The landmark Supreme Court of Appeal (SCA) decision in Mashwayi Projects (Pty) Ltd and Others v Wescoal Mining (Pty) Ltd and Others (2025 ZASCA 5) reshaped the business rescue landscape by affirming the voting rights of post-commencement creditors (PCFs).
However, this precedent-setting ruling is now under appeal, raising significant legal and practical implications for business rescue practitioners (BRPs) and affected creditors. For an in-depth analysis of the original judgment, see our first article published on 11 February 2025: Do Post-Commencement Creditors Now Have a Say in Business Rescue?.
The Constitutional Appeal: What has happened so far?
On 18 February 2025, Salungano Group Ltd filed an application for leave to appeal to the Constitutional Court, seeking to overturn the SCA ruling. If successful, this appeal could reinstate the previous High Court order, which limited voting rights to pre-commencement creditors.
Salungano's appeal argues that:
- " The SCA's interpretation of voting rights for PCFs raises constitutional issues, particularly regarding property rights under section 25 and equality under section 9 of the Constitution.
- " The ruling involves an arguable point of law of general public importance that merits consideration by the Constitutional Court.
The appeal process remains in its early stages, with no decision yet on whether the Constitutional Court will grant leave to appeal.
Does the Appeal suspend the SCA Judgment?
Under South African law, the filing of an appeal generally suspends the operation of the lower court's decision. Section 18(1) of the Superior Courts Act 10 of 2013 provides that:
"The operation and execution of a decision which is the subject of an application for leave to appeal or of an appeal is suspended pending the decision of the application or appeal, unless the court under exceptional circumstances orders otherwise."
In practical terms, this means that as of 18 February 2025, the SCA's ruling remains unenforceable, and the legal position regarding PCF voting rights remains unsettled.
Exceptions: Can the SCA Judgment be enforced despite the Appeal?
While the default position is that the SCA decision is suspended, section 18(2) and 18(3) allow for an exception:
- " Section 18(2): The appellant (Salungano) could apply for an order stating that the SCA ruling should not be suspended, arguing exceptional circumstances and that they would suffer irreparable harm if the ruling is not enforced.
- " Section 18(3): The respondents (Mashwayi, the BRP, and Arnot Opco) could apply for immediate execution of the ruling, demonstrating that failure to enforce it would cause them irreparable harm.
However, as of 18 February 2025, there is no indication that either party has applied for such an order. This means that the SCA's ruling, which set aside the High Court's declaration that the July Plan was approved, remains in legal limbo.
What this means for Business Rescue Practitioners and Creditors
With the SCA ruling suspended, the business rescue process for Arnot Opco remains uncertain:
- " Status of the July Plan: Neither the High Court's approval of the July Plan nor the SCA's rejection of it is currently enforceable. This leaves the fate of the plan undecided until the Constitutional Court either grants or denies leave to appeal.
- " Role of the BRP: The business rescue practitioner, Phahlani Lincoln Mkhombo, continues to oversee the process, but without a binding resolution on whether the July Plan was validly adopted.
- " Impact on PCFs: For now, the legal uncertainty means PCFs may remain cautious in extending further financial support, as their voting rights remain disputed.
The uncertain path ahead
The filing of the Constitutional Court appeal on 18 February 2025 has effectively frozen the SCA's ruling, leaving the question of PCF voting rights in flux. Until the Constitutional Court either denies leave to appeal or delivers a final ruling, business rescue practitioners and creditors must navigate an uncertain landscape.
If the Constitutional Court ultimately upholds the SCA's ruling, PCFs will have confirmed voting rights, strengthening their position in business rescue proceedings. Conversely, if the appeal succeeds, the High Court's original ruling – limiting voting to pre-commencement creditors – may be reinstated.
For now, BRPs and creditors should closely monitor the Constitutional Court's next steps, as the resolution of this appeal will have far-reaching implications for the future of business rescue in South Africa.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
