High court errs in business rescue ruling for restaurants
The judgment that the unpaid salary bill is a legal debt stems from a misunderstanding of lockdown regulations
The high court in Johannesburg recently handed down a judgment in which it placed Mezepoli and Plaka, two high-profile Johannesburg restaurants, into business rescue. This was on the basis that their unpaid salary bill to employees was a legal debt and that the restaurants’ legal defence, of inability to pay, constituted grounds to place them in business rescue.
But it seems the court’s reasoning was flawed and stems from a fundamental misunderstanding of lockdown regulations. The court found that the usual principle of force majeure (in which parties to a contractual relationship can hold the agreement to be unenforceable) did not apply to an employment relationship, on the basis that the employment contracts entered into between the parties did not contain force majeure clauses. The clauses are not recognised by the Labour Relations Act as a fair reason for the termination of the employment relationship...
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