Diener NO v Minister of Justice and Correctional Services and Others

• Jurisdiction: South Africa
• Citation: 2019 (4) SA 374 (CC)

Diener NO v Minister of Justice and Correctional Services and Others
2019 (4) SA 374 (CC)

2019 (4) SA p374

Citation	2019 (4) SA 374 (CC)
Case No	CCT 3/18; [2018] ZACC 48
Court	Constitutional Court
Judge	Mogoeng CJ, Basson AJ, Cameron J, Dlodlo AJ, Froneman J, Goliath AJ, Khampepe J, Mhlantla J, Petse AJ and Theron J
Heard	November 29, 2018
Judgment	November 29, 2018
Counsel	JL van der Merwe SC (with LK van der Merwe and IM Hlalethoa) for the applicant.; KW Lüderitz SC (with J Vorster) for the third respondent.; J Gauntlett SC (with JE Smit) for the sixth respondent.; AE Bham for the eighth respondent.; J Hershensohn (with L Maite) for the ninth respondent.; X Stylianou (with N Mncube) for the tenth respondent.

Flynote : Sleutelwoorde

Company — Business rescue — Practitioner — Rescue converted to liquidation — Ranking of practitioner's claim for remuneration and expenses — C Companies Act 71 of 2008, ss 135(4) and 143(5).

Headnote : Kopnota

In this case a corporation was put into business rescue and Mr Diener appointed its business rescue practitioner. The business rescue was, however, later converted to a liquidation, and Diener came to submit a claim for his remuneration and costs to the liquidators. It was rejected.

The D Master later confirmed the liquidation and distribution account, and Diener applied for review thereof, and an order that the account include his costs.

When the High Court dismissed the application, Diener appealed to the Supreme Court of Appeal.

The issue there was whether ss 135(4) and 143(5) of the Companies Act 71 of 2008, E on liquidation, caused a practitioner's claim for remuneration and costs to be preferred above the claims of pre-business rescue secured creditors (see [17]).

It held that this was not the case: the practitioner's claim, on liquidation, ranked after the costs of liquidation (see [21]). It dismissed the appeal.

Here, the Constitutional Court confirmed the finding of the Supreme Court of Appeal, F and refused leave to appeal (see [44], [66], [71] and [73]).

Cases cited

Absa Bank Ltd v Marotex (Pty) Ltd [2016] ZAGPPHC 1190: referred to

Cloete Murray and Another NNO v FirstRand Bank Ltd t/a Wesbank 2015 (3) SA 438 (SCA): referred to

Cross-Border Road Transport Agency v Central African Road Services (Pty) Ltd G 2015 (5) SA 370 (CC) (2015 (7) BCLR 761; [2015] ZACC 12): dictum in para [52] applied

DH Brothers Industries (Pty) Ltd v Gribnitz NO and Others 2014 (1) SA 103 (KZP): referred to

Diener NO v Minister of Justice [2016] ZAGPPHC 1251: referred to

Diener NO v Minister of Justice and Others 2018 (2) SA 399 (SCA): H confirmed on appeal

FirstRand Bank Ltd v KJ Foods CC 2017 (5) SA 40 (SCA): dictum in para [75] applied

Ingledew v Financial Services Board In re: Financial Services Board v Van der Merwe and Another 2003 (4) SA 584 (CC) (2003 (8) BCLR 825; [2003] ZACC 8): dictum in para [13] applied

Kubyana v Standard Bank of South Africa Ltd I 2014 (3) SA 56 (CC) (2014 (4) BCLR 400; [2014] ZACC 1): referred to

Mankayi v AngloGold Ashanti Ltd 2011 (3) SA 237 (CC) (2011 (5) BCLR 453; [2011] ZACC 3): dictum in para [70] applied

Natal Joint Municipal Pension Fund v Endumeni Municipality 2012 (4) SA 593 (SCA) ([2012] 2 All SA 262; [2012] ZASCA 13): dictum in J para [18] applied

2019 (4) SA p375

National Education Health and Allied Workers Union v University of Cape Town and Others A 2003 (3) SA 1 (CC) ((2003) 24 ILJ 95; 2003 (2) BCLR 154; [2002] ZACC 27): referred to

National Union of Metalworkers of South Africa and Others v Bader Bop (Pty) Ltd and Another 2003 (3) SA 513 (CC) ((2003) 24 ILJ 305; 2003 (2) BCLR 182; [2003] 2 BLLR 103; [2002] ZACC 30): referred to

Oakdene Square Properties (Pty) Ltd and Others v Farm Bothasfontein (Kyalami) (Pty) Ltd and Others B 2013 (4) SA 539 (SCA) ([2013] 3 All SA 303; [2013] ZASCA 68): referred to

Panamo Properties (Pty) Ltd and Another v Nel and Others NNO 2015 (5) SA 63 (SCA) ([2015] 3 All SA 374; [2015] ZASCA 76): referred to

Paulsen and Another v Slip Knot Investments 777 (Pty) Ltd 2015 (3) SA 479 (CC) (2015 (5) BCLR 509; [2015] ZACC 5): dictum in para [22] C applied

S v Boesak 2001 (1) SA 912 (CC) (2001 (1) SACR 1; 2001 (1) BCLR 36; [2000] ZACC 25): dictum in paras [11] – [12] applied

Wary Holdings (Pty) Ltd v Stalwo (Pty) Ltd and Another 2009 (1) SA 337 (CC) (2008 (11) BCLR 1123; [2008] ZACC 12): referred to.

Legislation cited

The Companies Act 71 of 2008, ss 135(4) and 143(5): see Juta's Statutes of South Africa 2017/18 D vol 2 at 1-456 and 1-458.

Case Information

JL van der Merwe SC (with LK van der Merwe and IM Hlalethoa) for the applicant. E

KW Lüderitz SC (with J Vorster) for the third respondent.

J Gauntlett SC (with JE Smit) for the sixth respondent.

AE Bham for the eighth respondent.

J Hershensohn (with L Maite) for the ninth respondent.

X Stylianou (with N Mncube) for the tenth respondent. F

An appeal from the Supreme Court of Appeal.

Order

1.

The application for leave to file a replying affidavit is dismissed.

2.

The application for condonation for the late filing of the third respondent's written submissions is granted. G

3.

Leave to appeal is refused.

4.

There is no order as to costs in this court.

Judgment

Khampepe J (Mogoeng CJ, Basson AJ, Cameron J, Dlodlo AJ, Froneman J, Goliath AJ, Mhlantla J, Petse AJ and Theron J concurring): H

Introduction

[1] One of the purposes of the Companies Act [1] is to provide for the efficient rescue and recovery of financially distressed companies, in a I manner that balances the rights and interests of all stakeholders. [2] Chapter 6 of the Companies Act makes provision for the execution of

2019 (4) SA p376

Khampepe J (Mogoeng CJ, Basson AJ, Cameron J, Dlodlo AJ, Froneman J, Goliath AJ, Mhlantla J, Petse AJ and Theron J concurring)

this A purpose by introducing and regulating the concept of business rescue.

[2] This is an application for leave to appeal against the order of the Supreme Court of Appeal which dismissed the applicant's appeal. [3] The matter involves the interpretation of certain provisions of the B Companies Act dealing with the ranking of claims for the remuneration and expenses of business rescue practitioners (practitioners). In particular, the matter raises the question whether, when business rescue is converted to liquidation, a practitioner's claim for remuneration and expenses enjoys a 'super preference' over all creditors, whether secured C or unsecured.

Parties

[3] The applicant is Mr Ludwig Wilhelm Diener, the erstwhile practitioner appointed for JD Bester Labour Brokers CC (in liquidation) (JD Bester). D

[4] The first respondent is the Minister of Justice and Correctional Services (Minister). The second respondent is the Master of the High Court of South Africa, Gauteng Division, Pretoria (Master). The Minister and the Master did not take part in the proceedings and no relief is E sought against them.

[5] The third, fourth and fifth respondents were the joint liquidators in the estate of JD Bester. The fourth and fifth respondents no longer occupy those positions and the third respondent, Mr Murray, is at F present the sole liquidator of JD Bester.

[6] The sixth respondent is FirstRand Bank Limited (FRB) and was the secured creditor in the aforementioned estate.

[7] The seventh respondent is the South African Restructuring and G Insolvency Practitioners Association (Saripa), who was admitted as the first amicus curiae in the Supreme Court of Appeal. In this court, Saripa has abided the outcome of this application and has not made any submissions.

[8] H The eighth respondent is the Banking Association of South Africa (Basa). The ninth respondent is the Independent Business Rescue Association of South Africa (Ibrasa). The tenth respondent is Turnaround Management Association Southern Africa NPC (Turnaround). The eighth to tenth respondents all participated in the Supreme Court of Appeal proceedings as amici curiae and were cited by the applicant as I respondents on this basis. [4]

2019 (4) SA p377

Khampepe J (Mogoeng CJ, Basson AJ, Cameron J, Dlodlo AJ, Froneman J, Goliath AJ, Mhlantla J, Petse AJ and Theron J concurring)

Factual background A

[9] JD Bester is a property holding entity. It owned one immovable property and had one major creditor — FRB, which held a mortgage bond over the property. After JD Bester breached its contractual obligations to FRB, judgment was granted against it and an order was made declaring the immovable property executable. A sale in execution was scheduled B for 15 June 2012.

[10] On 13 June 2012, a mere two days before the sale in execution, the sole member of JD Bester passed a resolution placing it in business rescue in terms of s 129(1) of the Companies Act. [5] This resolution was adopted without consultation with JD Bester's sole creditor, FRB. It is C common cause that at the time JD Bester was not conducting any business, had no employees and no assets other than the immovable property over which FRB held the mortgage bond. On the same day the resolution was adopted JD Bester wrote to the Companies and Intellectual Property Commission requesting that Mr Diener be appointed as D practitioner. It completed and filed the necessary form giving notice of the commencement of business rescue proceedings. On 20 June 2012, Mr Diener was appointed.

[11] The day before the sale in execution, on 14 June 2012, after the commencement of business rescue but before the appointment of E Mr Diener, Cawood Attorneys were instructed by JD Bester to launch an urgent application against FRB. The application sought to stay the sale in execution of JD Bester's immovable property, its only asset of any value. An interim order to this effect was granted on 14 June 2012.

[12] Cawood Attorneys...