Xolitshe Trading Enterprise (Pty) Ltd and Others v Blairvest CC and Another; Sithole and Others v Red Tape Investment (Pty) Ltd and Another (45141/2021; 45142/2021) [2021] ZAGPPHC 595 (16 September 2021)

HIGH COURT OF SOUTH AFRICA

(GAUTENG DIVISION, PRETORIA)

(1) REPORTABLE: NO.

(2) OF INTEREST TO OTHER JUDGES: NO.

(3) REVISED.

DATE: 16 SEPTEMBER 2021

CASE NO: 45141/2021

In the matter between:

XOLITSHE TRADING ENTERPRISE (PTY) LTD

First Applicant

THOMAS HENDRICK SAMONS N.O.

Second Applicant

FORTUNATE ESTHER LETLAPE N.O.

Third Applicant

and

BLAIRVEST CC

Respondent

FAMOUS BRANDS MANAGEMENT

COMPANY (PTY) LTD Intervening Party

CASE NO: 45142/2021

MUZIWETSHE JOHN SITHOLE

First Applicant

XOLANI SITHOLE Second Applicant

UNOSIPHE (PTY) LTD

Third Applicant

RED TAPE INVESTMENT (PTY) LTD

First Respondent

MASTER OF THE HIGH COURT

Second Respondent

J U D G M E N T

This matter has been heard in open court and otherwise disposed of in terms of the Directives of the Judge President of this Division. The judgment and order are accordingly published and distributed electronically.

DAVIS, J

[1] Introduction

On 07 September 2021 the abovenamed two applications were launched as matters of urgency by the same set of attorneys. Both applications are for the restoration of possession of two business premises on which “Steers” and “Fishaways” businesses were allegedly operated.

Both applications were opposed by the landlords of the respective premises and, in case no 45141/2021, also by the franchisor of the “Steers” and “Fishaways” brands as intervening party. The landlord in that matter and the intervening party also launched counter-applications. As will be seen hereinlater, the facts of the two applications and the two companies involved and their businesses are so interrelated and intertwined that, although the applications were heard separately and consecutively, a joint judgment is justified, particularly in order to obviate repetition of facts common to both applications.

[2] The salient facts and chronology of events

2.1 Mr and Mrs Sithole are business people and are the shareholders and directors of a company called Xolitshwe Trading Enterprise (Pty) Ltd (“Xolitshwe”). Mr and Mrs Sithole are similarly the shareholders and directors of another company called Unosiphe (Pty) Ltd (“Unosiphe”).

2.2 Funded by Xolitshwe, Unosiphe in 2019 became a franchisee of Famous Brands Management Company (Pty) Ltd (Famous Brands) in respect of two “Steers” and “Fishaway” outlets. The outlets of the two brands operated jointly, albeit side-by-side on two premises, being the Steers/Fishaways in Bromhof and the Steers/Fishaways in Blairgowrie Plaza.

2.3 In respect of the Bromhof premises, Unosiphe was at all relevant times the tenant while in respect of the Blairgowrie Plaza premises Xolitshwe was initially the tenant, but had ceded the lease agreement to Unosiphe in February 2017. Since 1 November 2019 however, Xolitshwe again became the tenant. The landlord of these premises, Blairvest CC, claims this was because it was misled that Xolitshwe had in fact became the franchisee (which it did not). Despite the new lease agreement in the name of Xolitshe, it was in fact Unosiphe who had occupied the premises and operated the Steers/Fishaways outlets in terms of its franchise agreement with Famous Brands.

2.4 Both Unosiphe and Xolitshwe were, apparently at the behest of the Sithole’s, placed in business rescue and Xolitshwe’s business rescue practitioners featured as the second and third applicants in respect of the application concerning the Blairgowrie Plaza premises.

2.5 In proceedings in the Johannesburg Division if this court, in case number 21/38180, Mr and Mrs Sithole confirmed, in opposition to the conversion of the business rescue proceedings of Unosiphe to liquidation proceedings, that Unosiphe was in fact the franchisee of the Steers/Fishaways business. In those proceedings, Mr and Mrs Sithole, acting as directors of Unosiphe, also opposed the relief claimed by Famous Brands for interdicting Unosiphe from continuing to trade as a Steers/Fishaways business pursuant to the termination of the Steers franchise agreement on 2 July 2021 and the Fishaways franchise agreement on 16 July 2021. Incidentally, the Steers franchise agreement would in any event have terminated through the effluxion of time on 31 July 2021.

2.6 On 2 September 2021, Unosiphe was placed in provisional liquidation by way of the conversation of the business rescue proceedings by an order of court. This resulted in the landlord in respect of the Bromhof premises terminating the electrical supply and in locking the premises on 3 September 2021. The same happened in respect of the Blairgowrie Plaza premises pursuant to the cancellation of the lease agreement on 3 September 2021 pursuant to unfulfilled demands issued on 16 August 2021. These two events prompted the two applications, case no 45141/2021 in respect of the Blairgowrie Plaza premises and case no 45142/2021 in respect of the Bromhof premises.

[3] Spoliation generally

3.1 Spoliation occurs where a party who has been in peaceful and undisturbed possession of a thing is deprived of such possession unlawfully. In this context, “unlawfully” refers to dispossession without consent or without due legal process. George Municipality v Vena 1989 (2) SA 263 (A) and Stocks housing (Cape) (Pty) Ltd v Chief Executive Director, Department of Education and Culture Services 1996 (4) SA 231 (C).

3.2 The requirement of possession is satisfied if the person in actual or physical possession of the thing in question exercises possession with the intention of securiting some benefit for him or herself. The cause of such possession is generally irrelevant and so is the enquiry into whether the respondent may have a stronger right. See inter alia Yeko v Qana 1973 (4) SA 734 (A) and Stocks Housing above.

3.3 The consequences of the above has been described in Harms, Amler’s Precedents of Pleadings at 358 as follows: “The respondent is generally not allowed to contest the spoliated applicant’s title to the property, because good title is

irrelevant: the claim to relief under the mandament arises solely from deprivation of possession without following legal procedures”.

3.4 The mandament van spolie is a possessory remedy, rooted in the rule of law and its main purpose is to prevent persons from taking the law into their own hands and effectively ending or frustrating a complainant’s control over the property. See Tswelopele Non-Profit Organisation and Others v City of Tshwane Metropolitan Municipality and Others 2007 (6) SA 511 (SCA) para 22 and Minister of Home Affairs v Gqiba ECHC 847/2006 [2008] ZAECHC 176 (21 October 2008) paras 13 and 15. Nevertheless, “what constitutes spoliation or unlawful possession must be determined on the facts” – Bisschoff v Welbeplan Boerdery (Pty) Ltd 2021 (5) SA 54 (SCA) at para 6.

3.5 Lastly, should an applicant claim a substantive right of possession, whether based, for example, on title of ownership or on contract, the respondent may answer such claims and may demonstrate that the applicant does not have the right to possession which is claimed. See: Street Pole Ads Durban (Pty) Ltd v Ethekwini Municipality [2008] ZAGPHC 33; 2008 (5) SA 290 (SCA) para 15, Minister of Agriculture and Agricultural Development and Others v Segopolo and Others 1992 (3) SA 967 (T) and Ivanov v North West Gambling Board 2021 (6) SA 67 (SCA) para 25.

[4] Evaluation

4.1 Although in both applications, the applicants therein only claim restoration of possession, they all rely on various allegations on which they base their claims for rights of possession. In case no 45141/2021 the business rescue practitioner in paragraphs 10, 11, 12 and 16 of the principal founding affidavit claims the substantive right of possession “in terms of the lease agreement” and the conducting of a Steers/Fishaways business. In case no 45142/2021, Mr Sithole claims the same rights in respect of

Unosiphe’s lease agreement and also its conduct of Steers/Fishaways businesses. I therefore find that, in this regard and based on the facts of the two cases, the matters fall within the exception referred to in paragraph 3.5 above. To my mind, the exception becomes even more applicable where it appears that the applicants adjust their claims of possession or the allegations of the identities of actual possessors in order to meet circumstances. As will be demonstrated below, the chronology

already referred to in paragraph 2 above, illustrates this in respect of the two premises and the two corporate entities involved.

4.2 In respect of the Blairgowrie Plaza premises:

4.2.1 The franchisee of Famous Brands entitled to operate Steers/Fishaways businesses from these premises (and to “possess” such occupation for purposes thereof), was at all relevant times Unosiphe. Its rights to operate as a franchisee have been terminated in July 2021. This was when Unosiphe was still in business rescue and prior to its liquidation on 2 September 2021. I interpose to indicate that there were in fact two franchise agreements, one for the Steers brand and one for the Fishaways brand but nothing turns on this as the terms are materially the same in each instance.

4.2.2 The fact that Xolitshe had become the tenant, did not entitle it to occupy the premises as if a franchisee, which its business rescue practitioners now claim. There was never any franchise agreement supporting this claim. In an attempt to bolster this allegation, the business rescue practitioners attempted to rely on an invoice issued to Unosiphe for the sale of fish to the Fishaways business on 24 June 2021, that is before the franchise agreement was terminated. The fact that this invoice has as its shipping address “Xolitshe Trading Enterprise CC, shop No 1 and 2, Blairgowrie Plaza” can hardly elevate Xolitshe to a contracting party in respect of a written franchise agreement with Famous Brands. The contentions by Xolitshe’s business rescue practitioners that it, and not Unosiphe conducted the business of the Steers/Fishaway alternatively that it, “together with an entity known as Unosiphe” conducted the franchise business, are rejected as clearly unfounded. Furthermore, in the preceeding litigation in the Johannesburg Division of this Court preceeding Unosiphe’s liquidation, the termination and effluxion of its franchise agreements featured as a basis for termination of the business rescue proceedings. Xolitshe did not feature at all as part of that argument.

4.2.3 Famous Brands also indicated, in its founding affidavit to its counter-application which shall be dealt with hereinlater, that, prior to the allegations of possession now relied on, Xolitshe had been dormant for a period of some months. This allegation has not been refuted in any meaningful manner and, applying the Plascon Evans-principles (either in respect of opposition to the spoliation application or in respect of the counter application) it is accepted as being correct.

4.2.4 The consequence of all of the above is that the factual situation was that Unosiphe had at all relevant times until the termination of its franchise agreements traded as a Steers/Fishaways franchisee at the Blairgowrie premises, despite the lease agreement being in the name of Xolitshe. Since termination of the franchise agreements, it continued to so do, but unlawfully so. Its possession of the premises was exercised by its business rescue practitioners until its liquidation on 2 September 2021. Xolitshe’s lease agreement was also terminated on 3 September 2021 and, on these facts, I find that Xolitshe’s business rescue practitioners, who now claim to have been spoliated, have not established the requisite peaceful and undisturbed possession which would have entitled them to the relief sought.

4.3 In respect of the Bromhof premises:

4.3.1 In the application regarding restoration of possession of these premises, there are two sets of parties claiming possession (and dispossession): the first set comprises of Mr and Mrs Sithole and the second set, Unosiphe (or, more correctly, the Master, pending the appointment of liquidators).

4.3.2 It is common cause that, immediately prior to its liquidation, Unosiphe was in business rescue. In similar fashion as alleged in respect of Xolitshe, the persons exercising Unosiphe’s rights of tenancy, were the business rescue practitioners. Mr and Mrs Sithole however, conveniently avoided disclosing particulars of these facts to the court. In respect of the Blairgowrie Plaza premises, the business rescue practitioners as applicants, explained that the employees running the businesses had informed Mr Sithole that the premises were being locked, which caused him to inform those business rescue practitioners, who then sought to assert rights of possession. In respect of the Bromhof premises, this construction of facts could not be followed due to the conversion of the business rescue proceedings into liquidation proceedings by the order of the Johannesburg Division on 2 September 2021 per Lamont J. When the business rescue practitioners therefore fell out of the picture as a result hereof, Mr and Mrs Sithole stepped in as applicants.

4.3.3 From the moment the winding-up of Unosiphe commenced by way of the aforesaid order however, the powers of both its directors and its business rescue practitioners ceased and its property became under the control and custody of the Master until a provisional liquidator has been appointed and has assumed office. See Sections 261 and 353(2) of the Companies Act 61 of 1973 read with item 9 of Schedule 5 of the Companies Act 71 of 2008 and Section 132(a)(ii) of the latter Act.

4.3.4 At no stage during these proceedings could Mr and Mrs Sithole have been in possession of the premises in their own name. Although spoliation is a possessory remedy, often dependent on physical possession only, the requisite possession encompasses some mental element also. It is not sufficient to only be present in premises, but the premises must be occupied or controlled to establish actual possession. In Marais v Engler Earthworks (Pty) Ltd 1998 (2) SA 450 (E) where an insolvent successfully claimed protection of possession by way of a mandament van spolie, Erasmus J found that “an insolvent has the physical and mental ability to possess an object”. Prior to Unosiphe’s liquidation, Mr and Mrs Sithole’s “physical and mental ability to possess” were at best exercised on behalf of the business rescue practitioners and not in their personal capacities. To allege that upon the conversion of the business rescue proceedings to liquidation proceedings, the representative possession changed to personal possession, is a claim which is neither supported by the facts nor the law.

4.3.5 But Mr and Mrs Sithole go further, they allege that they claim protection of possession on behalf of the company in liquidation. The landlord argued that they have no locus standi to do so, on the basis of the legal consequences set out in paragraph 4.3.3 above. In an attempt to counter this, it was argued on behalf of all the applicants in the application relating to the Bromhof premises that the directors of Unosiphe retained their legal capacity to represent the company in liquidation in legal proceedings such as these. For purposes of this argument, reliance was placed on Marais v Engler Earthworks (above) where the insolvent was allowed to protect possession of his motor vehicles which protection has not been denied him at common law or by any provision of the Insolvency Act. That case is distinguishable, both in law and on the facts. In the present case, no personal estate is at stake, but rather the estate, assets and control of a corporate entity. This stands on a different footing than that of a natural person. A further important distinguishing element is the express divesting of powers of directors of a company as contemplated in the Companies Act. This divesting of the directors’ powers are illustrated by the other case on which reliance was placed, namely Ex parte G. Pagan Enterprises (Pty) Ltd 1983 (2) SA 30 (W). In that case, a director was allowed to represent a company which has been placed in provisional liquidation but, as is apparent from 13E – 32D of the reported judgment, with reference to O’Connell Manthe & Partners Inc v Vryheid Mineral (Edms) Bpk 1979 (1) SA 553 (T) and other cases, the residual powers of directors were limited to that of opposition or not of the provisional order.

4.4 Even where the business of a company is to be continued for purposes of its winding-up, such continuation is done by and at the instance of the liquidators and the directors are, upon the granting of the liquidation order, divested of such powers. See: Letsitele Stores (Pty) Ltd v Roets and Others 1958 (2) SA 224 (TPD).

4.5 The consequences of the above, is that neither the directors, nor the shareholders (i.e. Mr and Mrs Sithole) have the necessary locus standi to represent the company in liquidation, being Unosiphe.

4.6 Insofar as Mr and Mrs Sithole claim to protect the rights of the company, in the fashion of safeguarding its interests pending the appointment of provisional liquidators, they have cited the party actually vested with such rights and powers being the Master, as second respondent. The Master has chosen not to assert any of these rights and Mr and Mrs Sithole have no locus standi to otherwise act on behalf of either the Master or the company in liquidation.

[5] The counter-application in respect of the Blairgowrie Plaza premises.

5.1 In the application relating to these premises both the landlord and Famous Bands have launched counter-applications. They have, however restricted themselves to making their counter-applications conditional upon the possibility of the business rescue practitioners of Xolitshe remaining in occupation of the premises and continuing to trade as Steers/Fishaways, i.e. conditional upon the spoliation application being successful.

5.2 The landlord’s counter-application is for eviction of the business rescue practitioners and, in effect, Xolitshe as erstwhile lessee of the premises, as a result of the termination of the lease agreement. The business rescue practitioners have not raised any defence against the termination of the lease agreement. Had the counter-application not been conditional upon the success of the main application, it would therefore otherwise have been granted.

5.3 The counter-application by Famous Brands is a bit wider. It set out in its founding affidavit details of its get-up, trademarks and intellectual property connected to the “Steers” and “Fishaways” brands in respect of which it operates nationwide as a franchisor (629 Steers outlets and 243 Fishaways outlets). Not only does Xolitshe (and its business rescue practitioners) have no rights to operate business purporting to be franchised Steers and Fishaways businesses, but the manner in which the businesses were operated, did not comply with the strict demands required by Famous Brands for maintaining the goodwill of the two brands and registered trademarks. Had the applicants been successful and were they to be allowed to continue in occupation of these premises, their continued trading as purported Steers and Fishaways businesses would have been unlawful, which would have entitled Famous Brands to the interdicts conditionally sought, which would have prevented such unlawful trade.

[6] Conclusion

To sum up:

6.1 I find that, in respect of the Blairgowrie Plaza promises, the right which the business rescue practitioners seek to assert, namely possession by virtue of a lease agreement, had been terminated, and that they are not entitled to retain occupation of the premises. Insofar as they claim to have been operating Steers and Fishaway businesses on the premises, that was also done unlawfully. Both the landlord and Famous Brands would have been entitled to the relief sought in the counter-applications, had that not been sought on a conditional basis.

6.2 I find that, in respect of the Bromhof premises, Mr and Mrs Sithole were never in their personal capacities in possession of the premises and, insofar as their possession were as representatives of firstly the business rescue practitioners and lately allegedly on behalf of the company in liquidation, they do not have locus standi to represent the latter.

6.3 Costs should follow the event in respect of the unsuccessful applications. Insofar as Unosiphe had been cited as co-applicant in the application regarding the Bromhof premises, Mr and Mrs Sithole had no locus standi to do so and costs should therefore, not be awarded against the company in liquidation. Insofar as the counter-applications are concerned, none of the relief sought thereby was granted, but only because the conditions upon which they had been brought, namely success for the applicants, have not materialized. Having regard to the nature of the relief sought in the counterapplications and the conduct of the applicants, which are akin to the abuse of the various corporate structures, and the failure of the main applications themselves which obviated the “counter-relief” being necessary, I find, in the exercise of my discretion, that the unsuccessful applicants should also bear the costs of the counter-applications.

[7] Orders

In case no 45141/2021

1. The application is dismissed.

2. The applicants are ordered to pay the costs of the respondent as well as the intervening party, both in respect of their opposition and their counter-applications.

In case no 45142/2021

1. The application is dismissed.

2. The first and second applicants are, jointly and severally, ordered to pay the first respondent’s costs.

N DAVIS

Judge of the High Court

Gauteng Division, Pretoria

Date of Hearing: 14 September 2021

Judgment delivered: 16 September 2021

APPEARANCES:

In case no: 45141/2021

For the Applicants:

Adv. J. Vorster

Attorney for Applicants:

Gothe Attorneys Inc.,

Pretoria

For the Respondent & Intervening party:

Adv. M V-J Chauke

Attorney for Respondent & Intervening Party: Van Wyk Matabane

Incorporated, Sandton

In case no: 45142/2021

For the Applicants:

Adv. J Vorster

Attorney for Applicants:

Gothe Attorneys Inc., Pretoria

For the 1st Respondent:

Adv. H.P Van Nieuwenhuizen

Attorney for the 1st Respondent: Van Nieuwenhuizen, Kotze and Adam

Attorneys, Alberton