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under the agreement in each case.
123MDS went into business rescue. BMW was a
creditor in the business rescue proceedings. Its claim was
recognised by the business rescue practitioner and BMW
participated in the business rescue proceedings. BMW in
fact voted in favour of a business rescue plan. The principal
controversy is what is meant by clause 18.2 of that plan.
Clause 18.2 of that plan, reads as follows .
U nder the heading: “ [t]he extent to which the
company is to be released from payment of its debts.” i t is
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recorded that:
“Creditors can still assert their rights
against individuals who acted as sureties
or guarantors for the company’s debts
under the plan. If the company voluntarily
surrenders movable assets in the form of
vehicle asset finance agreements to its
security holder by agreement, any
resulting shortfall would be treated as a
concurrent claim and included in the
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compromise as a full and final settlement
of the security holder ’s claim against the
company.”
What that rather inelegantly expressed clause means,
according to the defendants, is that in the event that
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123MDS surrendered the six vehicles that are the subject of
these summary judgment application s to BMW, the vehicles
would be sold and any difference between the price realised
and the remaining amounts due under the finance
agreement would be treated as a concurrent claim in the
business rescue. That , the second and third defendants say ,
was the compromise reached with BMW . Its effect, they say,
was to extinguish the principal claim, and release the
sureties from their liability .
BMW says otherwise. It relies heavily on the opening
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sentence of clause 18.2, which as I have said, says that:
“The c reditors can still assert their rights
against individuals who acted as sureties
or guarantors for the company’s debts
under the plan.”
In correspondence that has passed between the parties,
each side in these cases takes a diametrically opposed view
of the meaning of clause 18.2. If the defendants are right,
then the claims against them as sureties have been
compromised and they were released as a result .
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If BMW is right, the claims were not compromised to
the extent that BMW was still entitled to claim any
difference between the sum realised when the vehicles were
sold on surrender and the amount outstanding on the
finance agreements.
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The question at the summary judgment stage is of
course whether the defence raised by the defendants, in
other words the defendants’ interpretation of clause 18.2,
raises a triable issue.
I was taken during argument to various decisions of
the Supreme Court of Appeal and of the High Court , which
tend towards the view that there is little if any scope, for a
business rescue process to release a surety from their
obligations by operation of law.
What has been left open, particularly in terms of the
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decision of Van Zyl v Auto Commodities (Pty) Ltd 2021
ZASCA 67, handed down on the 3 rd of June 2021, is whether
a business rescue plan, which has been acceded to by a
creditor , can compromise the creditor’s claim in such a
manner that releases the sureties from their obligations.
On the face of things, it is at least a plausible reading
of clause 18.2, that that is exactly what has happened.
Clause 18.2 is reasonably capable of meaning that a
creditor can either pursue the sureties directly, or accept
voluntary surrender of the vehicles from the company and 20
then pursue a concurrent claim for the shortfall in the
business rescue. I also see the sense in BMW’s
interpretation of clause 18.2 , which is that nothing of the
sort happened and that the clause preserves its right to
pursue the sureties for their obligations under the finance