Ergomode (Pty) Ltd vs. Jordaan NO and Others

South Africa

29.01.2024

Company

A landlord’s hypothec comes into effect the moment rent is in arrears, and is enforceable against the debtor immediately

The Appellant, Ergomode (Pty) Limited (Ergomode), instituted legal proceedings by way of notice of motion in the Mpumalanga Division of 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.

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.

Pertaining to the perfection of the landlord’s hypothec, Supreme Court 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 Section 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. There was no dispute on the papers that, Ergomode's tacit hypothec was not perfected before Sakhile was placed in business rescue.

Relating to the setting aside of the BRP’s determination that, Ergomode was not an independent creditor and condonation thereof, it is held that in terms of Section 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. 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. Further, 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. Appeal dismissed.

Tags : Business rescue Hypothec Perfection

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