Zungu-elgin Engineering (Pty) Ltd vs. Jeany Industrial Holdings (Pty) Ltd and Ors.

South Africa

03.12.2020

Company

A statutory provision does not alter the common law unless it says so explicitly or by necessary implication

The first Respondent, Jeany Industrial Holdings (Pty) Ltd, the second Respondent, Ian Laverne Donjeany and the third Respondent, Lee Spencer Donjeany, each bound themselves as sureties and co-principal debtors in respect of a debt owed by the Appellant, Zungu-Elgin Engineering (Pty) Ltd, to Hollard Insurance Company Limited (Hollard). After having made payment to Hollard, the Respondents exercised their right of recourse against the Appellant. The narrow issue in the appeal is whether this debt was owed by the Appellant immediately before the beginning of the business rescue process, within the meaning of Section 154(2) of the Companies Act 71 of 2008.

Hollard instituted proceedings in the High Court, against the Respondents, as well as the three other signatories to the indemnity, for payment of the amount under the indemnity and suretyship respectively. The Court gave judgment in favour of Hollard against these parties. The Respondents paid Hollard the total amount of R250 000 in instalments. Following hereon, the Respondents sued the Appellant in the Durban High Court based on the surety’s right of recourse against the principal debtor. The Appellant defended the action and the Respondents applied for summary judgment. The court granted the summary judgment with leave to this Court.

The Appellant’s sole argument was that, the debt became owing prior to the commencement of the business rescue proceedings. As the approved and implemented business rescue plan did not provide for this debt, the Respondents were not entitled to enforce it in the court a quo.

Section 154(2) of the Act provides that, if a business rescue plan has been approved and implemented in accordance with the Chapter, a creditor is not entitled to enforce any debt owed by the Company immediately before the beginning of the business rescue process, except to the extent provided for in the business rescue plan. In terms of Section 154(2) of the Act, the question whether any debt was owed by the company at the specified point in time, was to be determined in terms of existing law, including the common law.

In Proksch vs. Die Meester en Andere, this Court considered the common law principles in respect of when the surety’s right of recourse arises. A surety could only be regarded as a creditor of the principal debtor, when he had paid the creditor.

There is a presumption in law that, a statutory provision does not alter the common law unless it says so explicitly or by necessary implication. The Appellant contended that to permit claims against a company that were not provided for in the approved and implemented business rescue plan, might jeopardise the business rescue. That may be so, but is irrelevant. The appeal is dismissed.

Tags : Surety Right Debt

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