Timasani (Pty) Ltd (in business rescue) and Another v Afrimat Iron Ore (Pty) Ltd

Timasani (Pty) Ltd, a mining company, was placed in business rescue on 28 July 2015. The business rescue practitioner (BRP), Mr Werner Cawood, was authorised to sell the company's assets. Afrimat Iron Ore (Pty) Ltd made an offer to purchase Timasani's assets (a farm, mineral rights and mining equipment) for R17 million. Afrimat paid a deposit of R1,700,000 (10% of the purchase price) into a separate investment account held by Timasani with Investec Bank on 29 March 2017. The BRP confirmed in writing that the deposit would be retained on behalf of Afrimat in an interest-bearing account pending the outcome of due diligence and conclusion of final agreements. However, the sale did not proceed due to disputes over the auctioneer's commission, advertising costs, and an undisclosed encumbrance on the farm by a mineral rights-holder, Soliter. The suspensive conditions were not fulfilled and the sale agreements were never concluded. Afrimat's offer lapsed on 21 June 2017 and it requested repayment of the deposit. When the deposit was not repaid, Afrimat launched an application in the High Court for repayment.

• Whether section 133 of the Companies Act 71 of 2008, which provides for a moratorium on legal proceedings against a company in business rescue, precluded Afrimat from claiming repayment of the deposit
• Whether the deposit constituted property belonging to Timasani or lawfully in its possession within the meaning of section 133(1)
• Whether the deposit was property over which Timasani exercised powers of a trustee as contemplated in section 133(1)(e)
• Whether Afrimat was required to join all creditors of Timasani as parties in terms of section 145(1) of the Act
• Whether the auctioneer should have been joined as a party to the application

The appeal was dismissed with costs. The High Court's order directing Timasani to repay the deposit of R1,700,000 together with interest to Afrimat was upheld.

Section 133(1) of the Companies Act 71 of 2008 prohibits legal proceedings in relation to property belonging to the company in business rescue or lawfully in its possession. The moratorium does not apply to legal proceedings to recover property that neither belongs to the company nor is lawfully in its possession. Where a contract is subject to suspensive conditions which are not fulfilled, the contract is void ab initio and any deposit paid in anticipation of fulfilment of the condition must be returned unless the contract provides otherwise. A party who paid a deposit under such circumstances is entitled to its return as the company has no legal right to retain it. Section 145(1)(a) of the Act is a general notification requirement to creditors of court proceedings during business rescue; it does not require joinder of all creditors in legal proceedings involving the company. The duty to give notice to creditors rests on the business rescue practitioner. Property held subject to powers of a trustee under section 133(1)(e) refers to companies that hold funds in trust with fiduciary duties, such as incorporated law firms, estate agents, and financial institutions - not to deposits paid pending conclusion of sale agreements.

The Court noted that this appeared to be the first occasion on which it had been sought to invoke the moratorium in section 133(1) in relation to a transaction concluded after the commencement of business rescue or property coming into a company's possession after that date. The Court raised the question whether, properly construed, section 133(1) is concerned only with transactions concluded prior to the commencement of business rescue and the possession or ownership of property acquired or possessed prior to that date. The Court observed that if the moratorium applied to post-commencement transactions, it may operate to dissuade third parties from entering into transactions necessary to keep the business afloat during rescue attempts. However, as neither counsel was in a position to make helpful submissions on this point, the Court decided it would not be appropriate to decide the issue without full argument, and resolved the case on the assumption that the moratorium may have effect in relation to transactions occurring after commencement of business rescue. The Court also commented that section 133 is "not easy to construe" and provided detailed analysis of its structure and language.

This judgment provides important clarification on the scope and application of the business rescue moratorium under section 133(1) of the Companies Act 71 of 2008. It establishes that the moratorium does not protect a company in business rescue from legal proceedings to recover property that does not belong to the company or is not lawfully in its possession. The judgment also clarifies the interpretation of section 145(1) of the Act, establishing that subsection (1)(a) is a general notification requirement to creditors of court proceedings during business rescue, and that the duty to notify creditors rests on the business rescue practitioner - it does not require joinder of all creditors in every legal proceeding involving the company. The Court raised but did not definitively decide whether section 133(1) applies only to transactions concluded prior to commencement of business rescue, leaving this question for future consideration with full argument. The judgment reinforces that the business rescue moratorium is intended to provide breathing space for restructuring, not to enable companies to retain property to which they have no legal entitlement.