Diener N.O. v Minister of Justice and Others

J D Bester Labour Brokers CC was placed under voluntary business rescue in June 2012, and Ludwig Diener N.O. was appointed as the business rescue practitioner (BRP). During business rescue, attorneys (Cawood Attorneys) were instructed to stay a sale in execution by a secured creditor, FirstRand Bank. Business rescue later failed, and on Diener’s application the proceedings were converted into liquidation under s 141(2)(a) of the Companies Act 71 of 2008. After liquidation, a dispute arose between the joint liquidators regarding the ranking and treatment of Diener’s remuneration and expenses as BRP, as well as the legal fees of Cawood Attorneys. The Master of the High Court upheld the view that Diener had failed to prove his claim under s 44 of the Insolvency Act 24 of 1936 and that the attorneys’ fees were concurrent claims. Diener applied to review and set aside the Master’s acceptance of the liquidation, distribution and contribution account, but the High Court dismissed the application. Diener appealed to the Supreme Court of Appeal.

The appeal was dismissed, and the order of the Gauteng Division of the High Court, Pretoria, dismissing Diener’s application with costs, was upheld.

This judgment is a leading authority on the ranking and treatment of business rescue practitioners’ remuneration and expenses when business rescue fails and is converted into liquidation. It clarifies the interaction between Chapter 6 of the Companies Act and the Insolvency Act, affirms that BRPs must comply with insolvency proof requirements, and dispels the notion that BRPs enjoy an unlimited super-preference over secured creditors.