Insolvency Matters


 Comair Ltd v Minister of Public Enterprises

  • This case dealt with a private domestic airline, Comair, requesting the court to invalidate and set aside a R5 billion loan guarantee to the insolvent airline, SAA, which the applicants contend was ultra vires due to the inconsistency with the Public Finance Management Act 1 of 1999.
  • The applicants further contended that such funding was done on three separate  occasions since 2007 and considering the airline’s financial position, further funding would be required in the future and that SAA would be unable to repay such loans, therefore not constituting loans but rather direct government funding.
  • The applicants raised matters dealing with competition law which the court held would have to be investigated by the competition authorities and not the courts as the Competition Act does not contemplate concurrent jurisdiction with regards to these matters.
  • The court held that a ‘guarantee’ is a means by which the guarantor undertakes to pay, on the happening of a certain event, but does not promise that that event will not happen. The court noted that when the ministers were granting the loan, it was unnecessary for them to have any optimism in this regard as such is not a requirement of the guarantee.
  • The court held therefore that the decision to guarantee loans on a perpetual basis subject to the conditions fulfils the purpose of the Public Finance Management Act and is valid.

 


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© Rui Lopes. All Rights Reserved.

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