Gihwala and Others v Grancy Property Ltd and Others (20760/14) [2016] ZASCA 35; [2016] 2 All SA 649 (SCA); 2017 (2) SA 337 (SCA) (24 March 2016)

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Gihwala and Others v Grancy Property Ltd and Others (20760/14) [2016] ZASCA 35; [2016] 2 All SA 649 (SCA); 2017 (2) SA 337 (SCA) (24 March 2016)

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THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
no: 20760/14
In
the matter between:
DINES
CHANDRA MANILAL
GIHWALA

FIRST APPELLANT
LANCELOT
LENONO MANALA

SECOND APPELLANT
DINES
CHANDRA MANILAL
GIHWALA
NO

THIRD APPELLANT
SHANTI
GIHWALA
NO

FOURTH APPELLANT
KANTIELAL
JERAM PATEL NO

FIFTH APPELLANT
NARENDRA
GIHWALA
NO

SIXTH APPELLANT
KIRAN
GIHWALA
NO

SEVENTH APPELLANT
and
GRANCY
PROPERTY LTD

FIRST RESPONDENT
MONTAGUE
GOLDSMITH AG
(in
liquidation)
SECOND

RESPONDENT
MINISTER
OF TRADE AND
INDUSTRY

THIRD RESPONDENT
Neutral
citation:
Gihwala v Grancy
Property Ltd
(20760/2014)
[2016] ZASCA
35
(24 March 2016)
Coram:
LEWIS, LEACH, SERITI and WALLIS JJA and TSOKA AJA.
Heard
:
22 and 23 February
2016
Delivered
:
24 March 2016
Summary:
Investment agreement – express
and tacit terms – breach – damages – heads of
damage – claims not excluded
by rule in
Foss
v Harbottle
– declaration of
delinquency in terms of
section 162(5)
(c)
of the
Companies Act 71 of 2008
–
section applies in cases of substantial misconduct by directors –
not retrospective in its operation – section
a rational
response to the problem of delinquency by directors – not
unconstitutional – circumstances justifying the
making of a
declaration of delinquency.
ORDER
On
appeal from:
Western Cape Division of
the High Court (Fourie J sitting as court of first instance):
1
The appeal succeeds to the extent that:
(a)
Paragraphs 1(b) and (e) of the first
paragraph 1, and paragraphs 3 and 5 of the order in the High Court
are set aside;
(b)
The amount in paragraph 1(c) is reduced to
R41 763.20;
(c)
Paragraph 2 of the order in the High Court
is varied to read as follows:
‘
The
First, Second and Third Defendants are to make available to the First
Plaintiff for inspection and, if desired, the making of
copies of all
books of account and accounting records, including all supporting
vouchers and documents, in their possession relating
to the
transactions undertaken by and the financial position of the business
of the Third Defendant.’
2
The cross-appeal succeeds to the following
extent:
(a)
Paragraph 1(g) is inserted into the order
of the High Court reading as follows:
‘
The
amount of R465 000 plus interest calculated at 15.5 per cent
from 3 March 2009 to date of payment.’
(b)
The Dines Gihwala Family Trust is declared to be jointly and
severally liable,
the one paying the others to be absolved, with the
first and second defendants, for payment of the amounts referred to
in paragraphs
1(a), (b), (c) and (f) and 2(a) to (c) of the order of
the High Court.
3
The order of the High Court is accordingly
amended to read as follows:
‘
IT
IS ORDERED THAT:
1.
First and Second Defendants are declared liable, jointly and
severally with each other and,
in the case of paragraphs (a), (b),
(c) and (f), jointly and severally with the Dines Gihwala Family
Trust, to pay the following
to First Plaintiff:
(a)
The amount of R2 051 833,34, together with interest thereon at the
rate of 15,5% per annum, calculated
from 20 March 2007 to date of
final payment.
(b)
The amount of R41 763,20 together with interest thereon at the rate
of 15,5% per annum, calculated from
28 February 2009 to date of final
payment.
(c)
The amount of R620 000,00 together with interest thereon at the rate
of 15,5% per annum, calculated
from 15 June 2009 to date of final
payment.
(d)
The amount of R213 789,57, together with interest thereon at the rate
of 15,5% per annum, calculated
from 19 August 2009 to date of final
payment.
(e)
The amount of R326 740,00, together with interest thereon at the rate
of 15,5% per annum, calculated
from 19 August 2009 to date of final
payment.
(f)
The amount of R165, 660,60, together with interest thereon at the
rate of 15,5% per
annum, calculated from 6 January 2010 to date of
final payment.
(g)
The amount of R465 000 plus interest calculated at 15.5 per cent
from 3 March
2009 to date of final payment.
2.
That the First and Second Defendants and the Dines Gihwala Family
Trust are declared liable,
jointly and severally, to pay the
following to First Plaintiff:
(a)
The amount of R852 500,00, together with interest at the rate of
15,5% per annum on the amount
of R1 705 000,00 calculated from 8
April 2009 to 23 November 2010 and on the amount of R852 500,00,
calculated from 23 November
2010 to date of final payment.
(b)
The amount of R345 507,09, together with interest at the rate of
15,5% per annum on the amount of R691
014,18, calculated from 1 March
2008 to 23 November 2010, and on the amount of R345 507,09,
calculated from 23 November 2010 to
date of final payment.
(c)
The amount of R612 722,24, together with interest thereon, at the
rate of 15,5% per annum, calculated
from 24 June 2009 to date of
final payment.
3.
The First, Second and Third Defendants are to make available to the
First Plaintiff for inspection
and, if desired, the making of copies
of all books of account and accounting records, including all
supporting vouchers and documents,
in their possession relating to
the transactions undertaken by and the financial position of the
business of the Third Defendant.
4.
The First and Second Defendants are declared delinquent directors as
contemplated in
section 162(5)
(c)
of the
Companies Act 71 of 2008
.
5.
No order as to costs is made in respect of the constitutional
challenge.
6.
The First Plaintiff is declared liable for the costs of the
application for amendment, which
were reserved on 6 February 2014,
including the costs incurred by Second Defendant in opposing same.
7.
Save for paragraphs 6 and 7 above, the First and Second Defendants
and the Dines Gihwala
Family Trust, represented by the Fourth to
Eighth Defendants, are declared liable, jointly and severally, for
the payment of First
Plaintiff's costs of suit on the scale as
between attorney and client, which costs are to include the
following:
(a)
The costs of two counsel, where employed;
(b)
The attendance fees and qualifying expenses of the expert witness, Mr
H J Greenbaum;
(c)
The reasonable costs and disbursements, as followed on taxation
incurred by First Plaintiff in
respect of Mr KI Mawji, who is
declared a necessary witness.’
4
The amended paragraph 3 of the order of the
High Court is to be complied with within 30 days of the date of this
judgment and the
obligation to comply therewith will not be suspended
or postponed pending the outcome of any further application for leave
to appeal
in this or any other case.
5
The appeal is otherwise dismissed with
costs, such costs to include those consequent upon the employment of
two counsel, but to
exclude all costs occasioned by the challenge to
the constitutionality of
s 162(5)
of the
Companies Act 71 of 2008
, in
respect of which each party will pay its or their own costs.
6
The first and second appellants and the
Dines Gihwala Family Trust are to pay the costs of the cross-appeal,
such costs to include
those consequent upon the employment of two
counsel.
JUDGMENT
Wallis
JA (Lewis, Leach and Seriti JJA and Tsoka AJA concurring)
Introduction
[1]
In
about 2001 Mr Dines Gihwala, the first appellant and an attorney and
businessman, met Mr Karim Mawji, an English businessman,
while
playing golf in Portugal. Their acquaintance ripened into friendship
and in February 2005, together with Mr Lancelot Manala,
the second
appellant and a friend and business associate of Mr Gihwala’s,
they entered into a business venture. That went
awry and has
precipitated a flood of litigation and two prior appeals to this
Court,
[1]
as well as the present
proceedings.
[2]
This
appeal follows upon a lengthy trial before Fourie J in the Western
Cape Division of the High Court, Cape Town. It involved
the
consolidated hearing of two actions
[2]
brought by Grancy Property Limited (Grancy), the first respondent,
and Montague Goldsmith AG, (Montague), the second respondent,
both
corporate entities controlled by Mr Mawji, principally against Messrs
Gihwala and Manala. Other defendants were Seena Marena
Investments
(Pty) Ltd (SMI), the company through which the business transaction
was conducted, and the Dines Gihwala Family Trust
(the Trust). SMI
initially defended the actions and lodged a claim in reconvention in
the 2010 action. At the commencement of the
trial it withdrew the
claim in reconvention and indicated that it abided the decision of
the court. The Trust originally defended
the actions jointly with Mr
Gihwala, but at the trial and in this Court they were separately
represented.
[3]
Fourie J upheld
most of Grancy’s claims. He gave judgment against Mr Gihwala
and Mr Manala for payment of certain amounts.
In addition he ordered
Messrs Gihwala and Manala, as well as SMI, to disclose books of
account and financial records relating to
SMI’s affairs, and
ordered that the three of them and the Trust render a statement of
account to Grancy in regard to the
business venture.
[3]
Lastly,
in terms of s 162(5)
(c)
of
the Companies Act 71 of 2008 (the 2008 Act), Fourie J declared both
Mr Gihwala and Mr Manala to be delinquent directors. As he
added no
conditions qualifying that order, its effect was that the two men
were barred from acting as directors for any company
for seven
years,
[4]
subject to their right
after three years to apply for the suspension of the order and its
substitution with an order for probation.
[5]
Fourie J rejected a constitutional challenge to s 162 of the
2008 Act. The Minister of Trade and Industry (the Minister) had
been
joined, as a party to the proceedings, to argue that s 162 was
not unconstitutional.
[4]
No one, bar the Minister, was satisfied
with the outcome of the trial. Messrs Gihwala and Manala, and the
Trust, contended that
none of the orders made by Fourie J were
justified. Grancy and Montague, for their part, were dissatisfied
with Fourie J’s
refusal to grant certain declaratory orders as
well as his dismissal of two monetary claims and his failure to hold
the Trust jointly
and severally liable on some of the successful
monetary claims. They also challenged his rejection of claims under s
424 of the
Companies Act 61 of 1973 (the 1973 Act), alternatively
s 77(3) of the 2008 Act. When Messrs Gihwala and Manala and the
Trust
sought leave to appeal, Grancy applied for leave to
cross-appeal against the judgment in relation to their rejected
claims. Fourie
J granted leave to appeal and cross-appeal to this
Court. The Minister is also a party to the appeal.
Background
[5]
Spearhead Property Holdings Ltd (Spearhead) was a property loan stock
company listed on the Johannesburg Stock Exchange (JSE).
[6]
Its business was to hold and invest in immovable commercial,
industrial and retail properties, primarily in the Western Cape, and

to derive its income from rentals. Provided its business was
successful, as it appears to have been, it would generate a steady

and reasonably predictable flow of income. The capital structure of
the company, as with others of this type, consisted of linked

ordinary units with varying rate linked debentures. After deducting
operating expenses the net revenue would be distributed to

shareholders. Because of the capital structure of the company the
distributions made to unit holders were deductible from gross
income
in its hands before the assessment of tax, and were taxable as income
in the hands of shareholders. Such investments are
seen as comparable
to interest-bearing investments such as bonds. Their attraction to
investors lies in the fact that they provide
a reasonably consistent
return, which tends to grow at least in line with inflation as
rentals increase.
[6]
At the end of 2004 and early 2005
Spearhead, like many other companies, wished to engage in a Black
Economic Empowerment (BEE) transaction
to expand its shareholder base
in the Black community. To that end it was prepared to make available
3,5 million linked units to
a special purpose vehicle (SPV), the
shares in which would predominantly held by Black shareholders or
organisations or companies
that predominantly represented the
interests of Black people. The SPV would subscribe for the shares at
R15.50 per unit, a price
significantly below the then current price
of Spearhead shares on the JSE, of around R20 per unit.
[7]
Ngatana Property Investments (Pty) Ltd
(Ngatana) was incorporated as the SPV through which the BEE
transaction would be implemented.
Messrs Gihwala and Manala, were
offered a 40 per cent stake in Ngatana, which they proposed to take
up thorough SMI, an existing
company in which the Trust and Mr Manala
held equal shares. Prescient Real Estate Ltd (Prescient) and certain
other minor investors
would take a total of 42 per cent. Bonitas
Medical Aid Fund (Bonitas) was offered an 18 per cent share, but
withdrew at a late
stage in the implementation of the proposal. This
is what gave rise to the involvement of Mr Mawji.
[8]
Apart from his friendship with Mr Mawji, Mr
Gihwala was also a close friend of Mr Anil Narotam, who was at the
time the chief operating
officer of Montague, a company that
administered investments on behalf of Grancy. Mr Gihwala and Mr
Manala had been afforded the
opportunity of taking up the 18 per cent
stake in Ngatana that Bonitas had decided to forego. They in turn,
for reasons that do
not emerge fully from the record, but appear to
have included the fact that Mr Mawji would be in a position to help
finance the
transaction, decided to involve Mr Mawji in the
investment in Ngatana. Initially Mr Gihwala approached Mr Narotam. He
did not have
authority on behalf of Mr Mawji to make any final
decision on such matters, but conveyed the gist of the proposal to Mr
Mawji.
He in turn found it sufficiently interesting to come to South
Africa and meet with Mr Gihwala.
[9]
That meeting took place on 3 February 2005
at a hotel in Johannesburg. Present were Mr Gihwala, Mr Mawji and Mr
Narotam. According
to several later statements by Mr Gihwala he
represented himself, and also Mr Manala, the Trust and SMI, at the
meeting. The only
oral evidence of what transpired at the meeting was
that of Mr Mawji, because neither Mr Gihwala, nor Mr Narotam, gave
evidence,
although at the stage of the pre-trial conference such
evidence had been foreshadowed. Fourie J found that Mr Mawji was a
credible
witness and that finding was not challenged before us. Some
documents dealing with what was agreed are also important, as
contemporaneous
documents emanating from Mr Gihwala.
[10]
The meeting was conducted against the
backdrop of the Spearhead BEE transaction and the availability
through Ngatana of an interest
in 3.5 million units at a price
of R15.50. Standard Bank had agreed to provide finance in an amount
equivalent to R12.75 per
linked unit. The investors in Ngatana needed
to provide the balance of R2.75 per unit, as well as to fund the
implementation costs
to be incurred in implementing the transaction.
With the withdrawal of Bonitas as an interested party an opportunity
existed for
SMI to obtain an effective 58 per cent stake in the 3,5
million Spearhead units. This would be done by subscribing for 58 per
cent
of the shares of Ngatana and lending to Ngatana that proportion
of the funds needed to pay the balance of the subscription price
for
the Spearhead units and the anticipated implementation costs.
Prescient and the other investors would subscribe for the remaining

shares in Ngatana and provide the balance of the funding.
[11]
It was explained to Mr Mawji that SMI would be used as the vehicle
for the investment. The proposal put to him was fairly simple.
In
return for a shareholding in SMI he would provide a portion of the
funds, estimated as being approximately R3.5 million, needed
for SMI
to obtain the 58 per cent stake in Ngatana. In addition, as Mr Manala
lacked the resources to make his contribution to
SMI as a one-third
shareholder, Mr Mawji (through Grancy) and Mr Gihwala would each fund
one half of Mr Manala’s share. These
loans would attract
interest at a commercial rate and, if and when Mr Manala realised his
interests at a profit, Mr Gihwala and
Mr Mawji (or their corporate
doppelgängers) would share in a proportion of that profit.
[12]
Mr Mawji insisted on a one-third
shareholding in SMI and Mr Gihwala agreed to this. There was some
urgency about the matter and
Mr Mawji was told that it was essential
for him to make a decision that day. The cause of the urgency is not
entirely clear, but
it matters not because Mr Mawji agreed at the
meeting to participate in the investment on the basis outlined above.
In this Court
all parties accepted that an agreement was concluded at
the meeting on that day.
[13]
The business relationship appeared to
proceed without problems for a few months. In August 2005 Mr Narotam
raised the possibility
of Grancy exiting the investment, but nothing
came of this and it does not appear to have occasioned any problems.
Thereafter the
relationship between the parties deteriorated. On 6
October 2005 Mr Narotam wrote asking Mr Gihwala to finalise the
shareholders’
agreement for SMI and the loan agreement in
relation to the loan to Mr Manala. A loan agreement was forthcoming
in December 2005
at which stage it became clear that Grancy would
hold the investment in SMI.
[14]
In November 2005 Spearhead undertook a
rights issue. It does not appear that either Mr Mawji or Mr Narotam
was aware of this. The
effect of the rights issue, which was funded
entirely by Standard Bank, was that Ngatana acquired an additional
2 million
linked units in Spearhead. Its existing loan from the
bank was discharged and a fresh loan agreement concluded for
R93.6 million.
Additional security was furnished by way of a
pledge of a further 630 000 linked units and by additional
suretyships from
inter alia
Messrs
Gihwala and Manala.
[15]
In the early stages of 2006 information
sought by Mr Mawji concerning the Spearhead investment was not
forthcoming and the business
relationship with Mr Gihwala, which
included another venture referred to as ‘Scharrig’,
soured. By the middle of 2006
Mr Mawji was clearly regretting the
investment and sought to withdraw from it. On 28 June 2006 Mr
Narotam sent an email to
Mr Gihwala informing him that a decision had
been made to exit the Spearhead investment. He added:
‘
As
the initiators and co-investors we would like to offer to you the
opportunity to make a proposal to take over our investment
or bring
in a new investor of your choice to buy us out. Alternatively if you
also wish to exit now to arrange the full disposal.’
This
provoked an angry response from Mr Gihwala. Within an hour he replied
noting the decision and saying:
‘
You
are NOT and were NOT initiators of this transaction. You invested in
this deal through Lance who you lent money.
Please
let me have an exit proposal for consideration.
Strictly
speaking your investment was with Lance …’
[16]
Despite the tone of this communication Mr
Narotam appears to have set to work preparing a proposal. While he
was so engaged another
event occurred. On 26 July 2006 Redefine
Income Fund Ltd (Redefine), also a property investment trust,
announced its intention
to make an offer to unit holders in Spearhead
to acquire their units on the basis that they would receive either
6.18 Redefine
linked units or R31 in cash for each unit.
[17]
Mr
Narotam was aware of this offer and the calculations in the proposal
he prepared valued the Spearhead units at R30 per unit.
He
submitted the proposal to Mr Gihwala on 3 August 2006 suggesting that
Grancy’s interest could be acquired for about R11 million.

Less than two hours later Mr Gihwala rejected this figure out of hand
saying that Ngatana wished to become a significant investor
in
Redefine and did not want to exit the investment. He said that but
for Redefine’s offer the Spearhead price would be nearer
R26
per unit. In addition, although the calculations were based on an
equal division of the indirect interest of SMI in the Spearhead
units
originally acquired, resulting in each investor having an interest in
676 666 units,
[7]
Mr
Gihwala claimed that Grancy’s interest was limited to 630 000
units. After dealing with costs and some other issues
he suggested
that the calculations be redone ‘on the basis of 630k units at
a realistic price’.
[18]
On
3 September 2006 Mr Narotam sent an email to Mr Gihwala, that was
copied to Mr Manala and Mr Mawji.
[8]
As it, and the response to it, set the stage for the disputes that
followed it is desirable to set out its terms relatively fully:
‘
We
refer to our investment in Spearhead through Seena Marena Investments
(Pty) Ltd which was made in accordance with your e-mail
dated 21
February 2005.
The
main terms of the investment as clearly indicated in the
aforementioned e-mail are as follows:
1.
Seena Marena Investments (Pty) Ltd acquired 58% of the 3 500 000
units in Spearhead
at R15.50 each of which R12.75 was funded by
Standard Bank.
2.
For our one third investment (equivalent to 676 666 Spearhead units)
we paid
to you as requested an amount of R1 976 833.33 plus R75
000.00 for costs.
3.
In addition Montague Goldsmith and you equally and jointly, advanced
as a loan
to Lance Manala an amount of R1 976 833.33 …
Although
you proposed drafting an agreement acknowledging our one third share
in Seena Marena Investments (Pty) Ltd, such agreement
has not as yet
been concluded or executed. We request that agreements in the form of
a shareholders agreement together with loan
agreements between Lance
Manala, Montague Goldsmith and you be executed as soon as possible.
As
you are aware, our investment was made at very short notice on good
faith and on the understanding that the formal agreements
containing
the terms and basis of our investment (such terms being as per your
e-mail of 21 February 2005) would be executed shortly
thereafter.
This has not been done to date and needs to be regularised
immediately.
We
are concerned that you have indicated that our entitlement is for 630
000 Spearhead units and not the 676 666 units indicated
in
correspondence at the time the investment was made. At no time were
we subsequently informed of any rights issue etcetera that
could lead
to a dilution or reduction in our entitlement to Spearhead units. We
therefore maintain that we are entitled to 676
666 units.
We
are aware that an offer has been made by Redefine and Apex-Hi to the
shareholders of Spearhead. As an equal shareholder in Seena
Marena
Investments (Pty) Ltd we should be consulted on the decision to be
made by Ngatana. Please let us have full details of the
offer so that
we may provide our input.’
Ten
minutes after sending this email a further email was sent attaching a
copy of Mr Gihwala's email of 21 February 2005.
[19]
One week later, on 11 September 2006 Mr
Gihwala responded in an email to Mr Narotam, which was also sent to
Mr Mawji and Mr Manala.
It read:
‘
I
told you and now repeat hopefully for the final time that any
reference to any number of units other than 630k is wrong and a

mistake. 630k units became available after another participant
elected not to proceed with the investment. By this time Lance and
I
had already secured 1.4m units. I could therefore not offer any more
than was available at the time.
You
were never to be a shareholder in our company. You came in behind us
for 630k units. It was always so that you would be subject
to the
decisions of SMI. You were certainly not an independent party as you
now try to suggest. When you make investments you expect
priority
interest on your capital. Why should I bind my credit and take risk
for no reward? The position is unnecessarily complicated
by your
unilateral decision to realise this investment and above all on your
terms and conditions. I'm afraid it will not happen
in this instance.
I
shall conduct the affairs of SMI as I deem fit. You have no say in
its affairs. You are NOT a shareholder. You were never intended
to be
one. You will never be one. Your interest is limited to the 630k
units. There is no risk of any dilution; regardless of what
we choose
to do in SMI we have to account to you for your interest in 630k
units. This will only happen once SMI is liquidated
for us (Lance &
I) to realise our investment. The earlier correspondence you refer to
is premised on this grand plan of creating
SM Capital. You know what
happened and the least said about that the better. Could you perhaps
explain why I would want to introduce
you to the opportunity the 630k
units presented at its cost to us at a time when it was trading at a
premium of more than 35% above
the price we paid for the units; why
would I assume the risk of personal liability to the bank without any
indemnity or upside;
and why are these issues raised only now and not
before even though I told you explicitly I would be charging for my
“credit”?
I drafted an agreement some time ago and asked
my secretary to forward it to you. If she has not done so I can only
assume that
she wanted me to check it before dispatching same. I will
ask her to send it off immediately even though I have not had a
chance
to check it. The idea of a shareholders agreement is a little
disingenuous and a ploy to obtain a position of advantage you are
not
entitled to. Do you think I could not have personally funded the
amount of money you put in or raise it from family and friends
etc? …
As
far as the Redefine offer is concerned, which is a matter of public
knowledge … It is not our intention to take any cash
but to
take up all the RDF units we are entitled to. Even if we did take
some cash it will be used to pay down the debt; in short
there will
be no cash surplus. Even if there were cash we shall deal therewith
in the best interest of SMI and no other party,
least of all an
opportunistic and expedient one.
I
have no intention of dealing with your letter under reply in any more
detail. I reserve the right to do so if and when it may
become
necessary. My failure to do so now should therefore not be
interpreted as an acknowledgement of the correctness or otherwise

thereof. You should soon be in possession of the agreement I drafted
some time ago. You are at liberty to sign such agreement or
not. I
shall nevertheless act in accordance with that agreement. I can
assure you that the realisation of the SMI investment in
Ngatana is
not imminent unless something dramatic or spectacular happens. Rest
assured you will receive a proper accounting for
the 630k units or
its equivalent in RDF if the offer succeeds when the time to do so
arrives. I reserve the right to charge a fee
for my services I have
rendered and continue to render for SMI. You are liable for a portion
of those and other operating expenses
based on your 630k units. If
and when I need your share I shall call for it and expect you to make
payment promptly.
This
matter is now closed as far as I am concerned.
Finally,
I was the one to arrange this transaction. Lance does not know of any
detail of the transaction except that he may be able
to confirm that
there were only 630k units available. Accordingly, I am the one to
deal with.’
[20]
There can be little surprise that shortly
afterwards Mr Mawji, on behalf of Grancy, consulted attorneys and
various letters of demand
were sent to Mr Gihwala, Mr Manala and SMI.
It is unnecessary to go into any detail regarding this
correspondence, save to say
that if anything it served to harden the
parties’ opposing positions. A full account of the funds
deposited in the trust
account of Mr Gihwala's law firm for the
purposes of the Spearhead investment was demanded. In addition a
demand was made for full
details of the Redefine takeover of
Spearhead, including any monetary benefits offered to Spearhead unit
holders, the number of
Redefine units to be acquired, the nature and
extent of SMI’s and Ngatana’s stake in Redefine and the
date on which
the takeover became effective.
[21]
In November 2007 Grancy launched an
application in the Western Cape Division of the High Court claiming
against Messrs Gihwala and
Manala, SMI and the Trust delivery of a 31
per cent shareholding in SMI. Although this was less than the
one-third share originally
agreed upon Mr Mawji explained in his
founding affidavit that this was being accepted on the basis of a
concession by Messrs Gihwala
and Manala, whilst reserving Grancy’s
position to make further claims after receiving a proper account of
its investment.
In addition to the registration of that shareholding
in its name it sought an accounting in respect of its original
investment
in SMI.
[22]
Messrs
Gihwala and Manala, as well as the Trust and SMI, opposed the
application. Mr Gihwala deposed to the principal answering
affidavit
on behalf of himself, SMI and the Trust. The opposition was vigorous,
and aspersions were cast on Mr Mawji’s personality,
integrity
and business methods. In essence Mr Gihwala claimed that it had been
discovered that Grancy could not be a participant
in a BEE
transaction and that its interest was now being exercised indirectly
through Mr Manala. There was also a considerable
excursus in relation
to the failure of an attempt to establish a venture capital fund. But
the opposition to the application collapsed
shortly before the
hearing when an offer of settlement was made that in substance
conceded all the relief sought by Grancy. Pursuant
to the settlement
on 9 March 2009 an order
[9]
was
made directing that Grancy be registered as a 31 per cent shareholder
in SMI. It further directed Mr Gihwala, in both his personal
capacity
and as a trustee of the Trust, and Mr Manala to render a full and
proper account to Grancy in respect of its investment
in the
Spearhead investment and the Spearhead units. Pursuant to this order
Grancy was registered as a 31 per cent shareholder
in SMI on 25 March
2009.
[23]
In
the interim, while this dispute was raging and even before the
litigation was underway, events moved on. The Redefine offer was

accepted and the 5.5 million Spearhead units held by Ngatana were
replaced by 33.99 million Redefine units. On 7 March 2007
the
directors of Ngatana resolved to repay the amounts lent to it by its
various shareholders to enable it to conclude the original
BEE
transaction. This involved the repayment of R6 657 673 to
SMI on 15 March 2007. Thereafter amounts totalling
R4 million
were paid to the Trust, and shared between Messrs Gihwala and Manala.
Nothing was paid to Grancy. Instead, on 2 April
2007 an amount
of R2 million was invested in Scarlet Ibis Investments 52 (Pty)
Ltd (Scarlet Ibis), a property development
company. Later
correspondence between Mr Manala and Mr Gihwala showed that Mr Manala
had initially suggested that Grancy be repaid
its loan to SMI, but at
Mr Gihwala’s instigation the investment in Scarlet Ibis had
been made instead. This may not have
been unconnected to the fact
that Mr Gihwala’s wife and the Trust had an interest in the
development.
[10]
Mr Gihwala
apparently believed that there would be a 50 per cent return on the
investment within 24 months, but those prognostications
proved
incorrect and, when the company was liquidated, it is likely that it
was lost.
[24]
Also on 7 March 2007, Ngatana had
resolved to pay an amount of R3 million to Prescient and SMI in
equal shares, ostensibly
as compensation for their efforts in setting
up the BEE transaction. However, at that stage it lacked the
necessary funds to make
this payment. Needless to say Grancy was not
informed of this decision. But in March 2009 Ngatana’s board of
directors resolved
to pay R1.5 million to Prescient for setting up
the transaction and R750 000 each to Messrs Gihwala and Manala
as ‘directors’
fees’. Again Grancy was not aware of
this decision or these payments. The resolution noted, ‘…
this matter has
already been verbally discussed with many of the
shareholders and they will be asked to confirm their consent by
signing this resolution.’
This recognised that the payments
were sufficiently unusual that they necessitated consulting the
shareholders before they could
be made.
[25]
From May 2008 Ngatana started to dispose of
the Redefine units that it had received in place of the Spearhead
units. This was not
discussed with Grancy and it was not informed
that it was happening. By April 2009, shortly after the court order,
all the Redefine
units obtained in the acquisition of Spearhead had
been sold. The Standard Bank loan was repaid and substantial
dividends were
paid from the proceeds. (In the 2008 financial year
Ngatana purchased a further 20 million Redefine units as a
participant
in a BEE transaction by Redefine. It funded this by
incurring fresh liabilities to Standard Bank of some R25 Million and
to RMB
Securities (Pty) Ltd of R116 million.) In October 2008
Ngatana declared a dividend and SMI received R5 572 727.27.

This was paid, by way of dividend, in equal shares to the Trust and
Mr Manala. Accordingly, while the Trust and Mr Manala had been
repaid
the money they had lent to SMI to fund the original investment –
in Mr Manala’s case, money that he had been
lent by Grancy and
Mr Gihwala – and had received a substantial dividend, Grancy
had received nothing and indeed was unaware
that these payments had
been made.
[26]
After the grant of the order and the
registration of Grancy as a shareholder Mr Gihwala continued, as he
had said in his email of
11 September 2006 to ‘conduct the
affairs of SMI as I deem fit’. Demands for access to the
company records were
rebuffed. And on 15 June 2009 the directors
of SMI, by way apparently of a telephone conversation between Mr
Gihwala and Mr
Manala, agreed to lend the latter R2 million. Another
loan of slightly less than R2 million was made at the same time.
Overall
his ledger account reveals that between 2007 and 2009 Mr
Manala withdrew over R9 million from SMI. He had himself
provided
only R77 000 to SMI so he benefited handsomely from his
participation.
[27]
A one page account was furnished to Grancy
by Messrs Gihwala and Manala and the Trust in purported compliance
with the order referred
to in para 22. A demand by Grancy for full
accounting records was rejected on the footing that the account was
adequate. This prompted
a further opposed application in June 2009
regarding its adequacy. In the meantime Annual Financial Statements
for SMI for 2007,
2008 and 2009 were supplied to Grancy, which
objected to them. In September 2009 revised Annual Financial
Statements for SMI for
2009 were presented at the AGM and adopted
over Grancy’s objections. Attempts by Grancy to obtain further
information from
Mr Gihwala were rejected on the grounds that it was
not entitled to this information. In January 2010 Grancy launched the
first
action.
[28]
In
April 2010 Binns-Ward J handed down judgment holding that the account
tendered in response to the consent order was ‘woefully

inadequate’ and ordering that an improved account be furnished.
The further account tendered pursuant to this order and supplemented

after its rejection by Grancy, was said by Grancy to be inadequate.
After further litigation this Court granted an order holding
that it
also was inadequate and directing a hearing on that topic.
[11]
That hearing took place before Traverso DJP who delivered
judgment on 29 February 2016, holding the account to be inadequate

and making consequential orders. Meanwhile in June 2011 Grancy had
brought the 2011 action.
The
issues
[29]
Grancy’s case in both the 2010 and
the 2011 action was that in various respects Messrs Gihwala and
Manala, as well as the
Trust and SMI, breached the February 2005
agreement. It alleged that these breaches gave rise to a number of
claims to recover
compensation for financial loss that it had
suffered in consequence of such breaches. In addition to the
contractual basis for
such claims it also advanced a claim, in
respect of some items, under s 424 of the 1973 Act and in the
alternative under s 77(3)
of the 2008 Act. Apart from these
monetary claims it sought orders for the disclosure of financial
records and books of account
and an accounting against both Messrs
Gihwala and Manala and the Trust and SMI. Finally it sought an order
that Messrs Gihwala
and Manala be declared delinquent directors in
terms of s 162(5)
(c)
of the 2008 Act.
[30]
A fundamental dispute emerged in regard to
the identity of the parties to the February 2005 agreement and also
as to its nature
and contents. However, in the course of argument in
the appeal, counsel for Mr Gihwala made certain important concessions
that
narrowed the field of dispute. The Trust contended that it was
not a party to the agreement at all and accordingly, as the claims

were based on an alleged breach of contract, no relief could be
claimed against it.
[31]
In
regard to the monetary claims the respondents contended that they
were in truth claims by SMI against its directors, Messrs Gihwala
and
Manala, and therefore could not be pursued by Grancy in its own right
in accordance with the well-established principle of
company law
known as the rule in
Foss
v Harbottle
.
[12]
Over and above that it was submitted that one of the claims amounted
to a duplication and others were not well-founded on the facts.
[32]
It
was conceded in argument on behalf of Mr Gihwala that he and Mr
Manala owed Grancy an obligation to provide information and render
an
account in regard to its investment, but the scope of those
obligations was disputed. It was submitted that the accounting sought

related to claims that would be disposed of by the monetary
judgments. It was also said that such an accounting overlapped with

the accounting ordered in the March 2009 order.
[13]
Traverso DJP has now held that the accounting pursuant to that order
was inadequate, so that is an issue that remains unresolved.

Consistent with its attitude that it was not a party to the
agreement, the Trust denied any obligation to render an account.
[33]
The final substantial point of dispute
related to the orders made declaring Mr Gihwala and Mr Manala
delinquent directors. They
both contended that s 162 of the 2008
Act, under which the orders were made, was unconstitutional. Although
they did not formally
ask for an order to that effect it would
necessarily follow from any determination of unconstitutionality.
[34]
Flowing from this the following are the
issues to be determined in this appeal:
(a)
Who were the parties to the agreement
concluded on 3 February 2005 and what were its material terms?
(b)
Was that agreement breached and, if
so, in what respects?
(c)
Did Grancy have financial claims
arising out of the breach of the agreement?
(d)
Were those claims precluded by the
rule in
Foss v Harbottle
?
(e)
Was Grancy entitled to orders against Mr
Gihwala and Mr Manala in terms of s 424 of the 1973 Act or
s 77(3) of the 2008
Act?
(f)
Was Grancy entitled to an order for
access to the books and accounting records of SMI and for the
rendering of an account in relation
to its investment?
(g)
Is s 162 of the 2008 Act
unconstitutional and, if not, was Fourie J correct to make orders of
delinquency in relation to Mr
Gihwala and Mr Manala?
(h)
The disposal of the cross-appeal.
(i)
What order should be made in regard
to costs?
The
agreement
Parties
[35]
Grancy, Mr Gihwala and Mr Manala were
indisputably parties to the agreement. Grancy alleged, and contended
before us, that SMI and
the Trust were also parties. It is not
entirely clear what finding the High Court made in this regard. It
accepted that SMI and
the Trust might, in the event of specific
obligations having been undertaken by them, be regarded as separate
contracting parties
to the agreement. However, it held that they were
not to be regarded as contracting parties to the ‘primary
overarching joint
venture agreement’. In reaching that
conclusion the trial judge relied particularly upon a passage in the
evidence under
cross-examination of Mr Mawji, in which he described
SMI as being ‘the vehicle that was used by the three partners
to carry
the investment’ and went on to identify Grancy, Mr
Gihwala and Mr Manala as the three partners. He also emphasised that
in
response to a question by counsel for the Trust, Mr Mawji accepted
that the Trust had no greater responsibilities or obligations
to
Grancy than those contained in the memorandum or articles of SMI.
[36]
It
is unclear whether the High Court held that there was a primary
agreement concluded between Grancy and Messrs Gihwala and Manala
and
subsidiary agreements to which SMI and the Trust may have been
parties, or whether it accepted that SMI and the Trust were
parties
to a single agreement, but only undertook limited obligations
thereunder, not extending as far as the obligations undertaken
by
Messrs Gihwala and Manala. It is important that this be resolved at
the outset. If SMI and the Trust were as much parties to
the
agreement as Grancy and Messrs Gihwala and Manala, then prima facie
their obligations would have been the same as those of
Mr Gihwala and
Mr Manala. Even if they did not owe specific obligations to Grancy,
because only others could perform those obligations,
they would
nonetheless have incurred the ordinary obligation of all contracting
parties not to act in a way, or permit others to
act in a way that
would stultify the performance of the contract in accordance with its
terms.
[14]
[37]
Mr Mawji said that there were three
partners involved in the investment and that these were Grancy and
Messrs Gihwala and Manala.
Undue weight should not be attached to
that. The description of someone as a ‘partner’ may carry
various different
connotations. It may, in some contexts, carry a
strict legal meaning as a member of a partnership. But business
people frequently
use it to describe the individuals involved in a
business venture, without any technical connotation being attached to
it. For
example, where a business is conducted through a corporate
vehicle, the natural persons interested in it are frequently referred

to, and refer to themselves, as partners in that business. That is
how Mr Mawji used it when he said ‘the partners agreed
to use
SMI as a corporate vehicle for their common interest on this 3
rd
of February’. It is also the sense in which Mr Narotam used it
when writing to Mr Mawji on 3 March 2005 after Bonitas
again
expressed interest in participating in the Spearhead BEE transaction.
Mr Mawji was a chartered accountant and an experienced
and successful
businessman, but that does not mean that he was familiar with the
niceties of the law concerning partnership. Indeed,
elsewhere in his
cross-examination, he disavowed such knowledge, beyond a vague and
uncertain understanding.
[38]
It seems to me preferable to look at the
conduct of the parties present at the meeting in order to identify
the parties to the agreement
that resulted from that meeting. Mr
Mawji and Mr Narotam represented Montague, which is accepted as
having represented Grancy.
Mr Gihwala was plainly representing Mr
Manala and his interests. There is no other basis on which he could
have negotiated for
Mr Manala to forego one third of his interest in
SMI to Grancy, or for the latter to provide a loan to Mr Manala upon
the terms
for repayment of that loan agreed by him. That leaves SMI
and the Trust.
[39]
When the meeting commenced the Trust and Mr
Manala held equal shareholdings in SMI, that is, each held a 50 per
cent stake in SMI.
The agreement involved each of them sacrificing
one third of their interest in order for Grancy to acquire a one
third stake in
SMI. That was not something to which Mr Gihwala could
commit the Trust in his own right. He could only do so as a
representative
of the Trust with the authority of his co-trustees.
[40]
Not once, in all the litigation that has
ensued since February 2005, have his co-trustees questioned his
authority to represent
them and agree to forgo a one third share of
the Trust’s interest in SMI. On the contrary, when Grancy
brought proceedings
to compel delivery of these shares, Mr Gihwala
deposed to an answering affidavit in his own right and on behalf of
the Trust. In
response to a statement in the founding affidavit by Mr
Mawji that:
‘…
It
was never clear whether he [Gihwala] was acting in his personal
capacity … or as an authorised trustee of the [Trust]’
Mr
Gihwala responded:
‘…
the
deponent was at all times aware that I was acting in my personal
capacity and on behalf of the Trust in relation to the Spearhead

investment.’
That
statement has never been withdrawn or rebutted. It was confirmed in
another statement made by Mr Gihwala, this time in response
to a
complaint about his conduct lodged with the Cape of Good Hope Law
Society. Then he said:
‘
The
entities in which I have an interest which were involved in these
transactions included the Dines Gihwala Family Trust (“the

Trust”) and Seena Marena Investments (Pty) Ltd (“SMI”).
SMI is a company in which Lance Manala (“Manala”)
and the
Trust each initially had a 50 per cent interest. Grancy now has a 31
per cent equity interest in SMI. The directors of
SMI are Manala and
myself.’
[41]
There was an endeavour by Mr Kirk-Cohen SC,
who appeared for the Trust at the trial and in this Court, to suggest
that no reliance
could be placed on these documents. However, in a
pre-trial minute dated February 2012, at a stage when Mr Gihwala and
the Trust
were represented by the same counsel and attorneys, it was
agreed that all documents included in the trial bundle would, without

further proof, serve as evidence of what they purported to be. In the
case of these two documents they are respectively an affidavit
and a
statement by Mr Gihwala in regard to the identities of the parties
who he was representing at the meeting. Insofar as he
now seeks to
challenge the fact that the Trust was a party to the agreement they
are admissible as statements against interest
made by a
representative of the Trust.
[42]
In
addition, we were informed from the bar, without objection, that a
notice had been given in respect of these documents in terms
of the
provisions of rule 35(10) of the Uniform Rules of Court. That rule
permits any party to give to any other party a notice
to produce at
the hearing the original of any document referred to in the notice
and, once produced, it entitles the party giving
the notice ‘without
calling any witness, to hand in the said document, which shall be
receivable in evidence to the same
extent as if it had been produced
in evidence by the party to whom notice is given’.
Friedman J said in
Knouwds
,
[15]
that the rule provides an exception to the general requirement that a
document can only be admitted in evidence by a witness who
is in a
position to identify the document. Mr Kirk-Cohen submitted that
nonetheless the contents of the document remain hearsay
against the
Trust and inadmissible as proof of their contents. Friedman J
disposed of this by drawing attention to
[16]
an exception in the case of a statement made by a third party, where
there existed a privity or identity of interest between the
person
making the statement and the party that was the subject of the
statement. In this case there is a clear identity of interest
between
Mr Gihwala in his personal capacity and the Trust of which he is a
trustee. The objection to the admissibility of these
statements was
accordingly unfounded.
[43]
Mr Kirk-Cohen SC also posed the rhetorical
question whether after the meeting Mr Gihwala could, without
objection, have caused his
interest in SMI to be held by an entity
other than the Trust, and answered it in the affirmative. This he
said demonstrated that
the Trust could not have been a party to the
agreement. The problem is that the question is hypothetical and the
answer by no means
certain. Such a change could only have taken place
if the incoming shareholder undertook the same obligations as rested
on the
Trust in consequence of the agreement. That they could only do
by concluding a contract with the other contracting parties. Absent

such an agreement it is difficult to see on what basis Mr Gihwala
could have substituted some other entity for the Trust. In my
view
the Trust was clearly a party to the agreement.
[44]
I need spend less time on the position of
SMI. Under the agreement it would be required to issue the shares
that were to be taken
up by Grancy. Mr Gihwala and Mr Manala were the
directors of SMI and Mr Gihwala was there representing both Mr Manala
and SMI.
Furthermore loans in substantial sums would have to be made
to SMI to enable it in its turn to subscribe for shares in Ngatana
and make loans to Ngatana. In those circumstances to suggest that SMI
was not a party to the agreement is in my view unjustified.
I
accordingly agree with the contention on behalf of Grancy that the
parties to the agreement were Messrs Gihwala and Manala, the
Trust,
SMI and Grancy.
Terms
of the agreement
[45]
Apart from the evidence of Mr Mawji that
has been summarised earlier, there were documents that conclusively
supported his evidence
and dealt with the terms of the agreement.
After the meeting Mr Mawji and Mr Narotam remained in South Africa
for a short period
to attend to other business and to tie up the
loose ends of the deal. On 12 February Mr Narotam met Mr Gihwala
at the airport
in Johannesburg. He prepared a note of that meeting in
diagrammatic form showing the structure of the deal. It reflected
each of
Messrs Gihwala and Manala and Montague as having a one-third
interest in SMI. In turn SMI would hold 58 per cent of the shares in

Ngatana, which would hold approximately 13 per cent of Spearhead. The
note reflected the details of the loan to Mr Manala and indicated

that the cost to Grancy would be R3.5 million. Grancy had already
arranged to pay this amount to the trust account of Mr Gihwala’s

legal firm.
[46]
On 21 February 2005 Mr Gihwala sent an
email to Mr Narotam saying that the Spearhead deal had been announced
and had been favourably
received. Ngatana had purchased at R15.50 per
unit while the current market price was R20 per unit. He went on to
say that he needed
‘to regularise our relationship’.
Ngatana was acquiring 3.5 million Spearhead units at R15.50 per unit
and Standard
Bank had agreed to provide finance for 75 per cent of
the cost of that number of units at R17 per unit. Accordingly the
participants
in Ngatana needed to fund R2.75 per unit plus all costs,
which he estimated to be approximately R600 000. As SMI’s
interest
related to 58 per cent of the units it, needed to provide
R5 830 500. In the result he calculated that each of the
three
investors had to contribute R1 976 833.33. The loans
that he and Mr Mawji were to make to Mr Manala were half of that,
or
slightly less than R1 million each. When this email was sent,
two and a half weeks after the meeting where the agreement
was
concluded, Mr Gihwala calculated that Mr Mawji had contributed a
little over R450 000 more than was required to effect
the
investment and asked what should be done with this.
[47]
Other than on one aspect that is irrelevant
to this case, Mr Narotam confirmed the accuracy of this email in his
response on the
same day. His approach was that ‘the structure
of the Spearhead deal was done with Karim and I at the hotel when we
met’.
All that remained was for Mr Gihwala to do what he had
undertaken to do in his email, namely draft an agreement in which he
and
Mr Manala would acknowledge Mr Mawji’s one third share in
the company that was to be the vehicle for the investment, which
he
identified as SMI.
[48]
For reasons that are immaterial a portion
of the R3.5 million remitted to Mr Gihwala’s law firm was
used for the purposes
of another transaction. This resulted in a
further exchange of emails between Mr Narotam and Mr Gihwala
concluding with one from
Mr Gihwala on 10 May in which he again
confirmed the terms of the agreement with reference to his earlier
email of 21 February.
An additional amount was transferred to Mr
Gihwala’s firm to bring the total lent to SMI up to slightly
more than R3 million.
[49]
The documents are entirely supportive of Mr
Mawji’s description of the agreement.  In addition, Mr
Mawji testified that
they discussed the question of directorships and
it was agreed that Messrs Gihwala and Manala would remain as the sole
directors
of SMI and would be the directors representing SMI’s
interests on the board of Ngatana. He was perfectly willing to accept

this in the light of his friendship with Mr Gihwala and his faith in
him. The entire relationship was based upon mutual trust and

confidence. It therefore demanded the utmost good faith from Mr
Gihwala and Mr Manala.
[50]
On behalf of Mr Gihwala it was contended
that the agreement merely involved Grancy taking up a shareholding in
a private company,
SMI, and enjoying the ordinary rights and
incurring the ordinary obligations that attach to being a
shareholder. In other words
that Grancy’s rights would be no
different from those of a person who purchased shares in a company on
the Johannesburg Stock
Exchange.  I am unable to accept that
characterization.  Mr Mawji was approached through Mr Narotam on
the basis of ties
of friendship that he had formed with Mr Gihwala.
The investment in Spearhead was presented as an opportunity for them
to
do business together and it is plain from other correspondence
that at the time it was contemplated that this would be one of a

number of business ventures that they might undertake jointly.
The nature of the transaction; the fact that Mr Mawji’s

business operations were conducted from a base in Switzerland; and
the fact that Messrs Gihwala and Manala were to be responsible
for
administering and overseeing the investment, meant that Mr Mawji, and
therefore Grancy, were entirely dependent upon them for
information
regarding the investment and upon their probity and good faith in
dealing with it.  In those circumstances it
was too narrow a
view of the nature of the transaction to suggest that Grancy’s
rights would be delineated solely by the
memorandum and articles of
SMI and Ngatana.
[51]
The
factors that I have mentioned all point in the direction of the
agreement being subject to a number of important tacit terms,

necessary in order to give it business efficacy.
[17]
The issues that gave rise to this litigation posed the following
questions:
·
Was SMI to be used as a vehicle solely for
the purposes of investing through Ngatana in Spearhead?
·
If Ngatana wanted to make investments other
than the acquisition of the Spearhead units, or if SMI wished to make
an investment
other than its shareholding in Ngatana, did this
require the consent of Grancy?
·
Was Grancy entitled to access to all the
books and financial records of SMI?
·
Were Mr Gihwala, Mr Manala and the Trust
obliged to account to Grancy for the money invested in SMI and the
proceeds thereof?
·
Did Mr Gihwala, Mr Manala, SMI and the
Trust owe duties of good faith and fair dealing to Grancy?
·
Were Mr Gihwala and Mr Manala, as directors
of SMI, precluded from enriching themselves at the expense of Grancy
by charging SMI
with fees to which Grancy had not consented?
·
Were the investors to be treated equally in
regard to the receipt of benefits from SMI?
[52]
There
is no doubt in my mind that had an interfering bystander posed those
questions to Messrs Mawji and Gihwala at the meeting
the answer in
each case would have been an emphatic affirmative.  That
satisfies the ordinary test for a court to infer the
existence of a
tacit term. There was some muted argument before us whether these
terms operated to limit the powers vested in either
SMI or its
directors in terms of the memorandum and articles of association of
SMI, and it was submitted that to the extent they
did they could not
be accepted as tacit terms.  Reliance was placed upon the
principle that a tacit term cannot be inferred
where it is contrary
to the express terms of the contract.  Before a court can infer
the existence of a tacit term there must
be room for importing it in
the light of the express terms of the agreement.
[18]
[53]
I
see no conflict between the suggested tacit terms and the memorandum
and articles of association of SMI.  They do not alter
those
provisions in any way. By agreement
de
hors
the company’s founding documents, the parties agree as to the
manner in which the company and its directors will exercise
those
powers. Such an agreement is commonplace in the commercial world and
one was concluded by the Ngatana shareholders.
It is the means
whereby parties who intend to conduct a business venture through the
vehicle of a company arrange their rights
and obligations
inter
se
.
In the oft-quoted words of Lord Wilberforce
[19]
‘… there is room in Company Law for recognition of the
fact that behind it, or amongst it, there are individuals with

rights, expectations and obligations
inter
se
which
are not necessarily submerged in the company structure’.
Typical examples of provisions in such agreements are
those that
provide that the investors, or some of them, will be, or will
appoint, the directors of the company; provisions relating
to
decisions that will require the consent of the investors; provisions
relating to the incurring of credit or the sale of assets
of the
business; and provisions relating to decisions critical to the
strategic direction of the company.
[20]
[54]
A
shareholders’ agreement of this type, dealing with the right to
be appointed as a director and operating to nullify a provision
in
the 1926 Companies Act that provided for the removal of directors,
was enforced in
Stewart
v Schwab
.
[21]
That judgment has been cited on a number of occasions in provincial
divisions.  Its correctness was assumed by Trollip
JA in
Desai
.
[22]
Such agreements are frequently entered into in cases where investors
wish to regulate their relationship
inter
se
when the investment is to be made through the medium of a company. Mr
Narotam and Mr Mawji expected that Mr Gihwala would cause
such an
agreement to be prepared. The email of 21 February contemplated such
an agreement and one was prepared in Mr Gihwala’s
legal office
but never signed. Until such an agreement was prepared and signed,
the parties were bound by the express terms of
the agreement and any
tacit terms that formed part of it.
[23]
Such an agreement does not alter or vary the company’s
founding documents.  It is an agreement between the parties

thereto in terms of which they agree as to the manner in which, and
the purpose for which, the powers of the company and its directors

will be exercised.  There is no reason why such an agreement
should not ordinarily be given effect and no reason why it should
not
be given effect in this case. Section 15(7) of the 2008 Act
expressly provides that this is to be the situation. The
qualification that the shareholders’ agreement may not be
inconsistent with the Act and the Memorandum of Incorporation deals

with situations where there is a direct conflict between them, not
with a qualification in the shareholders’ agreement on
the
manner in which general powers are to be exercised, which may
constrain the exercise of those powers.
[55]
The last issue to be considered relates to
the manner in which the anticipated returns on the investment were to
be dealt with.
The nature of Spearhead’s business was described
in paragraph 5. It was not such as to require any active management
on the
part of either Ngatana or SMI. The practical day to day
business of acquiring properties and securing tenants would be
managed
by Spearhead. Ngatana, as a 13 per cent shareholder, would
keep abreast of the operations of Spearhead so as to be aware if it
appeared to be running into difficulties. They would be alive to, and
if necessary respond to, major business decisions by Spearhead
and
possibly suggest business opportunities if they encountered them. But
beyond that oversight role Ngatana’s affairs would
require
little by way of active management and the same was true of SMI.
Their accounting records would be straightforward and
the costs of
administration limited. Neither company would need to have any
full-time employees. Nor would they need office premises
or any of
the administrative infrastructure that characterises other
businesses. The annual financial statements of both Ngatana
and SMI
bear this out, whatever their other defects.
[56]
It could accordingly be anticipated that
Ngatana would use the revenue it would receive half-yearly from
Spearhead to service the
loan from Standard Bank, pay its own limited
expenses and distribute the remainder to its shareholders, initially
by repaying their
loans and then by way of dividends. If it realised
any of the units – and there was a three year lock-up period
applicable
to the BEE transaction that would preclude it from doing
so immediately – the proceeds would be used for the same
purposes.
As far as SMI was concerned its position was even simpler.
It would receive loan repayments and dividends from Ngatana, pay its

extremely limited administrative expenses and distribute the balance
by way of repayment of the initial shareholder loans and dividends
to
its shareholders.
[57]
Did these factors give rise to any terms of
the agreement? In my opinion they did. Parties entering into this
type of investment
anticipate that they will receive a flow of income
in accordance with the nature of the investment. Put simply, when
funds were
available they would be distributed by Ngatana and SMI.
Both Ngatana and SMI were presented to Mr Mawji as passive investors,
created
as SPV’s for the purpose of holding linked units in
Spearhead. As such, once the loan from Standard Bank was repaid, he
would
have anticipated that the investment in SMI would generate a
regular flow of dividend income to Grancy and this is precisely what

he said he expected. There was no reason for either Ngatana or SMI to
accumulate income. If either wished to expand the range of
their
investing activities Grancy would have to be consulted. The fact that
it stood at one remove from Ngatana was neither here
nor there. SMI
held a majority share in Ngatana and in terms of the shareholders’
agreement concluded in relation to Ngatana
any decision of that
character required the consent of both Prescient and SMI. Unless and
until there was agreement on a change
in the investment the position
would remain as described above. In the circumstances, and once again
applying the test of the interfering
bystander, it seems to me that a
question as to what would happen to the income earned by Ngatana and
SMI would have provoked the
response, ‘Why, it will be
distributed to shareholders, of course. What else could we do with
it?’
[58]
In summary therefore the material terms of
the agreement concluded between the parties on 3 February 2005 were
the following:
(a)
Mr Gihwala (through the vehicle of the
Trust), Mr Manala and Grancy would participate in the Spearhead BEE
transaction and thereby
invest indirectly in Spearhead linked units.
(b)
The investment would be undertaken using
SMI as a corporate vehicle with each participant (Grancy, the Trust
and Mr Manala) holding
one-third of the shares in SMI.
(c)
The parties would make their investment
contributions by way of subscription for shares in and the making of
loans to SMI on the
basis set out in Mr Gihwala’s email of 21
February 2005, which included the making of loans to Mr Manala to
enable him to
lend his share of the amount required by SMI.
(d)
SMI would use the funds so acquired to
subscribe for 58 per cent of the shares in Ngatana, which was the
corporate vehicle that
would hold the 3.5 million Spearhead linked
units acquired in terms of the BEE transaction, and lend money to
Ngatana to enable
it to take up these Spearhead units.
(e)
The investment would be directly managed by
Messrs Gihwala and Manala, who would be the directors of SMI and
SMI’s nominees
as directors of Ngatana.
(f)
Unless otherwise agreed by the investing
parties the investment by Ngatana would be restricted to an
investment in the 3.5 million
Spearhead units and SMI’s
investment would be restricted to its investment in 58 per cent of
the shares of Ngatana.
(g)
In the management of the investment Messrs
Gihwala and Manala, the Trust and SMI owed Grancy a duty to exercise
good faith and to
account fully for their stewardship of Grancy’s
investment. Their relationship with Grancy was a fiduciary one.
(h)
Grancy would be entitled on request to be
given access to all books and records of SMI relating to its affairs
and Grancy’s
investment in it.
(i)
The two directors would procure that the
net income accruing to Ngatana from the investment, after servicing
the Standard Bank loan
and paying its administrative expenses, would
be distributed to shareholders, first by repaying shareholder loans
and then as dividends.
(j)
The net income accruing to SMI after paying
its administrative expenses would be distributed to shareholders,
first by repaying
shareholder loans and then by way of dividends.
(k)
The investors would be treated equally so
that in the allocation of benefits arising from the investment no
investor would be treated
less favourably than another and no
investor would secure for himself or itself a benefit that was not
afforded to the other investors.
I refer to this as the principle of
parity of treatment.
Nature
of the agreement
[59]
In
its particulars of claim in both actions Grancy characterised the
agreement as one of partnership, alternatively one of agency.
Fourie
J did not accept either characterisation and held that it was rather
something akin to a joint venture. But in any event
he refused to
make declaratory orders dealing with this issue on the basis that
they would be academic. In its cross-appeal Grancy
sought such
declaratory orders, although it addressed no substantive argument in
support of the contention that the agreement was
one of agency. Its
enthusiasm for the argument that it was a partnership waned somewhat
after it was suggested that this might
mean that its claims could
only properly be pursued by way of the
actio
pro socio
.
[24]
[60]
Fourie
J correctly said that this was not a partnership. Among the essential
elements of a partnership are that the business is
carried on for the
joint benefit of the partners and the intention is to make a
profit.
[25]
One cannot
separate the latter of these from the former. The intention must be
to make a profit jointly, that is, a profit that
enures to the
benefit of the partnership. Its distribution thereafter to the
individual partners is another matter. Here there
was no such
intention. The parties intended that dividends would flow from
Spearhead to Ngatana, or that Ngatana would have the
proceeds of
realisation of the investment, and that these funds would then flow
to Ngatana’s shareholders. Once received
from SMI they would be
distributed to SMI’s shareholders. At no stage would the
participants in the venture hold the profits
for their joint benefit.
The aim of the parties was to receive in their own right the
dividends that would be paid by SMI. That
precluded the agreement
from being a partnership.
[26]
[61]
The
agreement could be described as a joint venture, a convenient
expression commonly used to describe a business agreement bearing

some resemblance to a partnership, but lacking one or more of its
essential elements. It does not convey any specific legal meaning,
as
every joint venture is dependent on the specific terms on which the
parties agree. Sometime the distinction between a joint
venture and a
partnership is blurred completely, and sometimes what is referred to
as a joint venture is in fact a partnership.
[27]
In this case the parties agreed to invest in Spearhead units. They
did so through corporate vehicles so that elements of company
law
would necessarily affect their relationship. They agreed on the terms
of their relationship
inter
se
,
something that bears a resemblance to a shareholders’
agreement. Their relationship was governed by mutual trust and
imposed
fiduciary obligations on Messrs Gihwala and Manala as well as
the Trust. In that it had some of the characteristics of partnership.

In regard to SMI they agreed to subscribe for shares and make loans
to SMI as well as the personal loans that Mr Gihwala and Grancy
were
to make to Mr Manala. It can best be described as an investment
agreement with a range of terms drawn from differing areas
of law.
There was no need to fit it into the jurisprudential pigeonhole of
either partnership or agency. It follows that, to the
extent that
Grancy sought to do so, that part of the cross-appeal must fail.
Breaches
of the agreement
[62]
From the very start there were wholesale
breaches of the investment agreement by Messrs Gihwala and Manala, as
well as by the Trust
and SMI acting through Mr Gihwala, who was
throughout the driving force in dealing with Grancy and the
alter
ego
of the Trust. As he said in his
email of 11 September 2006 he had put the investment agreement
together and he was accordingly
‘the one to deal with’.
In what follows I highlight the principal breaches.
[63]
The first and primary breach, which
coloured all the others, was the refusal from some stage in 2005 or
2006 – the date is
unclear but the breach was made manifest in
the 11 September 2006 email – to accept that Grancy had a
right to a one
third shareholding in SMI. This persisted until March
2009 when Mr Gihwala and the other respondents in the proceedings
brought
by Grancy capitulated and submitted to a court order that it
was entitled to a 31 per cent share in SMI. But the breach had more

far-reaching effects than merely an obdurate refusal to recognise and
implement the investment agreement. It was accompanied by
an equally
obdurate refusal to afford Grancy access to books and records in SMI
that would have enabled it to ascertain what had
occurred with the
money it had invested and a similar refusal to provide a proper
account in relation to that investment. Mr Gihwala
and Mr Manala
divided the benefits accruing from the investment in Ngatana between
themselves to the exclusion of Grancy. The refusal
to account has
persisted from the beginning until the present day. It is exemplified
by the recent judgment by Traverso DJP
and the need for her to
give a detailed order, declaring the respects in which the account
was inadequate and directing what needed
to be done to rectify the
position
[64]
Another area where there were significant
breaches of the agreement related to the investments by Ngatana. In
October 2005 they
were altered by the acquisition of a further 2
million Spearhead units, which of itself might not be thought to be
relevant, had
it not been accompanied by Ngatana increasing its
indebtedness to Standard Bank from the original R38.5 million to
R93.6 million.
That was clearly a significant increase in the
potential risks inherent in the investment and hence in the risks
attaching to Grancy’s
investment. But Grancy was not consulted
over this. Nor was it consulted, notwithstanding its explicit
request, over the attitude
that Ngatana should adopt to the offer by
Redefine to acquire all the linked units in Spearhead. It was not
consulted over the
disposal of all the Redefine units obtained as a
result of this transaction or over the further acquisition of 20
million Redefine
units. Fortunately it does not appear as if this
caused any financial loss to Grancy, but it was nonetheless a most
egregious breach
of the investment agreement. In effect, Grancy found
itself engaged, entirely without its knowledge and certainly without
its consent,
in a different investment to the one in which it had
agreed to become involved. That was a fundamental breach of the
principles
of trust and good faith on which the investment agreement
rested as well as of a tacit term of the agreement.
[65]
But these breaches were accompanied by
several other breaches that did have a detrimental financial impact
on Grancy. From the very
outset Messrs Gihwala and Manala used SMI to
provide themselves with financial benefits to the prejudice of SMI’s
only other
shareholder, Grancy. This started in 2005 when Grancy made
its initial payment of R3.5 million to the firm of attorneys of which

Mr Gihwala was a partner. In terms of the email of 21 February
2005 the amount allocated to the Spearhead transaction was

R3 040 250. That was money that Grancy had lent to SMI. It
should have been reflected as such in Grancy’s ledgers.
But it
was not. It was credited to a loan account for Mr Manala. Had that
not been done that loan account would have been in debit
from the
time of the first payment to Mr Manala in May 2007. In fact the
account was only maintained in credit by crediting it
with ‘promotion
fees’, surety fees and directors’ fees improperly raised.
None of these fees were permissible
but, as explained in more detail
below, their improper crediting to Mr Manala’s loan account
enabled him to withdraw over
R9 million from SMI between 2007
and 2009.
[66]
An equally serious breach occurred in March
2007 when Ngatana repaid the original loan it had received from SMI
to enable it to
conclude the Spearhead transaction. Mr Gihwala and Mr
Manala arranged for the loan portions of their own contributions to
be paid
to them, but deliberately did not repay Grancy the money it
had lent to SMI. Not only did SMI not do so, but it used those funds

to invest in Scarlet Ibis, without informing Grancy and without its
consent. This was a flagrant breach of the investment agreement,

which was confined to an investment in a relatively safe property
investment trust. Fourie J described it as misappropriating funds

that should have been paid to Grancy and I can only endorse that
description. Grancy was now exposed to the risks inherent in any

property development, while its co-investors had secured the
repayment of the money they had invested in SMI, including in Mr
Gihwala’s case the repayment of part of the money lent to Mr
Manala.
[67]
Although Grancy suffered no immediate
financial detriment, the simultaneous decision by Ngatana to pay an
amount of R3 million to
Prescient and SMI in equal shares for their
contribution to setting up the BEE transaction, was a breach of the
investment agreement.
No plausible justification was advanced for the
board of Ngatana agreeing to do this, and it was plainly directed at
prejudicing
the minority shareholders in Ngatana, and Grancy as the
minority shareholder in SMI. Restricting myself to Grancy there is no
question
that it was not intended that it would benefit from this,
had it been paid. The attitude evinced by Mr Gihwala and accepted by
Mr Manala was that Grancy had only an indirect interest in 630 000
Spearhead units and until that overall investment was realised
it was
not entitled to anything at all. Only Mr Manala and the Trust were
intended to benefit from this payment.
[68]
This general attitude manifested itself
when Ngatana paid a dividend to SMI of R5 272 727 in
October 2008. This was immediately
declared as a dividend and paid in
equal shares to the Trust and Mr Manala. After this payment the Trust
and Mr Manala had been
repaid their loans to SMI (insofar as they
ever made those loans, which may be doubted) and received a
substantial dividend, exceeding
the amount of those loans. Grancy,
however, had received nothing. On what basis Mr Gihwala, as the
moving spirit behind these transactions,
could have thought that this
was permissible in terms of the agreement he had concluded with Mr
Mawji, is a mystery. Grancy and
Mr Gihwala, via the Trust, were
making exactly the same financial investment in money terms, yet they
were receiving different
returns on their investment. No sensible
businessperson would ever have agreed to that and there is no
evidence to suggest that
Mr Mawji did so. One is led inevitably to
the conclusion that Mr Gihwala was simply exploiting his position as
the person in control
of the affairs of SMI in order to prefer
himself and Mr Manala over Grancy.
[69]
There were other equally untenable
payments. On 24 June 2009 SMI lent R2 million to Mr
Manala. The heads of argument
on behalf of Mr Gihwala said that
Fourie J erred in finding that ‘the R2 million payment to
Manala was in breach of
the agreement, the payment constituted a loan
to Manala, [and] that this payment resulted in the depletion of SMI’s
assets
by R2 million’, but no argument was advanced in support
of these contentions. Nor did Mr Manala, who was separately
represented,
attempt to justify the loan. The inescapable conclusion
is that with the connivance of Mr Gihwala he was permitted to treat
SMI
as a personal piggy bank.
[70]
Matters
did not end there. On 8 April 2009, shortly after the grant of
the original order that Grancy be registered as a shareholder
of SMI,
Messrs Gihwala and Manala, in a telephone conversation, agreed to pay
themselves directors’ fees in SMI of R2.75
million each. As if
that was not enough they had in March 2008 agreed to pay themselves a
further R1 114 539 as ‘surety
fees’, that is,
as compensation for the suretyships they had given to Standard Bank.
In 2009 these amounts were credited
to the loan accounts of the Trust
and Mr Manala with SMI, and subsequent withdrawals were made against
the resulting credit balances.
The fees were utterly unjustifiable.
The attempt to justify them when they were previously considered by
this Court
[28]
met with this
response:
‘…
not
only is the respondents’ evidence on this score untenable but
its shortcomings are exacerbated by the absence of a cogent

explanation as to why each payment was made in the first place.’
Neither
Mr Gihwala, nor Mr Manala, made any attempt on this occasion to
justify these fees. In fact, Mr Gihwala’s recognition
that they
were untenable was evidenced by the fact that he repaid the money to
SMI on 23 November 2010.
[71]
The last payment to which I must refer as
illustrative of a gross breach of the investment agreement arose on
3 March 2009.
It will be recalled that two years earlier, when
resolving to repay to shareholders their initial loans, Ngatana also
resolved
to pay each of Prescient and SMI an amount of R1.5 million,
but at the time it lacked the funds to put this into effect. On
3
March 2009, a month after the offer to settle the litigation in which
Grancy claimed its share in SMI, Ngatana passed a fresh
resolution.
It provided for the payment to Prescient of a ‘management fee’
of R1.5 million and for the payment
to each of Mr Gihwala and Mr
Manala of R750 000 as ‘directors’ fees’. The
earlier resolution would have
paid this amount, that is, R1.5 million
to SMI, where it would have been available to the Trust and Mr
Manala, on the basis
then being contended for that they were the only
shareholders in SMI. No explanation was advanced for this resolution,
nor any
explanation of what had happened to the earlier resolution.
The inference is that it was simply a different way of giving effect

to the original intention. Mr Gihwala and Mr Manala would be enriched
at the expense of Grancy.
Grancy’s
monetary claims
[72]
The prime mover in committing these
breaches of the investment agreement appears to have been Mr Gihwala.
But Mr Manala and the
Trust, as his collaborators in resisting
Grancy’s claims for recognition as a shareholder in SMI as well
as his claims for
access to information and a proper accounting in
relation to its investment, were parties to those breaches.
Furthermore, one or
other or both of them were the beneficiaries of
all the payments made in breach of the agreement. Grancy’s
monetary claims
must be considered against that background.
[73]
The
principle underpinning the claims was straightforward. Grancy
contended that, had there been no breach of the investment agreement,

funds that were diverted to other purposes in either Ngatana or SMI
would have flowed through to SMI’s shareholders by way
of
dividends.
[29]
As they were
diverted the shareholders did not receive what they would otherwise
have received by way of a return on their investment.
Grancy’s
own loss was calculated on the basis that, if these funds had been
available for distribution by SMI and had been
distributed, it would
have received 31 per cent of them. The amount that it did not receive
represented its monetary loss arising
from the various breaches of
the agreement. The propriety of this mode of calculation was not in
issue.
[74]
Mr Gihwala and Mr Manala attacked the
judgment in respect of most of the monetary claims on the ground
that, if valid, they were
claims in the hands of SMI and could not be
pursued by Grancy in the light of the rule in
Foss
v Harbottle
. That is something to which
I shall return. First it is necessary to consider whether the claims
were established on the basis
on which they were advanced. Although
we received oral argument on only three claims, they were all dealt
with in the heads of
argument of Mr Gihwala and I shall likewise deal
with each one separately. In doing so I draw no distinction between
the monetary
claims advanced in the 2010 action and those advanced in
the 2011 action. Once I have dealt with the merits of each claim and
who
is liable in respect of them I shall turn to consider whether any
of them are excluded by the application of the rule in
Foss
v Harbottle
.
The
repaid amount
[75]
The largest monetary claim related to what
was described as the ‘repaid amount’. This was the amount
of R6 657 673
paid by Ngatana to SMI on 15 March 2007 as
repayment of the initial loan by SMI to Ngatana enabling it to
acquire the Spearhead
units in terms of Spearhead’s BEE
transaction. These funds were used by SMI to refund the loans made by
the Trust and Mr
Manala, with an adjustment to allow for the fact
that Mr Manala had borrowed money from Mr Gihwala in order to
contribute his share.
The balance was used to make the investment in
Scarlet Ibis. Grancy received nothing in respect of its contribution
of R2 051 833.34.
[76]
There were some minor quibbles over the
trial judge’s description of the source of the R6 657 673,
but any misdescription
did not affect his conclusion. The attack on
the claim was based on the contention that the loan by Grancy was
only repayable when
the Spearhead investment was finally unwound and
that the loan included an amount of R75 000 in respect of SMI’s
costs,
which was not repayable. Neither contention was justified. It
was irrelevant whether it was originally anticipated that the initial

loan would only be repaid when the Spearhead transaction was unwound.
The reality was that Ngatana repaid the entire loan before
that. When
the decision was made to repay the Trust and Mr Manala, the principle
of parity of treatment of the investors dictated
that Grancy should
also have been repaid. As regards the fact that the original loan
included an amount in respect of SMI’s
costs in setting up the
transaction, this was neither here nor there. The costs were funded
by way of the loan and the loan had
to be repaid. Fourie J was
correct to uphold this claim.
The
Scarlet Ibis investment
[77]
Fourie J made a separate award of damages
in respect of the investment in Scarlet Ibis. He held that this
amount would have been
available to fund further dividends in SMI and
had been irrevocably lost. In the result he awarded Grancy damages of
R620 000,
equivalent to 31 per cent of the R2 million
investment. He rejected the submission that this was a duplication of
his award
in respect of the failure to repay Grancy’s loan. In
my respectful view he was wrong to do so. The source of the funds
used
to make the investment was Ngatana’s repayment of SMI’s
original loan to it. Had those funds been dealt with in accordance

with the investment agreement they would have been used to repay
Grancy’s loan to SMI. Instead they were invested in Scarlet

Ibis and lost. But Grancy’s loss as a result cannot exceed the
amount that it would have received had it been repaid in compliance

with the investment agreement. In that event there would have been no
funds available to invest in Scarlet Ibis and no loss arising
from
such investment. The appeal against this award of damages must
succeed.
Promotion
fees
[78]
There
was considerable confusion in regard to this claim. In his email of
21 February 2005, Mr Gihwala said that SMI had incurred
costs of
R225 000 in setting up the transaction. He included in the
amount Grancy was to invest an amount of R75 000
in respect of
these costs. But that amount was part of the overall loan made by
Grancy and was included in the claim in respect
of the repaid
amount.
[30]
It could not form
part of another claim.
[79]
It is unclear whether any costs were
incurred as alleged by Mr Gihwala. In his opening address at the
trial counsel for Grancy said
that none were, and he added that the
accounting treatment of these amounts was inappropriate. Mr
Greenbaum, Grancy’s expert
witness, confirmed this. He drew
attention to the fact that in SMI’s ledgers the Trust’s
and Mr Manala’s loan
accounts had each been debited with
R75 000 as promoter’s fees for Mr Manala. Then Mr Manala’s
loan account had
been credited with R150 000 as promoter’s
fees. The net effect of this, as the loan accounts show, is that the
credit
balance in Mr Manala’s loan account was increased by
R75 000 at the cost of the Trust. It had no impact on Grancy at

all.
[80]
In para 29 of the particulars of claim it
was alleged that in the financial year ending in February 2006, Mr
Manala and either the
Trust or Mr Gihwala had impermissibly credited
themselves with promotion fees in an amount of R75 000. In para
47.7 it was
alleged that these promotion fees had been credited in an
amount of R225 000 and judgment was sought in favour of Grancy
for
R75 000. The discrepancy between the two figures was
apparent and made no sense.
[81]
The judgment proceeded on the footing that
a total amount of R225 000 was credited to Mr Manala, Mr Gihwala
and/or the Trust
and reflected in SMI’s detailed income
statement as at 28 February 2006. It held that there should have been
an equal distribution
of this amount among the investors in
accordance with the principle of parity and awarded damages
equivalent to 31 per cent of
that amount. But that involved a
misconception. This amount appeared in the income statement, but as
an expense item under the
heading ‘legal fees’. Mr
Greenbaum explained that this was incorrect because no legal fees had
been incurred. But he
then characterised it as having been ‘designed
nominally to enrich Gihwala and/or Manala’. What the basis was
for that
statement he did not explain. When he came to give evidence
on the topic he drew attention to the entries in the loan accounts of

the Trust and Mr Manala and said that there was no invoice for the
legal fees shown in the trial balance and the annual financial

statements. The R225 000 in the income statement under the
heading ‘legal expenses’ was a red herring. Its
characterisation
in the particulars of claim as promotion fees merely
added to the confusion.
[82]
The correct position on the material before
this Court is that the R75 000 contributed by Grancy for costs
of establishing
SMI is included in the amount for which judgment was
given in respect of its loan to SMI under the rubric of the repaid
amount.
Upholding that claim reverses the effects of crediting Mr
Manala’s loan account with money obtained from Grancy. There
was
no credit or payment to Mr Manala or anyone else of R225 000.
Instead Mr Manala’s loan account was credited with a net

R75 000 at the expense of the Trust. This did not prejudice
Grancy in any way. Accordingly the appeal in respect of the damages

awarded under this head must succeed. On the evidence in this case
that award should not have been made. I note that Traverso DJP
dealt
with this in para 11.31 of her judgment and justifiably found the
entries in respect of the amount of R225 000 mystifying.
The
fact that the award of damages under this head is set aside does not
amount to a decision that once there has been a proper
explanation of
these entries Grancy may not have a claim. All that this judgment
does is to hold that the claim pleaded in the
2010 particulars of
claim was not proved.
Legal
fees
[83]
The foundation for this claim was a
provision for legal fees in an amount of R300 000 in the annual
financial statements of
SMI for the year ended 28 February 2009. In
the following year this provision was reduced by R75 000.
However, there is no
mention in the evidence of any accounts having
been discovered that reflected these fees having been charged and
paid. Mr Gihwala
argued that accordingly there was no proof that any
such fees had been paid. I agree that the mere fact of the provision
appearing
in accounts, the correctness of which was highly debatable,
did not prove that SMI had paid any amounts in respect of legal
expenses,
much less paid bills for which any of Mr Gihwala, the Trust
or Mr Manala, were responsible.
[84]
But a number of fee notes were produced
showing that SMI had been charged various amounts by the firm of
attorneys representing
Mr Manala and SMI in the litigation. The fee
notes related, with two exceptions, to fees charged during 2009 and
2010 by counsel
representing Mr Gihwala and the Trust. No explanation
was proffered that would justify Mr Gihwala’s and the Trust’s

legal bills being paid by SMI. As these on their face amounted to
more than R300 000 that might have provided a justification
for
this award of damages, but for what follows.
[85]
The claim was dependent upon an analysis
presented by Grancy’s counsel and annexed to its heads of
argument. That analysis
was defective, as emerged when investigating
a passing and unsubstantiated submission on behalf of Mr Gihwala that
a claim arising
from a loan to Mr Manala for the purposes of repaying
Grancy’s loan duplicated the claim in respect of the repaid
amount.
On investigation it became apparent that there was an overlap
between the claim for legal expenses and the claim in respect of that

loan. The outcome must be that the amount of the claim arising from
the payment of legal expenses should be reduced.
[86]
The attorneys’ ledger account annexed
to Grancy’s heads of argument included six invoices from the
attorneys in respect
of the fees of counsel appearing for Mr Gihwala
and the Trust. They totalled R241 303.78. These invoices were
debited to SMI’s
ledger account with the attorneys. However,
the ledger reflected only R134 720 as paid by SMI in respect of
these fees. An
amount of R58 140 was transferred from another
account and Mr Gihwala paid the balance personally. So, on the face
of it,
the only improper charging of fees to SMI related to the
R134 720.  The remaining fee accounts annexed to Grancy’s

heads of argument were debited to a different ledger account in the
name of Mr Manala. The transfer of R58 140 also came from
that
account. The funds used to pay these accounts came from the second
loan made to Mr Manala dealt with in the following section
of this
judgment. As that is subject to a separate claim, the claim for legal
expenses based on these accounts involved a duplication
of claims.
Accordingly Fourie J correctly upheld this claim, but the amount must
be reduced to take account of this duplication.
The correct figure is
R41 763.20, being 31 per cent of R134 720.
Loans
to Mr Manala
[31]
[87]
On 24 June 2009 pursuant to a resolution of
the directors of SMI, that is, Mr Gihwala and Mr Manala, dated 15
June 2009, SMI advanced
what was referred to as a loan of R2 million
to Mr Manala. In fact the resolution said that it was a payment in
reduction
of his loan account, but that could not be correct because
it would have resulted in his loan account reflecting a debit
balance.
Mr Gihwala told the auditors that it was a payment made in
error. It was reflected as an ‘overpayment’ in Mr
Manala’s
loan account in the general ledger of SMI. What is
certain is that this sum was paid to Mr Manala on 24 June 2009.
However the
payment was characterised it was plainly made in breach
of a number of the provisions of the investment agreement, as well as
the
provisions of s 226 of the 1973 Act, and it was not
suggested otherwise in argument before us. Instead it was argued that
in 2011, when a dividend of R3 450 000 was due to Mr
Manala, it was credited to his loan account less the amount of the

loan and interest. It was submitted that this ‘set off, with
interest, the payment previously (and erroneously) paid to Manala,

resulting in a repayment of the loan’. For the purposes of
considering this argument I assume that it was open to Mr Manala
to
appropriate the dividend credited to his loan account to the
repayment of the loan.
[88]
The difficulty is that in cash terms SMI
was no better off after the crediting of Mr Manala’s loan
account. When the loan
was advanced Mr Manala received R2 million
in cash. Had the loan not been made SMI would have had that
R2 million at
its disposal. In accordance with the terms of the
investment agreement those funds, being surplus to its needs, could
and should
have been distributed to the shareholders. In that event
Grancy would have received R620 000. It has received nothing as
a
result of the repayment of this loan and no attempt was made to
show that SMI was thereby placed in a position where it could
distribute
R2 million (or anything at all) to shareholders. This
highlights the fact that the question whether Grancy suffered losses

is not to be determined by book entries, but by having regard to the
actual flow of money in consequence of the disputed transactions.

That is why the appeal in respect of the award of damages arising
from the Scarlet Ibis investment must succeed and why the appeal

against the award in respect of the loan to Mr Manala must fail.
[89]
Also on 24 June 2009, a further amount of
R1 976 523.34 was paid to Mr Manala as a loan. The
ostensible reason was to
enable him to repay Grancy its original loan
to SMI, less the R75 000 in respect of the alleged costs of
establishment. Doing
this reflected the contention advanced by Mr
Gihwala in the email of 28 June 2006 quoted in para 16 above, that
Grancy came in
‘behind’ Mr Manala and that strictly
speaking its investment ‘was with Lance’. From this
flowed the attitude
that it was the latter who was responsible for
repaying the loan made by Grancy to SMI. Of course, in the light of
the concession
that Grancy was entitled to a shareholding in SMI this
was palpable nonsense. Mr Manala tendered to pay this amount to
Grancy but
the tender was justifiably refused. The money was then
used by Mr Manala to fund his legal expenses and for other personal
purposes.
It has not been repaid.
[90]
This loan was as unjustifiable and unlawful
as the payment to Mr Manala of R2 million made at the same time.
It has not been
repaid and SMI’s resources for the purpose of
making distributions to investors were diminished thereby. Mr Gihwala
submitted
that only Mr Manala had an obligation to repay it, which
may be correct insofar as SMI is concerned, but that does not bear
upon
his liability for breaches of the investment agreement. He also
submitted that the claim in this respect was a duplication of
Grancy’s
claim to the Repaid Amount. That is incorrect. In
relation to the Repaid Amount there was money available to repay
Grancy’s
loan, which was diverted to the Scarlet Ibis
investment and lost. Here a further amount was diverted to Mr Manala
and not repaid.
Had that not occurred it would have been available
for distribution to investors and hence, in part, to Grancy. This
claim was
properly upheld.
Ngatana
directors’ fees
[91]
The train of events in this regard was
dealt with in paras 67 and 71. In 2007 Ngatana resolved to pay SMI
and Prescient R3 million
in equal shares. Had the payment been
made it would have enured to the detriment of the minority
shareholders in Ngatana and, for
so long as Grancy was excluded as a
shareholder in SMI, it too would have been excluded from the benefit
of SMI’s receiving
this amount. In March 2009, after the offer
to settle the proceedings in which Grancy sought to be registered as
a 31 per cent
shareholder in SMI, Ngatana passed a new resolution
agreeing to distribute R3 million, by way of a payment of
R1.5 million
to Prescient and by way of the payment of
directors’ fees of R750 000 to each of Mr Manala and Mr
Gihwala.
[92]
Fourie J held that there was no evidence
linking the two resolutions. I disagree. The identity of the total
amount involved –
R3 million – and the peculiar
structure of the resolution in March 2009, where the two SMI
directors received directors’
fees and the two Prescient
directors did not, cried out for an explanation, which was not
forthcoming. The earlier resolution had
not been rescinded and it
revealed a clear intention to appropriate R3 million of funds in
Ngatana for the benefit of Prescient
and SMI, which, at the time,
meant for the benefit of Messrs Gihwala and Manala. Then, out of the
blue in 2009, a fresh resolution
appropriating the same sum for the
benefit of the same parties was passed by Ngatana. This occurred at
precisely the time when
Messrs Gihwala and Manala were reluctantly
conceding that Grancy was entitled to a shareholding in SMI.
Furthermore, when Messrs
Gihwala and Manala agreed to this
resolution, that involved a breach of the provisions of the
investment agreement set out in paras
58 (g), (i) and (k).
[93]
It follows that, subject to the argument in
relation to the application of the rule in
Foss
v Harbottle
, the cross-appeal in
respect of this item should succeed. Messrs Gihwala and Manala
received in total R1.5 million that should
have been available
to SMI for distribution. Grancy was thereby deprived of its 31 per
cent interest in that amount. Its claim
for payment of R465 000
plus interest at 15.5 per cent per annum from 3 March 2009 to date of
payment should have been upheld
by the trial court.
Late
payment of dividends
[94]
In October 2008 SMI received a dividend of
R5 272 727 from Ngatana. It promptly declared a dividend in
that amount and
paid it in equal shares to the Trust and Mr Manala.
But for their breaches of the investment agreement, Grancy would have
received
a dividend at that time of R1 634 545.37. Instead
that amount was only paid to it on 29 June 2009. It claimed the loss

of interest of R213 789.57 from Messrs Gihwala and Manala.
[95]
One other dividend received by SMI from
Ngatana was in due course distributed to SMI’s shareholders in
proportion to their
respective shareholdings. But those distributions
took place substantially after SMI received the dividend from Ngatana
in March
2009. The claim was for the lost interest on the basis that
a dividend should have been paid to the investors by 26 March 2009.

Instead it was paid in two tranches on 19 August 2009 and
6 January 2010. Grancy’s claims were for interest on
the
amount of each dividend paid to it from 26 March 2009 to the two
payment dates.
[96]
The judgment proceeded on the footing that
Messrs Gihwala and Manala had been paid their share of this latter
dividend before Grancy.
That was incorrect. But no excuse was
advanced for the delay in making payment. SMI had no reason to delay
the payment of dividends
once the money was received from Ngatana.
That was evidenced by the celerity with which the October 2008
dividend was paid to Messrs
Gihwala and Manala. The fiduciary duty
owed to Grancy, combined with the obligation to distribute funds
received from Ngatana referred
to in para 58(j) above, required
prompt distribution of dividends. There was therefore a breach of
their obligations under the
investment agreement. The calculation of
Grancy’s resultant loss on the basis of a loss of interest was
not challenged. These
claims were correctly held to be good claims.
Directors’
remuneration and surety fees
[97]
It is convenient to deal with these
together. I have already described in para 70 how these amounts were
credited to the loan accounts
of the Trust and Mr Manala, enabling
withdrawals to be made against those accounts at a later stage. Mr
Manala did not deal with
these credits. Mr Gihwala advanced no
argument to justify the directors’ remuneration as not being in
breach of the agreement.
There was some attempt to justify the surety
fees, but it was without merit. He argued that because he had repaid
these amounts
to SMI his liability was discharged and that Mr Manala
was separately liable for his share. I will need to revert to the
issue
of joint and several liability when I deal with the liability
of the Trust, so content myself, at this stage, with saying that the

claim in respect of the amounts credited to Mr Manala under this head
was sound.
Share
of the Residue
[98]
Under this heading Grancy sought an order
in the 2010 action for payment of what it termed its portion of the
share of the residue.
It asked for an order that this be paid to it
together with interest from 26 March 2009. The pleaded basis for this
claim was that
Grancy’s investment in Spearhead units was
realised fully when by 12 March 2009 Ngatana had disposed of all the
Redefine
units obtained in return for the Spearhead units. It claimed
that the amount of its share of the residue could be calculated in

accordance with a formula.
[99]
I have considerable difficulties with this
claim. Its underlying premise is that Grancy invested in a defined
number of Spearhead
units and that this investment came to an end in
March 2009, so that it was entitled to be paid whatever remained of
that investment
as at that date. This effectively disregarded the
corporate identity of both SMI and Ngatana and treated the investment
as one
in Spearhead units. But that was impermissible. Although both
Ngatana and SMI were SPV’s established for the purpose of
implementing
and participating in the Spearhead BEE transaction,
Grancy’s interest was not directly in the units but in SMI,
subject to
the terms of the investment agreement.
[100]
Another
problem is that the claim ignored the fact that the original
Spearhead investment by Ngatana had been transformed. The initial

acquisition of 3.5 million units with a loan facility of R38.5
million had become an investment in 5.5 million units with
a loan
facility of R93.6 million. Those units had become 33.99 million
Redefine units in 2006. Prior to the implementation of the
order
recognising Grancy as a shareholder in SMI, the original block of
Redefine units had been sold and a further 20 million
acquired
through fresh loans. The investment in SMI remained the same, as did
SMI’s stake in Ngatana, but the underlying
investment had
altered, initially in extent and subsequently in substance. This
cannot be ignored. The moving finger had writ and
moved on and, as
the poet instructs us, it is not possible to disregard that or
overlook it.
[32]
[101]
There
is a further objection. After Grancy secured its stake in SMI it
received substantial payments by way of dividends totalling
in all
about R14.5 million. These payments were generated from the
disposal of the original holding of Redefine units. Grancy
has been
happy to accept these payments from that source, but they were not
paid on the basis of the original investment in Spearhead.
They were
the product of the transformed investment. The first and second loans
from Standard Bank have been repaid and Grancy
retained an interest
in SMI, which in turn had an interest in Ngatana. As at the most
recent set of annual financial statements
Ngatana held 20 million
Redefine shares. Assuming that is still the position, and we were not
told otherwise, it is a substantial
investment.
[33]
But even if it is no longer in existence, bearing in mind that the
loan facilities granted to purchase the 20 million shares were
both
due for repayment prior to the trial, that does not affect the
matter. To uphold this claim would involve Grancy receiving
and
retaining benefits from the changes in investment by Ngatana, while
seeking to be paid on the basis of the original investment
by that
company. That is not in my view permissible. Accordingly Fourie J was
correct to dismiss this claim and the cross-appeal
relating to it
must fail.
Liability
for the monetary claims
[102]
Fourie
J held Mr Gihwala and Mr Manala liable to pay the monetary claims
jointly and severally. The cross-appeal seeks to add the
Trust as
liable jointly and severally with them in relation to certain of
those claims.
[34]
By contrast
the appeal challenges the finding that the liability of the
contracting parties was joint and several. I will address
each point
in turn.
[103]
I have already held that the Trust was a
party to the investment agreement. As such it owed the same fiduciary
duties to Grancy
as did Mr Gihwala and Mr Manala. It is so that the
monetary claims arise from the actions and decisions of Mr Gihwala
and Mr Manala.
Were the Trust represented by someone other than Mr
Gihwala, so that it could claim ignorance of their actions, the
position might
have been different. But when Mr Gihwala, in his
capacity as a party to the investment agreement and as a director of
SMI and Ngatana,
took the decisions that gave rise to these claims,
he was obliged in his capacity as trustee of the Trust not to do so.
That would
have been the obligation of an independent trustee and it
is unaltered by the fact that Mr Gihwala was acting in two
capacities.
He could not discard his trustee hat when acting as a
director. Accordingly I am of the view that the Trust was as much a
party
to the breaches of the investment agreement as were Messrs
Gihwala and Manala. Grancy’s damages claims arising from those

breaches therefore lie against the Trust as well.
[104]
We
were referred to the passage in
Christie
[35]
where the authors say that there is a presumption that obligations
entered into jointly are joint and not joint and several and
that the
presumption is a strong one. But the same authors say
[36]
that where the contract by express words or necessary implication
imposes liability
in
solidum
that liability is joint and several. The issue must be determined by
having regard to the terms of the contract and the nature
of the
relationship thereby created among the parties to that contract.
[105]
The
duty of good faith that formed an integral part of the terms of this
contract could in this case only be breached by the joint
conduct of
Messrs Gihwala and Manala (because they were the directors and acted
jointly) and, through Mr Gihwala, the Trust. The
obligations they
undertook to Grancy were indivisible. They carried with them
fiduciary duties of good faith that are characteristic
of
partnership, where liability is joint and several. In
Langermann
v Carper
[37]
Solomon J said that whether a transaction among businesspeople was
described as a joint venture or a partnership ‘the same

consideration must apply to the dealings of the several parties among
themselves as would be applied in the case of an ordinary

partnership’. Grosskopf AJ cited that passage with approval in
Koornklip
Beleggings
,
[38]
a case bearing some similarity to the present one. It involved an
agreement among various parties to make an investment by way
of
subscription for shares in a company formed to exploit a diamond
concession. Grosskopf AJ described the relationship as analogous
to a
partnership. The same is true here. In my view, the closer the
relationship between the parties to that which one expects
to exist
between partners, the more likely it is that any liability will be
joint and several.
[106]
A
helpful explanation of when liability
in
solidum
arises
appears in
Wessels
.
[39]
Liability as debtors
in
solidum
exists if the debtors have promised the same thing to the creditor in
such a way that the creditor can demand from each debtor
performance
of the entire obligation. Two essentials must be present. The first
is that each debtor must be separately liable as
completely as if
they were the sole debtor. The second is that each debtor should be
debtor of the same thing or the same amount
of money, not merely a
similar thing or a similar amount of money. In my view that is the
case here. Grancy was entitled to demand
the same thing from each of
Mr Gihwala, the Trust and Mr Manala. They each had to discharge the
same duty of good faith in the
same way. They are each liable in this
case for the same thing, namely the same breach of obligation and the
same damages. In my
view their liability was joint and several and
Fourie J was correct in holding that.
Foss
v Harbottle
[107]
It
is a curious feature of this case that we are asked to apply a rule,
or more accurately a combination of rules, of ancient origin
that has
been abolished in the country of its birth.
[40]
The rule has two components. The first recognises that a company is a
separate legal entity from its shareholders and accordingly,
in the
ordinary course, any loss caused to the company must be recovered by
the company, and not by its shareholders on the basis
of the
diminution in the value of their shares or the loss of dividends they
had anticipated. The second recognises the need for
exceptions to
this principle in order to avoid oppression and permits a shareholder
to recover loss caused to the company by way
of what is termed a
derivative action. In certain circumstances it also permits recovery
of the shareholder’s own loss.
[108]
A
helpful summary of the rule and its different elements is to be found
in the following passage from the leading case of
Prudential
Assurance Co Ltd v Newman Industries Ltd and Others (No 2)
(
Prudential
Assurance
):
[41]
‘
The
classic definition of the rule in
Foss v
Harbottle
is stated in the judgment of
Jenkins LJ in
Edwards v Halliwell
[1950] 2 All ER 1064
at 1066 - 7 as follows. (1) The proper plaintiff
in an action in respect of a wrong alleged to be done to a
corporation is,
prima facie
,
the corporation. (2) Where the alleged wrong is a transaction which
might be made binding on the corporation and on all its members
by a
simple majority of the members, no individual member of the
corporation is allowed to maintain an action in respect of that

matter because, if the majority confirms the transaction,
cadit
quaestio
; or, if the majority
challenges the transaction, there is no valid reason why the company
should not sue. (3) There is no room
for the operation of the rule if
the alleged wrong is
ultra vires
the corporation, because the majority of members cannot confirm the
transaction. (4) There is also no room for the operation of
the rule
if the transaction complained of could be validly done or sanctioned
only by a special resolution or the like, because
a simple majority
cannot confirm a transaction which requires the concurrence of a
greater majority. (5) There is an exception
to the rule where what
has been done amounts to fraud and the wrongdoers are themselves in
control of the company. In this case
the rule is relaxed in favour of
the aggrieved minority, who are allowed to bring a minority
shareholders' action on behalf of
themselves and all others. The
reason for this is that, if they were denied that right, their
grievance could never reach the court
because the wrongdoers
themselves, being in control, would not allow the company to sue.’
[109]
The
parameters of the rule are apparent from this passage. It precludes
shareholders from suing in their own right where the claim
is one in
respect of a wrong done to the company causing it to suffer loss.
That is so even where the result is to diminish the
value of the
shareholder’s shares or deprive them of a dividend and the
company has declined or failed to take steps to recover
the loss. On
the other hand, where there is no wrong to the company, but only one
to the shareholder, there is no reason to bar
the shareholder from
suing. That is so even if the measure of the shareholder’s loss
is the diminution in value of their
shareholding. Those two
propositions appear clearly from the speeches of Lord Bingham of
Cornhill
[42]
and Lord
Millett
[43]
in
Gore
Wood
.
[110]
There is a third case described by Lord Bingham
[44]
in
Gore
Wood
in
the following terms:
‘
Where
a company suffers loss caused by a breach of duty to it, and a
shareholder suffers loss separate and distinct from that suffered
by
the company caused by a breach of duty independently owed to the
shareholder, each may sue to recover the loss caused to it
by breach
of the duty owed to it but neither may recover loss caused to the
other by breach of the duty owed to that other.’
[111]
It was unclear under which leg of the rule
it was contended that Grancy’s claims were precluded. Grancy’s
claims were
undoubtedly claims arising from breaches of obligation
separate and distinct from any claim that SMI may have had. They
arose from
obligations owed to Grancy by Mr Gihwala, the Trust and Mr
Manala under the investment agreement. As such they appeared to fall

in the third category referred to in para 110.  It is true that
in respect of all of them, save that for loss of interest
on the late
payment of dividends, the measure of Grancy’s loss was the
pecuniary loss arising from SMI’s failure either
to repay its
loan account or distribute surplus funds to its shareholders by way
of dividends. But the fact that SMI did not have
the funds available
for this purpose because they had been diverted elsewhere does not
mean that SMI had a claim to recover those
amounts. A brief
examination of the different claims is called for.
[112]
The claim for the repaid amount cannot, as
I have held, be separated from the decision to invest in Scarlet
Ibis. The funds that
should have been used for the former purpose
were used for the latter. That is why Fourie J said that this was a
‘wilful
misappropriation of Grancy’s funds’. But
the investment in Scarlet Ibis was an investment that SMI was
entitled to
make. The impropriety arose not because it exceeded the
permissible limits of SMI’s investment powers, but because the
investment
agreement imposed an obligation not to engage in such an
investment without Grancy’s consent and an obligation to use
these
funds to repay Grancy’s loan. No basis was suggested for
saying that SMI could recover the money invested in Scarlet Ibis
from
anyone. Nor could it recover from the Trust and Mr Manala the money
used to refund their initial loans to SMI. It follows
that this claim
is not affected by the
Foss v Harbottle
rule.
[113]
Under the investment agreement SMI should
not have paid legal fees on behalf of Mr Gihwala and the Trust. That
does not mean that
it would have a claim to recover those fees from
the attorneys. If they agreed to pay the fees, as seems to have been
the case,
the attorneys were entitled to receive and keep them. There
is nothing wrong in principle with a person paying another’s
debt. Nor was there evidence explaining on what basis this was done
as between SMI and Mr Gihwala. Not surprisingly it was not argued
on
his behalf that he breached his fiduciary duties to SMI in making
that arrangement. So we are in the dark in regard to the basis
for
any claim by SMI against anyone to recover the amount of the fees.
[114]
The directors’ fees and surety fees
may have been irregular in that they were not approved as required by
article 107 at a
general meeting of shareholders. But it was not
suggested that, if divorced from the investment agreement, SMI could
not have decided
to make these payments. They seem grossly
extravagant in relation to the actual contribution of the directors –
a common
plaint by shareholders – but that alone does not mean
that the company would have been entitled to recover them if properly

sanctioned by a general meeting. And at a general meeting Grancy
would have been outvoted. Grancy’s claim is not an altruistic

claim to recover these amounts for the benefit of SMI. Its claim is
that as a result of breaches of the investment agreement it
has
suffered financial loss. That is not precluded by the rule.
[115]
That
leaves the two loans to Mr Manala. Apart from breaching the
investment agreement they were unlawful in terms of s 226
of the
1973 Act. This rendered them void
ab
initio
and
incapable of
ex
post facto
ratification.
[45]
In
Prudential
Assurance
it
was said that the rule in
Foss
v Harbottle
did
not apply when the matter was
ultra
vires
the
company or required a special resolution in order to authorise the
act in question. The reason for these exceptions, which must
apply
equally to conduct that is prohibited by statute, is that the
minority shareholder has no means of compelling the errant
majority
to take steps to remedy the conduct in question, in this case to sue
Mr Manala to recover the amount of the loans. Absent
an exception to
the rule it would be possible for the majority to perpetuate conduct
that was contrary to law or the articles of
the company, by the
simple expedient of doing nothing. Under s 226 an unauthorised
loan to a director could not be authorised
after it had been made. So
both loans fell within the exception to the rule. That conclusion
renders it unnecessary to consider
whether they also fell within the
fraud exception referred to in that case or the interests of justice
exception referred to in
Foss
v Harbottle
itself
and applied in
McLelland
v Hulett
.
[46]
[116]
For those reasons it seems to me that the
reliance on the rule in
Foss v Harbottle
was misplaced in relation to all of the
monetary claims advanced by Grancy. They must succeed or fail in
accordance with paras 75
to 101.
Section
424 liability
[117]
In the particulars of claim in the 2010
action Grancy invoked s 424 of the 1973 Act as a ground of
liability in relation to
three claims. They were the claim in respect
of the repaid amount and those in respect of promotion fees and legal
expenses. In
the 2011 action it sought to found liability for all the
monetary claims it advanced in either s 424 or alternatively
s 77(3)
of the 2008 Act. Fourie J rejected all these claims,
save that in relation to the repaid amount, but Grancy pursued them
by way
of its cross-appeal. Indeed it went further by seeking to
extend the application of s 424 to all the monetary claims in
the
2010 action, both those that had been upheld by Fourie J and
those that were the subject of the cross-appeal.
[118]
It was throughout unclear why Grancy should
continue to pursue s 424 relief if it was successful in its
contractual claims.
A declaration under s 424 would add nothing
to the liability of Mr Gihwala, Mr Manala and the Trust to pay the
damages awarded.
The proposition in the heads of argument that it
would ‘impose statutory and unlimited personal liability’
on them
does not identify on what basis this was any greater
liability than a judgment ordering them to pay the damages that were
claimed.
But this need not detain us because I am satisfied that the
claims based on s 424 must fail.
[119]
In
at least three relatively recent decisions of this Court it has been
held that s 424 is only available to a claimant where
the
company is unable to pay its debts and therefore recovery of the
claimant’s claim is imperilled.
[47]
Not only did Grancy not plead a case based on SMI’s inability
to pay any of the claims it was advancing, but it led no evidence
in
support thereof. Instead it relied in argument on the contents of
some emails sent by independent directors of SMI when seeking
funds
to conduct an investigation into the affairs of SMI. Even that
evidence did not emerge in the course of presenting Grancy’s

case. It emerged when counsel for the Trust was cross-examining Mr
Mawji on a completely different issue. I agree with Mr Gihwala’s

counsel that to permit reliance on them for the purpose of showing
that SMI was unable to pay its debts would be unfair and amount
to
trial by ambush.
[120]
We were also urged to hold that the three
cases I have mentioned were wrongly decided because they overlooked
the use of the words
‘or otherwise’ in s 424 and
also because, so it was said, the judgments overlooked s 219(1)
(d)
of the 1973 Act. The circumstances in
which this Court will overrule one of its own decisions, much less
three, particularly when
they are of recent origin, are limited. It
suffices for me to say that I am not satisfied that these decisions
were clearly wrong.
Accordingly the cross-appeal insofar as it
relates to s 424 must fail, whether that related to claims in
the 2010 action or
claims in the 2011 action. In relation to the
latter the claim was advanced in the alternative under s 77(3)
of the 2008 Act.
That section, in this departing from s 424,
does not involve a declaration by the court, but creates a statutory
claim in
favour of the company against a director, imposing liability
on the latter for any loss, damages or costs incurred by the company

in certain circumstances, including where the director acquiesces in
the company engaging in reckless trading. It is not a provision
that
can be invoked to secure payment to a creditor or shareholder in
respect of their claim against the company or a director.
So the
attempt to rely on s 77(3) must also fail.
Right
to an account and access to accounting records
[121]
At the outset of his argument counsel for
Mr Gihwala accepted that the investment agreement gave rise to a
relationship of trust
and good faith as between Grancy, Mr Gihwala
and Mr Manala. This implied that Mr Gihwala and Mr Manala owed Grancy
a duty to account
for their stewardship of its investment in SMI and
indirectly in Ngatana. It also included an obligation to provide
Grancy with
access to the books and accounting records of SMI.
Counsel for Mr Manala and counsel for the Trust did not question the
correctness
of these concessions. Once it is held, as I have done,
that the Trust and SMI were also parties to the investment agreement,
they
owed the same obligations.
[122]
Details of the gross deficiencies in the
books of account and records of SMI were canvassed in the evidence
and are summarised in
the judgment of the High Court. The accounting
records were plainly in a deplorable state. Fourie J ordered SMI, Mr
Gihwala and
Mr Manala to deliver to Grancy, within 30 days, proper
and full books of account and such accounting records as would be
necessary
fairly to present the state of affairs and business of
third defendant, and to explain the transactions and financial
position
of the business of third defendant for the period January
2005 to date of his judgment.
[123]
My concern with this order is two-fold.
First, the requirement that proper and full books be produced as well
as explanations for
the transactions and financial position of the
business overlaps to a substantial degree with the existing order to
render an account
that has been the subject of the various orders
referred to above, most recently that of Traverso DJP. The detail
that she has
ordered to be produced will inevitably clarify the
uncertain picture that emerged at the trial. Second, and more
importantly, if
such books of account and records did not exist or
existed only in an imperfect form and had to be reconstructed, albeit
unsuccessfully,
for the purposes of the trial, the order made in this
case relates to books and records that did not exist. An entitlement
to access
to books and records is not a right to a meticulous set of
books properly kept and accurately reflecting the affairs of the
business.
It is a right to have access to whatever books and records
the business has kept. But the terms of the order granted by Fourie J

would oblige SMI to create a ‘full and proper’ set of
books of account and accounting records and provide explanations
that
would be part of an accounting.
[124]
It is not disputed that Grancy has been
denied access to the books of account and accounting records of SMI.
It is accordingly entitled
to an order, but the terms of that order
must be limited to the books of account and accounting records that
exist. The order granted
by Fourie J must be varied accordingly.
[125]
Turning then to the accounting that was
ordered, the scope for argument was narrowed by the concessions
referred to in para 121.
It was confined to two issues. First that
the orders in relation to an accounting related to monetary claims
disposed of by the
judgment, and those orders rendered further
accounting unnecessary. Second that the account ordered by Fourie J
overlapped with
the account ordered by the High Court in 2009.
Traverso DJP dealt with the accuracy of that account and a detailed
order as to
the requirements for a satisfactory account has been
made. A further order would necessarily cover the same ground and be
oppressive
to the parties required to render the account.
[126]
The contents order granted by Fourie J in
regard to the provision of an account was set out in prayers 6 and 7
in the 2010 action
and prayers 12 and 13 in the 2011 action. Those
prayers detailed in multiple sub-paragraphs the scope of the
accounting being called
for. On analysis, however, they covered all
the matters giving rise to Grancy’s monetary claims including
the use to which
the repaid amount was put; the payment of dividends
by SMI; the payment of fees to Mr Gihwala and Mr Manala and an item
described
as ‘any transactions pursued with funds which were
unlawfully paid to Gihwala, [the Trust] and/or Manala’ or
unlawfully
retained by them. The prayers in the 2011 action extended
this to all payments made by SMI to Mr Gihwala, the Trust, Mr Manala,

the Auditors and ‘any third party’ and ‘any and all
transactions pursued by them with the said amounts’.
The sweep
of the final prayer was breathtaking. It required an account from Mr
Gihwala, the Trust, SMI and Mr Manala of:
‘…
any
profits or losses which Gihwala, Manala and/or [the Trust] made in
connection with or arising from the breaches set forth in
paragraphs
24C to 43F of the plaintiffs’ particulars of claim’.
How
any sense was to be made of that order, much less how anyone could be
expected to comply with it, escapes me. It is hopelessly
vague and
overbroad. I mention only one example by way of illustration.
Paragraphs 40A and 40B of the particulars of claim in the
2011 action
dealt with the failure of Mr Gihwala and Mr Manala to discharge their
statutory obligations in regard to the preparation
of annual
financial statements for SMI. There was no evidence that suggested
that this caused anyone to make a profit or that any
account could be
rendered in that regard.
[127]
There is no doubt that these orders
overlapped with the existing order for the rendering of an account.
In addition they were formulated
when the two actions commenced and
do not appear to have been reconsidered by Grancy at the end of the
trial, having regard to
the possible implications of the monetary
claims succeeding. They are couched in extremely general language so
that it is impossible
to ascertain with any degree of certainty what
must be done to comply with them. They cover matters that are
irrelevant to Grancy,
such as the fate of the Scarlet Ibis
investment. The evidence in that regard shows that SMI invested
R2 million in that venture
that should have been used to repay
Grancy’s loan. The development failed with the company being
placed in liquidation. Grancy
sued for and obtained an award of
damages arising from the misuse of funds that should have accrued to
it. No basis has been advanced
for a further account in this regard.
[128]
The
order also covered matters on which Grancy was already fully informed
if its representatives simply read the documents already
in their
possession. An area covered by the order in the 2010 action was the
conversion of Spearhead units into Redefine units.
The details of
this appeared from the circular to unitholders that preceded the
implementation of the scheme of arrangement under
which the
conversion was effected.
[48]
The number of Spearhead units exchanged for Redefine units was set
out quite clearly in Ngatana’s audited annual financial

statements that formed part of the record. What more Grancy needed by
way of an account was unclear. It was common cause that all
of these
Redefine units were disposed of in 2008 and 2009. The brokers’
notes in respect of those disposals were also part
of the record and
the core bundle prepared for the hearing of the appeal. What then was
the basis for making an order that an account
be rendered to Grancy
concerning those disposals?
[129]
It is incumbent on a party, seeking an
order for an account to be rendered to it in relation to a business
relationship or a particular
transaction or particular transactions,
to define with precision the accounting that it is seeking. It is
inappropriate for it
to set out a broad and general list of questions
to which it would like to have answers and incorporate them in an
order. That
is especially the case where the order is sought at the
end of lengthy litigation in which there has been extensive
discovery.
The order should then be reformulated to require an
account in relation to outstanding matters, not in relation to
matters that
have been clarified in the course of the litigation,
much less matters that may be, and as it happened were, resolved by
way of
awards of damages. An order to produce an account is a
precursor to a debatement of that account and an award of what is
owing
consequent upon that debatement. Where potential monetary
claims have been dealt with by judgment there is no room for a
further
account.
[130]
For those reasons the order to render an
account granted in this case was inappropriate. Its deficiencies are
so manifest that it
is incapable of being remedied by way of a
variation of its terms. I reach that conclusion reluctantly as it is
apparent that Mr
Gihwala and Mr Manala have adopted every possible
stratagem to avoid discharging their fiduciary obligation to account
properly
to Grancy for its investment in SMI. But that did not
justify the grant of an award that was vague, overbroad, dealt with
matters
already disposed of by judgment and overlapped an existing
order that was in the course of being enforced by the Western Cape
Division
of the High Court. The appeal against these orders must
succeed. It follows that the further order relating to the
appointment
of independent directors is unnecessary and must also
fall away.
Delinquency
declarations
[131]
Mr Gihwala and Mr Manala were both declared
delinquent directors in terms of s 162(5)
(c)
of the Act, which reads:
‘
A
court must make an order declaring a person to be a delinquent
director if the person—
…
(c)
while a director—
(i)
grossly abused the position of director;
(ii)
took personal advantage of information or an opportunity, contrary to
section 76 (2)
(a)
;
(iii)
intentionally, or by gross negligence, inflicted harm upon the
company or a subsidiary
of the company, contrary to section
76 (2)
(a)
;
(iv)
acted in a manner—
(aa)
that amounted to gross negligence, wilful
misconduct or breach of trust in relation to the performance of the
director’s functions
within, and duties to, the company; or
(bb)
contemplated in section 77 (3)
(a),
(b)
or
(c)
… ’
[132]
Mr Gihwala challenged the delinquency order
made against him, contending that it was based on an incorrect
appreciation of the evidence,
without specifying in what respects
Fourie J erred. This argument was without merit and counsel did not
deal with it in oral argument.
For my part I agree with and endorse
Fourie J’s findings in regard to the conduct of Mr Gihwala and
Mr Manala and this judgment
should not be read as in any way
detracting from those findings.
[133]
In what follows I propose to refer to Mr
Gihwala as the main actor because that appears to have been the
situation in fact. That
does not excuse Mr Manala from responsibility
for the misconduct that will be catalogued. He owed the same
fiduciary duty to SMI
and to Grancy and was aware of what was being
done in his name. He was also a director of Ngatana and party to
those matters concerning
Ngatana. He was equally responsible for what
happened and must bear the same consequences.
[134]
The directors of SMI were under an
obligation in the performance of their duties to ensure that the
share register of the company
properly reflected the persons who were
entitled to be registered as shareholders. For four years from 2005
to 2009 they breached
that duty by refusing to register Grancy as a
shareholder and resisting its attempts to secure that. They failed to
ensure that
SMI kept proper accounting records as required in terms
of the 1973 Act and the 2008 Act. That failure was compounded because
it
led directly to their failure to cause annual financial statements
to be prepared fairly reflecting the financial position of the

company. On the pretext that Grancy was not a shareholder in the
company they refused to provide even the statutory information
to
which Grancy was entitled. After it was registered as a shareholder
they produced hopelessly inaccurate and incomplete annual
financial
statements and represented them as fairly reflecting the financial
position of the company.
[135]
One of the more egregious defects in SMI’s
accounting records involved the loan made by Grancy to the company as
its contribution
towards the cost of acquiring the 58 per cent
interest in Ngatana. This was reflected in the company’s ledger
account as
a loan made by Mr Manala. That can only have occurred as a
result of information given by Mr Gihwala. It was, to his knowledge,

false as the money was being lent by Grancy pursuant to the
investment agreement. The credit thereby created in Mr Manala’s

loan account, in conjunction with other improper credits to which I
will revert, was then used to enable Mr Manala to be paid over
R9
million by SMI, to none of which was he entitled. Part of this sum
included the two loans totalling slightly less than R4 million

made in June 2009. The one was given on the pretext that Grancy’s
loan was to him personally and that he had on-lent that
amount to SMI
and could withdraw his loan to repay Grancy. Had there been any bona
fides about that version of matters one would
have expected him to
repay the money as soon as Grancy refused his tender. But he did not
do so. He used some of it to pay his
legal fees and the bulk of it he
caused to be paid to himself. He has never explained what happened to
that money.
[136]
The two loans contravened the provisions of
s 226 of the 1973 Act. They caused loss to SMI because it has
not been able to
recover them from Mr Manala. At best that loss was
undoubtedly due to gross negligence on the part of both Mr Gihwala
and Mr Manala.
As I mentioned in the opening paragraph of this
judgment Mr Gihwala is a businessman and attorney. He was at the
material time
the chairman of one of South Africa’s largest
firms of attorneys and the chairman of Redefine, one of the largest
property
loan stock companies listed on the JSE. His failure to
observe the requirements of s 226 was inexcusable.
[137]
Earlier in this judgment the many respects
in which the investment agreement was breached to the detriment of
Grancy and the personal
advantage of Messrs Gihwala and Manala have
been summarised. All of those constituted breaches of fiduciary duty
on their part
as directors of SMI, which was a party to the
investment agreement and bound by it. The directors of SMI owed a
fiduciary duty
to SMI to ensure that it complied with its obligations
under that agreement. They consistently breached that duty.
Furthermore
they involved SMI in litigation when Grancy sought to
enforce its rights. That resulted, when they were forced to
capitulate shortly
before the hearing, in an adverse order for costs,
leaving aside SMI’s obligation to pay its own legal costs.
[138]
This conduct falls squarely within s
162(5)
(c)
of the 2008 Act. It involved gross abuses of the position of a
director. Grancy was excluded from the benefits of an investment,

which it had substantially financed, while Mr Gihwala and Mr Manala
took those benefits for themselves. In four instances they
sought
their own personal enrichment:
·
The use of the repaid amount to repay
themselves and to invest in Scarlet Ibis in an attempt to secure a 50
per cent profit in 24
months.
·
The payment to themselves of the full
amount of the first dividend received from Ngatana in an amount in
excess of R5 million.
·
The taking of director’s fees of
R750 000 each from Ngatana to the detriment of SMI.
·
The taking of director’s fees of
R2.75 million from SMI together with surety fees in excess of
R1 million.
To
that I would add the loans to Mr Manala.
[139]
These actions caused harm to SMI. It was in
my view wilful misconduct on the part of Mr Gihwala and Mr Manala
because it was entirely
intentional and with knowledge of the
obligations owed to Grancy under the investment agreement. But at the
very least it was gross
negligence akin to recklessness. It involved
a breach of trust in relation to their performance of their duties as
directors. It
was entirely inexcusable and ongoing as evidenced by
their endeavours to avoid complying with their obligation to provide
a proper
accounting to Grancy in regard to its investment. A
declaration of delinquency was entirely justified.
[140]
Realising
that this was the case the argument on this issue centred on the
challenge to the constitutionality of s 162(5).
This had two
legs. The first was that the entire section was unconstitutional
because it was alleged to be retrospective in its
operation. The
argument was based upon the fact that the events relied upon to
justify the order occurred before the commencement
of the Act on
1 May 2011. By then Mr Gihwala had resigned as a director
of SMI
[49]
and Mr Manala did
so soon afterwards.
[50]
The
second argument, while expressed in general terms, effectively
attacked s 162(5)
(c)
,
as read with s 162(6)
(b)
(ii),
alone. It focused on the fact that there was no discretion vested in
the court either to refuse to make a delinquency order
if the
requirements of s 162(5)
(c)
were satisfied, or to moderate the period of such order to a period
of less than seven years. No argument was addressed to the

consequences of the absence of discretion in relation to the other
sub-sections of s 162(5). Whether they may be subject to

constitutional attack is a matter that must await another day.
[141]
The
first of these arguments fell away when counsel’s attention was
drawn to the established principle of our law that a statute
is not
retrospective merely ‘because a part of the requisites for its
action is drawn from time antecedent to its passing’.
[51]
The argument was then confined to the proposition that the absence of
flexibility in regard to the imposition of delinquency had
the
potential to infringe the constitutional rights to dignity,
[52]
the right to choose a trade occupation or profession
[53]
and the right of access to courts.
[54]
In argument the focus fell on the right to dignity.
[142]
In
order to assess these arguments it is appropriate first to examine
the purpose of s 162(5). Contrary to the submissions
on behalf
of Mr Gihwala and Mr Manala it is not a penal provision. Its purpose
is to protect the investing public, whether sophisticated
or
unsophisticated, against the type of conduct that leads to an order
of delinquency, and to protect those who deal with companies
against
the misconduct of delinquent directors.
[55]
What is that conduct? It is helpful to examine some of the other
provisions of the section. Under subsec 5
(a)
consenting to serve as a director, or acting in that capacity or in a
prescribed office, while ineligible or disqualified from
doing so
attracts delinquency. Under subsec 5
(b)
acting as a director while under a probation order in terms of s 162,
or the corresponding provision dealing with close corporations,

results in delinquency as both orders are directed at preventing that
very conduct.
[143]
Turning
to subsec 5
(c)
one
starts with a person who grossly abuses the position of director,
conduct of which I have found Mr Gihwala and Mr Manala guilty.
We are
not talking about a trivial misdemeanour or an unfortunate fall from
grace. Only gross abuses of the position of director
qualify. Next is
taking personal advantage of information or opportunity available
because of the person’s position as a
director. This hits two
types of conduct. The first, in one of its common forms, is insider
trading, whereby a director makes use
of information, known only
because of their position as a director, for personal advantage or
the advantage of others. The second
is where a director appropriates
a business opportunity that should have accrued to the company. Our
law has deprecated that for
over a century.
[56]
The third case is where the director has intentionally or by gross
negligence inflicted harm upon the company or its subsidiary.
[57]
The fourth is where the director has been guilty of gross negligence,
wilful misconduct or breach of trust in relation to the performance

of the functions of director or acted in breach of s 77(3)
(a)
to
(c)
.
That section makes a director liable for loss or damage sustained by
the company in consequence of the director having:
‘
(a)
acted in the name of the company, signed anything on behalf of the
company, or purported to bind
the company or authorise the taking of
any action by or on behalf of the company, despite knowing that the
director lacked the
authority to do so;
(b)
acquiesced in the carrying on of the company’s
business despite knowing that it was being conducted in a manner
prohibited
by section 22 (1);
(c)
been a party to an act or omission by the company
despite knowing that the act or omission was calculated to defraud a
creditor,
employee or shareholder of the company, or had another
fraudulent purpose …’
[144]
All
of these involve serious misconduct on the part of a director. In the
affidavits raising the constitutional issue there was
a complaint
that gross negligence could trigger a delinquency order. There is no
merit in this complaint. There is a long history
of courts treating
gross negligence as the equivalent of recklessness, when dealing with
the conduct of those responsible for the
administration of
companies,
[58]
and
recklessness is plainly serious misconduct. It was urged upon us that
there might be circumstances of extenuation, or perhaps
that,
notwithstanding the seriousness of the conduct, the company might not
have suffered any loss. But neither of those is relevant
to the
protective purpose of the section. Its aim is to ensure that those
who invest in companies, big or small, are protected
against
directors who engage in serious misconduct of the type described in
these sections. That is conduct that breaches the bond
of trust that
shareholders have in the people they appoint to the board of
directors. Directors who show themselves unworthy of
that trust are
declared delinquent and excluded from the office of director. It
protects those who deal with companies by seeking
to ensure that the
management of those companies is in fit hands. And it is required in
the public interest that those who enjoy
the benefits of
incorporation and limited liability should not abuse their position.
The exclusion is for a minimum period of seven
years,
[59]
but the court has the power to relax that after three years and
instead place the person under probation in terms of the
section.
[60]
So there is
power to relax the full effect of a declaration of delinquency once
the delinquent has demonstrated that this
is appropriate. In addition
the court may restrict the operation of the declaration of
delinquency to one or more particular categories
of company. A
director declared delinquent in relation to a financial services
company may be permitted to be a director of an
engineering firm.
[145]
It
is noteworthy that the section was not attacked on the ground that it
was irrational. It is a requirement of our Constitution
that all
legislation must serve a rational purpose.
[61]
There must be a rational connection between the purpose of the
legislation and the provision under consideration. Section 162 passes

that test. Patently it is an appropriate and proportionate response
by the legislature to the problem of delinquent directors and
the
harm they may cause to the public who place their trust in them. We
were referred to legislation in other countries where their

legislatures have seen fit to vest their courts with a wider
discretion in this regard. But I fail to see why that should render

the response of our legislature constitutionally problematic.
Rationality is the touchstone of legislative validity and
s 162(5)
(c)
,
read with s 162(6)
(b)
(ii),
is rational.
[146]
Section 22 of the Constitution provides:
‘
Every
citizen has the right to choose their trade, occupation or profession
freely. The practice of a trade, occupation or profession
may be
regulated by law.’
The
background to the section was explained by the Constitutional Court
in
Affordable
Medicines Trust
.
[62]
In para 60 Ngcobo J said:
‘
Limitations
on the right to freely choose a profession are not to be lightly
tolerated. But we live in a modern and industrial world
of human
interdependence and mutual responsibility. Indeed we are caught in an
inescapable network of mutuality. Provided it is
in the public
interest and not arbitrary or capricious, regulation of vocational
activity for the protection both of the persons
involved in it and of
the community at large affected by it is to be both expected and
welcomed.’
Even
if it is assumed in favour of Mr Gihwala and Mr Manala that being a
director of companies is an occupation, trade or profession,
a
proposition the correctness of which is by no means obvious, they did
not suggest that s 162(5) is either capricious or
arbitrary. On
that ground alone the constitutional challenge under this head must
fail.
[147]
The
challenge under s 34 was misconceived. The court is involved at
every stage of an enquiry under s 162(5). It is the
court that
makes the findings on which a delinquency order rests. It is the
court that decides whether the period of delinquency
should be
greater than seven years or should be limited to particular
categories of company and whether conditions should be attached
to a
delinquency order and, if so, their terms. It is to the court that a
delinquent director turns if they believe that the period
of
delinquency should be converted into one of probation. The fact that
a delinquency order of a specific duration follows upon
the factual
finding by a court that the director is delinquent is no different
from any other provision that provides for a statutory
consequence to
follow upon a finding in judicial proceedings. It is apparent
therefore that before a declaration of delinquency
is made the errant
director has an entirely fair hearing before a court. It is not the
absence of a fair hearing that is in issue
but the consequences of an
adverse decision. That consequence cannot be challenged under s 34
on the basis that the delinquent
director has been deprived of a
right of access to court. It can only be challenged on the basis that
it is an irrational legislative
response to the particular problem,
in this case that of directors’ delinquency. It stands on the
same footing as any statutory
provision that disqualifies a person
from pursuing a trade, occupation or profession in consequence of
their disability or misconduct.
Countless examples of such
disqualifications such as minority, insanity, insolvency, criminal
conduct, other misconduct or absence
of qualification are to be found
in legislation.
[63]
[148]
That
leaves the challenge based on the right to dignity. Central though
that is in our constitutional dispensation,
[64]
it is difficult to see on what basis it is engaged in this case. I
stress that unlike
Makwanyane
and
Dodo
[65]
this case is not concerned with a sentence in criminal proceedings or
a sanction for misconduct.
Makwanyane
engaged the right to life in s 12 of the Constitution and
Dodo
the doctrine of the separation of powers, the right to be free from
cruel, unusual or degrading punishment and the rights conferred
on a
criminal accused under s 35 of the Constitution. None of those
are relevant in this case. It does not involve questions
of the
individualisation of punishment, but the appropriateness of the
protective measures the legislature has prescribed to deal
with
delinquent directors.
[149]
It must be borne in mind that a delinquency
order can only be made in consequence of serious misconduct on the
part of a director.
It is that conduct that results in delinquency.
In the same way if an attorney is guilty of serious misconduct they
will lose their
right to practice as an attorney. I find the
suggestion surprising that the grant of a striking off order or an
order suspending
an attorney from practice infringes their right to
dignity. That ignores the fact that the commission of the misconduct
is what
leads to that result. And it is the director or the attorney
who is guilty of that misconduct. The court investigates the conduct

and if it is established by evidence the striking off or suspension
or delinquency order is the necessary consequence.
[150]
At the end of the day the argument under
this head was reduced to saying that the terms of the statute do not
permit the court to
take into account the individual director’s
circumstances and degree of blameworthiness. But that is merely an
attack on
the legislative decision that a delinquency order in
particular terms must follow from conduct of the type specified. Such
an attack
can only be pursued by attacking the rationality of that
legislative decision, and that case was not made. It follows that
Fourie
J correctly rejected the attacks on the constitutionality of
s 162 as a whole and that on s 162(5)
(c)
,
read with s 162(6)
(b)
(ii),
separately. The appeal against the delinquency orders must fail.
The
cross-appeal
[151]
The Trust was a party to the investment
agreement and Mr Gihwala was its
alter
ego
. Grancy was a co-investor with the
Trust in SMI. In those circumstances the Trust was bound in the same
way and by the same duties
as were Mr Gihwala and Mr Manala in their
personal capacities. In those circumstances Grancy sought an order
that the Trust be
jointly and severally liable with Mr Gihwala and Mr
Manala for certain of its monetary claims. The relevant claims were
those in
respect of the repaid amount, the legal expenses, the loans
to Mr Manala and the claims in respect of directors’ fees and

surety fees. In my view this part of the cross-appeal must succeed.
So must the cross-appeal against the dismissal of the claim
against
Mr Gihwala and Mr Manala in relation to the Ngatana directors’
fees.
[152]
The cross-appeal in respect of alleged
liability under s 424 of the 1973 Act and s 77 of the 2008
Act must be dismissed.
In addition there was a cross-appeal against
the trial court’s refusal to grant a declaratory order that the
investment agreement
constituted a partnership and an order
appointing a liquidator to the alleged partnership. That too must be
dismissed, as must
the cross-appeal in regard to the share of residue
claim. There was initially a cross-appeal against its refusal to make
declaratory
orders spelling out details of specific breaches, but
wisely that was not pursued.
Costs
[153]
Mr Gihwala and Mr Manala have enjoyed some
success in their appeal in that their appeals in relation to the
Scarlet Ibis claim and
the claim for promotional expenses must
succeed in full and the amount of the award in regard to legal
expenses must be reduced.
In addition the appeal in relation to the
order to render an account has succeeded, although that is something
of a Pyrrhic victory
given the proceedings in regard to an account at
present underway in Cape Town. They have also successfully resisted
some of the
relief claimed in the cross-appeal. The Trust has
succeeded in having the order to render an account set aside but on
grounds other
than those it advanced. Its primary contention that it
was not a party to the investment agreement failed. As a result it is
now
to be held liable in respect of the bulk of Grancy’s
monetary claims.
[154]
From a monetary perspective the successful
appeals in relation to the Scarlet Ibis claim, the promotional fees
claim and the partial
success of the legal expenses claim are largely
offset by Grancy’s successful cross-appeal in relation to the
Ngatana directors’
fees and in holding the Trust liable for the
bulk of the monetary claims. The setting aside of the order to
account is not a major
triumph for the appellants.
[155]
The major arguments on behalf of the
appellants related to the nature of the investment agreement and the
obligations arising thereunder;
the application of the rule in
Foss
v Harbottle
; and the delinquency
orders. On all those issues the appellants have been unsuccessful. In
my view they must pay the costs of the
appeal and Grancy is entitled
to the costs of the cross-appeal. In both instances those costs must
include the costs of two counsel.
Grancy sought an order that its
costs be paid on an attorney and client scale, but the arguments
advanced in the appeal were not
without merit and enjoyed some
success. It cannot be said that there was any impropriety in seeking
to challenge the findings of
the trial court. Costs must be on the
ordinary scale. In regard to the costs occasioned by the
constitutional challenge the parties
were agreed that the ordinary
rule applies that no adverse costs order should be made in that
regard.
The
order
[156]
The order that I make is as follows:
1
The appeal succeeds to the following
extent:
(a)
Paragraphs 1(b) and (e) of the first
paragraph 1, and paragraphs 3 and 5 of the order in the High Court
are set aside;
(b)
The amount in paragraph 1(c) is reduced to
R41 763.20;
(c)
Paragraph 2 of the order in the High Court
is varied to read as follows:
‘
The
First, Second and Third Defendants are to make available to the First
Plaintiff for inspection and, if desired, the making of
copies of all
books of account and accounting records, including all supporting
vouchers and documents, in their possession relating
to the
transactions undertaken by and the financial position of the business
of the Third Defendant.’
2
The cross-appeal succeeds to the following extent:
(a)
Paragraph 1(g) is inserted into the order of the High Court reading
as follows:
‘
The
amount of R465 000 plus interest calculated at 15.5 per cent
from 3 March 2009 to date of payment.’
(b)
The Dines Gihwala Family Trust is declared to be jointly and
severally liable, the one paying the others
to be absolved, with the
first and second defendants, for payment of the amounts referred to
in paragraphs 1(a), (b), (c) and (f)
and 2(a) to (c) of the order of
the High Court.
3
The order of the High Court is accordingly amended to read as
follows:
‘
IT
IS ORDERED THAT:
1.
First and Second Defendants are declared liable, jointly and
severally with each other and,
in the case of paragraphs (a), (b),
(c) and (f), jointly and severally with the Dines Gihwala Family
Trust, to pay the following
to First Plaintiff:
(a)
The amount of R2 051 833,34, together with interest thereon at the
rate of 15,5% per annum, calculated
from 20 March 2007 to date of
final payment.
(b)
The amount of R41 763,20 together with interest thereon at the rate
of 15,5% per annum, calculated from
28 February 2009 to date of final
payment.
(c)
The amount of R620 000,00 together with interest thereon at the rate
of 15,5% per annum, calculated
from 15 June 2009 to date of final
payment.
(d)
The amount of R213 789,57, together with interest thereon at the rate
of 15,5% per annum, calculated
from 19 August 2009 to date of final
payment.
(e)
The amount of R326 740,00, together with interest thereon at the rate
of 15,5% per annum, calculated
from 19 August 2009 to date of final
payment.
(f)
The amount of R165, 660,60, together with interest thereon at the
rate of 15,5% per annum, calculated
from 6 January 2010 to date of
final payment.
(g)
The amount of R465 000 plus interest calculated at 15.5 per cent
from 3 March 2009 to date
of final payment.
2.
That the First and Second Defendants and the Dines Gihwala Family
Trust are declared liable,
jointly and severally, to pay the
following to First Plaintiff:
(a)
The amount of R852 500,00, together with interest at the rate of
15,5% per annum on the amount
of R1 705 000,00 calculated from 8
April 2009 to 23 November 2010 and on the amount of R852 500,00,
calculated from 23 November
2010 to date of final payment.
(b)
The amount of R345 507,09, together with interest at the rate of
15,5% per annum on the amount of R691
014,18, calculated from 1 March
2008 to 23 November 2010, and on the amount of R345 507,09,
calculated from 23 November 2010 to
date of final payment.
(c)
The amount of R612 722,24, together with interest thereon, at the
rate of 15,5% per annum, calculated
from 24 June 2009 to date of
final payment.
3.
The First, Second and Third Defendants are to make available to the
First Plaintiff for inspection
and, if desired, the making of copies
of all books of account and accounting records, including all
supporting vouchers and documents,
in their possession relating to
the transactions undertaken by and the financial position of the
business of the Third Defendant.
4.
The First and Second Defendants are declared delinquent directors as
contemplated in
section 162(5)
(c)
of the
Companies Act 71 of 2008
.
5.
No order as to costs is made in respect of the constitutional
challenge.
6.
The First Plaintiff is declared liable for the costs of the
application for amendment, which
were reserved on 6 February 2014,
including the costs incurred by Second Defendant in opposing same.
7.
Save for paragraphs 6 and 7 above, the First and Second Defendants
and the Dines Gihwala
Family Trust, represented by the Fourth to
Eighth Defendants, are declared liable, jointly and severally, for
the payment of First
Plaintiff's costs of suit on the scale as
between attorney and client, which costs are to include the
following:
(a)
The costs of two counsel, where employed;
(b)
The attendance fees and qualifying expenses of the expert witness, Mr
H J Greenbaum;
(c)
The reasonable costs and disbursements, as followed on taxation
incurred by First Plaintiff in respect
of Mr KI Mawji, who is
declared a necessary witness.’
4
The amended paragraph 3 of the order of the High Court is to be
complied with within
30 days of the date of this judgment and the
obligation to comply therewith will not be suspended or postponed
pending the outcome
of any further application for leave to appeal in
this or any other case.
5
The appeal is otherwise dismissed with costs, such costs to include
those consequent
upon the employment of two counsel, but to exclude
all costs occasioned by the challenge to the constitutionality of
section 162(5)
of the
Companies Act 71 of 2008
, in respect of which
each party will pay its or their own costs.
6
The first and second appellants and the Dines Gihwala Family Trust
are to pay the costs
of the cross-appeal, such costs to include those
consequent upon the employment of two counsel.
M
J D WALLIS
JUDGE OF APPEAL
Appearances
For
first appellant:       L A Rose-Innes
SC (with him G G M Quixley)
Instructed
by:
Adriaans
Attorneys, Cape Town
Honey
Attorneys, Bloemfontein.
For second appellant: J
Blou SC (heads of argument prepared by J Blou SC and I Goodman)
Instructed
by:
Edward
Nathan Sonnenbergs Inc, Sandton
Webbers,
Bloemfontein.
For third to seventh
appellants (the Trust): S C Kirk-Cohen SC
Instructed
by:
Adriaans
Attorneys, Cape Town
Honey
Attorneys, Bloemfontein
For first and second
respondents: P B Hodes SC (with him J P V McNally SC)
Instructed
by:
Webber
Wentzel Attorneys, Johannesburg
Symington
& De Kok, Bloemfontein.
For third respondent:
H J de Waal (with him S Mahomed)
Instructed
by:
The
State Attorney, Cape Town and Bloemfontein
[1]
Grancy
Properties Ltd v Manala and Others
[2013] ZASCA 57
;
2015 (3) SA 313
(SCA);
Grancy
Property v Seena Marena
[2014]
ZASCA 50
;
[2014] 3 All SA 123
(SCA).
[2]
Where it is necessary to distinguish between them they will be
referred to as the 2010 action and the 2011 action respectively.
[3]
Although represented by separate counsel they continued to conduct
the litigation on pleadings common to both Mr Gihwala and
the Trust
and the instructing attorneys remained the same.
[4]
Section 162(6)
(b)
(ii)
of the Act.
[5]
Section 162(11) of the Act.
[6]
Many of these have since converted to Real Estate Investment Trusts
(REITs).
[7]
SMI’s stake in Ngatana was 58 per cent and the original
acquisition was of 3.5 million Spearhead units. A 58 per cent share

in those units amounted to 2 030 000. One third of that
would be 676 666 units, with two remaining.
[8]
In an affidavit filed in earlier proceedings Mr Narotam claimed that
the email was drafted by Mr Mawji and sent on his instructions,
but
this was denied by Mr Mawji.
[9]
The order read:
‘
1.
The First Applicant is entitled to a 31% direct equity shareholding

in the First Respondent.
2.
The First to Third and Fifth to Ninth Respondents shall
do all
things (including but not limited to passing resolutions, allotting,
issuing or transferring the shares, registering the
transfer thereof
and delivering to the First Applicant share certificates and all
other documents which establish and evidence
its 31% equity stake in
the First Respondent) and such other things as are necessary to
transfer 31% of the shares in the First
Respondent to the First
Applicant and to effect the registration of the First Applicant as a
member of the First Respondent in
its register of members.
3.
The Second, Third and Fifth Respondents shall, within
fourteen days
of this order, render a full and proper account to the Second
Applicant in respect of the First Applicant's investment
in
Spearhead Property Holdings Limited linked units (
"the
Spearhead Investment"
) and (
"the Spearhead units"
)
and shall provide a statement of account, duly supported by all
relevant vouchers, dealing with at least, but not limited to,
how,
when, by whom and for what purposes the First,
alternatively
the Second Applicant's fund of R4 040 250.00 deposited into
the Fourth Respondent's First National Bank trust account number
51331425227
between February and June 2005, were utilised by any of
the said Respondents or any other party.
4.
The First to Third and Fifth to Ninth Respondents after
rendering
the aforesaid account shall:
4.1
debate the aforesaid account;
4.2
pay to the First and Second Applicant, such amount, if any, as may

be due to them upon such debatement.
5.
The Third Respondent shall pay to the First Applicant
the sum of
R988 416.66 plus interest thereon calculated monthly from 11
February 2005 to date of payment at the rate equal to
the greater of
the interest rate on the Quant Plus Call Account of Prescient
Investment Management (Pty) Ltd or the dividend
yield rate of the
Spearhead units, from time to time.
6.
The Third Respondent shall pay to the First Applicant,
upon the
realisation and unwinding of the Spearhead investment and payment of
the proceeds thereof to the First Respondent, an
amount equivalent
to 25 per cent of the amount by which the price of the 700 000
Spearhead units held indirectly by the Third
Respondent, upon
realisation thereof, exceeds R18.00 per Spearhead unit.
7.
The First to Third and Fifth to Ninth Respondents, jointly
and
severally, the one paying the others to be absolved, shall pay the
Applicants' costs in the above proceedings on the High
court scale
as between party and party, as taxed or agreed, to 5 February 2009,
which costs will include the costs of two counsel.’
[10]
When
Scarlet Ibis was liquidated they were the sole shareholders.
[11]
Grancy
Property Limited and Another v Seena Marena Investment (Pty) Ltd and
Others
[2014] ZASCA 50; [2014] 3 All SA 123 (SCA).
[12]
Foss v
Harbottle
[1843] EngR 478
;
(1843)
2 Hare 461
;
(1843) 67 ER 189.
[13]
See fn 9 above.
[14]
As to the duty of co-operation in contracts see
A
McAlpine & Son (Pty) Ltd v Transvaal Provincial Administration
1974
(3) SA 506
(A) at 533H-534E.
[15]
Knouwds
v Administrateur, Kaap
1981
(1) SA 544
(C) at 551G-552B.
[16]
At
552B-G.
[17]
Wilkins
NO v Voges
[1994]
ZASCA 53
;
1994 (3) SA 130
(A) at 136H-137B.
[18]
Pan
American World Airways Inc. v SA Fire and Accident Insurance Co
Limited
1965
(3) SA 150
(A) at 175C.
[19]
Ebrahimi
v Westbourne Galleries Limited
[1973]
AC 360
(HL) at 379b-380b;
[1972] 2 All ER 492
at 500a-h. The passage
has been quoted with approval by this Court.
APCO
Africa (Pty) Ltd and Another v APCO Worldwide Inc
[2008]
ZASCA 64
;
2008 (5) SA 615
(SCA) para 17. See also
Bellairs
v Hodnett and Another
1978
(1) SA 1109
(A) at 1130D-F;
Hulett
and Others v Hulett
[1992] ZASCA 111
;
1992
(4) SA 291
(A) at 307E-308F.
[20]
The shareholders’ agreement concluded in relation to Ngatana
provided in clause 10 that a range of what were termed ‘material

decisions’ would only be taken by means of a resolution
supported by both Prescient and SMI.
[21]
Stewart
v Schwab and Others
1956
(4) SA 791
(T) at 793D-H.
[22]
Desai
and Others v Greyridge Investments (Pty) Ltd
1974
(1) SA 509
(A) at 518G -H.
[23]
CGEE
Alsthom Equipments et Enterprises Electriques, South African
Division v GKN Sankey (Pty) Ltd
1987
(1) SA 81
(A)
at
92A-C. In
Wilkins
NO v Voges
supra,
at 144B-D Nienaber JA pointed out that tacit terms are as much part
of the agreement as express terms.
[24]
Morar
NO v Akoo & another
[2011] ZASCA 130
;
2011 (6) SA 311
(SCA) paras 10-11.
[25]
Bester
v Van Niekerk
1960
(2) SA 779
(A) at 783H-784A;
Purdon
v Miller
1961
(2) SA 211
(A) at 218B-D;
Pezzuto
v Dreyer and Others
[1992] ZASCA 46
;
1992
(3) SA 379
(A) at 390.
[26]
Novick
v Benjamin
1972
(2) SA 842
(A) at 851A-H.
[27]
United
Dominions Corporation Ltd v Brian Pty Ltd and Others
[1985] HCA 49
;
(1985)
60 ALR 741
(HCA) at 746.  R C I Banks
Lindley
and Banks on Partnership
(8
ed, 2002) para 5-07 where the author expresses the view that every
partnership is a joint venture, but not every joint venture
is a
partnership. B Bamford
The
Law of Partnership and Voluntary Associations
3
ed (1982) 11-12.
[28]
Grancy
Property Ltd v Manala
supra
para 35.
[29]
In other words the investment agreement placed Grancy and the other
shareholders in SMI in a position to insist on the payment
of
dividends from available funds, which is a more extensive right than
a shareholder would ordinarily enjoy.
[30]
The Grancy loan to SMI was R1 976 833.33. With the
addition of the R75 000 in respect of the alleged costs that

amounted to R2 051 833.33, which was the amount for which
Grancy obtained judgment on the repaid amount claim.
[31]
The first of the two payments to Mr Manala dealt with under this
heading was claimed in the 2010 action and the second in the
2011
action.
[32]
Edward Fitzgerald
The
Rubáiyát of Omar Khayyám
quatrain
51:
‘
The
Moving Finger writes; and, having writ,
Moves
on: nor all thy Piety nor Wit
Shall
lure it back to cancel half a Line,
Nor
all thy Tears wash out a Word of it.’
[33]
In
recent times
Redefine
shares have traded on the JSE at a price between R9 and R11 per
share giving a total value for the investment of between
R180 and
R220 million. It paid dividends in the last year of about 80
cents per share.
[34]
The relevant claims are those relating to the repaid amount, the
legal expenses, both loans to Mr Manala and the claims in respect
of
directors’ fees and surety fees.
[35]
RH Christie and GB Bradfield
Christie’s
The Law of Contract in South Africa
6ed
(2011) at 262.
[36]
At 263.
[37]
Langermann
v Carper
1905
TH 251
at 261.
[38]
Koornklip
Beleggings (Edms) Bpk v Allied Minerals Ltd
1970
(1) SA 674
(C) at 677H.
[39]
A
A Roberts (ed)
Wessels’
The Law of Contract in South Africa
2
ed (1951) Vol 1 paras 1496 to 1502.
[40]
See
Part
11 of the United Kingdom Companies Act 2006, which provides a
detailed structure for the bringing of derivative claims.
[41]
Prudential
Assurance Co Ltd v Newman Industries Ltd and Others (No 2)
[1982] 1 All ER 354
(CA) at 357j - 358b. The principles enunciated
in this case were approved and applied by the House of Lords in
Johnson
v Gore Wood & Co (a firm)
[2000] UKHL 65
;
[2001]
1 All ER 481
(HL) (
Gore
Wood
).
[42]
At 503
a-f
.
[43]
At 528
b-h
.
[44]
At 503
f-g
.
[45]
See the majority judgment in
Neugarten
and Others v Standard Bank of South Africa Ltd
[1988] ZASCA 140
;
1989 (1) SA 797
(A) at 808F-J.
[46]
McLelland
v Hulett and Others
1992 (1) SA 456
(D) at 467C-I.
[47]
L &
P Plant Hire BK en andere v Bosch en andere
[2001]
ZASCA 147
;
2002 (2) SA 662
(SCA) paras 39-40;
Saincic
and Others v Industro-Clean (Pty) Ltd An
[2006]
ZASCA 83
;
2009 (1) SA 538
(SCA); and
Fourie
v Firstrand Bank Ltd and Another NO
[2012]
ZASCA 119
;
2013 (1) SA 204
(SCA) paras 28-29.
[48]
The allegation in the 2010 particulars of claim that there had been
a non-disclosure in regard to the terms of this transaction
is
extraordinary bearing in mind that Mr Narotam was aware of the
transaction and the details of the scheme were contained in
public
documents.
[49]
He resigned on 28 February 2011.
[50]
He resigned on 18 September 2011.
[51]
R
v St Mary, Whitechapel (Inhabitants)
[1848] EngR 746
;
116
ER 811
((1848)
12 QB 120)
at 814;
Krok
and Another Commissioner, South African Revenue Service
[2015]
ZASCA 107
;
2015 (6) SA 317
(SCA) para 40. This is all that item 7(7)
in Schedule 5 to the 2008 Act provides.
[52]
Section 10 of the Constitution.
[53]
Section 22 of the Constitution.
[54]
Section 34 of the Constitution.
[55]
Re Gold
Coast Holdings Pty Ltd (In Liq); Australian Securities &
Investments Commission v Papotto
[2000]
WASC 201
para 22
[56]
Robinson
v Randfontein Estates Gold Mining Co Ltd
1921 AD 168
;
Phillips
v Fieldstone Africa (Pty) Ltd and Another
[2003] ZASCA 137; 2004 (3) SA 465 (SCA).
[57]
The section qualifies this by reference to s 76(2)
(a)
of the
Act but that section does not limit its scope. It reads:
‘
(2)  A
director of a company must—
(a)
not use the position of director, or any information obtained while
acting
in the capacity of a director—
(i)
to gain an advantage for the director, or for another person
other
than the company or a wholly-owned subsidiary of the company; or
(ii)
to knowingly cause harm to the company or a subsidiary of the
company …’
[58]
Philotex
(Pty) Ltd and Others v Snyman and Others; Braitex (Pty) Ltd and
Others v Snyman and Others
[1997]
ZASCA 92
;
1998 (2) SA 138
(SCA) at 143C-144A;
Ebrahim
and Another Airport Cold Storage (Pty) Ltd
[2008] ZASCA 113
;
2008 (6) SA 585
(SCA) para 13;
Tsung
v Industrial Development Corporation of South Africa
[2013]
ZASCA 26
;
2013 (3) SA 468
(SCA) paras 29 to 31..
[59]
Section 162(6)
(b)
(ii)
of the Act.
[60]
Section 162(11)
(a)
.
[61]
New
National Party of South Africa v Government of the Republic of South
Africa and Others
[1999]
ZACC 5
;
1999 (3) SA 191
(CC) para 24.
[62]
Affordable
Medicines Trust and Others v Minister of Health and Others
[2005] ZACC 3
;
2006 (3) SA 247
(CC) paras 57-60.
[63]
The
constitutionality of c
itizenship
as a requirement for registration as a security guard was upheld in
Union
of Refugee Women and Others v Director: Private Security Industry
Regulatory Authority and Others
[2006] ZACC 23; 2007 (4) SA 395 (CC).
[64]
See
eg
S
v Makwanyane and Another
[1995]
ZACC 3
;
1995 (3) SA 391
(CC) para 144;
Bhe
and Others v Magistrate, Khayelitsha and Others (Commission For
Gender Equality as Amicus Curiae); Shibi v Sithole and Others;
South
African Human Rights Commission and Another v President of the
Republic of South Africa and Another
[2004]
ZACC 17; 2005 (1) SA 580 (CC).
[65]
S
v Dodo
[2001]
ZACC 16
;
2001 (3) SA 382
(CC).