About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Western Cape High Court, Cape Town
SAFLII
>>
Databases
>>
South Africa: Western Cape High Court, Cape Town
>>
2021
>>
[2021] ZAWCHC 269
|

|

Trustees for the time being of the Bymyam Trust v Butcher Shop and Grill CC (11877/2020) [2021] ZAWCHC 269 (22 December 2021)

IN THE HIGH
COURT OF SOUTH AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
Case
No.: 11877/2020
In
the matter between:
THE
TRUSTEES FOR THE TIME BEING
OF
THE BYMYAM
TRUST
Applicant
and
THE BUTCHER SHOP
AND GRILL
CC
Respondent
Date of hearing:  17
December 2021
Date of judgment: 22
December 2021 (delivered electronically)
JUDGMENT –
APPLICATION FOR LEAVE TO APPEAL
PANGARKER AJ
1.
In the judgment which I delivered on 19 November 2021, I dismissed
the respondent’s
counter application for rental remission with
costs and ordered it to make payment to the applicant of R2 703 191,
17 which represented
all amounts due by the respondent to the
applicant in terms of the provisions of the lease concluded between
the parties in February
2014 (Judgment, par 111). Additionally, in
terms of the Order at paragraph 111 of the judgment, the respondent
was ordered to pay
interest on the amount as well as costs on the
scale as between attorney and client plus VAT.  The applicant's
applications
to strike out were dismissed with costs, including costs
two counsel.
2.
I refer to the parties as they were cited in the main proceedings
before me in
August 2021. The respondent delivered its Notice of
Application for Leave to Appeal on 25 November 2021 and save for the
order regarding
the two striking out applications, seeks leave to
appeal to the Supreme Court of Appeal (SCA), alternatively, to the
Full Bench of
this Division against the whole of the judgment and
orders (including costs).
3.
In summary, the grounds upon which the application is based are:
firstly, that
I erred when I dismissed the counter application on the
basis that the respondent had failed to make out a case to pierce the
corporate
veil or disregard the separate juristic personalities of
the respondent and Apoldo Trade (Pty) Ltd (Apoldo), the sub-lessee of
the
leased premises. Secondly, that I had erred when finding that the
respondent had failed to prove, on a balance of probabilities,
a lack
of beneficial occupation of the leased premises which had the result
that I had incorrectly found that it was not entitled
to claim rental
remission from the applicant (Judgment, par 108).
4.
The application falls squarely under
section 17
(1)(a)(i) and (ii) of
the
Superior Courts Act 10 of 2013
read with Uniform
Rule 49(1).
It
is the respondent's contention that there are reasonable prospects
that another Court would find that this Court erred in arriving
at
certain findings which culminated in its dismissal of the counter
application on the grounds as stated. It is also submitted that
there
exist compelling reasons to grant leave to appeal to the SCA. The
applicant opposes this application, submitting that there
are no
reasonable prospects of success on appeal and that the dispute
between the parties is a factual dispute.
5.
In his submissions on the first aspect relating to piercing the
corporate veil,
the respondent’s counsel is of the view that this
Court was incorrect to have applied
section 20(9)
of the
Companies
Act 71 of 2008
in respect of prayer 1A of the counter application
which sought a declaration that the separate juristic personalities
of Apoldo
and the respondent ought to be disregarded for the purpose
of the rental remission claim. It is submitted that I should have
applied
and extended the common law, which, as was found in
Ex
parte Gore and Others NNO
2013 (3) SA 382
(WCC)
at par
34, supplements
section 20(9)
of the
Companies Act.
6.
Given the various factors on which the respondent based its case for
such relief
(that the two entities have the same shareholder, the
same directors, share the same banking institution, the same
suppliers, the
same administrative staff and accountants, etc.), it
is argued that I should have found in the circumstances of the
matter, that
justice required that the corporate veil be pierced or
that the separate juristic personalities were to be ignored. It is
submitted
that the result of the judgment on the issue of piercing
the corporate veil, is unfair.
7.
The respondent’s counsel referred to
LAWSA, 2
nd
ed, Vol 4,
Part 1
,
submitting that fraud and/or an unconscionable
abuse of the separate corporate personalities need not always be
present and therefore
I should have developed the common law given
the circumstances of the case. Furthermore, I should have found that
in a group of companies
scenario, Courts were more inclined to pierce
the corporate veil or ignore the separate juristic personalities (the
reference is
to
Cape Pacific Limited v Lubner Controlling
Investments (Pty) Ltd & Others
[1995] ZASCA 53
;
1995 (4) SA 790
(A)).
The respondent contends that my finding that the corporate veil
should not be pierced seen against the backdrop of the facts and the
COVID regulations resulted in a situation where the landlord received
a windfall in circumstances where the lessee did not occupy
the
leased premises.
8.
As to the second ground of appeal relating to beneficial occupation
and that the
respondent was not entitled to claim rental remission,
the submission is that while I was correct to hold that
North
Western Hotel Ltd v Rolfes Nebel & Co
.
1902 TS 324
was not binding authority on this Court, I was incorrect to hold that
there was a requirement of physical occupation of the leased
premises. It is submitted that there is a reasonable prospect that
another Court would come to a different conclusion and hold that
there is nothing in principle which precludes a lessee from claiming
rental remission where the premises are occupied by the sub-lessee.
It is argued that
North Western Hotel
is good in law
and has not been overturned. With reference to the Addendum which the
applicant introduced in the matter at a late
stage, the submission
is, as in the main hearing, that it is a tripartite agreement and
created a contractual relationship between
the applicant and Apoldo.
9.
In contrast, the applicant’s counsel submits that
section 20(9)
of
the
Companies Act codifies
the common law and what the respondent
wanted the Court to do was to have found that it be permitted to
ignore the separate juristic
personalities for purposes of succeeding
with its counter application. It is submitted that such a finding
would have made a mockery
of corporate legal personalities and in
circumstances where Apoldo was not a party to the proceedings.
Furthermore, it is submitted
that the judgment was correct not to
ignore the separate juristic personalities of the two entities. The
applicant contends that
in terms of par 52 of
Cool Ideas 1186
CC v Hubbard and Another
[2014] ZACC 16
,
equity and
fairness considerations were seen to be invoked on a case by case
basis in order to subvert the meaning of a statutory
provision which
applies (here, section 20(9) of the
Companies Act). It
is submitted
that the shareholders themselves sought to pierce the veil.
10.
The applicant’s response to the complaint that this Court should
have developed the common law
in relation to the piercing of the veil
is that with reference to section 39 (2) of the Constitution
(Interpretation of the Bill
of Rights), the respondent does not
specify which rights were infringed by this Court's judgment when it
refused to pierce the corporate
veil and what constitutional point
could possibly be relied upon.
11.
Insofar as the rental remission ground of appeal is concerned, the
applicant persists that the
North Western Hotel
judgment is not binding on this Court. It is submitted that this
Court could not ignore the general principles of contract. There
was no contractual relationship between Apoldo and the
applicant, and the counter application was based on the lease
agreement. The Addendum, which the respondent submits was a
tri-partite agreement, was merely a consent to sub-let the premises
and
no more. It is argued that the Addendum does not create
rights and obligations between the applicant and Apoldo and it does
not bring about a change in the contractual relationship between the
parties. The applicant holds the view that the Court was correct
when
it found that the respondent had not proved a loss of beneficial
occupation which would entitle it to claim rental remission.
12.
Objectively considered, my judgment took account of the authorities
such as
Ex parte Gore
and the circumstances where a
party seeks an order to pierce the corporate veil. This discussion
included the situation related to
a group of companies (Judgment,
para 74 to 83). I also considered the factors listed in the
respondent’s papers and those cited
again in this application
relevant to both juristic entities and their relationship to each
other. While I am satisfied that a Court
does not have a general
discretion to ignore the juristic personalities of companies and that
Courts should not lightly disregard
their separate juristic
personalities, the facts of each case must be considered, which I had
done (see for example,
Cape Pacific
at 803G-H
).
13.
One of the complaints raised relates to my finding of an absence of
an unconscionable abuse of the
separate juristic personalities. The
respondent relies on the findings of the authors in
LAWSA
for
its argument that a Court will pierce the corporate veil in certain
circumstances ‘
where the interests of justice or fairness or
right dealing so demand’
(LAWSA, par 88, p125)
. I am
mindful that the legal fiction of piercing the corporate has garnered
much consideration by the authorities, some referred
to in the
judgment, and that these authorities remind one that a flexible
approach is needed and that the legislation is supplemented
by the
common law (see
Ex parte Gore
). Having regard to the
judgment objectively, the submissions, the facts of this matter, the
relationship between the respondent and
Apoldo and the authorities, I
am of the view that another Court may reach a different conclusion
than I had.
14.
Furthermore, in the specific context of the impact of the COVID 19
regulations on restaurants during
2020 - 2021, another Court may well
arrive at a conclusion that fairness, justice and equity dictate that
the corporate veil be pierced
or that the separate corporate
personalities of Apoldo and the respondent be ignored. In those
circumstances, another Court may very
well extend the common law and
find that the corporate veil may be pierced in favour of a debtor.
Thus, on the first ground in this
application, I am satisfied that
the respondent has not only established reasonable prospects of
success but also compelling reasons
why leave to appeal should be
granted.
15.
On the second ground regarding my finding that the respondent was not
entitled to claim a rental
remission, my view is that the judgment
dealt in some detail with the
North Western Hotel
judgment. Its facts and findings and the reasons why I was of the
view that it did not establish a principle that a lessee who does
not
occupy the leased premises may claim rental remission where the
sub-lessee’s loss of beneficial occupation occurred were set
out
(Judgment, para 97 – 105). I held that the facts and circumstances
of
North Western Hotel
differed from those in this
matter. Counsel for the respondent does not agree and submits that
these facts (in this matter) make
out a stronger case for the
applicability of
North Western Hotel
, that is, that a
lessee may claim rental remission where its sub-lessee suffered a
loss of beneficial occupation.
16.
While I appreciate the respondent’s stance, I must add that I am
still inclined to agree with
the applicant’s view that the counter
application was premised on the lease and that no contractual
relationship existed in terms
of the lease between the applicant and
Apoldo. The parties are still at issue as to the effect and import of
the Addendum.
Whether another Court may consider that
North
Western Hotel
laid down principles which the respondent
submits it had, would be a question of its understanding and reading
of the judgment, and
within the context of the law applicable to
leases, landlord and tenant, and sub-tenant (see Judgment, par
105-106). In my view,
while the facts of this matter are simple and
mainly undisputed, the law may not be that straight forward given
that neither counsel
nor I were able to find any later authority than
the 1902
North Western Hotel
.
17.
Having regard to the submissions by counsel and my judgment
considered objectively and dispassionately,
I am of the view that
another Court could or may come to a different conclusion on the
understanding and applicability of
North Western Hotel
and the question of loss of beneficial occupation in the
circumstances where a lessee does not occupy the leased premises. It
is
important that there be legal certainty on the questions raised in
this matter: whether fairness, justice and equity required a finding
that the corporate veil be pierced or the separate corporate
personalities of Apoldo and the respondent be ignored; whether the
common
law related to piercing the corporate veil should be extended;
whether a debtor such as the respondent would be entitled to avail
itself of the common law legal fiction of piercing the corporate
veil; whether
North Western Hotel
laid down a legal
principle that a tenant (lessee) is entitled to claim rental
remission from a landlord for the sub-tenant’s (sub-lessee’s)
loss of the full use and occupation of the leased premises (loss of
beneficial occupation); and, whether (in the instances of this
matter) the Addendum created a contractual relationship between
Apoldo and the applicant.
18.
I am satisfied that reasonable prospects of success exist on appeal.
In addition, as there is a
request that the common law related to
piercing the corporate veil should be developed (as indicated in the
respondent’s written
submission), it would be reasonable to grant
leave to appeal. I must add that I am of the view that the outcome of
this matter on
appeal would hold great significance not only to these
parties but also to other commercial tenants and landlords in South
Africa,
more so in the persistent shadow of COVID 19 regulations
which impact upon them. For all of these reasons, I believe that
there
are compelling reasons to grant leave to appeal to
the SCA.
19.
As for costs, my view is that the fairest and most appropriate order
would be that costs should
be costs in the appeal. Counsel are
thanked for their instructive written and oral submissions in the
application for leave to appeal
and for attending to the application
during the end of year recess period.
20.
In the result, I grant the following order:
Leave
to appeal is granted to the Supreme Court of Appeal in terms of
section 17(1)(a),
read
with
sections 17(2)(a)
and
17
(6)(a)(i) of the
Superior Courts Act 10
of 2013
.
Costs
of the application shall be costs in the appeal.
M
PANGARKER
ACTING
JUDGE OF THE HIGH COURT
For
applicant:        Mr P Corbett SC
Instructed
by:        Van Rensburg & Co.
Per:
Mr L J van Rensburg
For
respondent:     Mr J Muller SC with Mr L Kelly
Instructed
by:         Werksmans
Attorneys
Per:
Mr R Gootkin