Court rules Tongaat Hulett must pay

In spite of Tongaat Hulett’s legal efforts, the company remains responsible for its financial obligations in the sugar industry, as ruled by the High Court of South Africa, Durban Local Division.

Court rules Tongaat Hulett must pay
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The court dismissed, with costs, Tongaat Hulett and the Business Rescue Practitioners’ application challenging their financial commitments under the Sugar Act and the Sugar Industry Agreement last week.

Tongaat Hulett and Gledhow mills failed to pay more than R1,5 billion to the South African Sugar Association (SASA) in March, citing ongoing business rescue proceedings.

The Business Rescue Practitioners argued that the business rescue process took precedence over industry arrangements and challenged the legal basis for the owed amounts.

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On Monday, 4 December, Judge Rashid Vahed delivered his judgment on the application to suspend the miller’s payment obligations, ruling that the Sugar Industry Agreement creates statutory obligations not overridden by the business rescue process and, therefore, Tongaat Hulett and Gledhow will have to pay what is owed.

Had Tongaat Hulett succeeded, it would have been relieved of financial obligations.

SA Canegrowers chairperson Andrew Russell said the judgment emphasised that payment obligations under the agreement are an inherent cost of doing business, not subject to the moratorium on claimants’ rights in business rescue proceedings.

Russell said 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 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 BRPs’ 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.”

Russell noted the judgment’s significance for the sugar industry’s sustainability, saying that SA Canegrowers will closely monitor the situation to assess any potential appeals or revisions to the business rescue plans that do not currently include provisions for the overdue payment to SASA.

Tongaat Hulett also published a revised business rescue plan on 29 November, which creditors will on Friday have the opportunity to vote on.