Diener N.O. v Minister of Justice and Correctional Services and Others

JD Bester Labour Brokers CC owned a single immovable property bonded in favour of FirstRand Bank Ltd, its sole major creditor. After default, judgment was granted and a sale in execution was scheduled. Two days before the sale, JD Bester resolved to commence business rescue under section 129 of the Companies Act and requested the appointment of Mr Ludwig Wilhelm Diener as business rescue practitioner. JD Bester had no ongoing business, employees, or assets other than the bonded property. Business rescue halted the sale in execution through urgent litigation. Within two months, Mr Diener concluded that rescue was not feasible and applied for liquidation, which was granted. After liquidation, Mr Diener and attorneys sought payment of their fees and expenses incurred during business rescue. A dispute arose with the liquidators regarding the ranking of these claims. The Master upheld the view that the practitioner’s claims did not enjoy preference over secured creditors. Mr Diener unsuccessfully challenged this decision in the High Court and the Supreme Court of Appeal, and then sought leave to appeal to the Constitutional Court.

Leave to appeal was refused. The application to file a replying affidavit was dismissed. Condonation for late filing of written submissions was granted. No order as to costs was made.

The case provides authoritative clarification on the ranking of business rescue practitioners’ remuneration and expenses when business rescue fails and is converted into liquidation. It confirms that practitioners do not enjoy a super preference over secured creditors, thereby safeguarding the traditional priority of secured claims and limiting potential abuse of business rescue proceedings. The decision reinforces careful statutory interpretation of Chapter 6 of the Companies Act in harmony with the Insolvency Act.