By: Nicola Mawson - IOL

Pick n Pay must pay back more than R21 million it received from a liquidated franchise, after the Supreme Court of Appeal dismissed its case this week.

The money came from the 2017 sale of a Pick n Pay Family Supermarket in San Ridge Square, Midrand, that was owned by Lashka 167. Lashka was placed into final liquidation in February 2018 after struggling financially and falling behind on payments, including a R13.5 million debt to Pick n Pay, the ruling indicated.

Before it shut down, Lashka had agreed to sell the store to Enthrall Trading for R25m. That amount was paid into the trust account of White & Case Attorneys. According to the agreement, Lashka had to give payment instructions to White & Case to settle debt – including money owed to Pick n Pay. If it failed to do so, Pick n Pay could step in and issue those instructions itself, it argued.

Lashka gave payment instructions for its loans with FNB but failed to do so for Pick n Pay. In 2019, a year after Lashka was liquidated, Pick n Pay issued its own instruction to be paid and received the amount it said it was due, which had now grown to R21.6m, from the trust account.

Lashka’s liquidators took the matter to court in 2022, arguing that once Lashka was liquidated, Pick n Pay had no right to access those funds directly. The High Court agreed, ruling that Pick n Pay should not have been paid outside of the formal liquidation process, which protects the rights of all creditors equally.

Pick n Pay appealed, saying the contract was still in effect and that it had been granted the right to collect the money. But the appeal court rejected this view, saying the sale of the business was already completed before liquidation and that any mandate to pay Pick n Pay ended when Lashka was wound up.

The judges found that Pick n Pay was not allowed to take money that belonged to the insolvent estate without going through the proper legal channels. The payment was found to be unlawful, and the court ordered that the R21.6m must be returned to the liquidators.

The appeal was dismissed with costs.

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