TIES THAT BIND
voted to reject the plan.
The attorney for the Kariba shareholders said his clients wished to make a binding offer to purchase the bank’s voting interest, in terms of section 153(1)(b)(ii). The practitioner immediately ruled that the bank could not respond to the offer because it was binding, and that the bank’s voting interest had been immediately transferred to the shareholders.
The bank brought an application, and in the court a quo contended that it could not be bound by an offer it had not been allowed to respond to. It further contended that the offer was improper, in that it lacked clarity as to the identity of the offeror, the amount and payment terms, and whether there were any conditions attached to it. The binding offer only stated that the purchase of the bank's voting interests would be “at a value independently and expertly determined to be a fair and reasonable estimate of the return to the bank, if Kariba were to be liquidated”.
In dismissing the bank’s application, Judge Kathree-Setiloane held that the practitioner had applied section 153(1)(b)(ii) properly. The “binding offer” envisaged in section 153(1)(b)(ii) did not anticipate an “option” or an “agreement” in the contractual sense, but was “a set of statutory rights and obligations, from which neither party could resile”.
This meant that the offer was automatically binding on both the offeror and the offeree once it was made. According to the court, this interpretation was consistent with the intention of the legislature to ensure “cooperation” by opposing creditors in business rescue proceedings.
On appeal to the Supreme Court, the bank argued that the binding offer made in terms of section 153(1)(b)(ii) did not automatically bind the offeree. Use of the term “binding offer” was intended to convey that once the offer had been made, the offeror would not be able to withdraw it.
Judgments were written by Dambuza AJA and Leach JA of the Supreme Court of Appeal, with Mpati P, Mhlantla JA and Schoeman AJA concurring with both judgments.
Dambuza AJA disagreed with the approach adopted by the high court. He stated that it is a well-established principle of law that an ambiguous proposal cannot be classified as an offer because the terms of an offer must cover the minimum requirements of the proposed contract.
Even if the bank had wanted to respond to the ‘binding offer’ there was no valid binding offer to which it could respond