THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Reportable

Case No: 617/2021
In the matter between:

SOUTHERN SKY HOTEL AND LEISURE (PTY) LTD
trading as HANS MERENSKY HOTEL AND SPA
(in liquidation) (Registration No. 2006/005152/07)
FIRST APPELLANT

MARYNA ESTELLE SYMES N O
SECOND APPELLANT

MUSTAFA MOHAMED N O
THIRD APPELLANT

JOHANNES ZACHARIAS HUMAN
MULLER N O
FOURTH APPELLANT

PULENG FELICITY BODIBE N O
FIFTH APPELLANT

VAN’S AUCTIONEERS GAUTENG (PTY) LTD
SIXTH APPELLANT

and

SOUTHERN SKY FOOD ENTERPRISES (PTY) LTD

RESPONDENT

Neutral Citation:
Southern Sky Hotel and Leisure (Pty) Ltd and Others v Southern
Sky Food Enterprises (Pty) Ltd (617/2021) [2022] ZASCA 134
(13 October 2022)

Coram:
PONNAN and VAN DER MERWE JJA and MUSI, BASSON and
MASIPA AJJA

Heard:

29 August 2022

Delivered:

13 October 2022

Summary:
Whether agreement concluded by liquidators for the sale of the property
of a company in liquidation is invalid by virtue of the provisions of s 131(6) of the
Companies Act 71 of 2008.

___________________________________________________________________

ORDER
___________________________________________________________________

On appeal from: Gauteng Division of the High Court, Johannesburg (Victor J, sitting
as court of first instance):

The appeal is upheld with costs, including the costs of two counsel.
The order of the high court is set aside and replaced with the following order:
‘The application is dismissed with costs, including those of two counsel.’
___________________________________________________________________

JUDGMENT
___________________________________________________________________

Basson AJA (Ponnan and Van der Merwe JJA and Musi and Masipa AJJA
concurring)

[1] The issue in this appeal is whether an agreement (the agreement) concluded
by the liquidators of a company (in liquidation) for the sale of the company’s immovable
property in circumstances where business rescue proceedings have been

commenced, is invalid by virtue of the provisions of s 131(6) of the Companies Act 61
of 2008 (the Companies Act).

[2] The first appellant is Southern Sky Hotel and Leisure (Pty) Ltd t/a Hans
Merensky Hotel and Spa (in liquidation) (the company). The second, third, fourth and
fifth appellants are the appointed provisional liquidators of the company (the
liquidators). The sixth appellant is Van’s Auctioneers Gauteng (Pty) Ltd (the
auctioneer), who made common cause with the liquidators both before this Court and
the one below. Where the context so requires the first to sixth appellants will jointly be
referred to as the appellants. The respondent is Southern Sky Food Enterprises (Pty)
Ltd (the respondent). Ms Shamira Rinderknecht (Rinderknecht) is the sole shareholder
and director of the respondent.

[3] The Hans Merensky golf course was established in 1967 by the Phalaborwa
Mining Company. The golf course and the surrounding land were later purchased by
the Hans Merensky Country Club (Pty) Ltd (the club) and developed into a golf estate.
The company later bought the estate from the club and developed it into the Hans
Merensky Hotel and Spa.

[4] During 2003 to 2007, various individuals, referred to in the papers as the ‘Irish
Investors’, bought immovable property from the club and developed it into furnished
bush lodges. An agreement was concluded between the Irish Investors and the club
in terms whereof the club had the right to lease out the bush lodges to the public,
subject to the Irish Investors receiving certain agreed returns (the rental pool
agreements). At some point, the company took over the management of the rental pool
agreements and assumed liability under these agreements.

[5] After the 2010 FIFA World Cup, occupancy in the hotel dropped dramatically
and by 2013 the company was already in financial distress and unable to honour its
obligations in terms of the rental pool agreements. This resulted in the Irish Investors
launching the first winding-up application in the Gauteng Division of the High Court,
Pretoria in 2013. Prior to the hearing of the application, the company settled its entire
indebtedness, and the winding-up application was withdrawn.

[6] On 14 April 2016, the Irish Investors launched a second winding-up application
in the Gauteng Division of the High Court, Pretoria due to the company’s failure to
again comply with its financial obligations in terms of the rental pool agreements. This
application was withdrawn and reissued in the Limpopo Division of the High Court,
Polokwane on 9 June 2016 when the company challenged the jurisdiction of the court
on the basis that its registered address had been changed.

[7] On 8 June 2016, one day prior to the launching of the liquidation application, a
resolution to place the company under business rescue was adopted. As a result of
the company having been placed under business rescue, no opposing papers were
filed, and the liquidation application was suspended in terms of s 131(6) of the
Companies Act. In the same year, Nedbank Ltd and Zelpy 2539 (Pty) Ltd launched an
application before the Gauteng Division of the High Court, Pretoria in terms of which
an order was sought setting aside the business rescue resolution of 8 June 2016 and
seeking the winding-up of the company.

[8] Despite the fact that business rescue proceedings had commenced as far back
as 8 June 2016, almost a year went by without a business rescue plan having been
adopted. The business rescue plan was only published on 15 March 2017 but was
rejected when it was put to a vote at a creditors’ meeting in terms of s 151 of the
Companies Act on 6 September 2016. This resulted in yet another application by
Rinderknecht in the Gauteng Division of the High Court, Pretoria for the setting aside
of the vote in terms of s 153 of the Companies Act. On 18 October 2018, the high court
dismissed the application with costs.

[9] The liquidation application launched by the Irish Investors in the Limpopo
Division of the High Court, Polokwane finally served before Ledwaba AJ on 25
November 2019. On 21 January 2020, the court handed down its judgment placing
the company under final liquidation by virtue of it being unable to pay its debts and
being factually and commercially insolvent as envisaged in s 344(f), read with s
345(1)(c), of the 1973 Companies Act.

[10] On 3 February 2020, the liquidators were appointed and on 22 September 2020
their powers were extended to allow them to, inter alia, dispose of the movable and

immovable property of the company by public auction. Pursuant thereto the liquidators
resolved in November 2020 to put the immovable property of the company up for sale
on auction. The auction was advertised to take place on 23 and 24 February 2021.

[11] On 1 December 2020, Vision Tactical (Pty) Ltd (Vision), a creditor of the
company, launched an application for an order placing the company under supervision
and commencing business rescue proceedings in terms of s 131(1) of the Companies
Act. This application was only enrolled for hearing on 11 March 2021, shortly after the
auction was to have taken place.

[12] The liquidators sought an expedited hearing date, namely a date before the
auction was to take place, being 16 February 2021. Their counter-application to have
the business rescue application dismissed was also set down for the same day.  The
liquidators took the view that the business rescue application ought to be dismissed,
inter alia, on the basis that the application did not set out a reasonable prospect of
rescuing the company, and because the application had not been served on interested
parties and on the Companies and Intellectual Properties Commission (CIPC) as
required by s 131 of the Companies Act. The liquidators accordingly decided to
proceed with the auction as, according to them, there was no valid business rescue
application as recognised in law.

[13] The respondent, by way of an affidavit deposed to by Rinderknecht, to use the
words of the provisional liquidators, ‘rather unsurprisingly’ applied for leave to
intervene in the business rescue application on 15 February 2021. The respondent
proposed a different business rescue plan and a different business rescue practitioner.
Once again, the papers were not properly served on interested parties or on the CIPC.

[14] On 19 February 2021, leave was granted to the respondent to intervene. At the
hearing the court directed the respondent to serve the business rescue application
and the intervention application on all affected parties and, more in particular, on the
CIPC. On 22 February 2021, the business rescue application was served on all
affected parties in terms of the court’s directive.

[15] After the respondent’s intervention, although Vision did not formally withdraw
its application, it filed a notice to abide the outcome of the application.

[16] The liquidators proceeded with the online auction on 23 and 24 February 2021,
which was conducted by the auctioneer, for the sale of the company’s immovable
property and its business as a going concern (the property). Despite the pending
business rescue application, Rinderknecht, on behalf of the respondent, attended the
online auction on 24 February 2021 and, being the highest bidder, presented a signed
and written offer prepared by the liquidators to the auctioneer. On 11 March 2021, the
liquidators accepted the respondent’s offer, and the agreement was concluded.

[17] Clause 24 of the agreement, which is headed ‘SPECIAL CONDITION’ is
relevant. It provides:
‘Subject to clause 4.1 herein above, the conclusion and implementation of this agreement
shall be subject to the following:
24.1
If there is, at the date of the signing of this agreement, any application pending by any
person to procure business rescue in respect of Southern Sky Hotel and Leisure (Pty) Ltd,
registration number 2006/005152/07, then the seller, if it has not already been done by the
time this contract is signed, shall take steps to accelerate the hearing of any such an
application for business rescue in order to enrol it for hearing as soon as possible, including
to ask for the disposal of such an application in a special court, in an endeavour to procure an
order to dismiss any such an application.
. . .
24.3
If in respect of any such an application for business rescue the court does not dismiss
the application, but either grant the relief or give any other order, except one dismissing the
application, then this agreement shall lapse and be of no further force and effect.’

[18] Concerned, so the respondent claimed, about the validity of the auction and the
agreement, as both events had occurred after the business rescue application was
made and whilst the liquidation proceedings were ‘suspended’, on 25 March 2021, it
launched an urgent application out of the Gauteng Division of the High Court,
Johannesburg (the high court). The respondent sought an order that the high court
declare the agreement invalid and set it aside. That application succeeded before
Victor J. The appeal to this Court is with her leave.

[19] Of the four issues that served before the high court, only two remain on appeal,
namely: (a) was there a valid business rescue application as envisaged in s 131(6) of
the Companies Act; and (b) whether the agreement was invalid by virtue of the
provisions of s 131(6) of the Companies Act.

[20] Section 131(6) of the Companies Act reads as follows:
‘131.
Court order to begin 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.’

[21] Insofar as (a) is concerned: The argument advanced on behalf of the appellants
is that only a valid business rescue application can suspend the liquidation
proceedings that have already been commenced. In what follows, I am prepared to
assume in favour of the respondent, without deciding, that the business rescue
application was properly ‘made’ as envisaged in s 131(6) of the Companies Act.

[22] It must be accepted that s 131(6) does not suspend the legal consequences of
a winding-up order but merely suspends the liquidation proceedings, which means
that the process of continuing with the realisation of the assets of the company in
liquidation with the aim of ultimately distributing them to the various creditors, is
suspended.1 It is not controversial that one of the most important functions of the
liquidators is to commence with the process of winding-up or liquidating the assets of
the company with the aim of constituting a concursus creditorum. This process is
exhaustive and includes recovering and reducing into possession the assets of the
company, to realise them and to distribute the proceeds thereof to the satisfaction of

1 GCC Engineering and Others v Maroos and Others [2018] ZASCA 178; 2019 (2) SA 379 (SCA): ‘[17]
In terms of s 131(6) of the Act, it is liquidation proceedings, not the winding-up order, that is suspended.
What is suspended is the process of continuing with the realisation of the assets of the company in
liquidation with the aim of ultimately distributing them to the various creditors. The winding-up order is
still in place; and prior to the granting or refusal of the business rescue application, the provisional
liquidators secure the assets of the company in liquidation for the benefit of the body of creditors’.

the costs of the winding-up as well as the claims of creditors and to distribute the
residue (if any) amongst the shareholders in accordance with their rights.2

[23] The issue that arises for decision is thus whether s 131(6) of the Companies
Act rendered the agreement invalid. To answer this question, the meaning and effect
of clause 24 of the agreement must firstly be determined. Clause 24.1 and 24.2 were
aimed at expediting the finalisation of any business rescue application pending at the
date of the signing of the agreement or subsequently launched prior to the transfer of
the property. Clause 24.3 provided that the agreement would lapse in the event of
such business rescue application succeeding. In my view, the combined effect of these
provisions was that the property would not be realised unless the business rescue
application is dismissed. Put differently, irrespective of whether clause 24 had
suspensive or resolutive operation, the realisation of the property was subject to the
termination of the suspension of the liquidation process under s 131(6).

[24] The next question is whether, as a matter of statutory interpretation, s 131(6)
evinces an intention to visit such an agreement with nullity. I find no such indication in
its text, context or purpose. There is no direct prohibition of such an agreement as
contemplated in Schierhout v Minister of Justice.3 As I have said, s 131(6) does not
suspend the appointment, office and powers of a liquidator; it suspends only the
process of liquidation. There is no reason why a liquidator may not exercise these
powers subject to the lifting of the suspension under s 131(6). Consequently, the
agreement was valid and the high court should have dismissed the application to
declare it invalid.

[25] One final comment is necessary regarding the manner in which Rinderknecht
has over the years frustrated the various efforts to wind-up a company that was clearly
financially distressed since at least 2013. I need not restate the facts. It took the Irish
Investors close to eight years of litigation to obtain a final liquidation order. The

2 AMS Marketing Co (Pty) Ltd v Holzman and another at 268G-H. H S Cilliers et al Cilliers & Benade
Corporate Law 3 ed at 494: ‘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’.
3 Schierhout v Minister of Justice 1926 AD 99 (A) at 109.

liquidators have the following to say about this latest attempt to frustrate the liquidation
process:
‘Simply put, the business rescue applications have been filed as part of a clear and unlawful
stratagem to abuse the machinery of business rescue and to further frustrate the eventual
winding-up of the insolvent estate of [the company]. [The respondent] acted in concert with
the original applicant [Vision] who issued the first business rescue in December 2020. Both
applications constitute an abuse and are nothing but simulated litigation. The aim and motive
is to procure and [sic] ulterior object, namely a suspension of litigation.’

[26] Although these allegations are strenuously denied by Rinderknecht, the facts
speak for themselves. Business rescue proceedings are intended to provide for the
efficient rescue and recovery of financially distressed companies in a manner that
maximises the likelihood of the company continuing in existence on a solvent basis.4
Essentially, it is required that there must be a reasonable prospect of rescuing the
financially distressed company.5 This process is not, as so fittingly put by the court in
Welman v Marcelle Props 193 CC,6 for ‘the terminally ill close corporations. Nor are
they for the chronically ill. They are for ailing corporations, which, given time, will be
rescued and become solvent’.

[27] I can put it no better than this Court did in Panamo Properties (Pty) Ltd and
Another v Nel N O and Others N N O:7
‘Business rescue proceedings under the Companies Act 71 of 2008 (the Act) are intended 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”. They contemplate the
temporary supervision of the company and its business by a business rescue practitioner.

4 Section 128(1)(b)(i)-(iii) of the Companies Act states:
‘(b)  “business rescue” means proceedings to facilitate the rehabilitation of a company that is financially
distressed by providing for –
(i)   the temporary supervision of the company, and of the management of its affairs, business and
property;
(ii)   a temporary moratorium on the rights of claimants against the company or in respect of property
in its possession; and
(iii)   the development and implementation, if approved, of a plan to rescue the company by
restructuring its affairs, business, property, debt and other liabilities, and equity in a manner that
maximises the likelihood of the company continuing in existence on a solvent basis or, if it is not
possible for the company to so continue in existence, results in a better return for the company's
creditors or shareholders than would result from the immediate liquidation of the company.’
5 Oakdene Square Properties (Pty) Ltd and Others v Farm Bothasfontein (Kyalami) (Pty) Ltd and Others
[2013] ZASCA 68; [2013] 3 All SA 303 (SCA); 2013 (4) SA 539 (SCA) paras 21, 23 and 29 et seq.
6 Welman v Marcelle Props 193 CC 2012 JDR 0408 (GSJ) para 28.
7Panamo Properties (Pty) Ltd and Another v Nel N O and Others N N O 2015 (5) SA 63 (SCA).

During business rescue there is a temporary moratorium on the rights of claimants against the
company and its affairs are restructured through the development of a business rescue plan
aimed at it continuing in operation on a solvent basis or, if that is unattainable, leading to a
better result for the company's creditors and shareholders than would otherwise be the case.
These commendable goals are unfortunately being hampered because the statutory
provisions governing business rescue are not always clearly drafted. Consequently, they have
given rise to confusion as to their meaning and provided ample scope for litigious parties to
exploit inconsistencies and advance technical arguments aimed at stultifying the business
rescue process or securing advantages not contemplated by its broad purpose. This is such
a case.’

[28] In the result, the following order is made:
The appeal is upheld with costs, including the costs of two counsel.
The order of the high court is set aside and replaced with the following order:
‘The application is dismissed with costs, including those of two counsel.’

_______________________
A C BASSON
ACTING JUDGE OF APPEAL

APPEARANCES

For first to fifth appellants:

M P van der Merwe SC (with J Hershensohn)
Instructed by:

Barnard & Patel Incorporated, Pretoria

Hill, McHardy & Herbst Incorporated, Bloemfontein

For sixth appellant:

G J Scheepers SC (with J Stroebel)
Instructed by:

Vermaak Beeslaar Attorneys, Pretoria

Hill, McHardy & Herbst Incorporated, Bloemfontein

For respondent:

L Hollander (with V Qithi)
Instructed by:

JJF Cameron, Johannesburg

Honey Attorneys, 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:
13 October 2022
Status:
Immediate

The following summary is for the benefit of the media in the reporting of this case and
does not form part of the judgments of the Supreme Court of Appeal
Southern Sky Hotel and Leisure (Pty) Ltd and Others v Southern Sky Food Enterprises (Pty)
Ltd (617/2021) [2022] ZASCA 134 (13 October 2022)
Today, the Supreme Court of Appeal (SCA) upheld with costs, including the costs of two
counsel, an appeal against the decision of the Gauteng Division of the High Court,
Johannesburg (the high court).

The first appellant was Southern Sky Hotel and Leisure (Pty) Ltd t/a Hans Merensky Hotel and
Spa (in liquidation) (the company). The second, third, fourth and fifth appellants were the
appointed provisional liquidators of the company (the liquidators). The sixth appellant was
Van’s Auctioneers Gauteng (Pty) Ltd (the auctioneer), who made common cause with the
liquidators both before the SCA and the high court. The respondent was Southern Sky Food
Enterprises (Pty) Ltd (the respondent). Ms Shamira Rinderknecht (Rinderknecht) was the sole
shareholder and director of the respondent.

The issue in the appeal was whether an agreement (the agreement) concluded by the
liquidators of a company (in liquidation) for the sale of the company’s immovable property in
circumstances where business rescue proceedings had been commenced, was invalid by
virtue of the provisions of s 131(6) of the Companies Act 61 of 2008 (the Companies Act).

The facts of the matter were as follows. The Hans Merensky golf course was established in
1967 by the Phalaborwa Mining Company. The golf course and the surrounding land were
later purchased by the Hans Merensky Country Club (Pty) Ltd (the club) and developed into a
golf estate. The company later bought the estate from the club and developed it into the Hans
Merensky Hotel and Spa. During 2003 to 2007, various individuals, referred to in the papers
as the ‘Irish Investors’, bought immovable property from the club and developed it into
furnished bush lodges. An agreement was concluded between the Irish Investors and the club
in terms whereof the club had the right to lease out the bush lodges to the public, subject to
the Irish Investors receiving certain agreed returns (the rental pool agreements). At some
point, the company took over the management of the rental pool agreements and assumed
liability under these agreements. The company became financially distressed and unable to
honour its obligations in terms of the rental pool agreements.

This resulted in the Irish Investors launching a winding-up application. On 21 January 2020,
the court placed the company under final liquidation. On 3 February 2020, the liquidators were
appointed and on 22 September 2020 their powers were extended to allow them to, inter alia,
dispose of the movable and immovable property of the company by public auction. Pursuant
thereto the liquidators resolved in November 2020 to put the immovable property of the
company up for sale on auction. The auction was advertised to take place on 23 and 24

February 2021. On 1 December 2020, Vision Tactical (Pty) Ltd (Vision), a creditor of the
company, launched an application for an order placing the company under supervision and
commencing business rescue proceedings in terms of s 131(1) of the Companies Act. This
application was only enrolled for hearing on 11 March 2021, shortly after the auction was to
have taken place. On 19 February 2021, the respondent was granted leave to intervene in the
business rescue application.

The liquidators decided to proceed with the auction as, according to them, there was no valid
business rescue application as recognised in law. The liquidators proceeded with the online
auction on 23 and 24 February 2021, which was conducted by the auctioneer, for the sale of
the company’s immovable property and its business as a going concern (the property). Despite
the pending business rescue application, Rinderknecht, on behalf of the respondent, attended
the online auction on 24 February 2021 and, being the highest bidder, presented a signed and
written offer prepared by the liquidators to the auctioneer. On 11 March 2021, the liquidators
accepted the respondent’s offer, and the agreement was concluded.

On 25 March 2021, the respondent launched an urgent application out of the high court, in
which it sought an order that the high court declare the agreement invalid and set it aside, as
both the auction and the agreement had occurred after the business rescue application was
made and whilst the liquidation proceedings were ‘suspended’.

The SCA found that the issue was thus whether s 131(6) of the Companies Act rendered the
agreement invalid. To answer that question, the SCA found that the meaning and effect of
clause 24 of the agreement had to firstly be determined. The SCA found that clause 24.1 and
24.2 were aimed at expediting the finalisation of any business rescue application pending at
the date of the signing of the agreement or subsequently launched prior to the transfer of the
property. Clause 24.3 provided that the agreement would lapse in the event of such business
rescue application succeeding. The SCA held that the combined effect of those provisions
was that the property would not be realised unless the business rescue application was
dismissed. Put differently, irrespective of whether clause 24 had suspensive or resolutive
operation, the realisation of the property was subject to the termination of the suspension of
the liquidation process under s 131(6).

The SCA found further that the next question was whether, as a matter of statutory
interpretation, s 131(6) evinced an intention to visit such an agreement with nullity. The SCA
held that no such indication was found in its text, context or purpose. The SCA held further
that there was no direct prohibition of such an agreement as contemplated in Schierhout v
Minister of Justice 1926 AD 99 (A). Section 131(6) did not suspend the appointment, office
and powers of a liquidator; it suspended only the process of liquidation. The SCA thus held
that there was no reason why a liquidator could not exercise those powers subject to the lifting
of the suspension under s 131(6). Consequently, the agreement was valid and the high court
should have dismissed the application to declare it invalid.

Notably, the SCA deemed a final comment necessary regarding the manner in which
Rinderknecht had over the years frustrated the various efforts to wind-up a company that was
clearly financially distressed since at least 2013. The SCA found that this was such a case in
the latest attempt by the respondent to frustrate the liquidation process by stultifying the
business rescue process.

~~~~ends~~~~