Knoop and Another NNO v Gupta (No 1)

Messrs Knoop and Klopper were appointed as business rescue practitioners (BRPs) for Islandsite Investments 180 (Pty) Ltd and Confident Concept (Pty) Ltd, two companies in the Oakbay Group owned by the Gupta family. These companies were placed under voluntary business rescue on 16 February 2018 after becoming "unbanked" due to allegations of state capture. Disputes arose between the BRPs and Ms Ragavan (acting CEO of Oakbay) which led Mrs Gupta to apply for the removal of the BRPs in terms of section 139(2) of the Companies Act. A full court of the Gauteng High Court granted the removal order on 13 December 2019. On 7 February 2020, the court granted leave to appeal to the Supreme Court of Appeal and also granted leave to execute the removal order in terms of sections 18(1) and (3) of the Superior Courts Act. Critically, the full court also made an order that "any present or future appeals, applications and petitions by any party relating to this judgment shall not suspend the operation of the order" - purporting to override the automatic suspension in section 18(4)(iv). Acting on this execution order, Messrs Tayob and Naidoo were appointed as replacement BRPs on 10 February 2020. On 12 February 2020, Messrs Knoop and Klopper lodged notice of an extremely urgent appeal against the execution order (as was their right under section 18(4)(ii)). Subsequently, the replacement BRPs purported to withdraw the main appeal and terminate the business rescue proceedings - Mr Tayob on 16 October 2020 for Islandsite and Mr Naidoo on 23 October 2020 for Confident Concept.

• Whether a court has power to order that the automatic suspension in section 18(4)(iv) of the Superior Courts Act shall not operate
• Whether the full court's order purporting to override the statutory suspension was valid
• Whether the execution order was enforceable pending the urgent appeal
• Whether the appointments of the replacement BRPs were valid given the suspension of the removal order
• Whether the purported termination of business rescue by the replacement BRPs was valid
• Whether exceptional circumstances existed to justify granting leave to execute
• Whether irreparable harm to the applicant and no irreparable harm to the respondent were established
• Whether Messrs Knoop and Klopper retained locus standi to pursue their appeals

The appeal was upheld with costs including two counsel. The full court's execution order was set aside and replaced with an order dismissing the application for leave to execute with costs. The court made several declaratory orders: (1) The execution order was suspended in terms of section 18(4)(iv) from the date of the urgent appeal; (2) The appellants were not validly removed as BRPs; (3) The appointments of Messrs Tayob and Naidoo were invalid; (4) The termination notices of business rescue were invalid and of no force and effect; (5) Islandsite and Confident Concept remain in business rescue under the supervision of the original BRPs (Messrs Knoop and Klopper) pending the main appeal. The order reserved the question of validity of other actions taken by the replacement BRPs for determination in other proceedings where affected third parties could be heard.

A court has no power under section 18 of the Superior Courts Act to order that the automatic suspension of an execution order provided for in section 18(4)(iv) shall not operate. Any such order is void and a nullity as it directly contradicts an explicit statutory provision. The inherent power of courts to regulate their own procedure cannot be invoked to override clear statutory provisions governing substantive or procedural rights. Where a court makes an order it has no power to make, and the invalidity appears on the face of the order, that order is a nullity and can be disregarded without need for a formal setting aside. An execution order under section 18(3) may only be granted if the applicant proves on a balance of probabilities: (a) exceptional circumstances; (b) that they will suffer irreparable harm if the order is not granted; and (c) that the respondent will not suffer irreparable harm if the order is granted. All three requirements must be satisfied.

The court made several obiter observations: (1) The question whether there is a discretion to refuse an execution order once the three statutory requirements are met, and whether prospects of success should affect that discretion, was left open for determination on an appropriate occasion with full argument. (2) The court noted difficulties with the approach in Justice Alliance regarding prospects of success, given that urgent appeals may need to be decided without the full record. (3) The court observed that if termination of business rescue had been done with dolus to defeat the ends of justice, it could amount to contempt of court, but did not make findings on this as it was not necessary and would require further evidence. (4) The court noted that while the business rescue involved high-profile allegations of state capture examined by the Zondo Commission, these broader issues did not feature in the legal questions to be determined. (5) The court observed that CIPC plays only a record-keeping role in voluntary business rescue, not a decision-making role, so principles requiring formal setting aside of administrative acts (Tasima) did not apply to the termination notices.

This judgment is significant for: (1) Clarifying that courts have no power to override the automatic suspension in section 18(4)(iv) of the Superior Courts Act - such orders are void ab initio; (2) Emphasizing the constitutional right to a fair hearing before adverse orders are made; (3) Confirming that courts cannot use inherent powers to contradict explicit statutory provisions; (4) Providing guidance on requirements for execution orders under section 18(3): exceptional circumstances, irreparable harm to applicant, and no irreparable harm to respondent must all be proved on balance of probabilities; (5) Explaining that "exceptional circumstances" must be something sufficiently out of the ordinary to warrant departure from the norm of suspension - routine grounds for removal do not qualify; (6) Demonstrating the importance of courts complying with section 18(4)(i) by immediately recording reasons for execution orders to facilitate urgent appeals; (7) Illustrating the remedy where invalid court orders have been acted upon - declaratory relief as to nullity and status quo ante; (8) Providing important procedural protection for office-holders (BRPs, liquidators, trustees, executors) removed by court order pending appeal.