Unions up in arms as court gives nod to Mango rescue

The Mango airline board won out in the battle over the business rescue process at the embattled carrier with the high court in Johannesburg ruling on Tuesday that it could go into voluntarily business rescue with the plan it had brought.

Responding to the judgment, the Mango Pilots’ Association and the South African Cabin Crew Association (Sacca) said that the high court’s dismissal of their case in the airline’s favour opens up the business rescue system for abuse by companies seeking to block liquidation applications, or even stop other rival business rescue applications.

The two unions and the National Union of Metalworkers of SA (Numsa) brought an urgent application last week to have the low-cost carrier placed in business rescue.

Sacca president Zazi Nsibanyoni-Mugambi said the ruling “has the potential to block other legitimate business rescue processes that a creditor could choose to institute”.

Speaking after the release of the judgment by judge Michael Antonie on Tuesday, Mango Pilots’ Association chairperson Jordan Butler said the ruling had the potential to set an “important legal precedent in terms of the Companies Act and the way business rescue is conducted in the future”.

Nsibanyoni-Mugambi said it means people “can take a business resolution whenever they want, put it in their drawer and use it whenever it suits them. It creates an opportunity for fraud for businesses.”

At issue for the three unions is that Mango, which had on April 16 passed a resolution recommending business rescue, had held onto this resolution for three-and-a-half months before trying to submit its business rescue proposal on July 28.

The three unions had brought their own business rescue proposal before the South Gauteng high court last Tuesday, saying their preferred business rescue practitioner was Ralph Lutchman.

The unions, whose matter was heard in full on Friday, indicated through their legal team that they were in favour of a joint-business rescue process with the airline, as long as Lutchman was one of the joint business rescue practitioners.

Mango’s own proposal was initially rejected by the Companies and Intellectual Property Commission (CIPC) on the grounds that an application to be placed in business rescue must be filed five days after a board resolution to do so. Mango then added the CIPC as a third party for the hearing.

Butler said they waiting for the reasons for the ruling.

“Mango basically passed their business rescue resolution on April 16, and has sat on it for three-and-a-half months, and so it could open up a can of worms for the business rescue process in SA in the future. This could mean companies could just keep a resolution for months on end, just in case someone files a liquidation application,” he said.

Butler said in principle the organisation is “happy Mango is in business rescue”, but that they “just wanted to do it together”, with the airline.

Nsibanyoni-Mugambi said she was “taken aback” by the judgment, as it represents a “huge shift in the law and it is extremely worrying for us”.

She said the judgment, which effectively ruled in favour of Mango’s own business rescue application, opened the way for abuse of the business rescue system in SA.

In his ruling dismissing the unions’ application, Antonie said that he will provide reasons for his decision later.

He also declared invalid the CIPC’s refusal to process Mango’s board resolution adopted on April 16, and to change its “enterprise status” to “in business rescue”.

Antonie also “declared that business rescue proceedings” of Mango became effective from July 28, when the airline submitted its application to the CIPC.

He also directed the CIPC to “immediately change the respondent’s enterprise status to ‘in business rescue’”.

All parties are to pay their own costs, the ruling reads.

Nsibanyoni-Mugambi said the unions are regrouping and are waiting for the full reasons for the judgment to decide if they intend appealing.

“If not, then we are going to guard the business process with our lives. In the beginning we made it clear that we are willing to compromise and work together and that is something which government did not want. We are going to guard the process even more.”

Mango and Numsa said they would not comment now.

The department of public enterprises welcomed the judgment. 

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