THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Not Reportable
Case no: 643/2022
In the matter between:
ERGOMODE (PTY) LTD

APPELLANT

and

CRAIG DERECK JORDAAN NO

FIRST RESPONDENT
BRETT LESLIE HOLDING NO

SECOND RESPONDENT
SAKHILE CONTRACT MINING (PTY) LTD    THIRD RESPONDENT
(in business rescue)
GIDEON MINING & BENEFICIATION           FOURTH RESPONDENT
(PTY) LTD

INDEPENDENT COAL MARKETING
FIFTH RESPONDENT
COMPANY (PTY) LTD
COMMISIONER OF THE SOUTH

SIXTH RESPONDENT
AFRICAN REVENUE SERVICE
ARADOM (PTY) LTD

SEVENTH RESPONDENT
GARY MAZAHAM

EIGHTH RESPONDENT
ABAPHUMELELI TRADING 115 CC

NINETH RESPONDENT
t/a PORTALOO

RENTTECH SOUTH AFRICA (PTY) LTD
TENTH RESPONDENT
SIBONISWE COAL LABORATORY
ELEVENTH RESPONDENT

SERVICES CC
STALLION SECURITY (PTY) LTD
TWELFTH RESPONDENT
COAL PROCUREMENT

THIRTEENTH RESPONDENT
SA (PTY) LTD

DARRYL HENDRICKS

FOURTEENTH RESPONDENT
STREET SPIRIT TRADING

FIFTEENTH RESPONDENT
131 (PTY) LTD
VERALOGIX (PTY) LTD

SIXTEENTH RESPONDENT
KEENAN HENDRICKS

SEVENTEENTH RESPONDENT
F E SKOSANA

EIGHTEENTH RESPONDENT
J MAOME

NINETEENTH RESPONDENT
M X ZULU

TWENTIETH RESPONDENT
T M ZITHA

TWENTY-FIRST RESPONDENT
J P MATHE

TWENTY-SECOND RESPONDENT
S G MATHE

TWENTY-THIRD RESPONDENT
N E NEFEFE

TWENTY-FOURTH RESPONDENT
M J MATHONSI

TWENTY-FIFTH RESPONDENT
S SIFUNDZA

TWENTY-SIXTH RESPONDENT
K J MALOPE

TWENTY-SEVENTH RESPONDENT
L P MAKABANE

TWENTY-EIGHTH RESPONDENT
R J KHANYE

TWENTY-NINTH RESPONDENT
M E HELEPE

THIRTIETH RESPONDENT
N S MOKOENA

THIRTY-FIRST RESPONDENT
M E TWALA (ELIAS)

THIRTY-SECOND RESPONDENT
M TWALA

THIRTY-THIRD RESPONDENT
J G JOUBERT

THIRTY-FOURTH RESPONDENT
VOICE OF WORKERS OF
THIRTY-FIFTH RESPONDENT
SOUTH AFRICA CIVIL RIGHTS UNION
NATIONAL UNION OF METAL        THIRTY-SIXTH RESPONDENT

WORKERS OF SOUTH AFRICA

Neutral citation: Ergomode (Pty) Ltd v Jordaan NO and Others (643/2022)
[2024] ZASCA 10 (29 January 2024)
Coram:
PETSE DP and MOCUMIE, WEINER and MOLEFE JJA and
WINDELL AJA
Heard:
31 August 2023
Delivered: 29 January 2024
Summary: Business rescue – s 133 of the Companies Act 71 of 2008 –
moratorium on legal proceedings against company in business rescue –
landlord’s hypothec over company asset – tacit hypothec before ‘perfection’ –
whether the extension of the time period for the publication of the business plan
was validly done and the plan validly adopted.

ORDER

On appeal from: Mpumalanga Division of the High Court, Middelburg
(Mtimunye AJ sitting as court of first instance):
The appeal is dismissed with costs, including the costs of two counsel.

JUDGMENT

Molefe JA (Petse DP and Mocumie, Weiner JJA and Windell AJA
concurring):

[1] The appellant, Ergomode (Pty) Limited (Ergomode), instituted legal
proceedings by way of notice of motion in the Mpumalanga Division of the High
Court, Middelburg (the high court), seeking an order to set aside the third
respondent’s business rescue plan as well as to have its landlord’s tacit hypothec
perfected. Only the first, second and third respondents opposed the application,
which was dismissed with costs. The appeal is with leave of the high court.

[2] The background facts are uncontroversial. On 23 October 2020 the third
respondent, Sakhile Contract Mining (Pty) Limited (Sakhile), was placed under
business rescue in terms of s 129(1) of the Companies Act 71 of 2008 (the Act).
On 30 October 2020 the first and second respondents, Mr Craig Dereck Jordaan
and Mr Brett Leslie Holding were appointed as business rescue practitioners
(BRPs) of Sakhile. Sakhile owns a coal washing plant (the plant) situated on
Ergomode’s property pursuant to a lease agreement entered into between
Ergomode and Sakhile, in terms of which Sakhile occupied a portion of
Ergomode’s premises. The plant was operated from the leased premises until

August 2020 when the owner of the filter press, a component of the plant,
removed the filter press from the plant. This rendered the plant non-functional.

[3] At the date of the commencement of the business rescue, Sakhile owed
arrear rental of more than R18,2 million1 to the landlord, Ergomode. The latter
submitted a claim in the said amount. However, the BRPs deducted
approximately R4,8 million from the claim. They asserted that the latter amount
represented damages suffered by Sakhile as a result of the removal of the filter
press which was supplied by Filtaquip (Pty) Limited (Filtaquip), in terms of an
agreement concluded between IPC Benefication (Pty) Ltd (IPC), a related entity
to Ergomode, and Filtaquip. The deduction was also subsequent to Ergomode's
alleged non-compliance with its environmental licenses. Accordingly, the BRPs
valued Ergomode's claim at approximately R12,8 million.

[4] On 30 March 2021, the majority creditors and other interested parties
adopted a business rescue plan at a meeting convened in terms of s 151 of the
Act. The business rescue plan, inter alia, provides for the relocation and
refurbishment of the plant. On 22 February 2022 the BRPs, acting in terms of
s 136(2) of the Act, suspended the lease agreement between Sakhile and
Ergomode with immediate effect and gave instructions to their agent to remove
the plant from Ergomode’s property.

[5] The BRPs based the business rescue plan on the proposal by the fifth
respondent, Independent Coal Marketing Company (Pty) Ltd (ICMC), a
company controlled by the fourteenth respondent, Mr Darryl Hendricks. The
proposal was that ICMC would purchase the plant from Sakhile in terms of an

1 On the papers there is a dispute in relation to the correct amount owing, but nothing turns on this.

instalment sale agreement. The plant was to be removed, refurbished and re-
established, and the agreed purchase price was R26,3 million.

[6] Before the plant could be removed and effect given to the business rescue
plan, Ergomode sought leave in terms of s 133 of the Act to institute an
application to: (a) perfect its landlord’s hypothec over the plant as real security
over the arrear rentals; (b)  set aside the BRPs determination in terms of s 145(5)
of the Act that it is not an independent creditor; (c) condonation for its admitted
failure to comply with s 145(6) of the Act; and (d) declaring the adoption of the
business plan on 30 March 2021 to be of no force or effect or, alternatively, for
same to be reviewed and set aside.

Procedure for adoption of the business rescue plan
[7] In the main, Ergomode sought an order declaring the adoption of the
business plan on 30 March 2021 to be of no force or to be reviewed and set aside.
Section 150(1) of the Act provides that the BRPs, after consulting the creditors,
other affected persons and the management of the company, must prepare a
business plan for consideration and possible adoption at a meeting held in terms
of s 151. The business plan must, in terms of s 150(5), be published within 25
days after the date on which the practitioner(s) were appointed, or such longer
time as may be allowed by the court on application by the company, or by the
holders of a majority of creditors’ voting interest.

[8] In this case the following sequence of events ultimately led to the adoption
of the business rescue plan. On 12 November 2020 the BRPs held the first
meeting of creditors. On 8 January 2021, the BRPs sent an email to all known
affected persons requesting an extension of the date of the publication of the
business rescue plan to 28 February 2021. The addressees were requested to
respond to the email if they did not agree to the extension, and further advised

that if they did not respond at all, it would be taken that they agree to the
extension. None of the creditors responded to the email. The BRPs consequently
informed the creditors that the extension to 28 February 2021 had been granted.

[9] On 24 February 2021, the BRPs again requested, by email to all affected
persons, a further extension of the publication of the plan to 15 March 2021.
Again the creditors were requested to respond to the email only if they did not
agree to the proposed extension. If they did not respond to the email it would be
taken that they agreed to the extension. Ergomode sent an email objecting to the
extension, and this was the only response received by the BRPs. On 26 February
2021, the BRPs informed all affected persons that the creditors had voted in
favour of the extension to 15 March 2021. The plan was then published on
15 March 2021 and was thereafter adopted by the majority creditors on 30
March 2021.

[10] In the high court, counsel for Ergomode argued that the time period for
the publication of the business rescue plan as provided for in s 150(5) had lapsed
because there was no valid extension of the time for the publication of the plan
beyond 31 January 2021, alternatively, 28 February 2021. As a consequence, no
business rescue plan could, absent a valid extension, be validly adopted
thereafter.

[11] Ergomode further contended that s 150(5) requires that express consent
must be obtained from creditors in a formal meeting to extend the 25-day period
within which the business rescue plan must be published. In this regard,
Ergomode relied on DH Brothers Industries (Pty) Ltd v Gribnitz NO and

Others.2 It submitted that without a formal meeting and in the absence of express
consent having been given, the purported extensions were legally ineffectual.

[12]  It is common cause that Ergomode participated in the business rescue
proceedings and did not raise any objection pertaining to the publication of the
business rescue plan, (or any other issue) at the meeting of 30 March 2021,
where the business rescue plan was adopted. Accordingly, Ergomode's reliance
on DH Brothers is misplaced as the facts in this matter are distinguishable. In
DH Brothers, the BRP sent emails to creditors on a number of occasions
requesting an extension of the time within which to publish a plan, and did not
request a response or state that if no response was received, failure to respond
would be deemed as consent to the requested extension. On the contrary, in this
matter the BRPs invited a response from the affected persons. In DH Brothers,
the court adopted the approach that failure to publish a plan within the prescribed
time or extended period results in the termination of the business rescue
proceedings.3 This statement was, however, disapproved of by this Court in
Panamo Properties (Pty) Ltd and Another v Nel and Others.4

[13]  Business rescue is designed to ‘provide for the efficient rescue and
recovery of financially distressed companies, in a manner that balances the
rights and interest of all relevant stakeholders’.5 A liberal interpretation of the
Act must therefore be adopted so as to strike a balance between the rights and
interests of the relevant shareholders and the company in business rescue.
Section 150(5)(b) does not expressly require a meeting to be held to extend the
time periods for the publication of the business rescue plan. Other than that the

2 DH Brothers Industries (Pty) Ltd v Gribnitz NO and Others [2013] ZAKZPHC 56; 2014 (1) SA 103 (KZP);
[2014] 1 All SA 173 (KZP) (DH Brothers).
3 Ibid para 28.
4 Panamo Properties (Pty) Ltd and Another v Nel NO and Others [2015] ZASCA 76; 2015 (5) SA 63 (SCA);
[2015] (5) SA 63 (SCA) paras 28-29.
5 Section 7(k) of the Companies Act 71 of 2008.

extension must be allowed by the majority of the creditors’ voting interest,
there is no other prescribed formality.

[14] At no time during the meeting of 30 March 2021, or at any time prior
thereto, did Ergomode raise the issue that the time period for the publication of
the business rescue plan had lapsed. The majority of the creditors allowed the
extension(s) sought for the publication of the business rescue plan. Therefore,
Ergemode’s belated attempt to impugn the process long after the adoption of the
plan was prompted by Ergomode’s dissatisfaction with the outcome of the
adopted plan. Thus, Ergomode’s contention that: (a) the business rescue plan
was not approved in terms of s 151; (b) that the s 151 meeting was not properly
convened; and (c) that the purported adoption of the plan is a nullity, is plainly
unsustainable.

Notice to affected persons
[15] Section 151(2) of the Act obliges the BRP to deliver a notice of a meeting
called for the purpose of considering the plan to all affected persons.6 Ergomode
argued that the BRPs failed to give notice of the s 151 meeting to at least two of
the affected people, namely Biretta Investments (Pty) Ltd (Biretta), one of
Sakhile's creditors and Voice of Workers of South Africa Civil Rights Union
(VW-SACRU) the thirty-fifth respondent purportedly representing Sakhile’s

6 ‘151 Meeting to determine future of company -
(1) Within 10 business days after publishing a business rescue plan in terms of section 150, the practitioner must
convene and preside over a meeting of creditors and any other holders of a voting interest, called for the purpose
of considering the plan. [Sub-s (1) substituted by s. 95 Act No. 3 of 2011.]
(2) At least five business days before the meeting contemplated in subsection (1), the practitioner must deliver
a notice of the meeting to all affected persons, setting out—
(a) the date, time and place of the meeting;
(b) the agenda of the meeting; and
(c) a summary of the rights of affected persons to participate in and vote at the
meeting.
(3) The meeting contemplated in this section may be adjourned from time to time, as
necessary or expedient, until a decision regarding the company’s future has been taken
in accordance with sections 152 and 153.’

employees. Therefore, the adoption of the business rescue plan and the decisions
taken at the meeting are void.

[16] Firstly, in respect of the VW-SACRU, the BRPs submitted that they had
no knowledge whatsoever that VW-SACRU represented any of Sakhile’s
employees. At the time of the commencement of the business rescue
proceedings, National Union of Metal Workers of South Africa (NUMSA), the
thirty-sixth respondent, represented the employees. When the employees’
meeting was held on 12 November 2020, NUMSA was invited to the meeting
but failed to attend. Instead, three employees attended the creditors meeting on
the same day. The employees gave proxies to a co-worker, Mr Keenan
Hendricks (the seventeenth respondent), to represent them.

[17] Secondly, counsel for the BRPs submitted that Mr Erskine’s wife is the
sole director of Biretta, which in turn is a 10% shareholder in Sakhile. Mr
Erskine, the sole director of Ergomode and the deponent to the affidavits filed
on its behalf, is recorded as Biretta’s representative.  Ergomode’s argument in
this regard must also fail as the BRPs complied with s 151(2).

Section 144 of the Companies Act
[18] It is necessary to briefly deal with the issue of whether NUMSA is also an
interested party. Section 144(1) of the Act provides that employees who are
unionised shall be represented by their trade union in business rescue processes.
NUMSA represents the interests of Sakhile's employees who are or were its
members when Sakhile was placed in business rescue. On 15 February 2022, it
was joined as an interested party by order of the high court. However, thereafter
it remained supine. In this Court, NUMSA made common cause with Ergomode
and argued that the BRPs impermissibly allowed an employee (ie. a co-worker)
to represent other unionised employees by proxy contrary to the dictates of s

144(1)(a). Therefore, the business rescue plan adopted at the meeting of 30
March 2021 is, so it was submitted, of no force or effect and falls to be set aside.

[19] As I see it, the clear purpose of s 144(1) is to provide unionised employees
with a platform for representation in the business rescue process. The relevant
part of s 144(1) provides:
‘144 Rights of employees – During a company’s business rescue proceedings any employees
of the company who are –
(a) represented by a registered union may exercise any rights as set out in this Chapter –
(i) collectively through their trade union; and
(ii) in accordance with applicable labour law; or
(b) not represented by a trade union may elect to exercise any rights set out in this Chapter
either directly, or by proxy through an employee organisation or representative.’

[20]  Counsel for NUMSA submitted that it is common cause that the
employees in question are members of a trade union and yet they were
represented at the meeting by proxy and not by their union. Counsel argued that
the entire structure of Chapter 6 of the Act shows a legislative intent that
registered trade unions should represent employees collectively, and that s 144
distinguishes between employees who are members of a trade union and
employees who are not. This, so the argument went, was therefore a recognition
of the importance of trade unions and their collective representation. It was
contended that votes cast on behalf of the employees by the purported proxy
holder failed to meet the required threshold for adoption of the business rescue
plan and that the BRPs, in allowing an employee to represent other unionised
employees by proxy, acted in contravention of s 144(1)(a).

[21] In my view, properly construed, s 144(1) entitles employees to exercise
their rights, either directly or by proxy through an employee organisation (a trade

union) or representative. Were the interpretation espoused by NUMSA and
Ergomode to prevail, that would lead to employees whose union is invited but
does not attend the meetings (as it happened in this case) to be unrepresented
and unable to participate in the business rescue proceedings. Clearly, that would
not serve the bests interests of the employees.

Review of the BRPs' determination - s 145(6)(a)
[22] I turn now to deal with the BRPs' determination of Ergomode as a non-
independent creditor under s 145(5) of the Act. Ergomode contests its
determination as a non-independent creditor. In this regard, s 145(6) provides
that a creditor who is aggrieved by a business practitioner's determination may
bring an application to court to review such a determination, and that such
application must be instituted within five days after receiving a notice of
determination. Section 145(5)(a) empowers a BRP to determine whether a
creditor is independent for the purpose of the business rescue proceedings. An
‘independent creditor’ is defined in s 128 of the Act as a person:
‘(a) who is a creditor of the company (including an employee of the company) who is a
creditor in terms of s 144(2); and
(b) who is not related to the company, a director of the company, or the business rescue
practitioner.’

[23]  Ergomode was informed of its determination as a non-independent
creditor on 26 November 2020. The five-day period within which Ergomode
could apply to court lapsed on 3 December 2020. But, it inexplicably challenged
the BRPs’ decision only on 30 March 2021, which was long past the five-day
period. The BRPs decision was based on the fact that Mr Erskine’s wife is a
shareholder in a company that is a minority shareholder in Sakhile and therefore
‘related to the company’. Ergomode, whilst conceding that it failed to timeously
challenge its determination, nevertheless insists that the BRPs should have

determined that it is an independent creditor. Ergomode also sought condonation
for the institution of its review application outside the prescribed five-day
period.

[24] Subsections 145(5) and (6) provide:
‘(5) The practitioner of a company must –
(a) determine whether a creditor is independent for the purposes of this Chapter;
(b) request a suitably qualified person to independently and expertly appraise and value an
interest contemplated in subsection (4)(b); and
(c) give a written notice of the determination, or appraisal and valuation, to the person
concerned at least 15 business days before the date of the meeting to be convened in terms of
section 151.
(6) Within five business days after receiving a notice of a determination contemplated in
subsection (5) a person may apply to a court to –
(a) review the practitioner’s determination that the person is, or is not, an independent
creditor; or
(b) review, re-appraise and re-value that person’s voting interest as determined in terms of
subsection 5(b).’

[25]  As to Ergomode's application for condonation made from the Bar, the
high court found that, in the absence of a substantive application for condonation
setting out a full and satisfactory explanation as to why s 145(6)(a) was not
complied with within the stipulated time, alternatively, within a reasonable time,
it could not assist Ergomode. Before this Court, Ergomode argued that the
wording of s 145(6) is to be contrasted with the other provisions in s 145 in
particular and Chapter 6 in general. It was contended that the other sections of
the Act explicitly provide a procedural mechanism to apply to court for
condonation, on good cause shown, where there has been non-compliance with
the prescribed time limits. It was further argued that the five-day limitation in
s 145(6) constitutes an unwarranted limitation of the constitutional right of
access to court entrenched in s 34 of the Constitution. Therefore, so the argument

went, a restrictive construction of the limitation would allow the court to
condone a late application to review a determination under s 145(1) of the Act.
In this regard counsel relied on the dictum in Shoprite Checkers (Pty) Ltd v
Berryplum Retailers CC and Others7 dealing with s 150(5) of the Act.

[26] Finally, Ergomode submitted that a liberal construction of s 145(6)
favours granting condonation for non-compliance with the prescribed time limits
and the setting aside of the BRPs’ determination to the effect that Ergomode is
not an independent creditor. On the contrary, the inflexible approach adopted by
the BRPs would invariably lead to injustice. If the determination is set aside,
then Ergomode’s vote as an independent creditor would be decisive.

[27] The Act is silent on whether a failure to apply to court for the review of
the business rescue practitioners’ determination within the stipulated time of five
days as provided in s 145(6) may be condoned. Consequently, Ergomode’s
reliance on Shoprite where the Court was dealing with s 150(5) which, unlike s
145(6), explicitly provides for extension of the time stipulated therein is
misplaced. However, even if it is accepted that it is open to an aggrieved party
to apply for condonation in respect of the five-day time period, Ergomode has
in any event failed to make out a case for condonation. No facts were provided
by Ergomode as to why the application was launched only on 21 April 2021
after the adoption of the business rescue plan.

[28] The purpose of the time periods is to provide for the BRPs determination
to be challenged before voting on the proposed business rescue plan as such
determination, inter alia, determines the voting rights of a creditor. Considering
that business rescue is envisaged to be a speedy process, it would in any event

7 Shoprite Checkers (Pty) Ltd v Berryplum Retailers CC and Others (35/2014) [2015] ZASCA 76; 2015 (5) SA
63 (SCA) (Shoprite).

not be in the interests of justice for condonation to be granted. This is so because:
(a) Ergomode took part in the proceedings; (b) it voted at the meeting against
the adoption of the business rescue plan; and (c) it did not object to the
determination until after the business rescue plan was adopted.

[29] Furthermore, Ergomode’s argument that the limitation in s 145(6) is
extremely short and thus infringes the constitutional right of access to court as
entrenched in s 34 of the Constitution, does not avail it in circumstances where
the constitutional validity of the provision has not been frontally challenged for
at least two reasons. First, Ergomode’s access to court was not in any way
limited; second, Ergomode cannot raise this argument at this stage when it did
not rely on s 34 of the Constitution in the high court. Thus, Ergomode should
also fail in relation to this aspect of its case.

Moratorium on legal proceedings in terms of s 133 of the Act.
[30] Upon a company being placed under business rescue, a temporary
moratorium on the rights of creditors of the company is triggered in terms of s
133 of the Act. The section provides, in relevant parts, as follows:
‘General moratorium on legal proceedings against company _ (1) During business rescue
proceedings, no legal proceedings, including enforcement action, against the company, or in
relation to any property belonging to the company, or lawfully in its possession, may be
commenced or proceeded with in any forum, except-
(a) with written consent of the practitioner;
(b) with leave of the court and in accordance with any terms of the court considers
suitable;
(c) …
(d) …
(e) proceedings concerning any property or right over which the company exercises the
powers of a trustee;
(f) …’

[31] As a result, Ergomode sought leave in terms of s 133 to be permitted to
institute legal proceedings to perfect its landlord’s hypothec. The BRPs opposed
the application. They asserted that Ergomode failed to comply with s 133(1) of
the Act because it was precluded from instituting legal proceedings without the
written consent of the BRPs or, failing which, the leave of the court.

[32] Section 133 must be read as a whole and its different subsections dealing
with the same subject matter, as is the position here, must not be considered in
isolation. Rather, they must be read together so as to ascertain the meaning of
the provision.8 Section 133 is a general moratorium provision that applies in
relation to the assets and liabilities of the company immediately upon business
rescue coming into effect.9 The manifest purpose of this section is to protect the
company under business rescue against legal claims, save when the written
consent of the BRP is obtained or, failing such consent, leave of the court.

[33]  Accordingly, s 133 is meant to grant a company placed in business rescue
a moratorium to provide it, in popular parlance, with breathing space whilst
every attempt is made to rescue the company in financial distress, by designing
and implementing a business rescue plan.10 The term ‘legal proceedings’ in s
133 include claims in general, but also claims instituted, as in this instance, to
perfect security. Consequently, Ergomode was, as a matter of law, obliged, as a
preliminary step, to seek leave of the BRPs or of the court to commence
proceedings against Sakhile (in business rescue). This, it failed to do. Instead, it

8 Aziz v Divisional Council, Cape and Another 1962 (4) SA 719 (A) at 726E. See also Executive Council, Western
Cape v Minister of Provincial Affairs and Constitutional Development and Another; Executive Council,
Kwazulu-Natal v President of the Republic of South Africa and Others 2000 (1) SA 661 (CC) para 52.
9 Chetty t/a Nationwide Electrical v Hart and Another NNO [2015] ZA SCA 112; 2015 (6) SA 424 (SCA);
[2015] 4 All SA 401 (SCA) para 28.
10 Cloete Murray and Another NNO v Firstrand Bank Ltd t/a Wesbank [2015] ZASCA 39; 2015 (3) SA 438
(SCA) para 14.

heedlessly embarked on legal proceedings against Sakhile in the face of the
unequivocal prohibition contained in s 133(1) of the Act.

Perfection of the landlord’s hypothec
[34] In a situation where a lessee company is placed in business rescue, the
landlord’s claim for arrear rental is affected by the general legal moratorium in
terms of s 133 of the Act. The moratorium precludes the landlord from taking
legal action to perfect its hypothec after the commencement of the business
rescue process, unless the business rescue practitioner or the court grants consent
to the perfection. It is common cause that Ergomode is Sakhile’s landlord and
that it is owed arrear rental. Both parties are in agreement that the plant, which
is Sakhile’s major asset, is in Ergomode’s possession and it has not been used
since 2020. Ergomode seeks leave to perfect its landlord hypothec and thereby
convert it into real security as it is already in possession of the plant and is owed
rental. The issue is whether the general moratorium in terms of s 133 applies to
post commencement debt, and if so, whether leave should be granted to
Ergomode to perfect its hypothec through attachment or interdict.

[35] A landlord’s hypothec comes into effect the moment rent is in arrears, and
is enforceable against the debtor immediately. The landlord’s hypothec creates
a jus in personam ad servitutem adquirendam, ie. a personal right to perfect the
hypothec to make it enforceable against third parties. The effect of perfection is
that the right is converted to a real right enforceable against all and sundry.

[36] By contrast, the landlord’s unperfected hypothec ranks as a concurrent
claim in business rescue proceedings. Ergomode’s submission is that arrear
rental is owed both pre-commencement and post-commencement of the business
rescue up to and including 21 February 2022, when the BRPs suspended
Sakhile’s obligations under the lease and gave notice to that effect to Ergomode.

[37] The post-commencement debt commenced from 23 October 2021 to 21
February 2022, when the BRPs suspended the lease agreement. It was argued on
behalf of Ergomode that s 136(3) only applies to an agreement that has been
suspended or cancelled, and it accordingly applies only to the period after the
notice of suspension, and that the notice of suspension was clearly prospective.
As Ergomode is already in possession of the plant and the rent is overdue, it
contended that it has a personal right of retention that it can exercise against
Sakhile or the BRPs immediately. Accordingly, the perfection of the hypothec
does not change Sakhile’s or the BRPs’ position.

[38] Ergomode therefore submitted that the general moratorium does not apply
to post-commencement debt and that the business rescue plan only applies to
pre-commencement debt. Accordingly, Ergomode is entitled to enforce its
hypothec untrammelled by the strictures of s 133(1). Alternatively, Ergomode
argued that by virtue of its personal right of retention against Sakhile, perfection
of the hypothec would not affect the rights of the company in business rescue.
Accordingly, the court ought to exercise its discretion to grant leave to
Ergomode in terms of s 133(1). I proceed to consider these contentions in turn.

[39] The landlord’s tacit hypothec is real security created by operation of the
law to secure the lessor’s claim against the lessee for arrear rental. The
entitlement of the lessor to apply for the attachment of goods of the lessee at the
leased premises is the remedy’s most important feature. The hypothec comes
into existence the moment the lessee falls into arrears with the rental and it
terminates upon payment of the due amount.

[40] However, prior to the attachment or the lessee’s insolvency, the hypothec
holder (ie lessor) obtains no real right of security, with the effect that the subject

matter of the hypothec (invecta et illata), can simply be removed from the leased
premises, thus depriving the lessor of his security.11 Only once the lessor’s
hypothec has been perfected (by way of a court order and attachment) does the
lessor acquire real security that entitles the lessor to prevent the lessee or anyone
else from removing the lessee’s goods from the leased premises. The landlord
only obtains a right to approach the court for perfection and an order authorising
attachment. Only on attachment is the real right and preference vested. There is
no dispute on the papers that Ergomode's tacit hypothec was not perfected before
Sakhile was placed in business rescue. Consequently, Ergomode’s leave to
perfect the hypothec must fail.

[41] It follows that the conclusion of the high court cannot be faulted. The
issues raised in this appeal are without merit and consequently the appeal must
fail.

[42] In the result the following order is made:
The appeal is dismissed with costs, including the costs of two counsel.

________________________
D S MOLEFE
JUDGE OF APPEAL

11 Eight Kaya Sands v Valley Irrigation Equipment 2003 (2) SA 495 (T).

Appearances

For appellant:

S Vivian SC (with him J Bhima)
Instructed by

Tracey Lomax, Johannesburg

Honey Attorneys, Bloemfontein

For the 1st, 2nd and 3rd respondent
M Snyman SC (with him A Mare)
Instructed by:

BrandMullers Inc., Middelburg

Theron Jordaan Smit Inc., Bloemfontein

For the 36th respondent:

LK Siyo (with him R Kruger)
Instructed by:

CN Phukubje Inc., Johannesburg

Sally Attorneys, Bloemfontein
THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL

From:
The Registrar, Supreme Court of Appeal
Date:

29 January 2024
Status:
Immediate
The following summary is for the benefit of the media in the reporting of this case and does not
form part of the judgments of the Supreme Court of Appeal
Ergomode (Pty) Ltd v Jordaan NO and Others (643/2022) [2024] ZASCA 10 (29 January 2024)
Today the Supreme Court of Appeal (SCA) handed down judgment dismissing an appeal with costs,
including the costs of two counsel, against the decision of the Mpumalanga Division of the High Court,
Middelburg (the high court).
The background facts to this matter are uncontroversial. On 23 October 2020 the third respondent,
Sakhile Contract Mining (Pty) Limited (Sakhile), was placed under business rescue in terms of s 129(1)
of the Companies Act 71 of 2008 (the Act). On 30 October 2020 the first and second respondents, Mr
Craig Dereck Jordaan and Mr Brett Leslie Holding were appointed as business rescue practitioners
(BRPs) of Sakhile. Sakhile owned a coal washing plant (the plant) situated on Ergomode’s property
pursuant to a lease agreement entered into between Ergomode and Sakhile, in terms of which Sakhile
occupied a portion of Ergomode’s premises. The plant was operated from the leased premises until
August 2020 when the owner of the filter press, a component of the plant, removed the filter press from
the plant. This rendered the plant non-functional. At the date of the commencement of the business
rescue, Sakhile owed arrear rental of more than R18,2 million to the landlord, Ergomode. The latter
submitted a claim in the said amount. On 30 March 2021, the majority creditors and other interested
parties adopted a business rescue plan at a meeting convened in terms of s 151 of the Act. The
business rescue plan, inter alia, provided for the relocation and refurbishment of the plant. On 22
February 2022 the BRPs, acting in terms of s 136(2) of the Act, suspended the lease agreement
between Sakhile and Ergomode with immediate effect and gave instructions to their agent to remove
the plant from Ergomode’s property.
Before the plant could be removed and effect given to the business rescue plan, Ergomode sought
leave in the high court in terms of s 133 of the Act to institute an application to: (a) perfect its landlord’s
hypothec over the plant as real security in respect of arrear rentals; (b)  set aside the BRPs
determination in terms of s 145(5) of the Act that it is not an independent creditor; (c) condonation for
its admitted failure to comply with s 145(6) of the Act; and (d) declaring the adoption of the business
plan on 30 March 2021 to be of no force or effect or, alternatively, for same to be reviewed and set
aside.
In the high court, counsel for Ergomode argued that the time period for the publication of the business
rescue plan as provided for in s 150(5) had lapsed because there was no valid extension of the time for
the publication of the plan beyond 31 January 2021, alternatively, 28 February 2021. As a consequence,
no business rescue plan could, absent a valid extension, be validly adopted thereafter. Ergomode
further contended that s 150(5) requires that express consent must be obtained from creditors in a
formal meeting to extend the 25-day period within which the business rescue plan must be published.
Furthermore, it submitted that without a formal meeting and in the absence of express consent having
been given, the purported extensions were legally ineffectual. The high court, however, dismissed the
application which lead to Ergomode’s appeal to this Court, with leave from the high court.

Dealing with the issues raised by Ergomode, the SCA made the following findings:  Pertaining to the
perfection of the landlord’s hypothec the SCA held that where a lessee company was placed in business
rescue, the landlord’s claim for arrear rental was affected by the general legal moratorium in terms of s
133 of the Act. The moratorium precluded the landlord from taking legal action to perfect its hypothec
after the commencement of the business rescue process, unless the business rescue practitioner or
the court grants consent to the perfection. The SCA also found that there was no dispute on the papers
that Ergomode's tacit hypothec was not perfected before Sakhile was placed in business rescue.
Consequently, Ergomode’s leave to perfect the hypothec had to fail.  Relating to the setting aside of the
BRP’s determination that Ergomode was not an independent creditor and condonation thereof, the SCA
held that in terms of s 145(6), Ergomode had to institute such review within five days after receiving a
notice of determination but had failed to institute such review within the required time period. As a result,
SCA therefore held that it would not be in the interest of justice to for condonation to be granted
because: (a) Ergomode took part in the proceedings; (b) it voted at the meeting against the adoption of
the business rescue plan; and (c) it did not object to the determination until after the business rescue
plan was adopted. Lastly, coming to the issue of declaring the adoption of the business plan on 30
March 2021 to be of no force or effect, the SCA held that Ergomode’s argument in this regard had to
also fail because at no time during the meeting of 30 March 2021, or at any time prior thereto, did
Ergomode raise the issue that the time period for the publication of the business rescue plan had lapsed.
The majority of the creditors allowed the extension(s) sought for the publication of the business rescue
plan. Therefore, according to the SCA, Ergomode’s belated attempt to impugn the process long after
the adoption of the plan was prompted by its dissatisfaction with the outcome of the adopted plan.
Based on those findings, the SCA ordered that the appeal be dismissed with costs.
~~~~ends~~~~