CONSTITUTIONAL COURT OF SOUTH AFRICA
Case CCT 305/20
In the matter between:
SHIVA URANIUM (PTY) LIMITED
(IN BUSINESS RESCUE) First Applicant
CHRISTOPHER KGASHANE MONYELA Second Applicant
and
MAHOMED MAHIER TAYOB First Respondent
EUGENE JANUARIE Second Respondent
JUANITO MARTIN DAMONS Third Respondent
Neutral citation: Shiva Uranium (Pty) Limited (In Business Rescue) and Another v
Tayob and Others [2021] ZACC 40
Coram: Madlanga J, Madondo AJ, Majiedt J, Mhlantla J, Pillay AJ,
Rogers AJ, Theron J, Tlaletsi AJ and Tshiqi J
Judgments: Rogers AJ (unanimous)
Heard on: 19 August 2021
Decided on: 9 November 2021
Summary: Companies Act 71 of 2008 — business rescue — practitioner
appointed in terms of section 130(6)(a) — resignation —
section 139(3) — company to appoint substitute
2
ORDER
On appeal from the Supreme Court of Appeal (hearing an appeal from the High Court):
1. The second applicant’s application for leave to appeal is dismissed.
2. The second applicant must pay the first and second respondents’ costs in
this Court.
JUDGMENT
ROGERS AJ (Madlanga J, Madondo AJ, Majiedt J, Mhlantla J, Pillay AJ, Theron J,
Tlaletsi AJ and Tshiqi J):
[1] In this application for leave to appeal, the question on the merits is this. Where,
in the case of a voluntary business rescue initiated in terms of section 129 of the
Companies Act1 (Act), a business rescue practitioner appointed by a court in terms of
section 130(6)(a) in place of the company -appointed practitioner resigns, who has the
power to appoint the court-appointed practitioner’s replacement? The answer depends
on a proper interpretation of section 139(3) of the Act. The Supreme Court of Appeal
held that the power of appointment resided with the company’s board. The second
applicant contends that it resides with the majority of the independent creditors’ voting
interests who were represented in the proceedings giving rise to the court’s appointment
in terms of section 130(6)(a).
1 71 of 2008.
ROGERS AJ
3
[2] All statutory references in what follows are to the Act. It is doubtful whether the
first applicant, Shiva Uranium (Pty) L imited (Shiva), is properly bef ore us at the
instance of the second applicant, Mr Christopher Monyela. Since Mr Monyela is
properly before us, I treat him as the applicant.
Factual background
[3] In February 2018, Shiva’s board resolved to place the company under business
rescue and to ap point Messrs Kurt Knoop and Louis Klopper as its business rescue
practitioners. The Companies Regulations2 distinguish, for purposes of business rescue
proceedings, between “large companies”, “medium companies” and “small companies”
and between a “senior practitioner”, “experience d practitioner” and “junior
practitioner”.3 Shiva is a large company. In terms of the Companies Regulations, a
junior practitioner or experienced practitioner may not be appointed as the practitioner
of a large company except as an assistant to a senior practitioner. 4 Messrs Knoop and
Klopper were both senior practitioners.
[4] In March 2018, Shiva’s largest independent creditor, the Industrial Development
Corporation of South Africa Limited (IDC), launched an application in the High Court
(Gauteng Division, Pretoria) in terms of section 130(1) (b)5 for the removal of M essrs
Knoop and Klopper. Another creditor, Westdawn Investments (Pty) L imited, and a
group of Shiva employees intervened to support the IDC’s application. Messrs Knoop
and Klopper opposed the application.
2 Companies Regulations, 2011, GN R351 GG 34239, 26 April 2011, promulgated in terms of section 233 of the
Act (Companies Regulations).
3 Regulation 127(2) of the Companies Regulations.
4 Regulations 127(3)(b) and 127(4)(b) of the Companies Regulations.
5 Section 130(1)(b) provides that after a company has adopted a resolution to place itself in business rescue, an
affected person may apply to court for an order—
“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.”
ROGERS AJ
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[5] Section 130(6)(a) provides:
“If, after considering an application in terms of subsection (1)(b), the court makes an
order setting aside the appointment of a practitioner—
(a) the court must appoint an alternate practitioner who satisfies the requirements of
section 138, recommended by, or acceptable to, the holders of a majority of the
independent creditors’ voting interests who were represented in the hearing
before the court.”
[6] On 31 May 2018, and s hortly befor e the case was called, Messrs Knoop and
Klopper resigned as Shiva’s practitioners. When the matter came before court , the
parties handed up a draft order which Ranchod J made an order of court. It reads:
“Having read the papers and having heard counsel, the following order is made:
1. The applicants are granted leave to institute the applications under the above
case number in terms of section 133(1)(b) of the Companies Act 71 of 2008
(‘the Companies Act’).
2. The Court notes the resignation of the second and third respondents
[Messrs Knoop and Klopper] as the business rescue practitioners of the first
respondent [Shiva] on 31 May 2018.
3. In substitution for the second and third respondents:
3.1 The Court appoints Cloete Murray (‘Murray’), a senior business rescue
practitioner.
3.2 The fourth respondent [the Companies and Intellectual Property
Commission (CIP C)] i s directed within 48 hours of this order to
appoint an additional business rescue practitioner, subject thereto that
the appointment of such additional business rescue practitioner is
acceptable to the Industrial Development Corporation of South Africa
Limited.
4. Costs of all parties under the above case number, including the costs of two
counsel where so employed, shall be costs in the business rescue proceedings
of the first respondent.”
ROGERS AJ
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[7] This order was irregular. The court’s jurisdiction to appoint a substitute
practitioner in terms of section 130(6)(a) is a power which exists only if, after
considering an application in terms of section 130(1)(b), the court makes an order
setting aside the appointment of a practitioner. The High Court did not make an order
setting aside Messrs Knoop and Klopper ’s appointments . They resigned before the
matter served before Ranchod J. This is not, as counsel for Mr Monyela sought to argue,
to place form over substance. Whatever their motives, Messrs Knoop and Klopper in
fact resigned. There is nothing in the papers to suggest otherwise, and the fact of their
resignation was noted in the order. Because they had resigned, the High Court had no
occasion to determine whether any of the grounds for removal listed in
section 130(1)(b) existed, and in all likelihood Ranchod J did not make any such
determination. Thus, th e jurisdictional prerequisites for appointing a substitute
practitioner in terms of section 130(6)(a) did not exist. It is doubtful, too, whether a
court may delegate its power of appointment to the CIPC, as Ranchod J did in relation
to the appointment of an additional practitioner.
[8] It was uncontentious before us that where a company -appointed practitioner
resigns, the company through its board is the repository of the power to appoint a
replacement. This power is to be found in section 139(3). It is convenient to quote the
entire section, which is headed “Removal and replacement of practitioner”:
“(1) A practitioner may be removed only—
(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;
ROGERS AJ
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(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.”
[9] Following the resignation of Messrs Knoop and Klopper, the company’s board
should have appointed their replacements. There should have been no substantive order
in the section 130 application. But the order was made, it has not been set aside, and it
was acted upon. Pursuant to the order, the CIPC appointed Mr Monyela as a junior
practitioner to assist Mr Murray, and for several months Shiva’s business was under
their control. There was no challenge to the ir appointment. The company’s board did
not claim or exercise a right of appointment. In the circumstances, and in keeping with
the way in which the subsequent litigation was conducted, the present application
should be approached on the basis that Messrs Murray and Monyela were appointed by
a court in terms of section 130(6)(a).
[10] By September 2018 Mr Murray w anted to resign as Shiva’s practitioner. This
meant that a senior practitioner had to be appointed in his place, since Mr Monyela, as
a junior practitioner, could not complete the business rescue proceedings . To this end,
on 18 September 2018 Messrs Murray and Monyela passed a resolution purporting to
appoint the present third respondent, Mr Juanito Damons, as Shiva’s senior business
rescue practitioner. Since part of the applicant’s case hinges on the capacity in which
they passed this resolution, I note the following:
(a) In its heading, the resolution was described as one “passed at a meeting
held by the joint business rescue practitioners acting on behalf of Shiva
ROGERS AJ
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Uranium (Pty) L imited . . . having the full powers and author ity as
prescribed by the Companies Act 71 of 2008”.
(b) The two persons present were described as “practitioners”.
(c) Their resolution was set out in three numbered paragraphs.
(d) The first numbered paragraph stated that Mr Murray voluntarily resigned,
his letter of resignation being attached.
(e) The second numbered paragraph stated: “The company will appoint
[Mr Damons] as joint business rescue practitioner.”
(f) The third numbered paragraph set out the reasons for Mr Damons’
appointment, in essence tha t the company required a senior practitioner
and that Mr Damons’ appointment would be in the best interests of
affected parties because of his extensive experience and the complexity
of the matter.
[11] Immediately after the passing of this resolution, Mr Murray resigned and a filing
was made with the CIPC in respect of Mr Damons’ appointment. This time, however,
there was resistance. On 22 September 2018 Shiva’s board passed a resolution
resolving to appoint the present first and second respondents, Messrs M ahomed Tayob
and Eugene Januarie, as the company’s business rescue practitioners. They are both
senior practitioners. Although the resolution is not explicit in this respect, the board
appears to have accepted that Mr Monyela would remain as a practitioner, assisting the
two new senior practitioners. Steps were taken to file these competing appointments
with the CIPC.
[12] Mr Monyela, purporting to represent Shiva, lodged with the CIPC an objection
to the acceptance of the filing of Messrs Tayob and Januarie’s appointments. In
October 2018 Mr Monyela, on his own behalf and purportedly on behalf of Shiva,
brought proceedings in the Companies Tribunal (Tribunal) to compel the CIPC to
accept the filing of Mr Damons’ appointment and to remove the filing of Messrs Tayob
and Januarie’s appointments. The Tribunal decided the case in Mr Monyela’s favour.
The details of the proceedings in the Tribunal are not now relevant, because it is
ROGERS AJ
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accepted that the Tribunal could not decide the substantive question as to who had the
power to appoint new practitioners. The Tribunal was concerned with the ensuing
administrative processes.
Litigation history
[13] In December 2018 Messrs Tayob and Januarie launched an urgent application in
the High Court (Gauteng Division, Pretoria) in which they sought to interdict the CIPC
from implementing, enforcing or adhering to the Tribunal’s decision pending
proceedings (a) to have the Tribunal’s decision reviewed and set aside and (b) for an
order declaring that they , together with Mr Monyela , were Shiva’s duly appointed
business rescue practitioners.
[14] Messrs Monyela and Damons , on their own behalf and purporting to represent
Shiva, opposed the application. The basis of o pposition was that (a) the Act provided
for a vacancy created by the resignation of the company’s practitioner to be filled by
the company; (b) in terms of the Act, the management of the company was to be
undertaken by its business rescue practitioners, and the board could not act without the
practitioners’ authority; and (c) they (Messrs Monyela and Damons) had not authorised
the company’s board to adopt the resolution which the directors purported to pass on
22 September 2018.
[15] In amplification of this ground of opposition, the argument advanced on behalf
of Messrs Monyela and Damons in the High Court was that , although section 139(3)
provided for the company to appoint Mr Murray’s replacement, section 137 precluded
the board from exercising that power wit hout the approval of the practitioners. In that
regard, section 137(2) provides that during a company’s business rescue proceedings,
each director among other things “must continue to exercise the functions of director,
subject to the authority of the pra ctitioner” and “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”.
ROGERS AJ
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Section 137(4) states:
“If, duri ng a company’s business rescue proceedings, the board, or one or more
directors of the company, purports to take any action on behalf of the company that
requires the approval of the practitioner, that action is void unless approved by the
practitioner.”
[16] The High Court agreed with this argument and dismissed Messrs Tayob and
Januarie’s application with costs.6
[17] Aggrieved, Messrs Tayob and Januarie pursued an appeal to the
Supreme Court of Appeal. Although the proceedings in the High Court had been for an
interdict pending an application for review and a declaratory order, the parties agreed
to ask the Supreme Court of Appeal to determine the substantive question as to whether
or not the appointments of Messrs Tayob and Januarie were valid. The Supreme Court
of Appeal acceded to this sensible request.
[18] It appears from the Supreme Court of Appeal judgment7 that there was a change
of tack in the argument advanced on behalf of Mr Monyela. He jettisoned the argument
which the High Court had accepted. The Supreme Court of Appeal held that the original
argument was unsound, reasoning that in terms of section 140(1)(a) 8 the powers and
duties of the practitioner related to the “management” of t he company in the sense of
running the company on a day-to-day basis. In performing functions falling outside the
ambit of “management”, directors were not subject to the authority of the practitioner.
A decision taken by directors on behalf of the compa ny to appoint a substitute
practitioner in terms of section 139(3) was an act of governance falling outside the ambit
of the practitioner’s “management” of the company. 9 Accordingly, the board had not
6 Tayob v Shiva Uranium (Pty) Limited [2019] ZAGPPHC 37 at para 47.
7 Tayob v Shiva Uranium (Pty) Limited [2020] ZASCA 162 (Supreme Court of Appeal judgment).
8 Section 140(1)(a) provides that during a company ’s business rescue proceedings the practitioner, in addition to
any other powers and duties set out in Chapter 6 of the Act, “has full management control of the company in
substitution for its board and pre-existing management”.
9 Supreme Court of Appeal judgment above n 7 at para 25.
ROGERS AJ
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required the approval of the company’s business rescue practitioners in order to appoint
Messrs Tayob and Januarie as Shiva’s practitioners. Since Mr Monyela has not
persisted with this argument in this Court, it is unnecessary to say anything more about
it.
[19] Mr Monyela’s new argument, with which he persists in this Court, was that
section 139(3) did not, upon Mr Murray’s resignation, confer a power of appointment
on the company at all. Instead, so it was submitted, the power resided with the creditors
contemplated in section 130(6)(a), namely the holders of a majority of the independent
creditors’ voting interests represented in the proceedings before Ranchod J. Such
creditors were said to fall within the ambit of the phrase “or the creditor who nominated
the practitioner” in section 139(3). On the facts, so it was claimed, the IDC held the
majority of the independent creditors’ voting interests and had, through Messrs Murray
and Monyela, appointed Mr Damons.
[20] The Supreme Court of Appeal rejected this argument as a matter of law, finding
it unnecessary to deal with the argument’s factual component. The Supreme Court of
Appeal held that section 139(3) regulated only t wo scenarios in the alternative. If a
company enter s business rescue voluntarily in terms of section 129, the power to
appoint a substitute, if the practitioner resigns, remains with the company. Conversely,
if a company enters business rescue compulsorily in terms of section 131, the power to
appoint a substitute , if the practitioner resign s, remains with the affected person who
brought the application for business rescue. These were the two scenarios indicated by
the phrase “as the case may be” in section 139(3).
[21] Mr Monyela now seeks leave to appeal against the order of the Supreme Court
of Appeal.
ROGERS AJ
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Jurisdiction
[22] Mr Monyela contends on two grounds that this Court has jurisdiction in terms of
section 167(3)(b): first, that the proposed appeal is a constitutional matter; and second,
that it raises an arguable point of law of general public importance.
[23] The proposed appeal is said to be a constitutional matter on the following basis.
Section 39(2) of the Constitution requires a court, when interpreting any legislation, to
promote the spirit, purpo rt and objects of the Bill of Rights. Section 9 of the Bill of
Rights provides that everyo ne is equal before the law and has the right to equal
protection and benefit of the law, and prohibits unfair discrimination. The Supreme
Court of Appeal ’s interpretation of section 139(3) results in unfair discrimination
between creditors: a creditor who brings proceedings in terms of section 131 has an
ongoing power to appoint a substitute practitioner, whereas creditors who play a role in
the appointment of a practitioner in terms of section 130(6)(a) do not.
[24] The invocation of sections 9 and 39(2) of the Constitution is specious. It was
not raised in the High Court or the Supreme Court of Appeal. It is a belated attempt to
clothe an ordinary matter of statutory interpretation in constitutional garb. There is not
a sufficient commonality of circumstan ces between the two categories of creditors to
implicate section 9:
(a) The affected person contemplated in section 131(1), usually a single
creditor, is a person who has taken the initiative to have the company
placed in business rescue. In terms of sect ion 131(5), the court – if it
makes an order placing the company in business rescue – may appoint an
“interim practitioner” who has been “nominated” by the petitioning
creditor. This appointment is interim, because in terms of section 131(5)
the appointment is “subject to ratification by the holders of a majority of
the independent creditors’ voting interests at the first meeting of creditors,
as contemplated in section 147”.
ROGERS AJ
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(b) The creditors contemplated in section 130(6)(a) are persons who have not
taken the initiative to place the company in business rescue. The company
dealt with in that section is one which was placed in business rescue by
resolution of its board. The creditors have simply made a challenge to the
company’s appointment of the practit ioner, and they have to establish
grounds for the company-appointed practitioner’s removal. Although
notionally there might only be a single independent creditor represented
in the proceedings before the court, the section in its formulation
envisages a p lurality of creditors. They are not given a power of
“nomination”. The court’s power to appoint the practitioner is simply
subject to such practitioner having been “recommended by, or acceptable
to” the creditors in question. The appointment once made i s final, not
interim.
[25] The lawmaker could have decided that once there has been a successful
challenge in terms of section 130 (1)(b), the company should lose its power of
appointment and that the power should switch to creditors . However, that would be a
policy choice, not one dictated by the requirements of constitutional equality. It would
similarly be a policy choice to decide that the company should retain its ongoing power
of appointment, subject to fresh challenge if the new appointee falls foul of one or other
ground of removal set out in section 130(1)(b).
[26] Accordingly, this case does not engage our constitutional jurisdiction. It does,
though, fall within our general jurisdiction. Business rescue proceedings are a common
phenomenon of our corporate life. They serve the important economic and social goal
of trying to save financially distressed companies so that they can continue to contribute
to the economy and so that employees do not lose their jobs. Business rescue
practitioners play a vital role in the success of business rescue proceedings. It is
desirable that there should be clarity about the interpretation of the statutory provisions
governing their appointment.
ROGERS AJ
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[27] Statutory interpretation is a question of law. The question here is of ge neral
public importance, since the answer will govern the appointment of practitioners in all
cases where a practitioner appointed in terms of section 130(6)(a) dies, resigns or is
removed from office. Mr Monyela’s argument rises to the level of being “arguable”: it
is not “totally unmeritorious”, has “a measure of plausibility” and “some prospects of
success”.10 It is novel,11 the Supreme Court of Appeal’s judgment being the first judicial
pronouncement on the appointment of business rescue practitioners in this setting.
[28] The fact that the matter engages our jurisdiction does not mean , without more,
that it is in the interests of justice to hear the appeal. In the present case, as in Diener,12
the question whether it would be in the interests of justice to do so turns on
Mr Monyela’s prospects of success, which I shall address presently.
Clearing away irrelevancies
[29] The case in the High Court and the Supreme Court of Appeal was about the
validity of Messrs Tayob and Januarie ’s appointment . The relief foreshadowed by
Messrs Tayob and Januarie in the interdict application was an order establishing that
they, together with Mr Monyela , were Shiva’s duly appointed business rescue
practitioners. If Mr Monyela’s argument before us is correct, Shiva’s board had no
power to appoint Messrs Tayob and Januarie. Since Messrs Tayob and Januarie did not
claim that their appointment carried the approval of the creditors contemplated in
section 130( 6)(a), their appointments would be invalid. This conclusion would not
depend on any disputed factual matter.
[30] The invalidity of Messrs Tayob and Januarie’s appointment would not mean ,
without more, that Mr Damons ’ appointment was valid. That would depend on the
10 Paulsen v Slip Knot Investments 777 (Pty) Limited [2015] ZACC 5; 2015 (3) SA 479 (CC); 2015 (5) BCLR 509
(CC) at paras 21-2.
11 Id at para 23(e).
12 Diener N.O. v Minister of Justice and Correctional Services [2018] ZACC 48; 2019 (4) SA 374 (CC); 2019 (2)
BCLR 214 (CC) (Diener) at paras 35-6.
ROGERS AJ
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answers to the further question s as to whether the IDC held the majority of the
independent creditors’ voting interests in the proceedings before Ranchod J and
whether, in appointing Mr Damons, Messrs Murray and Monyela were acting at the
IDC’s behest. There were no factual allegations on these issues in the High Court or
the Supreme Court of Appeal. The allegations were made for the first time in
Mr Monyela’s founding and replying affidavits in this Court. Mr Monyela did not have
leave to file a replying affidavit. There was no application to adduce further evidence
in the proposed appeal. No regard could thus be had to the new facts alleged in this
Court. The new allegations, I may add, are inconsistent with the formulation of the
practitioners’ resolution.
[31] Be that as it may, no relief has been sought in connection with Mr Damons’
appointment. If Mr Monyela’s argument on the law were right, we could not find on
the facts that Mr Damons was validly appointed, but the creditor or creditors
contemplated in section 130(6)(a) could, if they have not already done so, make a valid
appointment. If Mr Monyela’s argument on the law is wrong, Messrs Tayob and
Januarie were validly appointed. It would then also follow, as a matter of law, that Mr
Damons was not validly appointed, although no relief to that effect has been sought.
[32] Before turning to the question of law, I must caution that litigants making
affidavits in this Court in applications for leave to appeal must, in regard to the merits
of the p roposed appeal, scrupulously confine themselves to the evidence that was
adduced in the courts from which the proposed appeal emanates. In the absence of an
application for leave to adduce further evidence on appeal, this Court should be entitled
to accept that the affidavits in this Court assert no facts on the merits which were not
contained in the record before the courts below.
The interpretation of section 139(3)
[33] The formulation of section 139(3) indicates that it is dealing with two scenarios
(X or Y “as the case may be”), and the lawmaker appears to have taken for granted that
it would be obvious to those applying the section whether a case fell into one category
ROGERS AJ
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or the other, because on this depends whether the power of appointment lies with the
“company” or with the “creditor who nominated the practitioner”. To see what it is that
the lawmaker has taken as obvious, it is necessary to consider the provisions of Chapter
6 of the Act as a whole.
[34] A company can be placed in business rescue in only two ways, voluntarily by a
board resolution in terms of section 129 or compulsorily by court application in terms
of section 131.
[35] In regard to the first of these pathways to business rescue, section 129(3)(b)
provides that within five business days after the company has adopted the resolution
placing itself in business rescue, it must “appoint a business rescue practitioner who
satisfies the requirements of section 138, and who has consented in writing to accept
the appointment”. This appointment is subject to challenge by an “affected person” in
terms of section 130(1)(b). In terms of section 130(4), “[e]ach affected person” has a
right to participate in the challenge proceedings.
[36] In regard to the second pathway to business rescue, section 131(1) entitles an
“affected person” to apply for the company to be placed in business rescue.
Section 131(3) again provides that “[e]ach affected person” has the right to participate
in the business rescue application. Section 131(5) stipulates that if the court places the
company in business rescue, it may make a further order “appointing as interim
practitioner a person who satisfies the requirements of section 138, and who has been
nominated by the affected person who applied in terms of subsection (1)”. This
appointment is “subject to ratification by the holders of a majority of the independent
creditors’ voting interests at the first meeting of creditors, as contemplated in
section 147”. A practitioner appointed in this way may be removed by order of court
in terms of section 139(2) on any of the grounds listed in that section.
[37] That section 139(3) applies to these two scenarios is obvious and uncontentious.
If the practitioner appointed by the company in terms of section 129(1)(b) resigns, the
ROGERS AJ
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company in terms of section 139(3) may appoint the substitute. If the practitioner
appointed in terms of section 131(5) resigns, the “affected person” who applied for the
company to be placed in business rescue, and who made the nomination envisaged in
section 131(5), may appoint the substitute.
[38] The reference in section 139(3) to the “creditor” who nominated the practitioner
is infelicitous, since the “affected person” envisaged by section 131(5) might not be a
creditor. It must be accepted, as it was by the Supreme Court of Appeal, 13 that
section 139(3) was carelessly formulated on the assumption that the person petitioning
for compulsory business rescue would be a creditor, as is most commonly the case.
Unless “creditor” in section 139(3) is read as meaning “affected pers on”, or unless the
words “or other affected person” are read into the section immediately after “creditor”,
there would be no provision for the appointment of a substitute where the person who
applied for compulsory business rescue was an affected person in a capacity other than
as creditor. If at all possible, a statute must be interpreted so as to avoid a lacuna,14 and
if the legislative intent is “clear and indubitable” the court may expand the literal
meaning of words so as to avoid the lacuna.15
[39] The question is where to accommodate the power to appoint the replacement of
a practitioner appointed by the court in terms of section 130(6)(a) when that practitioner
resigns. In such a case, one is dealing with a voluntary business rescue initiated in terms
of section 129. However, the person who has resigned is not the practitioner appointed
by the company in terms of section 129(3)(b) but a practitioner appointed by the court
in terms of section 130(6)(a) pursuant to a successful challenge to the comp any’s
13 Supreme Court of Appeal judgment above n 7 at para 18, approving a statement to this effect in Delport and
Vorster Henochsberg on the Companies Act 71 of 2008 (LexisNexis, Durban 2021) vol 1 at 526(50).
14 Davehill (Pty) Limited v Community Development Board [1987] ZASCA 120; 1988 (1) SA 290 (A) at 300C-D
relying on Koller, N.O. v Steyn, N.O. 1961 (1) SA 422 (A) at 429B-C.
15 Summit Industrial Corporation v Claimants Against the Fund Comprising the Proceeds of the Sale of the M.V
Jade Transporter [1987] ZASCA 2; 1987 (2) 583 (A) at 596I -597B. See also Barkett v SA Mutual & Assurance
Co Limited 1951 (2) SA 353 (A) at 362H -363D and Airports Company South Africa SOC L imited v Imperial
Group Limited [2020] ZASCA 2; 2020 (4) SA 17 (SCA) at paras 67 -72. This is a particular application of the
well-known principle in Venter v R 1907 TS 910 that a court may depart from the literal meaning of words to
avoid manifest absurdity, a principle approved in this Co urt in a number of cases (see, for example, Cool Ideas
1186 CC v Hubbard [2014] ZACC 16; 2014 (4) SA 474 (CC); 2014 (8) BCLR 869 (CC) at para 28).
ROGERS AJ
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appointment. Since the right to appoint the substitute in place of the practitioner whose
appointment was successfully challenged does not lie with the company but with the
court acting in terms of section 130(6)(a), a legislative choice against rev iving the
company’s right of appointment if the court -appointed substitute resigns would be
understandable. The question is whether section 139(3) can, and should, be interpreted
as achieving this outcome.
[40] The argument for Mr Monyela is that this outcome can be achieved through a
generous interpretation of the phrase “or the creditor who nominated the practitioner”
in section 139(3). In my view, there are a number of factors which militate against this
interpretation.
“who nominated”
[41] In the first place, there is the use of the word “nominated” in section 139(3). The
only place where that word is used in Chapter 6 is in section 131(5), where it is used
with reference to the practitioner “nominated” by the affected person bringing the
application for com pulsory business rescue. Counsel for Mr Monyela submitted that
the phrase “recommended by, or acceptable to” in section 130(6)(a) is substantively
equivalent to a nomination.
[42] I agree that in this statutory setting “recommendation” is not far removed from a
“nomination”. However, in the context of section 130(6), the independent creditors
may make no recommendation at all or there may be no majority in favour of any
particular practitioner. If they do by majority make a recommendation, they may
recommend X or Y, leaving the choice to the court. They may recommend X while
other parties prefer Y, and the court may appoint Y on the basis that Y, although not
recommended by the independent creditors, is acceptable to them. The appointment of
someone who is merely “acceptable to” the creditors is not closely akin to an act of
nomination by the creditors. Moreover, the point is not merely that “nominated by” is
not substantively the same as “recommended by or acceptable to”; the choice of words
matters, because it sheds light on what the lawmaker had in mind in section 139(3). If
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the section had been intended to cover the case of section 130(6)(a), section 139(3)
would, I consider, have expanded upon the phrase “or the creditor who nominated the
practitioner”.
“or the creditor”
[43] Section 139(3) refers to the “creditor” who nominated the practitioner. As
explained, this should be read as “creditor or other affected person” who nominated the
practitioner. Concentrating, however, on the word “creditor”, the definition of “affected
person” in section 128(1)(a) includes, among others, a “creditor” of the company. The
term “independent creditor” is defined in section 128(1)(g). A company’s independent
creditors are a subset of its creditors. So an “affected pers on” who is a creditor might
be an independent creditor or a creditor who is not independent.
[44] The importance of this is that a creditor applying for compulsory business rescue
in terms of section 131(1) need not be an independent creditor. It suffices tha t such
person is a creditor, independent or not. If the creditor’s application is successful, such
creditor, whether independent or not, gets to nominate the practitioner. Consistently
with this, section 139(3) refers to the “creditor” in unqualified language.
[45] On Mr Monyela’s argument, however, the language of section 139(3) must be
understood as referring also to the independent creditors contemplated in
section 130(6)(a). But what if no independent creditors were represented in the
section 130 proceedings? Any “affected person” may bring section 130 proceedings.
Such person, if a creditor, does not need to be an independent creditor. The affected
person bringing the application, and the affected persons (if any) who participate in the
proceedings, may be a combination of shareholders, trade unions and non -independent
creditors. In such a case, so it seems to me, the court’s power of appointment in terms
of section 130(6)(a) can not be conditioned by a recommendation or acceptance by
independent cr editors. Although the court would presumably take into account the
views of the affected persons participating in the proceedings, there would be no
quantifiable “voting interest” by which to determine whose views should carry the day.
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[46] In a case such as I have supposed in the preceding paragraph, the phrase “or the
creditor who nominated the practitioner” in section 139(3) could not refer to the
“independent creditors” envisaged in section 130(6)(a) because there would be none.
Who then has the power of appointment in terms of section 139(3)? The answer must
be the company, since otherwise there would be a lacuna, and, as I have said, statutes
must as far as reasonably possible be interpreted to avoid a lacuna. If the company is
to have the power of app ointment in this situation, it shows that the lawmaker did not
turn its face against a company’s continued involvement in appointing substitute
practitioners after a successful section 130(1)(b) challenge. This greatly weakens the
force of the argument that the company could not have been intended to retain the right
of appointing a substitute upon the resignation of a practitioner recommended by or
acceptable to a majority of independent creditors in terms of section 130(6)(a).
The use of the singular form of “creditor”
[47] Section 139(3) refers to an appointment by “[t]he company” or “the creditor” in
the singular. Section 6(b) of the Interpretation Act16 provides that “in every law, unless
the contrary intention appears . . . words in the singular number include the plural, and
words in the plural number include the singular”. Since it is conceivable that two or
more creditors might join as co -applicants in seeking to have a company placed in
business rescue in terms of section 130, section 139(3) could no tionally encompass
more than one creditor.
[48] Nevertheless, it is not without significance that the lawmaker chose in
section 139(3) to refer to “creditor” in the singular. Section 131(1) refers to an
application for business rescue by “an affected person” as an “applicant”, both in the
singular. Likewise, section 131(5) refers to a nomination “by the affected person” in
the singular. The use of “creditor” in the singular in section 139(3) is consistent with
16 33 of 1957.
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the second of the two scenarios being a referenc e to nomination in terms of section
131(5).
[49] By contrast, section 130(6)(a) refers to a practitioner recommended by, or
acceptable to, “the holders of a majority of the independent creditors’ voting interests”.
Although there might be only one independent creditor represented in the
section 130 proceedings, the lawmaker’s formulation was “independent creditors” in
the plural. If section 139(3) had been intended to include the independent creditors
envisaged in section 130(6)(a), the section could have bee n expected to refer to “the
creditor or creditors who nominated”.
Section 131(5)
[50] In the case of compulsory business rescue, the affected person who brought the
application nominates a practitioner, who is appointed as an interim practitioner, subject
to ratification by the holders of a majority of the independent creditors’ voting interests
at the first meeting of creditors. It was not suggested in argument that where a
practitioner whose interim appointment has been ratified resigns, the power of
appointment conferred by section 139(3) vests in those holding the majority of the
independent creditors’ voting interests. The power of appointment plainly resides with
the affected person who brought the application and nominated the interim practitioner.
[51] Accordingly, in the case of compulsory business rescue, the lawmaker decreed
that, in the event of the practitioner’s resignation, the power of appointment would stay
with the affected person who applied for business rescue rather than switching to the
body of independent creditors who ratified the appointment. The fact that the lawmaker
made this choice in relation to compulsory business rescue militates against a view that,
in the case of voluntary business rescue, the power of appointment would, after a
successful section 130 challenge, switch from the company to the body of independent
creditors.
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Removal of practitioner after approval of business rescue plan
[52] In terms of section 130(1), an application under that section for the removal of a
company-appointed practitioner cannot be brought once a business rescue plan has been
adopted in terms of section 152. Since the process of implementing approved business
rescue plans may on occasion be time -consuming, it is conceivable that circumstances
might come to light, after approval of the plan, which warrant the removal of the
practitioner. Such an application could be brought by an affected person in terms of
section 139(2). If the removal application succeeded, section 139(3) would
undoubtedly confer on the company the right to appoint the substitute, since the
removed practitioner would not, even on Mr Monyela’s argument, have been
“nominated” by the affected person. This is yet another indication that the lawmaker
was content for the company to retain the right of nominating the practitioner, even
though the company’s initial appointee was subsequently removed by court order.
Section 7(k) of the Act
[53] A final but important consideration is this. Section 5(1) requires that the Act be
interpreted and applied in a manner that gives effect to the purposes of the Act set out
in section 7. Section 158 stipulates that when determining a matter brought before it in
terms of the Act, a court “must promote the spirit, purpose and objects of the Act”; and
that if any provision of the Act read in its context can be reasonably construed to have
more than one meaning, the court must prefer the meaning “that best promotes the spirit
and purpose of this Act, and will best improve the realisation and enjoyment of rights”.
[54] In terms of section 7(k), one of the purposes of the Act is to “provide for the
efficient rescue and recovery of financially distressed companies, in a manner that
balances the rights and interests of all relevant stakeholders”. Section 7(l) proclaims
another purpose of the Act as being to “provide a predictable and effective environment
for the efficient regulation of companies”. In my opinion, the interpretation which the
Supreme Court of Appeal adopted gives effect to these stated purposes and best
promotes the spirit and purposes of the Act.
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[55] Business rescue is meant to be expeditious.17 Section 132(3) provides that if the
business rescue proceedings have not ended within three months after the start of the
proceedings, or such longer time as the c ourt on application by the practitioner may
allow, the practitioner must prepare monthly reports and deliver them to each affected
person and to the court (in the case of compulsory business rescue) or to the CIPC (in
the case of voluntary business rescue). Section 141(1) obliges the practitioner, as soon
as practicable after being appointed, to investigate the company’s affairs, business,
property and financial situation. Within 10 days of appointment the practitioner must,
in terms of sections 147(1) an d 148(1), convene first meetings of creditors and
employees’ representatives. Section 150(5) requires that a business rescue plan be
published within 25 business days after the da te on which the practitioner was
appointed, unless this period is extended by the court or by the holders of a majority of
the creditors’ voting interests. The consideration of the plan is itself subject to
time-limits which are set out in section 151.
[56] Given the desirability of the speedy and successful conclusion of business rescue
proceedings, a court should prefer an interpretation which aids rather than impedes the
attainment of this goal. If section 139(3) bears the interpretation which the Supreme
Court of Appeal adopted, the appointment of a substitute practitioner will be quick and
uncontentious. There will be no doubt as to who can make the appointment. Depending
on whether the business rescue is voluntary or compulsory, the substitute appointment
will be made by the company or by the affected person who brought the business rescue
application. In the case of voluntary business rescue, there is a balancing of the rights
and interests of stakeholders: the company retains its right of appointment, while
section 139(3) expressly preserves the right of creditors to launch a fresh challenge in
terms of section 130(1)(b), if grounds for such challenge exist.
17 Diener above n 12 at para 38.
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[57] By contrast, the interpretation for which Mr Monyela argues is beset with
potential obstacles:
(a) First, there would be a need to identify who the independent creditors are
who were represented in the section 130 proceedings.
(b) Second, it would be necessary to decide whether the creditors with the
power to make the substitute appointment are the full body of independent
creditors who were represented in the section 130 proceedings, or only
the subset who held the majority of the creditors’ voting interests in
recommending or signifying acceptance of the practitioner appointed by
the court.
(c) Third, there would have to be machinery to convene a meeting of the
creditors so that they could vote on the appointment, bearing in mind that
the erstwhile practitioner, who might have been a sole practitioner, would
no longer be in office. The Act contains no such machinery.
(d) Fourth, there might be disputes as to whether a pa rticular creditor is
independent and as to the proper appraisal of a creditor’s “voting interest”
as defined in section 128(1)(j), i.e. “an interest as recognised, appraised
and valued in terms of section 145(4) to (6)”.
(e) Fifth, what if, at the meeting of independent creditors, there is no majority
in favour of any particular substitute? The Act contains no mechanism to
resolve such a deadlock.
[58] Obstacles of this kind could delay the appointment of a new practitioner, and in
the meanwhile the company wo uld be left rudderless, jeopardising its prospects of
successful rescue.
Conclusion
[59] For all the reasons stated above, Mr Monyela has not demonstrated that there are
reasonable prospects of success of this Court reversing the Supreme Court of Appeal’s
conclusion. That Court held, rightly so, that upon Mr Murray’s resignation the right to
appoint his replacement vested in Shiva’s board of directors and that Messrs Tayob and
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Januarie were validly appointed. It is thus not in the interests of justice to hear the
appeal, and it follows that Mr Monyela’s application for leave to appeal must be
dismissed.
[60] As to costs, there is no reason why they should not follow the result. The
conclusion of the Supreme Court of Appeal’s judgment is that since 22 September 2018
the company’s business rescue practitioners have been Messrs Tayob, Januarie and
Monyela. Mr Monyela, acting on his own, was not entitled to cause Shiva to pursue an
appeal to the Supreme Court of Appeal or to pursue a further application to this Court .
Shiva should thus not be made to bear any costs.
[61] The Supreme Court of Appeal ordered Messrs Monyela and Damons to pay the
costs of the appeal and the costs of the High Court proceedings. Mr Damons did not
join with Mr Monyela as an applicant in this Court, instead being cited as a respondent.
In the circumstances, Mr Monyela must pay Messrs Tayob and Januarie’s costs in this
Court.
Order
[62] The following order is made:
1. The second applicant’s application for leave to appeal is dismissed.
2. The second applicant must pay the first and second respondents’ costs in
this Court.
For the Second Applicant:
For the First and Second Respondents:
S Symon SC and G D Wickins SC
instructed by Smit Sewgoolam
Incorporated
P F Louw SC instructed by Aphane
Attorneys