THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Case no: 20181/2014
Reportable

In the matter between:

DAWID JACQUES RICHTER                                                          Appellant

and

ABSA BANK LIMITED                                                                 Respondent

Neutral citation: Richter v Absa Bank Limited (20181/2014) [2015]
ZASCA 100 (01 June 2015)

Coram:                Mhlantla, Leach, Pillay JJA, Fourie and Dambuza AJJA

Heard:                  18 May 2015

Delivered:            01 June 2015

Summary:  Business rescue – application for business rescue can be made after
final order of liquidation – Interpretation of ‘liquidation proceedings’ in s 131(6)
of the Companies Act 71 of 2008 – ‘liquidation proceedings’ includes court
proceedings and the complete process of winding up or liquidation of a
company.

___________________________________________________________________
ORDER
__________________________________________________________________
On appeal from:  Gauteng Division of the High Court, Pretoria (Bam J
sitting as court of first instance):
1 The appeal is upheld with costs and the order of the court a quo is set
aside.
2 The matter is remitted to the court a quo to determine the application for
rescission of judgment.
__________________________________________________________________
JUDGMENT
__________________________________________________________________

Dambuza AJA (Mhlantla, Leach, Pillay JJA and Fourie AJA concurring):
[1] This appeal concerns the issue whether it is competent to apply for
business rescue in terms of section 131 of the Companies Act 71 of 2008 (the
Act) after a final liquidation order has been granted against a company. The
issue comes on appeal within the context of ss 131 (1) and (6) of the Act. The
first of these two sub-sections entitles an affected party to apply to a court, at
any time, for an order placing a company under supervision and commencing
liquidation proceedings; the second provides for suspension of liquidation
proceedings where such an application is brought at a time when ‘liquidation
proceedings have already commenced’. The crux of the issue is the
interpretation of ‘liquidation proceedings’ within the context of s 131(6);
whether the term refers only to a pending application for a liquidation order or
includes the process of winding up of a company after a final liquidation order
has been granted. The court a quo held that it was not competent to apply for
business rescue after the issue of a final winding order. The appeal against this
decision lies with its leave.

[2] On 13 September 2012 the Free State High Court, Bloemfontein granted
a final order of liquidation against Bloempro CC (Bloempro). The order was
granted despite opposition from Bloempro, which had contended that it should
rather be placed in business rescue. On 12 February 2013 the appellant, Mr
Dawid Jacques Richter brought an application, in the Gauteng Division,
Pretoria, (the court a quo in this appeal) for an order placing Bloempro CC
under supervision and commencing business rescue in terms of s 131 of the Act.
At the time Mr Richter, a chartered accountant, was employed by Bloempro as a
general manager. Bloempro was the owner of immovable property and derived
income from rental received from commercial tenants who occupied that
property. On 18 March 2013 the respondent, ABSA Bank Limited (ABSA),
filed an application for intervention in the business rescue proceedings. The
application for intervention also served as opposition to the application for
business rescue.

[3] Initially Mr Ritcher opposed ABSA’s application to intervene. However
on 12 April 2013 he served on ABSA’s attorneys a notice withdrawing his
opposition. The interpretation of that notice became contentious. Mr Richter
maintained that the withdrawal of opposition was only directed at the
application for leave to intervene. ABSA insisted that opposition was
withdrawn in respect of both the application for leave to intervene and its
opposition to the order of business rescue sought by Mr Richter. That issue is,
however, not relevant in this appeal. Following the notice of withdrawal on 6
May 2013 ABSA obtained an order by default granting it leave to intervene in
the application for business rescue, and dismissing the application for business
rescue.

[4] In due course Mr Richter applied for rescission of the default judgment.
ABSA opposed that application contending that default judgment had been

granted in the context of Mr Richter having withdrawn his opposition to
ABSA’s application. In opposing the application for rescission, ABSA
contended that when Mr Richter brought the application for business rescue, a
final order of liquidation had already been granted against Bloempro and that it
was no longer open to the court to consider an application for business rescue.
Thus, there were no prospects of success in the application for business rescue
and, that in any event a similar application had previously been dismissed by the
Free State High Court.

[5] The application for rescission of the default judgment served before Bam
J. The learned judge considered two issues which he viewed as determinative of
the application: (1) whether Mr Richter had locus standi to bring the application
for rescission and to apply for business rescue, and (2) whether a business
rescue application could properly be made, given that Bloempro was in final
liquidation.

[6] The court a quo dismissed the application for rescission. It found that Mr
Richter was an affected party as envisaged in s 128 of the Act; but that as a final
order of liquidation had been granted against Bloempro, it was not open to any
affected party to apply for business rescue proceedings.  It is against this order
that Mr Richter appeals. Before us counsel were in agreement that in the event
that the appeal succeeded the matter would have to revert to the court a quo to
determine the application for rescission.

[7] Sub-sections of s 131 (1) and (6) of the Act provide that:
‘(1)
Unless a company has adopted a resolution contemplated in section 129, an affected
person may apply to a court at any time for an order placing the company under supervision
and commencing business rescue proceedings.

(6)
…If liquidation proceedings have already been commenced by or against the
company at the time an application is made in terms of subsection (1), the application will
suspend those liquidation proceedings until-
(a)
the court has adjudicated upon the application; or
(b)
the business rescue proceedings end, if the court makes the order applied for.’

[8] Counsel for Mr Richter submitted that the stay of liquidation proceedings
as provided for in s 131(6) is applicable only in respect of a pending application
for liquidation;  and that once a final order of liquidation is made no application
for business rescue may be brought. The submission was that  ‘liquidation
proceedings’ in s 131 (6) should be interpreted in the same manner as in s
132(1) (c) in which, so he argued, the phrase liquidation proceedings referred to
proceedings preceding a final winding up order. Section 132 (1) of the Act
reads:
‘(1) Business rescue proceedings begin when-
(a)
the company-
(i) files a resolution to place itself under supervision in terms of s129 (3); or
(ii)
applies to the court for consent to file a resolution in terms of s129 (5) (b);
(b) an affected person applies to the court for an order placing the company under supervision
in terms of s 131 (1); or
(c) a court makes an order placing a company under supervision during the course of
liquidation proceedings, or proceedings to enforce a security interest, as contemplated in
section 131(7).’
The argument, as I understood it, was that if it had been the intention to refer to
proceedings after a final winding up order in s132 (1) (c) the provisions of s 132
(1) (b) would be superfluous. The argument is strained. The fact that legislation
may be somewhat repetitive does not necessarily mean that a departure from the
otherwise clear meaning of the Act is justified. In my view, the provisions of s
132 (1) do not clearly indicate that ‘liquidation proceedings’ necessarily mean
those proceedings leading up to a final winding up order and nothing else.

[9] The definition of ‘liquidation proceedings’ as envisaged in s 131(6) is at
the core of the issue. Firstly, it is significant that s 131(1) entitles affected
persons to apply to court ‘at any time’ for an order placing the company under
supervision and commencing business rescue proceedings. In the same vein
section 131 (7) also empowers the court, on application for business rescue, to
grant orders provided for in subsections 131 (4) and (5) ‘at any time’ during the
course of ‘any liquidation proceedings’. Generally, in law and in business,
liquidation is the exhaustive process by which a company is brought to an end,
and the assets thereof, if any, are redistributed. The authors of Cilliers and
Benade; Corporate Law1 describe liquidation as follows:
(27.01)‘…The process of dealing with or administering a company’s affairs prior to its
dissolution by ascertaining and realising its assets and applying them firstly in the payment of
creditors of the company according to their order of preference and then by distributing the
residue (if any) among the shareholders of the company in accordance with their rights, is
known as  the winding-up or liquidation of the company.’(my emphasis)

[10] The reasoning of the court a quo was motivated by an erroneous premise
that upon liquidation Bloempro ceased to exist; that it was ‘stripped of its
original legal status’. The correct position is that upon the final order of
liquidation being granted the company continues to exist, but control of its
affairs is transferred from the directors to the liquidator who exercises his or her
authority on behalf of the company. As to when liquidation commences, in
terms of s 348 of the Companies Act 61 of 1973 (the 1973 Act) liquidation of a
company by the court is deemed to commence on presentation to the court of
the application for the winding up and continues until the affairs of the company
have been finally wound up and the Master’s certificate to that effect is
published in the Government Gazette, thus dissolving the company.2 Similarly s

1 H S Cilliers et al: Corporate Law; 3 ed, 2000, at 494.
2 It has been held that the deeming provision only comes into effect once a liquidation order has been granted,
but that is not relevant to this appeal. See Kalil v Decotex (Pty) Ltd & another 1988 (1) SA 943 A (158/87)

82 of the Act provides for existence of a company until deregistered by the
Commission.

[11] Significantly, the terms ‘liquidation’ and ‘winding-up’ have historically
been used interchangeably in the context of dissolving a company. Thus, for
example s 79 (1) (a) of  the Act  provides for a solvent company to be dissolved
by ‘voluntary winding-up’ as contemplated in section 80 or ‘winding-up and
liquidation’ by a court order as contemplated in section 81. The terms  are also
used interchangeably in ss 80, 81 and 82 in relation to the process of liquidation
both prior to and subsequent to the final liquidation order being granted,
including the final stages of the  winding-up of a company.

[12] I do not think the phrase ‘liquidation proceedings’ in any way alters the
significance of what is meant by liquidation. In terms s 136 (4) of the Act if
liquidation proceedings have been converted into business rescue proceedings,
the liquidator is regarded as a creditor of the company to the extent of any
outstanding amounts owing to him or her for any remuneration due for work
performed, or compensation for expenses incurred before the commencement of
business rescue proceedings. Under s 1 (1) and Schedule 5 (9) of the 1973 Act,
which applies to liquidation of insolvent companies, the definition of
‘liquidator’ includes a provisional liquidator and a final liquidator.
Consequently, the conversion of liquidation to business rescue even after a final
liquidation order has been granted, was clearly envisaged by s 136 (4).3

[13] A review of the background to the introduction of the business rescue
process into our law gives an insight as to the intention of the legislature in
introducing the procedure. Our business rescue regime is adapted from similar

[1987] ZASCA 156 (3 December 1987) ; Absa Bank Ltd v Summer Lodge (Pty) Ltd 2013 (5) SA 444 (GNP) at
447. (63188/2012, 63189/2012) [2013] ZAGPPHC 544 (23 May 2013).
3 See also: Henoschberg on the Companies Act 71 of 2008 issue 9 at 479.

concepts in other jurisdictions such as the United States and Great Britain. In
South Africa it was introduced against the background of general acceptance
that the judicial management process provided for under chapter XV of the
1973 Act was failing the local economy because only few, if any, judicial
management orders resulted in the saving of companies experiencing financial
difficulties. Its purpose is stated as: ‘to provide for efficient rescue and recovery
of financially distressed companies in a manner that balances the rights and
interests of all relevant stakeholders.’4 It is meant to be a flexible, effective
process of extending the lifespan of companies and businesses.5 A necessary
consequence thereof is limitation, to some extent, on the power of creditors to
singlehandedly curtail the life of a company. But this is subject to compliance
with the procedural and substantive requirements set out in s 129 of the Act.

[14] Of significance is the fact that in respect of business rescue, the Act refers
to the interests of  ‘stakeholders’ in contrast to the interests of creditors and
shareholders which take centre stage in liquidation proceedings.6  The rights of
employees, through trade unions, as stakeholders, are expressly recognised in
the Act. Section 128(1)(a) defines the following as principal stakeholders and
affected persons who may apply for business rescue in respect of a company:
shareholders, creditors, registered trade unions representing employees, and
employees not represented by a registered trade union. Business rescue
therefore seeks to protect interests of a wider group of persons than liquidation.
The role of companies as a means of achieving economic and social benefits is
given prominence.7

4 Subsection 7(k) of the Act.
5 T H Mangalo. ‘An overview of company law reform in South Africa: From the Guidelines to the Companies
Act 2008’: (2010) Acta Juridica xiii.
6 See for example subsection 7 (k) of the Act.
7  Subsection 7(d) of the Act.

[15]  It takes little to imagine instances developing, after the issue of the final
order, that could lead to the circumstances of a company improving radically,
such that it would become profitable if allowed to trade. It could be awarded a
contract for which it had earlier tendered or secure funding for future projects; a
major creditor might indicate a willingness to subordinate its claim.
Accordingly, in the scheme of things, where, during liquidation, evidence
becomes available that business rescue proceedings will yield a better return for
shareholders and creditors and jobs will be retained, there could be no reason to
deny business rescue only because a company is in final liquidation. Indeed, to
allow it to do so would fall into the very scheme of business rescue envisaged
by the Act and fulfil the objectives of providing for revival of a financially
distressed company with all its attendant social benefits.

[16] Counsel for ABSA expressed concern that a liberal interpretation of s
131(1) may have negative results for the liquidation process. These include
repetitive disruptions and uncertainty that may result from various affected
parties making applications for business rescue at different times during the
winding up process, reversion of business control to the same directors who
may have been the cause of the financial distress experienced by the company,
and the capacity of a company under final liquidation to conduct effective
business, including concluding contracts, during the implementation of the
rescue plan. All these concerns are valid and appear to have been uppermost in
the mind of Bam J when he considered the issues. Indeed implementation of the
Act may produce some seemingly awkward results in the initial stages.
However, that does not justify an unduly restrictive approach in the
interpretation of the provisions of the Act.8 The simple answer is that a court
can dismiss any application for business rescue that is not genuine and bona fide

8 Section 5 of the Act provides that the Act must be interpreted in a manner that gives effect to its purposes.8

or which does not establish that the benefits of a successful business rescue will
be achieved.

[17] There is no sensible justification for drawing the proverbial ‘line in the
sand’ between pre and post final liquidation in circumstances where the
prospects of success of business rescue exist. The legislature did not do so and
to restrict business recue to those cases in which a final winding up order has
not been granted is inimical to the Act.

[18] For these reasons a proper interpretation of ‘liquidation proceedings’ in
relation to s 131(6) of the Act must include proceedings that occur after a
winding up order to liquidate the assets and account to creditors, up to
deregistration of a company.

[19] Accordingly, I make the following order:
1 The appeal is upheld with costs and the order of the court a quo is set aside.
2 The matter is remitted to the court a quo to determine the application for
rescission of judgment.

_______________
N Dambuza
Acting Judge of Appeal

APPEARANCES
For Appellant:

RF De Villiers
Instructed by:
Jacobs Attorneys, Pretoria
Hanno Bekker Attorneys, Bloemfontein

For Respondent:

DM Leathern SC

Instructed by:
Ririch Wolmarans & Luderits Inc,
Pretoria
Symington & De Kok, Bloemfontein

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA

MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL

FROM

The Registrar, Supreme Court of Appeal

DATE

1 June 2015

STATUS

Immediate

Please note that the media summary is for the benefit of the media and does not form part of the
judgment.

Ritcher v Absa Bank
(20181/2014) [2015] ZASCA .. (......... 2015)

MEDIA STATEMENT: RICHTER v ABSA

Today the Supreme Court of Appeal upheld an appeal by Mr Dawid Jacques Richter against a
judgement of the Gauteng High Court Pretoria which held that no application for business rescue may
be brought after a final order of liquidation has been granted against a company.
In September 2012 Bloempro CC, with which 013 Mr Richter was employed as a general manager, was
liquidated by the Free State High Court. In February 2013 Mr Richter brought an application in the
Gauteng High Court, Pretoria, seeking an order that Bloempro be placed in business rescue. In terms of
section 131 (6) of the Companies Act of 2008 if liquidation proceedings have commenced by the time
an application for business rescue is brought, the application for business rescue will suspend those
liquidation proceedings. Absa Bank opposed Mr Richter’s application for rescission on the basis that the
provisions of s131 (6) do not apply where a final liquidation order, The application was dismissed in his

absence and he applied for rescission of that order.  The High Court held that indeed business rescue
would be impermissible as Bloempro was in final liquidation. Mr Richter then appealed to the Supreme
Court of Appeal.
In upholding the appeal the Supreme Court of Appeal held that liquidation proceedings includes
liquidation prior to and after a final order of liquidation is granted. The court held that this interpretation
was consistent with the historical interpretation of liquidation and also with the meaning of liquidation
as used in other sections of the Act and its predecessor, the Companies Act 61 of 1973. That meaning
had not been altered by the provisions of s131 (6) of the Companies Act and the interpretation of
liquidation to include the complete liquidation process was consistent with the with the purpose for
which the business rescue procedure was incorporated into the South African legal system. The court
held that the matter revert to the High Court for determination of the application for rescission of
judgment.