A brief summary of the facts are as follows: The applicant, Oakbay Investments (Pty) Ltd (Oakbay), a shareholder of Tegeta Exploration and Resources (Pty) Ltd (Tegeta), sought leave to institute proceedings to remove Tegeta’s two BRPs, Mr Knoop and Mr Klopper. Oakbay was the holding company of eight subsidiary entities, five of which were in business rescue, including Tegeta, Optimum Coal Mine (OCM), Koornfontein Mines (KFM) and Optimum Coal Terminal (OCT), all of which had Mr Klopper, Mr Knoop or both as BRPs.
Importantly, OCM had two additional BRPs, being Mr Damons and Mr Monyela. Oakbay alleged that Tegeta’s business rescue plan did not reflect the inter-company loan with OCM, destroying Tegeta’s statement of assets and liabilities, to the extreme prejudice of Tegeta, its shareholders and other creditors. The alleged conflict of interest was based on the fact that Mr Knoop and Mr Klopper could not act in the best interest of OCM as a debtor of Tegeta and in the best interest of Tegeta, as a creditor of OCM. The crisp issue to be determined by the court was therefore whether Mr Klopper and Mr Knoop ought to be removed as Tegeta’s BRPs on the basis that there was a conflict of interest.
In reaching its conclusion, the court highlighted that there is no South African case law on the removal of a BRP due to a conflict of interest and/or lack of independence. Importantly, the court confirmed that the principles set out in Standard Bank v Master of the High Court  3 All SA 135 (SCA) relating to liquidators, similarly apply to BRPs. As such, a BRP stands in a fiduciary relationship to the company of which he is the BRP. As a fiduciary, the BRP must, at all times, act openly and in good faith, and must exercise his powers for the benefit of the company and the creditors as a whole, and not for his own benefit or the benefit of a third party or for any other collateral purpose.
In considering the facts of the case, the court emphasised that besides Mr Knoop and Mr Klopper, OCM also had Mr Damons and Mr Monyela as BRPs. OCM therefore had two additional, independent BRPs who were not also Tegeta’s BRPs. The court held that the inter-company loans did not create a conflict of interest. With the group structure as it is, the court agreed with the principle in Pellow N.O. and others v Master of the High Court and others 2012 (2) SA 491 (GSJ) that the “common practice of appointing a single liquidator to oversee the winding-up of companies in the same group is a salutary one that has distinct advantages, including a broad understanding of the inter-relationship between associate companies and the justification of intergroup transactions”. The court therefore concluded that the appointment of the two additional BRPs provided a sufficient safety net in the efficient rescue and recovery of this group in a manner that balanced the rights and interests of all relevant stakeholders. The application was dismissed with costs.
This case is important as it lays some of the foundation in establishing the test for the removal of a BRP based on a conflict of interest. It would have been interesting to see whether the case would have been decided differently, had Damons and Monyela not been additional BRPs appointed to OCM or if the BRPs could not agree on the way forward. In the current economic climate, this is no doubt an area of the law that will see rapid development.