S P Lenong Civil Group 8 (Pty) Ltd v ABSA Bank Limited and Others

The applicant, S P Lenong Civil Group 8 (Pty) Ltd, sought to set aside an order placing New Biginnings Projects CC (the second respondent) under provisional liquidation. ABSA Bank (first respondent), as a major creditor, had applied for the provisional winding up of New Biginnings and the setting aside of its voluntary business rescue resolution. The applicant claimed to be a creditor owed R15,529,140 for services provided. The applicant alleged it was never properly notified of ABSA's winding up application, as the bank only emailed papers to the applicant's former attorneys, Dlabantu & Associates, who no longer represented the applicant and never brought the matter to the applicant's attention. The applicant argued that New Biginnings had secured several contracts that could be implemented with the applicant's assistance, thereby remedying the close corporation's insolvency. New Biginnings was hopelessly insolvent, with liabilities exceeding assets by at least R145,000,000. ABSA opposed the application on grounds of lack of urgency, lack of merit, and argued that proper notice had been given.

• Whether the application was brought with sufficient urgency to warrant departure from Rule 6 of the Uniform Rules of Court
• Whether ABSA provided adequate notice to the applicant as an affected person under section 130(3) of the Companies Act 71 of 2008
• Whether special or exceptional circumstances existed to justify setting aside the provisional liquidation order under section 354(1) of the Companies Act 61 of 1973
• Whether the applicant demonstrated that setting aside the order would benefit the general body of creditors or at least not disadvantage any creditor
• Whether the contracts allegedly secured by New Biginnings provided a viable basis for business rescue

The application was dismissed. The applicant was ordered to pay the first respondent's (ABSA's) costs, including costs of two counsel where so employed.

An applicant seeking to set aside a provisional liquidation order under section 354(1) of the Companies Act 61 of 1973 must demonstrate special or exceptional circumstances and prove that the order would benefit the general body of creditors or at least not disadvantage any creditor. Service of notice on a creditor's former attorneys, where there has been no contact for eight months and no evidence of continuing mandate, does not constitute substantial compliance with section 130(3) of the Companies Act 71 of 2008 where that creditor holds a significant voting interest (7.44%). When evaluating business rescue viability, speculative future contracts of uncertain value and realization, particularly those conditional on the outcome of the very proceedings being challenged, are insufficient to justify setting aside a liquidation order. Self-created urgency arising from delay in bringing an application after becoming aware of an order will not justify departure from the Uniform Rules of Court timeframes.

The court observed that section 354(1) of the Companies Act 61 of 1973 appears to afford a wide enough discretion to stay or set aside winding up proceedings that were preceded by the setting aside of a resolution to place a company under business rescue, though this issue did not require definitive determination given the findings on other grounds. The court noted that while ABSA argued section 354(1) dealt only with winding up and not business rescue under the new Act, the court declined to explore this distinction further. The judgment also contains general observations on the importance of obeying procedural rules and respecting the interests of other parties and their legal representatives, citing Caledon Street Restaurants CC v D' Aviera regarding inappropriate use of urgent applications. The court noted that appointment of an alternative business rescue practitioner would merely prolong proceedings and increase costs with little prospect of positive outcome, and that construction contracts often attract costly and protracted litigation.

This case clarifies the requirements for setting aside provisional liquidation orders under section 354(1) of the Companies Act 61 of 1973, emphasizing the strict test and heavy onus on applicants. It reaffirms that applicants must demonstrate special or exceptional circumstances and show that relief would benefit the general body of creditors or at least not disadvantage any creditor. The judgment provides guidance on what constitutes substantial compliance with notice requirements under section 130(3) of the Companies Act 71 of 2008 in business rescue contexts, holding that service on former attorneys after eight months of no contact is insufficient for a creditor with significant voting interest. The case also illustrates the court's approach to evaluating the viability of business rescue based on alleged future contracts, requiring concrete evidence of profitability and likelihood of realization rather than speculative contract values. It demonstrates judicial scrutiny of self-created urgency and the importance of proper compliance with procedural rules.