Newton Global Trading (Pty) Ltd v Da Corte

Newton Global Trading (Pty) Ltd (the appellant), a chrome processing company, passed a resolution on 31 May 2013 to commence voluntary business rescue proceedings in terms of s 129(1) of the Companies Act 71 of 2008 and appointed Mr Re-Marius Hamel as business rescue practitioner. The company operated a chrome processing plant on leased premises. The appellant filed the resolution with the Companies and Intellectual Property Commission on 5 June 2013, and filed notice of the business rescue practitioner's appointment on 11 June 2013 (three days late). The appellant failed to publish a copy of the notice of the practitioner's appointment as required by s 129(4)(b) and failed to publish notice of the resolution as required by s 129(3)(a). On 10 July 2014, the appellant launched an urgent application seeking to interdict the respondent (Eddie Da Corte) from entering the leased premises and removing materials or operating the chrome plant. The respondent opposed the application on the basis that Macla Logistics CC had purchased the leased premises on 8 May 2014. The respondent raised a point in limine challenging the appellant's locus standi, arguing that due to non-compliance with s 129, the business rescue proceedings were a nullity and the business rescue practitioner lacked standing.

• Whether non-compliance with the procedural requirements of s 129(3) and (4) of the Companies Act 71 of 2008 automatically renders business rescue proceedings a nullity
• Whether the locus standi of a business rescue practitioner can be challenged when the resolution to commence business rescue has not been set aside by a court
• Whether a person who is not an 'affected person' as defined in the Act can challenge the standing of a business rescue practitioner on grounds of procedural non-compliance
• What is the effect of s 129(5) which states that failure to comply with s 129(3) or (4) causes the resolution to lapse and be 'a nullity'

1. The appeal succeeded with costs, including costs of two counsel. 2. The order of the High Court (Gauteng Division, Pretoria) was set aside and replaced with: 'The point in limine is dismissed with costs.' 3. The matter was remitted to the court below to deal with other defences and/or the merits.

The binding legal principle is that business rescue proceedings commenced under s 129(1) of the Companies Act 71 of 2008 do not terminate, and the business rescue practitioner's standing cannot be challenged, merely because of non-compliance with the procedural requirements in s 129(3) and (4), even though s 129(5) provides that such non-compliance causes the resolution to lapse and be 'a nullity'. Business rescue proceedings only terminate when a court sets aside the resolution in terms of s 130(5)(a), as provided in s 132(2)(a)(i) of the Act. Until such a court order is obtained, the business rescue practitioner retains standing to act on behalf of the company. This principle applies regardless of whether the person challenging the practitioner's standing is or is not an 'affected person' as defined in the Act.

The court made critical observations about the conduct of the respondent's legal representatives. Although the appellant had filed heads of argument together with a copy of the Panamo judgment in July 2015, the respondent's heads filed in August 2015 made no reference to Panamo whatsoever. The key distinguishing argument (that the respondent was not an 'affected person') was only raised orally at the hearing, taking both the court and opposing counsel by surprise. Mpati P expressed his disapproval, noting that counsel explained he had only thought of the point the previous evening. The President stated it was 'regrettable' that the court had not been afforded an opportunity to prepare for this argument, which was the only argument in the appeal. This reflects judicial expectation that counsel should disclose anticipated legal arguments in advance through written heads, particularly where recent binding authority exists. On costs, the court rejected the argument that costs should be costs in the cause merely because the point in limine had been upheld in earlier Gauteng Division decisions, noting that it had now been held not to be a good point.

This case is significant in South African company law as it clarifies the effect of procedural non-compliance with business rescue provisions under the Companies Act 71 of 2008. It establishes that business rescue proceedings do not automatically terminate upon non-compliance with s 129 procedural requirements, but continue until a court sets aside the resolution. This confirms the interpretation in Panamo Properties and overrules several Gauteng High Court decisions that had held otherwise. The judgment protects the integrity of business rescue proceedings by requiring formal court intervention to terminate them, preventing parties from unilaterally challenging business rescue on procedural grounds without obtaining a court order. It reinforces that the statutory scheme contemplates business rescue proceedings continuing even where there has been procedural non-compliance, until a court formally sets aside the resolution under s 130(5)(a) read with s 132(2)(a)(i).