Tongaat Hulett judgment upholds the validity of statutory obligations to industry
5 December 2023
On Monday, 4 December 2023, Judge Vahed today delivered his judgment on the Tongaat Hulett application to suspend the miller’s payment obligations arising out of the Sugar Industry Agreement. The judgment vindicates the South African Sugar Association (SASA) position that the Sugar Industry Agreement creates statutory, not contractual, obligations which are not overridden by the business rescue process under the Companies Act.
The judgment further rejects the argument that payment obligations under the Sugar Industry Agreement can be separated from the rest of the Agreement as obligations falling with the scope section 136(2)(a) of the Companies Act. Rather, the judgment holds that the obligations under the Sugar Industry Agreement are ‘simply the cost of doing business’ and therefore not subject to the moratorium on the rights of claimants applicable to business rescue proceedings under the Companies Act.
Critically, the judgment takes into account the purpose of the Sugar Industry Agreement, that being to ensure that all parties – growers, millers and refiners – benefit from an equitable division of the proceeds of the local market and are insulated against the risk of the export market.
What this means practically, is that the Business Rescue Practitioners (BRP’s) at Tongaat Hulett and Gledhow cannot suspend the obligation to pay more than R1.5 million that was due to SASA at the end of March 2023, and which was not paid at the time due to the BRP’s contention that the business rescue process took precedence over industry arrangements.
The substantive basis for the dismissal of the application is a welcome outcome for the ongoing sustainability of the sugar industry. This judgment brings the industry one step closer to a resolution of this critical industry matter. It does not, however, put the matter to bed.
SA Canegrowers will monitor the situation in the coming days to determine whether the Business Rescue Practitioners elect to appeal the judgment, and how they address this matter in light of the publication of the proposed business rescue plans last week, which do not include provisions to pay the more than R1.5 billion that was due to SASA.
It is our hope that the plans will be revised to accommodate the payment of the industry obligations upheld by the High Court. Failure to do so will needlessly prolong what has already been a protracted and costly process for the entire industry and will continue to put thousands of livelihoods at risk.
SA Canegrowers will continue to study the full implications of the judgment and to engage industry partners to find a mutually beneficial resolution to this matter in order to maintain the sustainability of the industry and protect the one million livelihoods it provides.
Issued by Kabelo Kgobisa on behalf of SA Canegrowers, 5 December 2023
