Mango gets sweet rescue deal, but unions not impressed

The Mango airline board won out in the battle over the business rescue process at embattled carrier.

The South Gauteng high court on Tuesday ruled that Mango would go into voluntarily business rescue using the plan brought by the airline’s board.

Responding to the judgment, the Mango Pilots’ Association and South African Cabin Crew Association — two of the three unions which brought an urgent application last week to have the low-cost carrier placed in business rescue — say the high court’s dismissal of their case in the airline’s favour opens up the business rescue system in SA for abuse by companies seeking to block liquidation applications, or even stop other rival business rescue applications.

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 quite an “important legal precedent in terms of the Companies Act and the way business rescue is conducted in the future”.

Basically, 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.

—  Sacca president Nsibanyoni-Mugambi

At issue for the three unions — the third of which is the National Union of Metalworkers of SA (Numsa) — 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 own preferred business rescue practitioner was Ralph Lutchman.

The three 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: “We are watching it very carefully and 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.”

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

Sacca’s Nsibanyoni-Mugambi said she was “taken aback” by the judgment, as it represented 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.

“Basically, 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,” she said.

In his ruling dismissing the unions’ application, Antonie said that “in the circumstances, I deem it prudent to hand down the order now and furnish reasons for my decision at a later date”.

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, the respondent, became effective from July 28, when the airline submitted its application to 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 said.

Nsibanyoni-Mugambi said the unions were “regrouping” and waiting to see 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 said it was “not commenting for now”.

Numsa also said it would not be commenting at this stage.

The department of public enterprises said it “welcomes the judgment”, saying that the decision was “good news for all stakeholders in the aviation industry as it brings certainty to the process that will unfold to restructure Mango and ensure that we have a sustainable aviation asset that will service the low cost market in the country”.

The department said the restructuring of Mango and other SAA subsidiaries Air Chefs and SAA Technical will ensure the overall SAA group has “fit for purpose subsidiaries that will support and become the conduit for growth of the aviation industry in the country”.