Section 133 of the Companies Act, 2008 provides for a moratorium on legal proceedings against a company which is in business rescue. It does not include an action to recover a deposit on a transaction with the company that was never completed because the money does not belong to the company under business rescue and is therefore not the property of nor in the possession of the business rescue practitioner.
The mining company Afrimat, made an offer to purchase the assets of the company now in business rescue namely a farm located in Kuruman with fixed improvements and mineral rights. In terms of that offer Afrimat paid a deposit of R1.7 million to the company. However the contracts for the purchase of the assets did not materialise due to the non-fulfilment of suspensive conditions.
Afrimat launched proceedings for repayment of the deposit and the business rescue practitioner alleged that the proceedings were impermissible by reason of the moratorium on legal proceedings in section 133.
Section 133 refers to a moratorium in relation to “any property belonging to the company, or lawfully in its possession”. Section 133(1) is a general moratorium provision that applies in relation to the assets and liabilities of the company at the stage when business rescue comes into effect. It protects against legal action in respect of claims in general, save with the written consent of the business rescue practitioner and, failing such consent, with the leave of the court. Section 133 gives the company crucial breathing space or respite whilst the restructure takes place. No purpose connected to the process of business rescue warrants the company under business rescue being protected against proceedings to recover property that it neither owns nor lawfully possesses. The agreement in terms of which the deposit was paid did not materialise. It is trite law that if a suspensive condition in a contract is not fulfilled no contract comes into existence. A party who has made payment in anticipation of the fulfilment of the suspensive condition is entitled to the return of the money unless the contract provides otherwise. There was no such provision in this contract and the deposit was not property held in trust. Seeing the company had no title to the property, section 133 did not apply and the company in business rescue was ordered to repay the deposit together with interest.