12 December 2023
By: Lloyd Phillips
The Durban high court will have its hands full on Wednesday with litigation from different parties about the future of the beleaguered agricultural giant Tongaat Hulett.
The already tumultuous business rescue proceedings for Tongaat Hullet and its agricultural subsidiaries have hit yet another legal snag after the most promising bidders, the Industrial Development Corporation (IDC) and Tongaat itself, opposed two urgent applications for legal interdicts.
African Farming reported how the South African Sugar Association (Sasa) and RCL Foods sought urgent interdicts in the Durban high court last Thursday to stop a meeting the following day between Tongaat Hulett, its business rescue practitioners and the company’s creditors. The meeting was called to discuss proposed business rescue plans involving the most promising bidders: The Vision Parties multinational consortium (Vision) and Mozambique’s RGS Group (RGS).
The court adjourned its hearing of the Sasa and RCL Foods applications to Wednesday, December 13, saying it will hear them simultaneously with an application by Tongaat Hulett for leave to appeal against a previous ruling by Judge Rashid Vahed.
In late November, Vahed dismissed an application from Tongaat and its business rescue practitioners for exemption from paying R1,94 billion the company reportedly owes Sasa in terms of the Sugar Act (9 of 1978) and the Sugar Industry Agreement (1994).
Under the act and the agreement, sugar millers must pay levies and proceeds to Sasa, which uses the money to fund industry facilities and functions, such as the South African Sugarcane Research Institute. The balance is distributed between sugar cane growers and sugar millers according to an agreed ratio.
Soon after Tongaat went into voluntary business rescue on October 27, 2022, its business rescue practitioners reportedly decided the company should withhold these levies and proceeds. They reportedly believe Tongaat should be exempted from the payments because it is in voluntary business rescue and its finances are in a critical state.
According to information provided by Tongaat last Thursday, the high court also ordered the meeting scheduled for Friday to be adjourned until Thursday, December 14.
Tongaat simultaneously announced that it, Vision, RGS and the IDC are to legally contest the interdict applications by Sasa and RCL Foods.
As previously reported, Sasa’s urgent application says it “seeks to interdict a vote on Tongaat’s business rescue plans because they both unlawfully treat Sasa’s claims as concurrent and unsecured. This classification is wrong and contravenes the Sugar Act, which imposes the Sasa claims by statute upon Tongaat in its capacity as a sugar cane miller.
“It is Sasa’s submission that such statutory claims are not capable of compromise [and] may not be deferred for payment and/or claims arising out of the costs of the business rescue proceedings”.
In RCL Foods’ application for an urgent interdict, the company also seeks to have the two latest business rescue plans for Tongaat declared unlawful and set aside. It wants the meeting and vote on the two business rescue plans deferred “until no earlier than January 2024”, by which time it hopes Tongaat’s business rescue practitioners will have amended the plans in accordance with Vahed’s judgment.
The IDC’s head of corporate affairs, Tshepo Ramodibe, says its decision to oppose the interdicts “underscores our commitment to concluding the Tongaat Hulett Limited business rescue process as soon as possible. We are mindful that the interdicts will further prolong the matter.”
He adds that the IDC’s standpoint is that concluding the business rescue process without further delays will benefit Tongaat, its employees, sugar cane growers and the regional economy.
