Ferrostaal GmbH and Another v Transnet SOC Ltd t/a Transnet National Ports Authority and Another

Transnet SOC Ltd, trading as the Transnet National Ports Authority, leased port property at Saldanha to Ferromarine Africa (Pty) Ltd (FMA) under a 15-year head lease expiring in September 2022, with an option to renew subject to future agreement. FMA’s shareholders were Ferrostaal GmbH and Atlantis Marine Projects (Pty) Ltd. In December 2016 FMA was placed under business rescue, and the business rescue practitioner suspended FMA’s obligation to pay rental under s 136(2)(a) of the Companies Act 71 of 2008, resulting in rental arrears of about R40 million owed to Transnet, FMA’s only independent creditor. Several business rescue plans were proposed and rejected by Transnet. A final revised business rescue plan in July 2019 proposed that Transnet approve a sub-lease to ArcelorMittal, receive current rental going forward, but defer payment of arrear rentals until a future extension of the head lease, with repayment terms still to be negotiated. Transnet voted against the plan, causing its rejection. The shareholders applied to the High Court under s 153 of the Companies Act to set aside Transnet’s vote as ‘inappropriate’. The High Court refused. The shareholders appealed to the Supreme Court of Appeal.

The appeal was dismissed with costs, including the costs of two counsel.

The case clarifies the application of s 153 of the Companies Act and reinforces that courts will not lightly interfere with a creditor’s vote against a business rescue plan. It confirms that business rescue does not override legitimate commercial interests of creditors and that only viable, balanced rescue plans warrant judicial intervention. The judgment further illustrates the limits of the pro-rescue bias articulated in earlier cases such as FirstRand Bank v KJ Foods.