Spar Group Limited v Sea Spirit Trading 162 CC t/a Paledi; Greenville Trading 543 CC t/a Paledi Tops; Vermaak and Another

The first and second respondents, close corporations operating a supermarket and bottle store, were indebted to Spar Group Limited for trading stock supplied on credit. To secure the debt, Spar held general notarial covering bonds over the respondents’ movable property. When the corporations could no longer meet their financial obligations, Spar obtained a High Court order perfecting the notarial bonds, took possession of the businesses, and temporarily ran them from 1 July 2015 to recover its debt. The third and fourth respondents, Mr and Mrs Vermaak, were employed as managers by the corporations. After Spar appointed its own managers and required the Vermaaks to leave, they alleged that Spar had become their employer through a transfer of business as a going concern under section 197 of the Labour Relations Act (LRA), and that their dismissals were automatically unfair. The Labour Court upheld their claim, but Spar appealed.

The appeal was upheld. The judgment of the Labour Court was set aside, and the claims of the third and fourth respondents were dismissed. No order as to costs was made.

The case clarifies that a creditor who perfects a notarial bond and temporarily takes control of a debtor’s business to realise its security does not, without more, effect a transfer of business as a going concern under section 197 of the LRA. It limits the scope of section 197 in the context of security enforcement and protects the effectiveness of notarial bonds as a form of commercial security.