Louis Case Reports

LIQUIDATION AND BUSINESS RESCUE

BUSINESS RESCUE – Application – Liquidation proceedings – Plan would not be adopted by creditors – Liquidators having cancelled leases – Substantial liabilities – Workforce depleted and reputation damaged such that unlikely to get credit from suppliers – Three years for the plan extraordinarily long – Haste in bringing application suggests it was not bona fide – Business rescue application dismissed – Companies Act 71 of 2008, s 131.

Forty Squares v Noris Fresh Produce ta Golden Harvest [2023] ZAWCHC 78 at [15]-[43]

Facts: Golden Harvest operated a large wholesale fruit distribution business at premises in Cape Town and Johannesburg. The staff compliment in its heyday was of the order of 180 employees. In 2022 the business ran into financial difficulties and it defaulted on payments to suppliers and generally gave its creditors the run-around. A disgruntled supplier was owed R1,4 million and lodged an application for provisional winding up. A final order of winding-up was later granted and the liquidators secured an order to proceed with an inquiry into the affairs of the company.

Application: Forty Squares, which holds the shares in Golden Harvest, and some of the employees of Golden Harvest have lodged an application to place the liquidated company into business rescue in terms of section 131 of the Companies Act 71 of 2008.

Discussion: That the business rescue application is opposed by the liquidators and by Erfco which as a landlord says it has claims for  arrear rental of at least of R12,5 million; that the total liabilities of Golden Harvest are said to be over R136 million; that already certain of the major creditors of Golden Harvest have stated under oath that they will not support the proposed business rescue plan, either in its present form or any similar iteration; the approach to business rescue and the meaning of “a reasonable prospect”; and the approach in Oakdene Square and whether the bar is higher when a company has been finally wound up.

Findings: There are no anticipated circumstances that will radically improve the prospects of Golden Harvest being returned to solvency and commercial viability. No court is going to put a moribund company through the expectation of commercial resurrection, with all the concomitant expense and delay, if the plan is not going to be adopted by the creditors. Furthermore, the liquidators have cancelled all of the company’s leases. The company’s workforce was sorely depleted and many of its top managers have drifted away. The company has suffered severe reputational damage in the marketplace and is no doubt likely to experience difficulty in procuring produce from suppliers who, having been once burnt, are likely to be twice shy of extending any further credit. The proposed three years for the rescue plan was extraordinarily long. The haste with which this application was brought suggests that it is not bona fide.

Order: The business rescue application is dismissed and the suspension of liquidation proceedings is lifted.

GAMBLE J

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OLD SOUTH AFRICAN FLAG AND FREEDOM OF EXPRESSION

CONSTITUTION – Freedom of expression – Old South African flag – Whether right infringed by prohibition of gratuitous public display of flag – Symbol of apartheid and white supremacy – Such display constitutes hate speech, unfair discrimination and harassment under the Promotion of Equality and Prevention of Unfair Discrimination Act 4 of 2000, ss 7, 10(1) and 11 – Constitution, 16(1).

Afriforum v Nelson Mandela Foundation Trust [2023] ZASCA 58 at [33]-[75]

Facts: Afriforum played a leading role in nationwide demonstrations in 2017 to protest against the murder of farmers. It was widely reported in the mainstream and social media that at some of these protests, called the Black Monday protests, the old South African flag was displayed. These incidents led to a complaint against Afriforum lodged by the Nelson Mandela Foundation Trust with the Equality Court that the display of the old flag at the protests was a contravention of the Promotion of Equality and Prevention of Unfair Discrimination Act 4 of 2000 (the Equality Act).            

Appeal: Against the order of the High Court determined that the display of the old flag at the Black Monday protests constituted hate speech, unfair discrimination and harassment, within the meaning of sections 10(1), 7 and 11 of the Equality Act.

Discussion: The contentions by Afriforum that a wide-reaching ban on public displays of the old flag would be an unconstitutional infringement of the right to freedom of expression; the argument that the High Court’s order infringes the rights to dignity and freedom of assembly of those who publicly display the old flag; and Afriforum’s argument that an Equality Court is a creature of statute and has no power to grant relief in respect of prospective conduct that has not yet taken place.

Findings: There was a public controversy about the lawfulness of displaying the old flag. The purpose of the application was to resolve that very controversy for the benefit of all. Declaratory orders by their very nature are often directed at conduct that has not yet occurred. But they are vital in the right context, specifically to address issues of public importance or involving a compelling public interest. The High Court interpreted section 10(1) of the Equality Act (hate speech) broadly and purposively in the light of the objects of the Act and the underlying constitutional imperatives. The gratuitous display of the old flag in a public space would fall foul of sections 10(1), 7 and 11 of the Equality Act. But the High Court erred in issuing a declaratory order which includes any display of the old flag within the privacy of a home.

Order: The appeal is dismissed with para [2] of the High Court order replaced to read:

“In terms of section 21(2) of the Equality Act, it is declared that subject to the proviso in section 12 of the Equality Act, any gratuitous public display of the Old Flag constitutes: (a) hate speech in terms of section 10(1) of the Equality Act; (b) unfair discrimination on the basis of race in terms of section 7 of the Equality Act; (c) harassment in terms of section 11 of the Equality Act.”

SCHIPPERS JA (MAYA P, PLASKET JA, MABINDLA-BOQWANA JA and SAVAGE AJA concurring)

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COVID-19 LOCKDOWN AND LEASE

CONTRACT – Lease – Vis major – Lockdown for Covid-19 pandemic and effect on restaurant – Remission and abatement of rent – Subtenant suffering loss of use and enjoyment of leased premises – Whether tenant entitled to claim remission – Piercing of corporate veil – Application of common law principles – Whether common law to be developed – High Court ordering payment – Appeal dismissed.

Butcher Shop and Grill v Trustees, Bymyam Trust [2023] ZASCA 57 at [13]-[66]

Facts: The Trust owns sections in a sectional title scheme for a building in Mouille Point, Cape Town. It concluded a lease agreement with the Butcher Shop & Grill which used the premises to run a restaurant. The Trust later found out that the premises were occupied by Apoldo Trading so concluded an addendum agreement to grant consent to the subletting arrangement between the Butcher Shop and Apoldo. The Covid-19 pandemic and the lockdown limited the operation of the restaurant and the Butcher Shop withheld payment of rent.

Appeal: Against the order of the High Court requiring the Butcher Shop to pay an amount of R2,703,191,17 together with interest and costs on an attorney-and-client scale.

Discussion: The contentions for the Butcher Shop that: the use and enjoyment of the premises caused it a significant loss of turnover in its business, which entitled it to remission or abatement of rent; its contentions that a lessee is entitled to claim remission of rental arising from the loss of a sub-lessee’s beneficial occupation on account of vis major or casus fortuitus; and the further contention that the Butcher Shop and Apoldo are in effect, Mr Pick, their sole shareholder, in corporate guise and therefore one business entity.

Findings: The lease agreement did not preclude a claim for remission of rent arising from a vis major event such as that relied upon in this case. The loss of beneficial use and enjoyment of the sub-leased premises was suffered by Apoldo, not the Butcher Shop. The existence of the sub-tenancy in law precludes a claim for remission based on loss suffered by the sub-tenant. There is no scope for the application of the remedy of disregarding the corporate identity, upon the existing principles of the common law, on the facts of this case. The common law does not countenance disregarding corporate identities to allow this to be done. The existence of separate corporate identities and the consequences which attach thereto are by no means inherently unfair or unjust.

Order: The appeal is dismissed with costs.

GOOSEN JA (VAN DER MERWE JA, MBATHA JA, CARELSE JA and WEINER JA concurring)

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ABOUT THE EDITOR

Louis Podbielski spent ten years at Juta working on various law reports and has read many thousands of judgments for case selection. He has considerable experience in writing flynotes and headnotes, compiling case annotations, and in refining subject indexes.​ During his four years at LexisNexis he was involved with legal data, analytics and in developing various legal tech solutions. He now runs his own case law service Louis Case Law

You can read his full CV and more about Louis on his LinkedIn profile where he shares interesting and recent cases.

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