Mazars Recovery & Restructuring (Pty) Ltd and Others v Montic Dairy (Pty) Ltd (in liquidation) and Others

Montic Dairy (Pty) Ltd was placed under business rescue on 2 November 2015, with the second to fourth appellants appointed as business rescue practitioners (BRPs), operating through Mazars Recovery & Restructuring (Pty) Ltd. On 14 April 2016, creditors launched liquidation proceedings. The BRPs resolved on 28 April 2016 that there were no reasonable prospects of rescue and on 16 May 2016 applied to convert business rescue to liquidation. While that application was pending, the BRPs caused two payments totalling R1.5 million to be made from the company’s bank account to Mazars for their fees and expenses (on 23 May and 2 June 2016). A final winding-up order was granted on 14 June 2016 and liquidators were appointed. The liquidators successfully applied in the High Court for an order declaring the payments void under s 341(2) read with s 348 of the Companies Act 61 of 1973. The BRPs appealed to the Supreme Court of Appeal.

The appeal was dismissed with costs, including the costs of two counsel. The payments totalling R1.5 million were declared void and had to be repaid to the liquidators.

The case reaffirms the strict operation of s 341(2) of the Companies Act 1973 in the context of failed business rescue proceedings and clarifies that business rescue practitioners do not enjoy super-preference for remuneration once liquidation proceedings commence. It confirms that Chapter 6 of the Companies Act 2008 does not dilute the voidness of post-commencement dispositions and underscores the importance of applying to court under the proviso to s 341(2) to validate payments. The judgment strengthens creditor protection and provides certainty on the interface between business rescue and liquidation.