Absa Bank Ltd v Naude NO and Others

Louis Pasteur Investments Ltd was placed under business rescue in terms of s 129 of the Companies Act 71 of 2008. Absa Bank Ltd, a major creditor, voted against the proposed business rescue plan, primarily because its claim based on a large cross‑suretyship was treated as a contingent claim with limited voting interest. Despite Absa’s opposition, the plan was adopted by the requisite majority and implemented, with payments made to creditors over an extended period. Absa applied to the High Court to have the adoption of the business rescue plan declared unlawful and invalid and sought the removal of the business rescue practitioner. The practitioner and the company opposed the application and raised non‑joinder of creditors. They also brought a counter‑application seeking a declaration that the cross‑suretyship in favour of Absa was void under s 226(1) of the Companies Act 61 of 1973.

The appeal against dismissal of Absa’s application was dismissed with costs, including the costs of two counsel. The cross‑appeal succeeded to the extent that the High Court’s order on the counter‑application was set aside. No separate costs order was made in respect of the counter‑application.

The judgment is significant for clarifying that creditors who vote for and benefit from a business rescue plan have a direct and substantial interest in any proceedings seeking to set aside the plan and must be joined as parties. It underscores the importance of joinder in business rescue litigation and limits the use of declaratory relief that has far‑reaching practical consequences without affected parties being before the court.