A recent development in the ever-evolving jurisprudence associated with business rescue proceedings relates to the remuneration of the business rescue practitioner in the event that a business rescue fails. The Supreme Court of Appeal in Diener N.O. v Minister of Justice (926/2016) [2017] ZASCA 180 has recently confirmed that the practitioner’s fees do not hold a ‘super preference’ in a liquidation scenario and the practitioner is required to prove a claim against the insolvent estate like all other creditors.
The plaintiffs in the underlying action, Art and Wendy Douglas, owned property in Kingston where there was an oil leak in January of 2008. The defendants, who had supplied the oil, sent an environmental clean-up company to remediate the property after being alerted of the leak. The plaintiffs' insurer, State Farm Fire and Casualty Company (the "Insurer"), ultimately indemnified the plaintiffs in full and paid for repairs, remediation, additional living expenses of Mr. Douglas, personal property and related damages totaling more than $800,000.
Canada v Callidus Capital Corporation
In Royal Bank of Canada v. A-1 Asphalt Maintenance Ltd. the Court was asked to determine the priority of claims in a bankruptcy between Royal Bank of Canada (the "Bank"), a secured creditor of the bankrupt, A-1 Asphalt Maintenance Ltd. ("A-1") and The Guarantee Company of North America (the "GCNA") a bond company that paid out 20 lien claims and was subrogated to those rights under the Construction Lien Act ("CLA").
Urbancorp Inc., a large real estate development company involved in various projects in the Greater Toronto Area, became subject to proceedings under the Companies' Creditors Arrangement Act (the "CCAA") in April of 2016. Alan Saskin, Urbancorp's President and primary shareholder, filed a Notice of Intention to Make a Proposal (the "NOI") in his personal capacity under the Bankruptcy and Insolvency Act (the "BIA") shortly thereafter.
On 22 January 2018, Statistics South Africa released a report for the period January to December 2017 on insolvencies in South Africa. This report reveals a general decrease in liquidations.
What is the “fatal flaw” in our law? The Insolvency Act, 1936 (Insolvency Act) has always made provision for the holder of a pledge and cession in security over “marketable securities” (Secured Party), upon the insolvency of the security provider (Security Provider), to immediately realise those marketable securities through or to a stockbroker on a recognised stock exchange. However, in terms of s83(10) of the Insolvency Act (as it currently stands), once the pledged securities have been so realised they must be paid over to the liquidator.
Certain debtors have become masters of delay and indeed professional insolvents, leaving creditors and failed businesses in their wake.
The legal moratorium is a protective mechanism inherent in business rescue proceedings. Another safety net available to debtors is the possibility of rehabilitation of insolvent estates. Debtors use these and other methods to take advantage of the system and their creditors, delaying the winding up process and impeding creditors’ recovery.
In Ex Parte Nell and Others NO 2014 (6) SA 545 (GP) (28 July 2014), the board of a company passed a resolution placing it in business rescue in accordance with s129 of the Companies Act, No 71 of 2008 (Companies Act). In terms of this section, a financially distressed company may, without any prior judicial oversight or consultation with its creditors, achieve a general moratorium against legal proceedings.