THE SUPREME COURT OF APPEAL OF SOUTH AFRICA

JUDGMENT

Reportable

Case No: 20323/2014
In the matter between:

SHAMLA CHETTY t/a NATIONWIDE ELECTRICAL                             APPELLANT
and
O D HART NO                                                                           FIRST RESPONDENT
R VENGADESAN NO                                                          SECOND RESPONDENT

Neutral Citation:
Chetty v Hart (20323/14) [2015] ZASCA 112 (4 September
2015)
Coram:
Cachalia, Willis, Saldulker and Mathopo JJA and Gorven AJA
Heard:
24 August 2015
Delivered:
4 September 2015

Summary:
Companies Act 71 of 2008 – business rescue proceedings – whether
arbitration proceedings fall within the general moratorium on legal proceedings
against a company under business rescue in s 133(1) – whether proceedings
instituted or continued without business practitioner’s consent a nullity – whether
s 133(1) enacted for the benefit of the company under business rescue –
interpretation of statute – provision capable of more than one meaning – proper
approach.

___________________________________________________________________
ORDER
___________________________________________________________________

On appeal from: KwaZulu-Natal Local Division of the High Court, Durban
(Nzimande AJ sitting as court of first instance):

The appeal is dismissed with costs, including the costs of two counsel.

___________________________________________________________________
JUDGMENT
___________________________________________________________________

Cachalia JA (Willis, Saldulker and Mathopo JJA and Gorven AJA concurring)

[1] The parties to this dispute are Shamla Chetty, trading as Nationwide Electrical
and TBP Building and Civils (Pty) Ltd (TBP). After agreeing to refer their contractual
dispute to arbitration, the arbitrator made an award substantially upholding
Ms Chetty’s claims against TBP and also TBP’s counterclaims against her. The
award was made while TBP was under business rescue. In terms of the award TBP
became liable to Ms Chetty for payment of an amount of R420 573.93 plus interest.
But she in turn was held liable to TBP for substantially more, namely, an amount of
R4 238 451.95 plus interest and costs. Dissatisfied with this outcome Ms Chetty, to
whom I shall henceforth refer as the appellant, sought to invalidate the award in its
entirety by seeking an order reviewing and setting it aside in the KwaZulu-Natal
Local Division, Durban. When the litigation commenced, TBP was no longer under
business rescue, but in liquidation. So the liquidator, to whom I shall refer as the
respondent, stepped into TBP’s shoes to oppose the relief sought. The arbitrator was
also cited as a co-respondent but he has no interest in these proceedings.

[2] There were several matters that arose on the papers before the court a quo.
But it was asked to adjudicate only one question as a point of law separately:
whether the arbitration award made while TBP was under business rescue was
precluded by the general moratorium on legal proceedings against companies under
business rescue under s 133(1) of the Companies Act 71 of 2008 (the Act).1

[3] Section 133(1)(a), which lies at the heart of this dispute, provides for a
moratorium on any ‘legal proceedings’ against a company during business rescue
proceedings except with the written consent of a business rescue practitioner
appointed to oversee the affairs of a financially distressed company. The arbitration
award was made in circumstances where the appellant, who is a creditor of TBP,
was not aware of the business rescue proceedings and therefore did not seek the
practitioner’s consent to pursue the suit against TBP. The appellant contended in the
court a quo that the arbitration was a ‘legal proceeding’ as envisaged in the section
and that the moratorium therefore applied to her claim. Her failure to apply for
consent – through no fault of her own – thus nullified both that part of the award in
her favour as well as the other part arising from the counterclaim in favour of TBP. In
other words, she sought to invalidate the award in its entirety. The respondent’s
response was that the moratorium on legal proceedings in s 133(1) applied only to
court proceedings, not arbitrations, and that even if it did apply to arbitrations, the
award was not a nullity.

[4] The court a quo (Nzimande AJ) rejected the appellant’s principal contention –
that an arbitration proceeding was a legal proceeding – holding instead in favour of
the respondent that the ‘ordinary meaning’ of a legal proceeding was a ‘lawsuit’ or
‘hofsaak’, which excluded arbitrations from its ambit. Consequently, the court ruled,
the moratorium on legal proceedings in s 133 did not apply to arbitration proceedings
and the arbitration award could therefore not be impugned on this ground. The
appeal against that ruling comes before us with its leave.

1 Section 133(1) is set out fully below at para 11.

[5] To better understand the genesis of the dispute between the parties it may be
helpful to briefly set out the facts. The dispute arose from a domestic sub-contract
agreement between the appellant as sub-contractor and TBP as the main contractor.
The contract was for an electrical installation at a hospital. The sub-contract was
cancelled on 6 October 2010. The disputed cancellation led to the arbitration, which
commenced on 11 December 2011 and was adjourned from time to time. It ran for
several days until all the evidence for the claim and the counterclaim had been led.
The proceedings were then postponed for argument to 12 October 2012.

[6] However, on 5 October 2012, TBP began business rescue proceedings by
filing a resolution to place itself under business rescue. The business rescue was
registered on 11 October 2012, and a business rescue practitioner duly appointed to
oversee the affairs of the company. Once the business rescue proceedings began,
the moratorium on legal proceedings in s 133 of the Act applied to claims against the
company. This means that no legal proceedings against the company could
commence or proceed except in the circumstances specified in ss 133(1)(a) to (e).
As mentioned earlier, s 133(1)(a) – the provision requiring the written consent of the
practitioner for legal proceedings – is central to this dispute.

[7] On 12 October 2012, unaware that TBP was under business rescue, the
arbitrator heard argument and on 23 October 2012, still unaware, delivered his
award. The appellant was also not informed of TBP’s changed legal status. So she
neither sought, nor was given, the practitioner’s written consent to continue the
arbitration proceedings begun in December 2011 and which by then had almost run
its course. The practitioner did nothing to bring the business rescue proceedings to
the appellant’s attention either. He says in his answering affidavit that he would have
given his consent had he been asked, though I do not think anything turns on this.

[8] I turn to the first issue in this appeal, which concerns the interpretation of the
phrase ‘legal proceeding’ as it is used in s 133 of the Act. It is helpful to reiterate that
the method of attributing meaning to the words used in legislation involves, as a

point of departure, examining the language of the provision at issue, the language
and design of the statute as a whole and its statutory purpose. So when the
lawmaker uses particular words to achieve its purpose they must be given effect. In
so doing a court will apply ordinary rules of grammar and syntax. It is not permissible
to ignore or distort the meaning of the words to achieve its purpose. For in so doing a
court will be substituting its own words for those of Parliament. But if the words used
are reasonably capable of bearing more than one meaning, the consequences of the
divergent interpretations must be examined so that a meaning that is likely to further
rather than hinder its purpose is adopted.2 In this regard a meaning that is more
sensible and business like is to be preferred over one that has a contrary effect.3

[9] It may be apposite to begin this interpretive exercise by reiterating how the
courts and standard textbooks have distinguished arbitration from the process of the
courts. Arbitration involves a practice whereby parties voluntarily resolve disputes
over their rights privately, outside of the public process of the courts. It involves the
appointment of an independent arbitrator, often chosen by the parties, to rule on their
dispute according to terms of reference and procedures they give him. The terms of
reference confer the mandate or jurisdiction on the arbitrator to decide the dispute by
making an award, which is final and binding upon them. By adopting this route the
parties remove the dispute from the jurisdiction of the courts. In short, they agree on
a private, non-State process.4

[10] Although there is a distinction between the nature of proceedings to resolve
disputes over rights in the courts and those through arbitration, the courts
nevertheless exercise a supervisory function over arbitration. A court will therefore
intervene at the behest of the parties where an arbitrator exceeds his jurisdiction,
misconducts himself or commits a gross irregularity. A court will also exercise its
jurisdiction over a dispute concerning an award that is alleged to have been

2 Stephen Breyer Making our Democracy Work: A Judge’s View (2010) at 92.
3 See generally Natal Joint Municipal Pension Fund v Endumeni Municipality (920/2010) [2012]
ZASCA 13; 2012 (4) SA 593 (SCA) para 18; Bristol Airport plc & another v Powdrill & others [1990] 2
All ER 493 at 501.
4 See generally Lufuno Mphaphuli & Associates (Pty) Ltd v Andrews & another (CCT 97/07) [2009]
ZACC 6; 2009 (4) SA 529 (CC) paras 195-198.

improperly obtained. Arbitration awards are also only enforceable by the process of
the courts.

[11] But the distinguishing features between court and arbitration proceedings do
not answer the question posed in this case, whether both or only court proceedings
are legal proceedings for purposes of s 133 of the Act. The relevant parts of the
section read as follows:
‘133  General moratorium on legal proceedings against company
(1)
During business rescue proceedings, no legal proceeding, including enforcement
action, against the company, or in relation to any property belonging to the company, or
lawfully in its possession, may be commenced or proceeded with in any forum, except-
(a)
with the written consent of the practitioner;
(b)
with the leave of the court and in accordance with any terms the court considers
suitable;
(c)
as a set-off against any claim made by the company in any legal proceedings,
irrespective of whether those proceedings commenced before or after the business rescue
proceedings began;
(d)
. . .
(e)
. . .
(f)
. . .
(2)
. . .
(3)
If any right to commence proceedings or otherwise assert a claim against a company
is subject to a time limit, the measurement of that time must be suspended during the
company's business rescue proceedings.’

[12] The phrase ‘legal proceeding’ is not defined in most standard dictionaries or in
the Act. But it has been defined in Black’s Law Dictionary as:

‘Any proceeding authorized by law and instituted in a court or tribunal to acquire a right or to
enforce a remedy.’5
And in International Arbitration Law6 the author notes that ‘arbitration constitutes
legal proceedings’. The internet also reveals that ‘arbitration is a legal proceeding
that results in an award that is generally binding’.7 In England, for example,
reference to ‘no other proceedings’ in a statute was found to mean that the
proceedings were legal proceedings or quasi-legal proceedings such as arbitration.8

[13] So, depending on the context within which the phrase is used, it is fairly
capable of covering proceedings before the courts as well as other tribunals, such as
arbitration tribunals, to resolve legal disputes over rights and remedies.9 In ordinary
parlance therefore it would be incongruous not to construe proceedings in which
legal disputes are resolved privately through arbitration as legal proceedings simply
because they take place outside of the formalities of the court system.

[14] Of course, the courts have on occasion ascribed a meaning to the phrase as
being a court proceeding. Thus, recently, in Cloete Murray & another NNO v
Firstrand Bank Ltd t/a Wesbank10 in interpreting s 133(1) in a dispute over whether
the cancellation of a contract constituted ‘enforcement action’ as envisaged in the
section, this court observed – without deciding – that the phrase ‘legal proceedings’
usually bears the meaning of a ‘lawsuit’ or ‘hofsaak’ and that ‘enforcement action’
was a species of or has its origin in such legal proceedings. This conclusion, it said,
was supported by the fact that the proceedings could only begin or continue in a

5 Bryan A Garner Black’s Law Dictionary 9 ed.
6 Mauro Rubino-Sammartano International Arbitration Law p 42.
7 An Internet search of the phrase ‘arbitration is a legal proceeding . . .’ produces many hits from sites
which explain the nature of arbitration: see for example the American Arbitration Association
https://www.google.co.za/url?url=https://www.adr.org/cs/idcplg%3FIdcService%3DGET_FILE%26dDo
cName%3DADRSTG_005023%26RevisionSelectionMethod%3DLatestReleased&rct=j&frm=1&q=&e
src=s&sa=U&ved=0CCkQFjACahUKEwi8rcyKmdHHAhVHtBQKHaAqCrw&usg=AFQjCNFJ6XXWsnfV
HlKd3A3OW0W7pPLwZQ ‘arbitration is a legal proceeding that results in an award that is generally
final and binding’.
8 Bristol Airport plc & another v Powdrill & others [1990] 2 All ER 493 at 506.
9 Section 1 of the Arbitration Act 42 of 1965 defines ‘arbitration proceedings’ as proceedings
conducted by an arbitration tribunal.
10 Cloete Murray & another NNO v Firstrand Bank Ltd t/a Wesbank (20104/2014) [2015] ZASCA 39;
2015 (3) SA 438 (SCA).

‘forum’, which usually refers to a court or tribunal. And therefore the ‘forum’ relates to
‘formal proceedings’ ancillary11 to legal proceedings, such as the enforcement or
execution of court orders by means of writs of execution or attachment orders, which
the cancellation of a contract was not.12

[15] The respondent relies heavily on this judgment to support its contention that
the phrase legal proceedings in s 133(1) relates to formal court proceedings. And at
first blush the reference in the judgment to a ‘lawsuit’ or ‘hofsaak’ that relates to
formal proceedings may suggest it does, particularly because the court referred to
Van Zyl v Euodia Trust (Edms) Bpk,13 which was followed in Lister Garment
Corporation (Pty) Ltd v Wallace NO14 to demonstrate that this was the ‘usual
meaning’ of the phrase.15 The court a quo also cited the two cases as authority for
the conclusion to which it came.

[16] But none of these cases support the respondent’s interpretation of the
section. Cloete Murray was concerned not with the meaning of legal proceedings,
but of ‘enforcement action’, which it said had its origin in ‘legal proceedings’.16 In
both Van Zyl and Lister Garment the issue was whether s 13 of the 1973 Companies
Act permits a court to order a company that proceeds as the plaintiff in reconvention
to furnish security for costs.17 It was held that the section applied only to the plaintiff
in convention, and not to the plaintiff in reconvention. In coming to this conclusion the
court said that the history of the provision was to be traced to the common law rule
that incolae must have free access to the courts and cannot be compelled to furnish
security for costs. And to the extent that s 13 made inroads into the common law the

11 Ibid paras 31 and 32.
12 Ibid para 33.
13 1983 (3) SA 394 (T) at 399B-D.
14 1992 (2) SA 772 (D) at 723 H.
15 Above fn 10.
16 Cloete Murray & another NNO v Firstrand Bank Ltd t/a Wesbank 2015 (3) SA 438 (SCA) para 32.
17 Security for costs in legal proceedings by companies and bodies corporate.—
‘Where a company or other body corporate is plaintiff or applicant in any legal proceedings, the Court
may at any stage, if it appears by credible testimony that there is reason to believe that the company
or body corporate or, if it is being wound up, the liquidator thereof, will be unable to pay the costs of
the defendant or respondent if successful in his defence, require sufficient security to be given for
those costs and may stay all proceedings till the security is given.’

provision ought to be restrictively interpreted so as not to include the plaintiff in
reconvention. The two cases were therefore concerned with access to the courts and
do not apply to the issue before us.

[17] However, in a recent unreported case involving the interpretation s 133,
Merchant West Working Capital Solutions (Pty) Limited v Advanced Technologies
and Engineering Company Limited & another,18 which the respondent drew to our
attention, the court cited the same cases (Van Zyl and Lister Garment) in holding
that the phrase ‘legal proceeding’ is ‘not . . . susceptible to any other meaning than
(its) ordinary every-day literal one’.19 But here too the issue was not germane to the
question before us. The court was confronted with a contention that legal
proceedings as envisaged in s 133(1) were concerned only with disputes over
claims, not applications to court for the perfection of security. The court’s conclusion
was that the application fell within the moratorium on legal proceedings, and
therefore required the consent of the practitioner before it could be instituted. So
what the judge said about legal proceedings in that case also has no bearing on the
current issue.

[18] I return to Cloete Murray. There the court observed that a ‘forum’, as the term
is used in the section, usually refers to a court or a tribunal (emphasis added). So the
‘forum’ clearly does not bear a single meaning ie formal court proceeding, and I do
not think that the judgment can be construed in this way either.

[19] This is why the respondent was driven to contend that the reference to a
forum in s 133 (1) means a public forum, that is, a court of law rather than a forum
that includes tribunals of all kind, public and private. But this interpretation
impermissibly requires the word public to be added before the word ‘forum’ in the

18 Merchant West Working Capital Solutions (Pty) Ltd v Advanced Technologies and Engineering
Company (Pty) Ltd & another (13/12406) [2013] ZAGPJHC 109.
19 Ibid para 63.

section,20 when the statute is perfectly capable of being interpreted intelligibly as it
stands. Had the aim of the drafters been to confine the proceedings to court
proceedings, it would simply have used the word ‘court’ instead of ‘forum’.

[20] Notwithstanding this difficulty, which was put to counsel for the respondent
during the hearing, he pressed the point. In this regard he relied heavily on the
judgment of the Constitutional Court in Lufuno Mphaphuli & Associates (Pty) Ltd v
Andrews & another as authority for the proposition that a ‘forum’ as referred to in
s 133(1) means a ‘public’ forum. There the court was concerned with whether s 34 of
the Constitution applied to private arbitrations. It provides that:
‘Everyone has the right to have any dispute that can be resolved by the application of law
decided in a fair public hearing before a court, or where appropriate, another independent
and impartial tribunal or forum.’

[21] The court had to decide whether an arbitrator was ‘another independent and
impartial tribunal or forum’ as contemplated in the section.21 In a majority judgment
the court held that s 34 did not apply to private arbitrations. In coming to this
conclusion, it said that the language used in the section did not apply directly to
private arbitrations.22 In other words, it applied to public tribunals and public forums,
not private ones.

[22] A crucial reason for why it arrived at this conclusion was that the words ‘fair
public hearing’ (emphasis added) in s 34 were held to apply to the tribunals and
forums.23 By contrast, there is no suggestion in the language employed in s 133 that
the ‘forums’ referred to are only public forums and not private ones. So the
respondent’s invocation of Lufuno Mphaphuli to buttress its interpretation must also
founder.

20 Kalil NO & others v Mangaung Municipality & others 2014 (5) SA 123 (SCA) para 20.
21 Ibid para 201.
22 Ibid para 218.
23 Ibid paras 201 and 213.

[23] I have thus far attempted to give meaning to the phrase ‘legal proceeding’ by
examining it in its immediate context ie by reading it with the other words and
phrases in the section so as to give it ‘colour and content’.24 But reading words in
their context often requires one to have regard to the wider context including other
provisions in the same statute. One such provision that is relevant in this contextual
analysis is s 142(3)(b), which paradoxically both parties seek to rely upon. This
section obliges directors of a company in business rescue to assist the practitioner
by providing details of:
‘any court, arbitration or administrative proceedings, including pending enforcement
proceedings, involving the company.’

[24] The appellant submits, with some persuasive force, that the specific mention
of arbitration proceedings in the section instead of the general reference to legal
proceedings in s 133(1), indicates that the latter is intended to encompass all those
proceedings and not simply court proceedings. Section 133(1), it is submitted,
therefore refers to the legal proceedings in general terms and s 142(3)(b)
particularises the proceedings of which the practitioner must be apprised. This is
fortified, so the submission continues, by the use of the words ‘in any forum’ as it
appears in s 133(1), which is broad enough to cover courts, arbitration and
administrative tribunals.

[25] The respondent counters this submission by contending that the two sections
are not inconsistent. And that by specifically mentioning arbitration proceedings in
s 142(3)(b), but not in s 133(1), the drafters intended to exclude arbitrations from the
ambit of legal proceedings in the latter.

[26] But the question the respondent is unable to answer is why the lawmaker
would want the company to provide details of all proceedings, including arbitration
proceedings, to a practitioner, but exclude arbitrations from the ambit of the

24 The phrase ‘colour and content’ was first used by Lord Simonds said in A G v H R H Prince
Augustus [1957] 1 All ER 49 at 53.

moratorium and the obligation to obtain a practitioner’s consent in s 133(1)(a). After
all the outcome of an arbitration by way of award is usually that the losing party has
to pay a sum of money, which is the outcome of most court actions involving
commercial disputes. In my view the answer lies in properly understanding the
purpose of these provisions as they apply to business rescue proceedings and the
consequences that flow from the parties’ contending interpretations.

[27] Section 5(1) of the Act directs that its interpretation and application must give
effect to the purposes stated in s 7. Section 7(k) is relevant here. It says that one of
these purposes is to:
‘. . . provide for the efficient rescue and recovery of financially distressed companies, in a
manner that balances the rights and interests of all relevant stakeholders . . .’

[28] Section 128(1)(b) of the Act defines business rescue to mean proceedings
that facilitate the rehabilitation of a financially distressed company by providing,
amongst other things, for the temporary supervision and moratorium on the rights of
claimants, and the development and implementation of a plan to rescue the
company. The obvious purpose of placing a company under business rescue is to
give it breathing space so that its affairs may be assessed and restructured in a
manner that allows its return to financial viability. The requirement for the
practitioner’s consent to be obtained is to give him the opportunity, after his
appointment, to consider the nature and validity of any existing or pending claim and
how it is to be dealt with, for example by settling it or continuing with the litigation. In
particular, the practitioner’s concern is directed at assessing how the claim will
impact on the well-being of the company and its ability to regain its financial health.25
A general moratorium on the rights of creditors enforcing their rights against the
company is therefore crucial to achieving this objective. And given the ubiquitous use
of arbitrations to resolve commercial disputes,26 an interpretation of s 133(1) that

25 Compare Umbogintwini Land & Investment Co (Pty) Ltd (In Liquidation) v Barclays National Bank
Ltd & another (205/86) [1987] ZASCA 86; 1987 (4) SA 894 (A) at 910G-I.
26 Peter Ramsden The Law of Arbitration: South African & International Arbitration 2009 p 15.

excludes them from the moratorium on legal proceedings against financially
distressed companies would significantly hinder its attainment.

[29] In my view once this purpose of business rescue – to give the practitioner
breathing space – is properly understood, it becomes apparent that only an
interpretation that includes arbitrations within, instead of excluding them from, the
meaning of legal proceedings in s 133(1), allows this provision to be read
harmoniously with s 142(3)(b). Such a reading is in line with the well-known canon of
statutory construction, which is that if by any reasonable construction the two can be
made to be compatible, not contradictory, that is the interpretation that should be
given. There can be no reason why s 142(3)(b) obliges the company to provide
details of arbitrations to the practitioner other than because they are also legal
proceedings – as contemplated in s 133(1) – that may have a bearing on its financial
viability and of which the business rescue practitioner must be cognisant.

[30] It may sometimes assist in ascertaining the meaning of a statutory provision
to examine similar language in other statutes for guidance. But travelling beyond the
borders of a statute to examine other statues is an exercise that must be undertaken
cautiously as their contexts and purposes differ. The parties refer to the Arbitration
Act 42 of 1965 to bolster their contentions regarding the meaning of legal
proceedings.

[31] The appellant points to the treatment of judicial management in the 1973
Companies Act, which, like business rescue, was also a mechanism to attempt to
save financially distressed companies. The Arbitration Act provides that arbitration
proceedings are to be treated as legal proceedings in winding up and ancillary
proceedings of judicial management.27 It follows, so it is submitted, that since
business rescue replaced judicial management as a process for providing a

27 Section 5 of the Arbitration Act 42 of 1965.

moratorium to allow ailing companies to be restored, it should be treated in the same
way.

[32] While this submission is not without merit it does not explain why the drafters
did not amend the Arbitration Act – as they did several other statutes28 – by replacing
the concept of judicial management, with business rescue. This would have been the
obvious course to adopt. It may be that this omission was as a result of
inattentiveness or carelessness on the part of the drafters, but a court must be slow
to reach this conclusion. As I emphasised earlier, it is the language used in statute
that must be examined to determine its meaning and not extraneous factors.

[33] On the other hand, the respondent contends that because the Arbitration Act
expressly draws a distinction between legal proceedings and arbitration proceedings
in several sections it is apposite to distinguish them in the Act.29 Examples given
where this distinction appears are s 6 – stay of legal proceedings when there is an
arbitration agreement; s 20 – delivery of an opinion by a court; s 31 – the making of
an award into an order of court and s 36, the awarding of costs for legal proceedings.

[34] It is unnecessary to analyse these provisions in any detail. What is clear
though is that the distinction between legal proceedings (court proceedings) and
arbitrations in the Arbitration Act is merely a factual recognition that both are
methods for enforcing legal rights. The respondent omits to mention the important
provision relied upon by the appellant – s 5 – which treats arbitration proceedings as
legal proceedings for the purposes of sequestration, liquidations and judicial
management. To conclude this point, therefore, I do not think that either party’s
reliance on the treatment of legal proceedings and arbitrations in the Arbitration Act,
which has a different statutory purpose, definitively answers the question in this
case.

28 Schedule 3 and 4 of the Act.
29 See subsec 6.

[35] To conclude this analysis, the phrase legal proceeding may, depending on the
context within which it is used, be interpreted restrictively, to mean court proceedings
or more broadly, to include proceedings before other tribunals including arbitral
tribunals. The language employed in s 133(1) itself suggests that a broader
interpretation commends itself, an approach with which academic commentators
concur.30 Contextual indications in s 142(3)(b), and the importance of reading these
provisions consistently, also support this interpretation. And finally, the purpose of
the provision, which is to give breathing space to the practitioner to get the
company’s financial affairs in order, also requires it to be construed widely because
arbitrations, like court proceedings also involve diversion of resources – both time
and money – that may hinder the effectiveness of business rescue proceedings. To
construe it narrowly, as the court a quo did, and as the respondent contends we
should, would be at odds with its language, defeat its purpose and lead to insensible
and impractical consequences.

[36] This brings me to the second leg of this case, which is whether the failure by
the appellant – the respondent’s creditor – to seek and obtain the practitioner’s
consent before continuing with the arbitration was fatal to its outcome and should for
this reason be invalidated. As I have mentioned there is no suggestion that the
appellant was aware of the business rescue proceedings and is trying to profit from
her own failure to have sought the practitioner’s consent.

[37] The appellant’s primary contention is that the practitioner’s written consent
under s 133(1)(a) is to be characterised as a jurisdictional fact or, put differently, a
condition precedent for the arbitral proceedings to proceed or continue.31 The

30 F H Cassim et al Contemporary Company Law 2 ed p 881 fn 99; Henochsberg On the Companies
Act 71 of 2008 Vol 1 p 478(12).
31 A similar characterisation was adopted in Re Taylor (a bankrupt); Davenham Trust plc (t/a Booker
Montagu Leasing v CV Distribution (UK) Ltd & another [2007] 3 All ER 638 where a Chancery Division
in England was asked to decide whether a claimant’s failure to obtain the leave of the court in
accordance with a statutory requirement before instituting proceedings against a bankrupt debtor
rendered the proceedings a nullity. In finding that it did the court said, at para 56, that such a provision
controls the jurisdiction of a court or arbitrator. So that leave is not merely permission to the would-be
litigant; it is a condition precedent to the jurisdiction of the court in which proceedings are then to be
started or of an arbitrator. However, in the instant case the issue before us concerns s 133(1)(a) – the

absence of such a jurisdictional fact, it is submitted, carries with it the implication that
a court or tribunal has no power or competence to determine an issue between the
parties. And if it nevertheless proceeds to determine the matter notwithstanding the
absence of jurisdiction the consequence is that the proceedings are void.

[38] The appellant mischaracterises the consent requirement in s 133(1)(a) as a
jurisdictional condition. The arbitrator’s jurisdiction is derived from the arbitration
agreement, not from any provision in the Act. Section 133(1)(a) is more properly
described as a statutory moratorium32 or procedural bar to the initiation or
continuation of legal proceedings. The important question is whether, in requiring this
condition to be satisfied, the lawmaker sought to invalidate the proceedings brought
without the condition having been met or simply to give certain procedural rights to a
creditor without nullifying the proceedings when this drastic consequence is not
warranted. This answer to this question calls for a closer examination of the
provision.

[39] Section 133(1) was enacted to protect a company under business rescue
against claims from creditors. Its object is to prevent the practitioner being inundated
with legal proceedings without sufficient time within which to consider whether or not
the company should resist them and to prevent the company that is financially
distressed from being dragged through litigation while it tries to recover from its
financial woes. Its effect is to stay legal proceedings except in those circumstances
mentioned in s 133(1)(a) to (e). The creditor may initiate or continue the proceedings
in terms of s 133(1)(a) with the written consent of the practitioner.

[40] But s 133(1)(a) is not a shield behind which a company not needing the
protection may take refuge to fend off legitimate claims. Thus s 133(1)(b), which is to
be read disjunctively with s 133(1)(a) because of the use of the word ‘or’ in

permission provision – not the failure to obtain the leave of the court in accordance with s 133(1)(b). It
is in any event doubtful whether s 133(1)(b) can be construed as a jurisdictional requirement.
32 Investec Bank Ltd v Bruyns (19449/11) [2011] ZAWCHC 423; 2012 (5) SA 430 (WCC) para 17.

exceptions (a) to (e), permits a creditor to seek the court’s imprimatur to initiate or
continue legal proceedings against the company in the event of a practitioner’s
refusal to give consent, or directly, even without the permission of the practitioner
having been sought. So s 133(1)(a) is not an absolute bar to legal proceedings being
instituted or continued against a company under business rescue. This is a strong
indication that non-compliance with the section is not to be visited with the sanction
of a nullity.

[41] Moreover, there is no other indication in the section that non-compliance
carries with it the implication that the proceedings are a nullity. In this regard it is of
some relevance that this court recently said of s 134(1)(c), which prohibits the
exercise of any right over the property in possession of the company during business
rescue proceedings without the practitioner’s written consent, that it was directory
rather than peremptory. So, non-compliance with the condition in this section does
not necessarily lead to nullity.33 Although this was said in an obiter dictum it was not
contended before us that it was wrong and I consider it persuasive.

[42] One would therefore have expected the section to say that non-compliance
with s 133(1)(a) renders the proceedings void – or use similar language – if that is
what it sought to achieve.34 Significantly it says so specifically in s 129(5). That
section, which is also in the chapter dealing with business rescue, says in terms that
any non-compliance with ss 129(3) or (4) pertaining to the publication of a company
resolution to begin business rescue proceedings and appointment of a practitioner
means that the resolution ‘lapses and is a nullity’. But even where this consequence
seemed clear this court considered that when this provision (s 129(5)) was read with
s 130(1), ‘lapsing and nullity arising from such non-compliance may be less than
absolute’.35 So in the treatment of two provisions in the Chapter36 dealing with
business rescue proceedings this court seems to have set itself against nullifying

33 Cloete Murray & another NNO v Firstrand Bank Ltd t/a Wesbank 2015 (3) SA 438 (SCA) para 24.
34 Compare Section 359 of the 1973 Companies Act.
35 Panamo Properties (Pty) Ltd & another v Nel NO & others (35/2014) [2015] ZASCA 76 (27 May
2015) para 14.
36 Chapter 6.

actions taken under business rescue proceedings in the face of non-compliance with
its provisions. And, properly construed, I think that non-compliance with s 133(1)(a)
does not in and of itself invalidate legal proceedings either.

[43] But there is more a fundamental obstacle in the way of the respondent’s bid to
invalidate the arbitration proceedings. Section 133(1) in general and s 133(1)(a) in
particular, appears to have been enacted exclusively for the benefit of the company
and the practitioner appointed to oversee its affairs. In this respect the practitioner’s
position is akin to that of a liquidator in s 359 of the 1973 Companies Act.37 In a
similar vein, the Western Cape High Court (Rogers AJ) in Investec Bank Ltd v
Bruyns38 characterised the defence afforded to the company by the statutory
moratorium as a defence in personam – ‘a personal privilege or benefit in favour of
the company’.39 Once this is accepted a creditor – a claimant against the company
as described in s 128(1) – has no locus standi to rely on non-compliance with the
section. Put another way, the defence is not available to the creditor. Only the
practitioner may seek its protection. And only he may waive or consent to dispense
with compliance therewith.40

[44] The appellant accepts that the moratorium operates for the practitioner’s
benefit. But she submits that it does not do so exclusively, to the detriment of the
creditor’s rights. The formal requirement in s 133(1)(a) for a creditor to obtain the
practitioner’s written consent for legal proceedings, it is submitted, balances the
rights of the company with that of the creditor, in a manner that is mandated by
s 7(k).41 This is because, so the submission goes, the creditor has a right to be
informed that the company is in business rescue so that it may apply for consent and

37 Compare s 359 of the 1973 Companies Act.
38 Investec Bank Ltd v Bruyns 2012 (5) SA 430 (WCC).
39 Ibid para 18.
40 Compare s 359(2) of the 1973 Companies Act; Barlows Tractor Company (Pty) Ltd v Townsend
(727/93) [1996] ZASCA 3; 1996 (2) SA 869 (A) at 884F-G; Henochsberg’s Commentary on the
Companies Act Vol 1 p 760(3).
41 One of the purposes of business rescue proceedings, according to s 7(k) is to ‘. . . provide for the
efficient rescue and recovery of financially distressed companies, in a manner that balances the rights
and interests of all relevant stakeholders . . . .’

receive a formal written communication on the outcome of the application. In this
case the practitioner’s failure to inform the appellant of the business rescue
proceedings infringed her right to receive the information. The appellant, it is
submitted, thus has a legal interest in the potential consequences that flow from the
practitioner’s failure to convey this information to her, which include the proceedings
being rendered a nullity in the event of non-compliance with the section.

[45] While not lacking in ingenuity, this submission is entirely without merit. It is
therefore hardly surprising that counsel for the appellant was not able to provide any
authority to support his contention. The statutory moratorium is crafted in a manner
that balances the rights and interests of the company and claimants against the
company. So, as I have pointed out earlier, during the moratorium there is no
absolute bar against legal proceedings. A creditor may ask for the practitioner’s
written consent and if refused, approach the court under s 133(1)(b). In addition a
creditor may approach the court directly under this provision for leave to institute
legal proceedings, without having asked for the practitioner’s consent. The creditor is
also entitled, under s 133(1)(c) to set-off a claim by the company in legal
proceedings commenced before or during the moratorium. Finally, s 133(3)
suspends the time limits for a creditor’s right to commence proceedings or otherwise
assert a claim against the company during the moratorium. The exercise of a
creditor’s rights are therefore suspended during the moratorium, but this is balanced
by the other protections afforded it in the section itself.

[46] The formal requirement for consent to be sought from the practitioner and
given in writing was obviously inserted to promote legal certainty and avoid later
disputes.42 But it confers no rights on a creditor other than those specifically provided
for in s 133. The appellant thus has no legal interest to challenge the award on the
ground she has advanced.

42 Compare Spring Forest Trading 599 CC v Wilberry (Pty) Ltd t/a Ecowash & another (725/13) [2014]
ZASCA 178; Spring Forest Trading CC v Wilberry (Pty) Ltd t/a Ecowash & another 2015 (2) SA 118
(SCA) para 13.

[47] It bears mentioning that the moratorium only suspends legal proceedings
against a company under business rescue and not by the company. This means that
the appellant’s claim against the company would be subject to the moratorium, but
the counterclaim, which is an independent claim, would not.43 So if the appellant’s
main contention – that the legal proceedings are void – were upheld, nullity would in
principle and logic apply only to the appellant’s claim against the company, but not to
the counterclaim. If that occurred, the appellant would have come to court seeking to
invalidate the award so that she could escape the unintended consequences of
having initiated a claim against a company only to have a counterclaim whose
monetary value exceeded her own claim upheld against her. And having gone to
court with the hope of nullifying the award in its entirety, she would have succeeded
only in nullifying her own claim, thereby making her potential loss even greater. She
would have thus proverbially been hoist by her own petard.

[48] To conclude, the appellant was successful in contending that arbitration
proceedings are legal proceedings for the purposes of s 133(1). But she has not
been able to persuade us that non-compliance with its provisions in and of itself
nullifies the legal proceedings. More fundamentally she has not shown that she has
standing to invoke its provisions in order to invalidate an arbitration award on the
ground that she was not informed of the business rescue proceedings and therefore
deprived of a right to request and to receive written permission to continue the
proceedings.

[49] In the result the following order is made:
‘The appeal is dismissed with costs, including the costs of two counsel.’

_________________
A CACHALIA
JUDGE OF APPEAL

43 Marshall Timbers Ltd v Hauser & Battaglia (Pty) Ltd & another 1976 (3) SA 437 (D) at 439D.

APPEARANCES

For Appellant:
M Pillemer SC

Instructed by:

Pearce, du Toit & Moodie, Durban

Phatshoane Henney Attorneys, Bloemfontein

For Second Respondent: A K Kissoon Singh SC (with him M W Collins SC)

Instructed by:

V Chetty Inc, La Lucia

Lovius Block Attorneys, Bloemfontein
THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL

From:
The Registrar, Supreme Court of Appeal
Date:
4 September 2015
Status:
Immediate

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

SHAMLA CHETTY t/a NATIONWIDE ELECTRICAL

v

O D HART NO & ANOTHER

The Supreme Court of Appeal (SCA) today held that arbitration proceedings are
legal proceedings, as this term is applies, in s 133(1) of the Companies Act 71 of
2008. Section 133(1)(a) provides that no legal proceedings may commence or
continue against a company during business rescue proceedings except with the
written permission of the business rescue practitioner. The main dispute in the high
court was whether arbitrations were legal proceedings as envisaged in the section.
The holding followed a high court ruling from Kwazulu-Natal, which came to the
contrary conclusion.

The dispute between the parties, Shamla Chetty, trading as Nationwide Electrical
and TBP Building and Civils (Pty) Ltd (TBP) occurred after they had referred a
contractual dispute between them relating to a building contract for arbitration. The

arbitrator upheld Ms Chetty’s claims against TBP for R420 573.93 plus interest. But
she in turn was held liable to TBP in respect of its counterclaim against her for a
substantially larger amount, namely R4 238 451.95 plus interest and costs. At the
time the award was made, TBP was in business rescue.

Dissatisfied with the outcome she approached the high court, Kwazulu-Natal, to
nullify the arbitral proceedings. She relied on the ground that the arbitral
proceedings had gone ahead with the arbitration without her being aware that TBP
was under business rescue, which meant that she had neither sought, nor was
granted, the written permission of the business practitioner appointed to oversee
the affairs of the company to continue the arbitration. TBP opposed the relief
sought on the ground that the moratorium on legal proceedings against a company
under business rescue, as provided for in s 133(1) of the Act, did not apply to
arbitrations as the phrase legal proceedings referred only to court proceedings and
not to arbitrations.

The SCA upheld Ms Chetty’s contention that the arbitrations were legal
proceedings for the purposes of s 133(1) of the Act. But it also ruled that her
appeal could not succeed for two reasons. First, the section did not require legal
proceedings to be nullified only because written permission of the business
practitioner was not sought or obtained for the proceedings to continue. Secondly,
because the requirement for written permission was enacted for the benefit of the
company and not the creditor, Ms Chetty did not have standing to invoke this
protection to nullify the proceedings.

Her appeal was accordingly dismissed with costs.