of
section 138
and
assumes full management of the company under
section 140.
From that
point in time, the
Companies Act establishes
a structured statutory
process designed to balance competing interests while facilitating
either the rehabilitation of the company
or a better return for
creditors than liquidation as contemplated in
section 128(1)(b).
[16]
Once appointed, the practitioner investigates the company’s
affairs
(section 141)
, convenes meetings of affected persons
including creditors and shareholders in accordance with
section 147
and
148
. These meetings are integral to the statutory architecture
and allows affected persons to participate meaningfully in shaping
the
proposed business rescue plan.
[17]
The BRP must publish a business rescue plan within the prescribed
period
(section 150)
which is then presented to affected persons at a
duly convened meeting under
section 151.
At that meeting, creditors
and shareholders debate the plan and vote in their respective
classes. Adoption requires the majorities
stipulated in
section
152(2)
ensuring that the outcome reflects a collective commercial
decision.
[18]
If the required majorities are achieved the plan is adopted and
becomes binding on the company and all affected persons
in terms of
section 152(4)
whether or not they supported it. At that point, the
statutory process is intact and the adopted plan replaces prior
rights and
claims with a new regime created by the plan.
[19]
Importantly, once the business rescue plan has been adopted in terms
of
section 152(4)
, the rights and obligations of all affected persons
are thereafter regulated exclusively by the statutory regime. That
outcome
accords not only with the express wording of
section 152(4)
but also with a foundational principle of company law, namely that by
becoming a shareholder and, in particular, a minority shareholder,
one accepts that properly constituted decisions of the majority will
prevail.
[20]
In
Sammel
and Others v President Brand G.M. Co Ltd
[9]
,
at pg. 678 G-679 C, the following was stated:
“
Those summarised
views are now more fully expounded. First, some general principles
that are relevant. By becoming a shareholder
in a company a person
undertakes by his contract to be bound by the decisions of the
prescribed majority of shareholders, if those
H decisions on the
affairs of the company are arrived at in accordance with the law,
even where they adversely affect his own rights
as a shareholder (cf.
secs. 16 and 24). That principle of the supremacy of the majority is
essential to the proper functioning
of companies. Thus, in Levin v.
Felt & Tweeds Ltd.,
1951 (2) S.A. 401
(A.D.), it was contended
(p. 411H) that the rights of the ordinary shareholders were being
altered by the reconstruction of capital
of the company, because,
when they invested money in it, they relied on the fact that the
capital of the company was as it then
was, and that any reduction of
capital therefore adversely affected their rights.
"The answer to this
contention (said CENTLIVRES, C.J., at p. 412A) is that when the
ordinary shareholders invested their money
in the company they must
be taken to have known that under the
Companies Act t
he Court may
confirm a reduction of capital voted for by three-fourths of the
shareholders and that on such a reduction of capital
the preference
shareholders are entitled to be paid out first (i.e. before the
ordinary shareholders)."
The
same view was expressed by EVERSHED, M.R., in answer to a similar
contention in Greenhalgh v. Arderne Cinemas,
(1951) Ch. 286
(C.A.) at
p. 292, which is quoted later in this judgment. Similarly in the
present case, when the minority shareholders became
members of Saai-
B plaas, they must be taken to have known that the prescribed
majority of shareholders, if at any time it appeared
to them to be
necessary or desirable, could and might resolve that the company
should take some action, even some unusual action
as in the present
case, which might adversely affect their rights as shareholders, but
they undertook to be bound by any such decision
if lawfully arrived
at, and by the Court's confirmation of it, if that were also required
by law.
[21]
The business rescue framework gives legislative effect to the aim,
purpose and scope of business rescue which is the
rehabilitation of
an insolvent company in the public interest.
[22]
Once the plan is implemented and the BRP files a notice of
substantial implementation, business rescue terminates by
operation
of law in terms of
section 132(2)(c)(ii)
read with
section 132(2)(b).
That termination marks finality and as such the completed process is
not susceptible to retrospective undoing.
SECURITY
FOR COSTS, DISCRETIONARY NATURE AND ESTABLISHED PRINCIPLES
[23]
It is well
established under South African law that the grant or refusal of an
order for security for costs lies within the discretion
of the court.
That discretion is a narrow or true discretion exercised judicially
upon a consideration of all relevant facts and
circumstances. No
single factor is determinative. Rather, the enquiry is fact-specific,
requiring a balancing of competing considerations
in the particular
case.
[10]
[24]
Moreover,
the Constitutional Court in
Giddey
NO v H C Barnard and Partners
[11]
,
has stated that the enquiry is no longer confined to the traditional
common law considerations arising from litigation between
and incola
and peregrinus. The Constitutional Court emphasised that the
discretion involves a constitutionally infused balancing
exercise: on
the one hand the potential prejudice and inconvenience to the incola,
including the practical difficulty of enforcing
an adverse costs
order; on the other, the peregrinus’ fundamental right of
access to court under section 34 of the Constitution.
The outcome
turns on a fact-intensive weighing of these competing contentions,
neither of which are afforded primacy.
[12]
[25]
As recognised in
Giddey NO v
H C Barnard and Partners
supra,
the discretion to order security for costs requires a
balancing exercise, and the mere risk that an incola may not recover
its costs
is insufficient to justify such relief.
[26]
An enquiry
into the merits of the claim is required to determine whether the
proceedings are vexatious or amount to an abuse but
only where it is
practicable to assess the prospects of success.
[13]
[27]
The
principle was clearly articulated in
Zietsman
v Electronic Media Network Ltd and Others
[14]
where the court stated:
“
[21]
I am not suggesting that a court should in an application for
security attempt to resolve the dispute between
the parties. Such a
requirement would frustrate the purpose for which security is sought.
The extent to which it is practicable
to make an assessment of a
party’s prospects of success would depend on the nature of the
dispute in each case
.”
[28]
In the present case, that enquiry does not require a resolution of
contested factual issues. It turns primarily on questions
of
statutory interpretation and the application of those principles to
largely common cause facts, rendering it both appropriate
and
necessary for this court to have regard to the merits of the proposed
application in the proper exercise of the discretion.
[29]
Against this legal framework, the following facts are common cause.
a
First,
Polsun is a foreign peregrini and holds no assets within the
jurisdiction of this court.
[15]
WRE, the BRPs, and Lexington Gold South Africa are incolae of
this court.
[16]
b
Second, Polsun holds no assets within
the jurisdiction of this court
and has failed to disclose its financial position;
c
Third,
Polsun has failed to disclose its financial position whether by way
of audited financial statements or otherwise and has
provided no
evidence whatsoever of its ability to satisfy an adverse order for
costs;
[17]
d
Fourth,
Polsun has not explained how the present litigation, which seems to
be extensive and complex, is funded. In the absence
of any disclosure
in this regard, it remains an open question whether Polsun would be
able to furnish security for costs if so
directed or to fund the
litigation.
[18]
[30]
These considerations are important but not decisive in the exercise
of a discretion and it is now both appropriate and
necessary to have
regard to the merits of the main application, the projected outcome
of which would constitute an important factor
in the exercise of a
discretion.
THE
CONSTITUTIONAL CHALLENGE (THE FIRST ISSUE)
[31]
The constitutional challenge is formulated in Polsun’s heads of
argument in terms which differ slightly from its
articulation in the
answering affidavits. In essence, it is advanced on the following
basis:
a
First, there is no legislation or other
law of general application
which authorises the cancellation of shares pursuant to a business
rescue plan;
b
Second,
reliance is placed on section 25 of the Constitution which provides
that no one may be deprived of property except in terms
of a law of
general application and that no law may permit arbitrary deprivation
of property
[19]
;
c
Third, it is contended that the
cancellation of Polsun’s shares
pursuant to the adopted business rescue plan accordingly constituted
an unlawful deprivation
of property;
d
Fourthly, it is asserted that even if
cancellation is authorised by
the
Companies Act, cancellation
without compensation is arbitrary and
thus unconstitutional – the implicit contention being that if
section 137
of the
Companies Act is
of application it is itself
unconstitutional.
SECTION
137
[32]
Section 137
of the
Companies Act regulates
the effect of business
rescue on the shareholders and directors of a company. Given its
centrality to the dispute between the parties,
the section is quoted
in full below.
“
137 (1)
During business rescue proceedings an alteration in the
classification or status of any issued securities
of a company, other
than by way of a transfer of securities in the ordinary course of
business, is invalid except to the extent
-
(a) that the court
otherwise directs; or
(b) contemplated in an
approved business rescue plan
.”
[33]
Section 137
cannot be read in isolation. It must be interpreted in
the context of the
Companies Act and
Chapter 6 read as a whole. Of
particular importance is
section 152(6)
, which reads as follows:
“
(6) To the
extent necessary to implement an adopted business rescue plan -
(a)
The practitioner may, in accordance with the plan, determine
the consideration for, and issue any authorised securities of the
company,
despite
section 38
or
40
to the contrary.”
[34]
Section 152
sets out the statutory requirements applicable to the
consideration of the business rescue plan and provides the mechanism
by which
the plan acquires binding force by empowering the business
rescue practitioner to implement the reorganisation of the company's
authorised and issued share capital. Properly construed,
section
152(6)
is the operative bridge between the approval of the plan and
the exercise of the practitioner's powers under
section 137.
[35]
It is now
convenient to ascertain the proper meaning of the phrases as employed
in
section 137
, an exercise which engages the established principles
of statutory interpretation under South Africa law, as set out in
Capitec.
[20]
The point of departure remains the language of the provision itself
but the enquiry does not end there. The words must be construed
purposively and contextually having regard to the aim, purpose and
scope of the business rescue regime created under
section 6
of the
Companies Act.
a
Classification refers to the class
or type of security and the rights
attaching to it such as ordinary as contrasted with preference
shares, voting contrasted with
non-voting shares, redeemable
contrasted with non-redeemable shares. An alteration in
classification therefore would encompass
any change to the nature of
the security itself or the rights inherent in that class;
b
Status by contrast appears to be
broader and concerns the legal
position of a holder/owner of shares including whether or not that
person remains a shareholder
at all and encompasses changes to the
shareholder’s relationship with the company, not merely a
variation in the incidence
of that class of shareholder.
[36]
In my view,
the cancellation of the shares (of all existing shareholders in WRE)
together with the issue and allotment of new shares
falls squarely
within the scope of
section 137.
Section 137
must be interpreted
purposively against the backdrop that business rescue is invoked only
in circumstances of acute financial distress,
where the very object
of the process is the injection of new funding to rescue the company
either as a going concern or to provide
a better dividend for
creditors.
[21]
It follows axiomatically that any genuine rescue will require a fresh
infusion of capital. Absent purposive interpretation, a business
rescue practitioner would be hamstrung in the performance of his/her
statutory duties by an unduly narrow reading of the words
“classification” and “change in status”. It
is contrary to commercial reality to suppose that an external
investor would inject funding into a financially distressed company
absent a capital restructuring or a restructuring of the existing
shareholding.
[37]
The views
expressed in this judgment accord with the finding of Meyer J (as he
then was) in
Moodley
[22]
in
which Moodley had contended that cancellation of shares was not
authorised by the
Companies Act. These
contentions were
authoritatively dealt with by Meyer J in a single paragraph where he
said the following:
“
[50]
Moodley’s contention that the provisions of
s
114
of
the
Companies
Act were
contravened
is founded on the premise that the ODM rescue plan does not
contemplate a cancellation (the buy-back procedure used)
and re-issue
of shares. The premise is wrong. There was no contravention of
s
114.
Moodley’s
contention that the practitioner failed to comply with
sections
46
and
48
(8)
of the
Companies
Act, is
also
wrong. The provisions of
s
48(2)
, requiring compliance with the liquidity and solvency
requirements of
s
46
, are inapplicable to business rescue proceedings where the
company in business rescue is under the control of a business rescue
practitioner and not its board. Moreover,
sections
137(1)
and
152
(6) of
the
Companies
Act give
express
recognition to the business rescue practitioner’s power to
effect the issue of securities, and the alteration in the
classification or status thereof, in accordance with the business
rescue plan. Clause 2.4(4) of the ODM memorandum of incorporation
also specifically provides for the practitioner's power to-
“
...in terms
of
section
152(6)(b)
amend
this Memorandum of incorporation to authorise, and determine the
preferences, rights, limitations and other terms of any securities
that are not otherwise authorised, but are contemplated to be issued
in terms of the business rescue plan...”
[38]
In short,
Meyer J
rejected the contention that the statutory scheme precluded
cancellation in the context of business rescue holding in substance
that
section 137
read together with
section 152(6)
expressly empowers
the practitioner to implement an adopted a business rescue plan
including an alteration of the shareholders’
rights through the
cancellation and reissue of securities.
Moodley's
case confirms the inseparable link between
sections 137
and
152
(6),
and makes it clear that once a business rescue plan has been adopted,
the practitioner is empowered to give effect to it in
accordance with
section 152(6)
, which includes the cancellation and reissue of shares
where required by the plan. This is so even absent an amendment to
the memorandum
of incorporation, since there exists a statutory right
to effect cancellation of the shares in order to implement a duly
adopted
plan.
[23]
[39]
It follows in my view that the contention of Polsun in relation to
the proper interpretation and application of
section 137
is
ill-conceived.
THE
ANCILLARY RELIEF (THE SECOND AND THIRD ISSUES), LEGAL IMPOSSIBILITY
AND FINALITY
[40]
It is convenient to deal with the second and third issues together.
[41]
The second and third forms of relief sought – namely the
setting aside of the business rescue and the alteration
of the share
register - are on any view legally untenable and practically
impossible to implement when considered against the undisputed
factual matrix and the Chapter 6 legislation.
[42]
There is no dispute that all the procedural requirements prescribed
by Chapter 6 were complied with. Meetings were properly
convened,
resolutions duly adopted. Polsun was represented through the business
rescue process by an experienced attorney.
[43]
The business rescue plan was approved by 100% of both creditors and
shareholders. The plan was adopted in April 2023
and on 7 September
2023 the business rescue practitioner filed a notice of termination
in terms of
section 132(2)(b).
Accordingly, even if in principle, the
constitutional challenge is assumed to be sustainable (which it is
not) there is no foundation
either as a matter of fact or law for the
ancillary relief sought. On the terse formulation set out in the
notice of motion, the
court will effectively be required to set aside
a business rescue process which no longer exists and which is legally
and factually
impossible.
[44]
The relief sought ignores the reality that business rescue has been
fully implemented, payments have been made to creditors
and other
parties under the plan, the rights and obligations of shareholders
have been fundamentally restructured and a new shareholding
arrangement has been put in place. No attempt is made to explain how
these completed transactions are to be unwound, who would
be
responsible for implementing such relief or how the position of third
parties and erstwhile shareholders is to be addressed.
[45]
The application is further silent on what is to happen to WRE is if
the business rescue is set aside and why such course
would be
appropriate more than two years after implementation of the plan, or
how the extensive commercial consequences flowing
from the business
rescue proceedings during the period are to be accommodated.
[46]
Moreover,
it is neither stated nor addressed why these issues were not raised
during the course of business rescue proceedings themselves
at a time
when Polsun was legally represented and actively participated in the
process and where the valuation of the shares was
expressly in
issue.
[24]
More particularly, no explanation is offered as to why the alleged
unconstitutionality of the cancellation of the shares was not
raised
contemporaneously, notwithstanding that the cancellation mechanism
was clearly and extensively addressed in the business
rescue plan.
The present constitutional challenge emerges only
ex
facto
after a full implementation of the plan and in circumstances where
Polsun elected not to pursue available remedies at the appropriate
time.
[47]
In these circumstances, the relief is not merely inappropriate, it is
conceptually incoherent and legally incapable of
implementation.
NON-JOINDER
[48]
It is not
in dispute that eight of the shareholders and nine creditors who have
a material interest in the outcome of the main application
and whose
rights would be materially affected by the outcome of the relief
sought in the main application have not been joined.
They are
obviously parties who have a material interest in the main
application and for reasons which remain unclear, have not
been
joined.
[25]
[49]
Polsun
fairly accepted that these parties had not been joined but contended
that the non-joinder was not fatal to the outcome of
the main
application since it constituted a mere technicality which could be
cured at a later stage.
[26]
[50]
In my view, that proposition is wrong for two reasons.
a
First, the
SCA has on two separate occasions authoritatively held that affected
persons must be joined to application of this nature.
[27]
b
In ABSA
Bank, the SCA emphasised that if creditors are not joined, their
position would be prejudicially affected because any business
rescue
plan that they had voted for would be set aside and the money they
would receive would not be paid or in the present instance
might have
to be paid.
[28]
Clearly in the present case, the shareholders and creditors who have
not been joined have a material legal interests in the relief
sought
in the main application.
c
Secondly, the possibility that
such parties may be joined at some
future stage is legally and factually irrelevant. The court must
assess the matter on the basis
of the position as it presently stands
and on that footing, the main application is fundamentally defective
and for that reason
alone ill-fated.
[51]
It follows in my view that
prima facie
the main application is
fatally defective.
THE
CONSTITUTIONAL CHALLENGE IS DEFECTIVE
[52]
It is also my view that the constitutional challenge is procedurally
defective for a number of reasons. First, constitutional
validity has
not been pleaded in compliance with the well-established requirement
that a party advancing such a challenge must
clearly identify the
precise constitutional infringement and set out the material basis
and relevant information required for determination
of the impugned
provisions.
[53]
In
Prince v President Cape Town Law Society and Others
[29]
,
the Constitutional Court stated the following:
“
Parties who
challenge the constitutionality of a provision in a statute must
raise the constitutionality of the provisions sought
to be challenged
a
t
the time they institute legal proceedings. In addition, a
party must place before the Court information relevant to the
determination
of the constitutionality of the impugned provisions.
Similarly, a party seeking to justify a limitation of a
constitutional right
must place before the court information relevant
to the issue of justification. I would emphasise that all this
information must
be placed before the Court of first instance. The
placing of the relevant information is necessary to warn the other
party
of the case it will have to meet, so as allow it the
opportunity to present factual material and legal argument to meet
that case.
It is not sufficient for a party to raise the
constitutionality of a statute only in the heads of argument, without
laying a proper
foundation for such a challenge in the papers or the
pleadings. The other party must be left in no doubt as to the nature
of the
case it has to meet and the relief that is sought. Nor can
parties hope to supplement and make their case on appeal
.”
[54]
In the
present case, that repeatedly stated requirement has been observed in
breach rather than adherence. There is simply no information
before
the court explaining why it is contended that
section 137
is
unconstitutional nor is there any articulation of the legal basis
upon which such invalidity is asserted. It is impermissible
to state
mere conclusions of law without pleading the facts or circumstances
giving rise to the conclusion of law.
[30]
[55]
Second,
once it is accepted that
section 137
of the
Companies Act is
a law of
general application authorising the cancellation of the shares,
constitutional subsidiarity requires any deprivation complaint
to be
directed at that provision and Polsun must demonstrate that
section
1367
is unlawful or unlawfully applied. A freestanding reliance on
section 25
is impermissible. In
My
Vote Counts NPC v The Speaker of National Assembly and Others
[31]
,
the Constitutional Court said the following:
“
[
52]
But it does not follow that resort to constitutional rights and
values may be freewheeling or haphazard. The
Constitution is
primary, but its influence is mostly indirect. It is perceived
through its effects on the legislation and
the common law – to
which one must look first
.
[53]
These considerations yield the norm that a litigant cannot
directly invoke the
Constitution to extract a right he or she
seeks to enforce without first relying on, or attacking the
constitutionality of, legislation
enacted to give effect to that
right. This is the form of constitutional subsidiarity
Parliament invokes here. Once
legislation to fulfil a
constitutional right exists, the Constitution’s embodiment of
that right is no longer the prime mechanism
for its enforcement.
The legislation is primary. The right in the Constitution plays
only a subsidiary or supporting role.
”
[56]
That requirement has not been observed or followed in the present
case.
[57]
Third, the attempt to invoke section 172 while leaving section 137
intact is legally incoherent. If section 137, properly
interpreted,
authorises the cancellation complained of, the deprivation is by a
law of general application and the only cognisable
challenge is to
the statute itself. It seems to me that if section 137 does not
authorise cancellation, the issue is rather one
of unlawfulness and
not constitutional invalidity.
[58]
Fourthly,
even assuming (contrary to what has previously been found) that
section 172 is properly engaged, Polsun has ignored the
remedial
consequences. Section 172 does not mandate an automatic setting
aside
[32]
since the court is required to fashion a remedy which is just and
equitable, taking into account legality, certainty and the interests
of third parties. This is not optional. It is an integral part of
constitutional adjudication.
[59]
Fifthly,
the Constitutional Court has repeatedly declined to unravel completed
transactions even where unlawfulness was established
precisely
because of the just and equitable enquiry. This principle is trite
and has been repeatedly affirmed by the Constitutional
Court in cases
such as
Bengwenyama
Minerals
(Pty) Ltd v Genorah Resources and Others
[33]
,
Kirland
Investments
[34]
,
Asla
[35]
and
Gijima
[36]
.
In each of these cases, the court emphasised that invalidity does not
inexorably entail setting aside and that the remedial discretion
must
be exercised with careful regard to practical justice and
constitutional consequences.
[60]
In the present case, no attempt whatever has been made to engage this
issue, particularly in circumstances where Polsun
is unable to
articulate what is to occur if the constitutional challenge is
successful. It expressly, fairly concedes that: “It
is not
possible for it to propose how to reverse the situation”. That
is, of course, no answer given that the business rescue
terminated in
September 2003.
[61]
There are, apart from these considerations, further factors which in
my view materially impact the relief sought in the
main application
and militate against the prospects of success. It is in any event
impossible to give effect to the proposed relief
sought without
materially affecting the rights of third parties. It has not been
indicated how what is to happen if the business
rescue is set aside
both as a matter of law and practicality, for example what is to
happen to creditors who have already been
paid under the plan? To
erstwhile shareholders? And in particular what is to happen to WRE
once business rescue is set aside?
[62]
More fundamentally it is wholly unclear on what basis the court will
be invited to reverse the business rescue process
in the absence of
any evidence whatsoever as to WRE’s present financial position.
There has been interregnum from at least
September 2023 until January
2025 when the main application was launched – during which the
restructuring was implemented
and WRE’s affairs necessarily
evolved. No financial information in relation to WRE is placed before
the court. In these circumstances,
the relief is not only speculative
but legally untenable.
[63]
A court
cannot be asked in the abstract and without current financial
information (even if the relief was attainable which it is
not) to
unwind the completed rescue process particularly where, as I have
emphasised, third party rights are affected and there
is no coherent
proposal as to how the clock is to be turned back or what the
commercial consequences would be.
[37]
[64]
In the
result, the main application has in my view limited prospects of
success. Both in substance and effect, Polsun seeks to reopen
a
concluded business rescue process long after implementation and in
circumstances where meaningful, remedial relief is neither
pleaded
with precision nor is realistically attainable. Allowing the main
application to proceed on this basis would result in
WRE and the
other parties being put to an expense which is neither fair nor
justified. Objectively assessed, it falls within the
approach
articulated by the SCA in Boost
[38]
.
There is no reason why the applicants should be required to engage in
what would appear to be lengthy litigation where there are
limited
prospects of success and without proper security being furnished.
[65]
In the circumstances, and in the exercise of my discretion, and
taking into account all these circumstances, I am of
the view that
the applicants are entitled to security for costs in an amount to be
determined by the registrar and that further
proceedings in the main
application be stayed depending the furnishing of such security and I
make the following order:
a
Polsun must
furnish security in an amount determined by the Registrar;
[39]
b
The main application is stayed pending
the furnishing of security;
c
Polsun must pay the costs of this
application including the costs
consequent upon the employment of two counsel on scale C.
DM
FINE AJ
ACTING
JUDGE OF THE HIGH COURT
JOHANNESBURG
APPEARANCES
DATE
OF HEARING:
26
January 2026
DATE
OF JUDGMENT:
04
February 2026
APPLICANT’S
COUNSEL:
Adv
M Antonie SC and Adv K Iles
APPLICANT’S
ATTORNEYS:
Werksmans/Mr
J Stockwell
RESPONDENT’S
COUNSEL:
Adv
J Kaplan and Adv Ashton
RESPONDENT’S
ATTORNEYS:
Ian
Levitt and Co.
[1]
In the main application, WRE is the first respondent,
the business rescue practitioners of WRE, the second to fourth
respondents (BRPs), the fifth respondent was Lexington Gold Ltd
(
Lexington
Gold
),
the sixth respondent is Lexington Gold South Africa (Pty) Ltd
(
Lexington
Gold SA
),
the seventh respondent is Mark Creasy (
Creasy
),
the eighth respondent Yandal Investments (Pty) Ltd (
Yandal
),
the ninth respondent is Sunswell Holdings (Pty) Ltd (
Sunswell
).
There were other respondents but they are not implicated in the
present proceedings and it is therefore not necessary to refer
to
them.
[2]
The identities and roles of the respective parties in
both the main application and the security for costs application
will be addressed later in this judgment insofar as the role of any
of the parties is relevant to the outcome of this application.
[3]
The Class A shares were held by Creasy and a company
Silver Meadow Trading 2005 (Pty) Ltd; the B Class shares were
held
by Cornelius Pieters, Steven Timothy O’Shea, Native
Exploration (Pty) Ltd, Insingizi Minerals (Pty) Ltd, the Tahlia
Family Trust, Polsun, Yandal, the Warburton Super Annuation Fund and
the Warburton Family Trust. The A and B Class shareholders
are
collectively referred to as
the
shareholders.
[4]
71 of 2008
[5]
which is defined in clause 2.1.2 of the plan as “the
capital sum”
[6]
The capital sum defined in clause 2.12 of the plan.
[7]
Clause 18.5 of the plan
[8]
The Constitution of the Republic of South Africa,
Act 108 of 1998
[9]
1969 (3) SA 629
A
[10]
Boost
Sports Africa (Pty) Ltd v South African Breweries (Pty) Ltd
2015 (5) SA 38
SCA at paras 13 and 14 and the cases therein referred
to.
[11]
2007 (5) 525 CC
[12]
See also Boost Sports supra at para 15 where the SCA
again emphasised that in terms of the common law the mere inability
by an incola (should be peregrinus) to satisfy a potential costs
order is insufficient to justify an order for security and that
something more is required.
[13]
Boost’s case supra at paras 16-19
[14]
2008 (4) SA 1
SCA at para 21
[15]
WRE, the BRPs and Lexington Gold South Africa are
incolae of this court whilst Lexington Gold, Creasy and Sunwell
are
peregrini of this court.
[16]
v The fact that the other applicants for security are peregrini is
irrelevant.
[17]
Equitable
Trust and Insurance Company of SA Ltd v Registrar or Banks
(T)
1957 (1) SA 689
T, where the court held that in an application
resisting the furnishing of security the ordinary and accepted
course is for a
company is to place a balance sheet before the
court.
[18]
See Boost, supra
[19]
Section 25(1)(a) of the Constitution provides that “No
one may be deprived of property except in terms of
the law of
general application and no law may permit arbitrary deprivation of
property.”
[20]
Capitec
Bank Holdings Ltd and Another v Coral Lagoon Investments 194 (Pty)
Ltd and Others
2022 (1) SA 100
SCA
[21]
In
Limbouris
and Others v Du Toit and Others
2025
(1) SA WCC at 71, the court there summarised and adopted with
approval the summary in Henochsberg on the
Companies Act dealing
with the nature, purpose and intended duration of business rescue.
This summary properly accords with the developing case law
and
constitutes a fair summary of the authorities and correctly
emphasises both the element of immediacy inherent in business
rescue
and the central requirement of a capital injection whether to
rehabilitate the company as a going concern or failing that,
to
achieve a better rate for creditors than will result in liquidation.
This would inevitably require a recapitalisation which
is
indispensable.
[22]
Moodley
v On Digital Media (Pty) Ltd and Others
2014 (6) SA 279
(GJ). Paragraphs [13]-[53] have been excised from
the main judgment but the full text is to be found in SAFLII
(20456-214) [2014
ZAGPJHC137]
[23]
I am in respectful agreement with the statement by
Meyer J in Moodley’s case.
[24]
Valuation of the shares enjoyed a great deal of time
and attention both during the course of business rescue, in
the
affidavits filed in this application and during the course of oral
argument. In my view however it is not relevant to the
outcome of
this application, nor can it impact on the outcome in the main
application.
[25]
There was no dispute that all interested parties have
not been joined both in relation to shareholders and creditors.
The
contention which was advanced was that this could take place in due
course, a matter which I will deal with later in this
judgment. The
same applies in relation to employees
[26]
It is important to note that the identity of all the
shareholders and all creditors was set out in the business
rescue
plan, a matter which appears to be common cause.
[27]
ABSA
Bank v Naude and Others
2016 (6) SA 540
SCA at paras 10-11 and Golden Dividend 339 (Pty) Ltd
v ABSA Ltd [2016] SASCA 79
[28]
In
Reiscor
2 (Pty) Ltd (in business rescue) v Anheuser-Busch Imbev Africa (Pty)
Ltd and Others
2025 (1) SA H, Opperman J albeit it obiter, with reference to ABSA
and Golden Dividend, stated that the failure to join an interested
party was not a mere technicality but fatal to the outcome of the
application.
[29]
2001(2) SA 388 GJ at para 22
[30]
Arthur
E Abrahams and Gross v Cohen and Others
1991 (2)-SA 301C, pg. 309
[31]
2016(1) (132 CC)
[32]
In casu the business rescue and the issue of shares
[33]
2011 (4) SA 113
CC at 85
[34]
MEC
for Health v Kirland Investments (Pty) Ltd t/a Eye Lazer Institute
2014 (3) SA 468
CC at para 46
[35]
Buffalo
City Metropolitan Municipality v Asla Construction (Pty) Ltd
2019 (4) SA 331
CC at para 96
[36]
State
Information Technology Agency SOC Ltd v Gijima Holdings (Pty) Ltd
2018 (2) SA CC
[37]
It is neither necessary nor prudent for the purposes of
this judgment to engage in the contention based on section
11 of the
Mineral and Petroleum Resources Development Act, 28 of 2022,
particularly given the complexity of the provisions and
the fact
that this was not fully ventilated, nor was it necessary for me to
determine the issue of waiver.
[38]
at paras 17-19, 26 and 27
[39]
The parties were in agreement with the amount of
security is to be fixed by the Registrar.