Merchant West (Pty) Ltd v Crestar Printers & Publishers (Pty) Ltd (85778/19) [2021] ZAGPPHC 397 (21 May 2021)

Key Facts

Issues

• Whether there should be appearance on behalf of any of the parties in the BR application.
• If liquidation proceedings include proceedings pre- and post the granting of a provisional or final liquidation order.
• Whether the BR application can be brought at any time (at such a late stage).
• Whether a properly made business rescue application suspends the liquidation proceedings in terms of section 131(6) of the Act; and whether, notwithstanding the suspension of the liquidation proceedings, a court may grant leave for the liquidation application to proceed in terms of section 133(1)(b) of the Act.
• Whether a business rescue application has been made, which incorporates the question of how the court assesses whether it has been made; when the business rescue proceedings commenced; if liquidation proceedings include proceedings pre- and post the granting of a provisional or final liquidation order; whether there should be appearance on behalf of any of the parties in the BR application; whether the applicant in the BR application should apply to be joined in the liquidation application; whether the BR application can be brought at any time (at such a late stage); whether a properly made business rescue application suspends the liquidation proceedings in terms of section 131(6) of the Act; and whether, notwithstanding the suspension of the liquidation proceedings, a court may grant leave for the liquidation application to proceed in terms of section 133(1)(b) of the Act.
• Whether the applicant in the BR application should apply to be joined in the liquidation application.
• When the business rescue proceedings commenced.

Holdings

• The court found that the business rescue application was properly made in terms of section 131(1) of the Act, which suspended the liquidation proceedings. The application was deemed valid as notice was provided to substantially all affected parties, and there is a prima facie case of a reasonable prospect of success due to the Applicant's proposed funding and employee support.
• The court determined that a business rescue application can be brought at any time during liquidation proceedings without requiring an explanation for the timing. This aligns with the legislative intent to allow flexibility in initiating business rescue despite late-stage applications.
• The court ruled that joinder of the business rescue applicant into the liquidation proceedings is not a requirement. The suspension of liquidation under section 131(6) is automatic upon the proper making of the business rescue application, regardless of formal joinder.
• The court dismissed the Applicant's application under section 133(1)(b) to proceed with liquidation, concluding that this provision does not apply to liquidation proceedings suspended by section 131(6). The specific provisions of section 131(6) prevail over the general moratorium in section 133, ensuring the suspension remains in effect.

Remedies

• The court dismissed the Applicant's application for leave to proceed with the liquidation proceedings under section 133(1)(b) of the Companies Act, as the application was not competent to uplift the suspension caused by the business rescue application.
• The Applicant's liquidation application was postponed indefinitely (sine die) with costs reserved, pending the resolution of the business rescue application.

Legal Principles

• The court applied a purposive interpretation of the Companies Act, emphasizing that business rescue proceedings aim to avoid liquidation if feasible. This approach guided the determination that section 131(6) suspends liquidation proceedings to allow for restructuring.
• Section 131(6)'s specific provisions (suspending liquidation proceedings) prevail over the general moratorium in section 133, as the former addresses a unique statutory scenario not covered by the latter's broader language.

Precedent Name

• ABSA Bank v Zwahili
• Panamo Properties (Pty) Ltd v Nell & Others NNO
• Booysen v Jonkheer Boerewynmakery
• Taboo Trading 232 (Pty) Ltd v Pro Wreck Scrap Metals CC & Others
• Safari Thatching Lowveld CC v Misty Mountain Trading 2 (Pty) Ltd
• Others v Leveton
• Oakdene Properties Pty Ltd V Farm Bothasfontein Pty Ltd
• Standard Bank of South Africa Ltd v Gas 2 Liquids (Pty) Ltd

Cited Statute

Judge Name

Passage Text

• I find that section 133(1)(b)... does not provide that an application may be made (whether it is made from the bar or otherwise) to uplift the liquidation proceedings suspended in terms of section 131(6).
• The special and specific provisions of section 131(6) thereby provide impetus to the specific aim of business rescue in order to avoid the liquidation of a company if it is feasible to do so.
• I find that there is a reasonable prospect of success based on the allegations in the founding affidavit, alternatively in terms of the discretion I exercised. The BR application has thus been properly made and section 131(6) automatically becomes applicable and suspends the liquidation proceedings.