Southern Sky Hotel and Leisure (Pty) Ltd and Others v Southern Sky Food Enterprises (Pty) Ltd

Southern Sky Hotel and Leisure (Pty) Ltd, owner of the Hans Merensky Hotel and Spa, experienced long‑term financial distress arising mainly from obligations under rental pool agreements with investors. After several failed attempts at winding‑up and abortive business rescue efforts, the company was finally placed under final liquidation in January 2020. Liquidators were appointed and authorised to sell the company’s assets by public auction. In December 2020, while liquidation was underway, a creditor (Vision Tactical (Pty) Ltd) launched a business rescue application under s 131(1) of the Companies Act 71 of 2008. Despite this, the liquidators proceeded with an auction in February 2021. Southern Sky Food Enterprises (Pty) Ltd, represented by its director Ms Rinderknecht, participated in the auction and was the highest bidder. The liquidators accepted its offer in March 2021, concluding a written sale agreement containing a special condition that the agreement would lapse if business rescue were granted. The respondent thereafter approached the Gauteng Division of the High Court seeking to have the agreement declared invalid on the basis that liquidation proceedings were suspended by s 131(6). The High Court upheld that application, and the liquidators and auctioneer appealed to the Supreme Court of Appeal.

The appeal was upheld with costs, including the costs of two counsel. The High Court’s order was set aside and replaced with an order dismissing the respondent’s application with costs.

The judgment clarifies the effect of s 131(6) of the Companies Act, confirming that it suspends only the liquidation process and not the liquidator’s powers or the validity of conditional transactions. It provides important guidance on the interaction between liquidation and business rescue proceedings and limits the potential for abuse of business rescue applications to frustrate liquidation.