Land and Agricultural Development Bank of South Africa v Lazercore Eight (Pty) Ltd and Others

The First to Sixth Respondents (six companies) were placed under business rescue due to severe financial difficulties. The Seventh Respondent, Mr Bester, was appointed as the business rescue practitioner (BRP). The Landbank, a major creditor, objected to a singular business rescue plan proposed by Mr Bester, which diluted its voting interests. The Landbank launched an application to set aside the plan and remove Mr Bester as BRP. That application was settled and made an order of court on 26 July 2021. The Tenth to Twelfth Respondents (the Trust, sole shareholder of the Second Respondent) and the Thirteenth Respondent (Mr Smith, sole director of the six companies and a trustee of the Trust) then sought intervention and relief including: forfeiture of Mr Bester's BRP fees, repayment of fees already paid, prohibition on paying his legal costs from company assets, costs de bonis propriis against Mr Bester, and rescission of a court order of 21 April 2022. By the time the matter was heard, business rescue proceedings had been concluded and Mr Bester was no longer the BRP.

• Whether intervening parties may seek relief in terms of the notice of motion of another party.
• Whether the Trust and Mr Smith have standing (locus standi) to seek relief against Mr Bester in his capacity as former BRP.
• Whether a court has the power to order forfeiture of a business rescue practitioner's fees.
• Whether a case has been made out for the forfeiture of the BRP's fees based on gross negligence under section 140(3)(c)(ii) of the Companies Act 71 of 2008.
• Whether a costs order de bonis propriis should be granted against Mr Bester.
• Whether the order of 21 April 2022 should be rescinded.

1. The application to strike out is dismissed and the further affidavit of the Fourteenth Respondent dated 13 October 2023 is admitted, with costs in the main application. 2. The Tenth to Thirteenth Respondents' application for relief is dismissed with costs, including the Fourteenth Respondent's application for leave to intervene and the costs in paragraph 1. The Tenth to Thirteenth Respondents are ordered to pay, jointly and severally, the costs of the Fourteenth Respondent, including the costs of two counsel where employed. 3. The application for rescission of the order of 21 April 2022 is dismissed. The Fourteenth Respondent is ordered to pay the costs of the Tenth to Thirteenth Respondents in respect of the rescission application, including the costs of two counsel where employed.

A shareholder or creditor of a company under business rescue does not have standing to bring proceedings in their own name for loss suffered by the company, as the loss is reflective and only the company may sue. A court has no inherent jurisdiction to order forfeiture of a business rescue practitioner’s fees; the Act does not provide such a power, and the appropriate remedy lies in a claim for damages under section 140(3)(c)(ii) of the Companies Act upon proof of gross negligence.

Even if the forfeiture relief were competent in law, the court observed that section 140(3)(c)(ii) requires a finding of gross negligence, which is a high threshold. On the disputed facts in motion proceedings, the court could not reach such a finding. The court also noted that the BRP's entitlement to fees under section 143 remains unaffected absent removal under section 139, and that the business rescue plan's fee provisions are binding once approved.

The judgment clarifies several important aspects of South African business rescue law: (1) the standing of shareholders and creditors to seek relief against a BRP is limited by the rule against reflective loss and does not automatically survive the termination of business rescue proceedings; (2) a court does not have inherent power to order forfeiture of a BRP's fees—the statutory remedy for misconduct is a damages claim based on gross negligence under section 140(3)(c)(ii) of the Companies Act; (3) the high threshold for gross negligence in this context is confirmed; and (4) a settlement order that finally deals with costs between the original parties cannot later be reopened by interveners to seek costs de bonis propriis against the BRP.