Mazars Recovery & Restructuring (Pty) Ltd and Others vs. Montic Dairy (Pty) Ltd (in liquidation) and Others - (13 Oct 2022)

Every disposition made after the commencement of the winding-up is void, unless the court had ordered otherwise

Company

The appeal addressed the remuneration of fees of business rescue practitioners in respect of work performed after an application to convert business rescue proceedings to liquidation proceedings, but before the final winding-up order. The Western Cape Division of the High Court, Cape Town (the high court) answered that question in the affirmative. It accordingly declared void the payments to the business rescue practitioners (BRPs), and ordered them to pay those amounts to the liquidators of the first Respondent, Montic Dairy (Pty) Ltd. The high court subsequently granted the BRPs leave to appeal to this Court.

Payments made to a BRP before the presentation of the application for the winding-up were unaffected by Section 341(2) of the Companies Act, 1973. Thereafter, a BRP was in the same position as all other creditors. Section 341(2) dictated that every disposition made after the commencement of the winding-up was void, unless the court had ordered otherwise. The Court, therefore, confirmed that unless a creditor availed him- or herself of the remedy provided in the proviso in Section 341(2), payments made after the commencement of the winding-up were void. However, a BRP was not left without a remedy.

A BRP could have approached a court in terms of the proviso to Section 341(2) to have a payment validated and a court that heard such an application would have had a wide discretion. A BRP ranked after the costs of liquidation and would have enjoyed a preference in the ranking of creditors in the winding-up. These remedies catered entirely for any undue hardship that the appellants could have relied upon. The exercise of the court’s discretion under the proviso in Section 341(2) served to balance all relevant interests. The argument that the appellants had advanced would not only have rendered nugatory the discretion conferred upon a court by the proviso in Section 341(2), but would also have placed all payments made by BRPs in the relevant period beyond judicial scrutiny. This Court found that that could hardly have been the intention of the Legislature. The case of the respondents was simple and relatively straightforward. It complied with the unambiguous provisions of the 1973 Act - the payments were void and should have been repaid. Appeal dismissed.

Tags : BRP PAYMENT VALIDITY