Louis Pasteur Holdings (Pty) Ltd and Others v Absa Bank Limited and Others (1119/2017; 1120/2017) [2018] ZASCA 163; 2019 (3) SA 97 (SCA) (29 November 2018)

Louis Pasteur Holdings (Pty) Ltd and Others v Absa Bank Limited and Others (1119/2017; 1120/2017) [2018] ZASCA 163; 2019 (3) SA 97 (SCA) (29 November 2018)

The Supreme Court of Appeal held that, in terms of section 134(3) of the Companies Act, a business rescue practitioner may not utilise rental income ceded to a creditor as security without the creditor's prior consent, unless the proceeds are sufficient to fully and promptly discharge the indebtedness protected by the security. Periodic payments from rental income do not satisfy the requirement of full and prompt discharge. The companies in question were hopelessly insolvent, and the business rescue plans were not viable, as it would take decades to repay the debt. The procedural irregularities in the High Court did not affect the outcome, as the separated legal issue was determinative...

Citation
[2018] ZASCA 163
Parties
Appellant: Louis Pasteur Holdings (Pty) Ltd; Appellant: Ahmed Ismail Gutta (Pty) Ltd; Appellant: Haroon Ahmed Gutta NO; Appellant: Feriel Gutta NO; Appellant: Abdul Razak Ahmed Gutta NO; Appellant: Saleem Omar Gutta NO; Appellant: Zunaid Osman Tayob NO; Appellant: Leopont Properties (Pty) Ltd; Appellant: Abdul Razak Ahmed Gutta; Respondent: Absa Bank Limited; Respondent: Medical Empowerment Consortium Investments Limited; Respondent: Liebenberg David Ryk van der Merwe NO; Respondent: Etienne Jacques Naude NO; Respondent: Companies and Intellectual Property Commission
Court
Supreme Court of Appeal
Jurisdiction
South Africa
Judgment Date
29 November 2018
Case Number
1119/2017; 1120/2017
Procedural Posture
Civil Appeal / Appeal From Gauteng Division of the High Court, Pretoria
Outcome
Appeals dismissed; final liquidation orders confirmed.
Judges
Navsa, Swain, Mathopo, Mocumie, Matojane
Legal Topics
Business Rescue, Cession of Rental Income, Companies Act 71 of 2008, Liquidation, Rule 33 4 Separation, Security Interest
Commercial and Corporate Civil Procedure Business Rescue Cession of Rental Income Companies Act 71 of 2008 Liquidation Rule 33 4 Separation Security Interest

Case Brief

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Parties

Louis Pasteur Holdings (Pty) Ltd

Appellant

Ahmed Ismail Gutta (Pty) Ltd

Appellant

Haroon Ahmed Gutta NO

Appellant

Feriel Gutta NO

Appellant

Abdul Razak Ahmed Gutta NO

Appellant

Saleem Omar Gutta NO

Appellant

Zunaid Osman Tayob NO

Appellant

Leopont Properties (Pty) Ltd

Appellant

Abdul Razak Ahmed Gutta

Appellant

Absa Bank Limited

Respondent

Medical Empowerment Consortium Investments Limited

Respondent

Liebenberg David Ryk van der Merwe NO

Respondent

Etienne Jacques Naude NO

Respondent

Companies and Intellectual Property Commission

Respondent

Procedural Posture

Civil Appeal / Appeal From Gauteng Division of the High Court, Pretoria

Legal Issues

  1. 1 Whether a business rescue practitioner may utilise rental income ceded to a creditor without the creditor's consent.
  2. 2 Whether the proceeds of rental income must be sufficient to fully discharge the indebtedness protected by the creditor's security before utilisation.
  3. 3 Whether procedural irregularities in the court a quo warrant setting aside the liquidation order and remitting the matter.

Ratio Decidendi

The Supreme Court of Appeal held that, in terms of section 134(3) of the Companies Act, a business rescue practitioner may not utilise rental income ceded to a creditor as security without the creditor's prior consent, unless the proceeds are sufficient to fully and promptly discharge the indebtedness protected by the security. Periodic payments from rental income do not satisfy the requirement of full and prompt discharge. The companies in question were hopelessly insolvent, and the business rescue plans were not viable, as it would take decades to repay the debt. The procedural irregularities in the High Court did not affect the outcome, as the separated legal issue was determinative...

Court Disposition

Appeals dismissed; final liquidation orders confirmed.

Orders

  • The appeals in case numbers 1119/2017 and 1120/2017 are dismissed.
  • The costs of the appeal are to be borne by the appellants, jointly and severally, including the costs of two counsel, except for 50 per cent of the costs of preparation of the appeal record.