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[2017] ZAWCHC 43
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Oosthuizen v Oosthuizen and Others (8307/2016) [2017] ZAWCHC 43 (14 March 2017)
IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
(Coram:
Holderness, AJ)
[Reportable]
Case
No: 8307/2016
In
the matter between:
NOLA
ADRé OOSTHUIZEN
Applicant
and
PIERRE
ADRIAAN OOSTHUIZEN
First
Respondent
ANTON
GERALD OOSTHUIZEN
Second
Respondent
JACQUES
ANDRE OOSTHUIZEN
Third
Respondent
SWAN
LODGE CC (1989/034551/23)
Fourth
Respondent
JUDGMENT DELIVERED ON 14 MARCH
2017
HOLDERNESS,
AJ
INTRODUCTION
[1]
The applicant and the first, second and third respondents (‘the
respondents’) are siblings. Each holds 25% of the
members’
interest in the fourth respondent (‘Swan Lodge’ or ‘the
corporation’).
[2] The applicant seeks final
relief on motion. The relief sought is two-fold. The applicant
firstly seeks an order in terms of
section 49 of the Close
Corporations Act 69 of 1984 (‘the Act’),
inter alia
directing the respondents to purchase her member’s interest
in Swan Lodge. Secondly, she seeks an order postponing the instant
application, to a date to be determined by the Court, to adduce
evidence to establish the fair market value of her member’s
interest in Swan Lodge. In the interim she seeks an order that she be
‘
granted full access to all relevant financial information
pertaining to Fourth Respondent so that Applicant might be in a
position
to adduce cogent and relevant evidence relating to the value
of her membership interest.’
THE
ISSUES
[3] The issues, which this Court
is required to determine, are the following:
3.1 Was there
an act or omission by Swan Lodge, or by one or more of its members,
which was unfairly prejudicial, unjust or inequitable
to the
applicant, or were the affairs of Swan Lodge conducted in a manner
unfairly prejudicial, unjust or inequitable to the applicant?
If
there was such an act, did it
have
results that were unfairly prejudicial, unjust or inequitable?
3.2 If both
questions are answered in the affirmative, is it just and equitable
for the court to make an order with a view to settling
the dispute
between the applicant and the respondents?
[4] The relevant legal principles
applicable to relief in terms of section 49 of the Act (‘section
49’) will be set
out in greater detail below.
THE
FACTS
[5]
Swan Lodge is the registered owner of two commercial properties, Erf
3042 Kommetjie, where the Swan Lodge building is situated,
and Erf
3043, a commercial vacant plot adjacent to Erf 3042 (‘the
properties’). Swan Lodge is principally a property
letting
entity, and has its principal place of business and registered
address at KEA Estate Agency in Kommetjie. No relief is
sought
against Swan Lodge.
[6]
Swan Lodge was formed in 1989 by Pierre Crowther Oosthuizen (‘Pierre
Senior’), the late father of the applicant
and the respondents.
Pierre Senior died on 18 September 2010. The applicant and the
third respondent were appointed as the
executors of the estate.
[7]
Swan Lodge owns the single biggest building in the seaside village of
Kommetjie. The building is comprised of residential, retail
and
commercial units. The seven commercial units are presently occupied
by a restaurant, a cafe, a hairdresser, an estate agency,
Kommetjie
Estate Agency (‘KEA’), a veterinary clinic, a bric-a-brac
shop and a surf shop. There are eight residential
units, which vary
in extent. The applicant estimates the rental income for the building
to be approximately R150 000 per month
or R1 800 000 per annum.
Although no formal valuations have been undertaken in respect of the
properties, according to the applicant,
informal valuations estimate
Erf 3042 to have a value of between R16 million and R18 million, and
Erf 3043 to have an estimated
value of R3.5 million. The applicant
contends that all the members agreed during 2014/2015 to sell the
properties, but that the
failure to obtain a valuation by a suitably
qualified professional has impeded the sale.
[8]
Prior to Pierre Senior’s death, Swan Lodge was wholly owned and
controlled by him. The first respondent acted as the manager
of KEA,
which was owned and run by Pierre Senior from approximately 2003.
[9] After the winding up of the
estate of Pierre Senior, the applicant and the third respondent
remained the sole signatories to
the business account held by Swan
Lodge at First National Bank (‘FNB’), under the name
‘Swan Lodge Maintenance’.
All rental and other income due
to Swan Lodge was paid into this account. In addition, a money market
account was opened into which
interest earned from surplus funds
could be deposited. The relevance of the so-called bank account issue
will become apparent from
what is set out below.
The
acts or omissions relied upon by the applicant for relief in terms of
section 49 of the Act
Kommetjie
Estate Agency – KEA
[10]
The applicant avers that, whilst Pierre Senior’s estate was
being wound up, the first respondent, in a ‘somewhat
devious
manner’, pressurised the applicant, and the second and third
respondents to sell KEA to him and to deduct the purchase
price from
his share in the inheritance. The applicant raised the fact that
shortly after Pierre Senior’s death, the first
respondent
phoned the Estate Agents Board to inform them that KEA was no longer
‘legitimate’ as the principal was deceased,
and that
prior to the sale of KEA even being discussed, took steps to have KEA
registered in his ‘personal capacity’
and finalised the
registration of KEA CC with CIPC on or about 24 January 2011.
[11]
It bears mentioning, that it appears from the CIPC records annexed to
the founding affidavit, that the applicant and the respondents
were
only appointed as members of Swan Lodge on 18 December 2012. The
complaint about KEA relates to events in 2011. In any event,
these
events do not constitute acts or omissions by Swan Lodge or by its
members, and thus cannot form the basis for a section
49 complaint.
KEA CC is a separate corporate entity, is not a party to this
application.
[12]
It is common cause that KEA was not required to pay any rental to
Swan Lodge for the first year, which presumably ran from
24 January
2011 until 24 January 2012 (before the date on which the other
siblings were appointed as members of Swan Lodge).
The
applicant and the other respondents had to debit the first
respondent’s loan account in Swan Lodge with the first year’s
rental. The applicant states that, to date, the first respondent has
also failed to sign the written lease agreement on behalf
of KEA with
Swan Lodge.
[13]
The applicant’s last complaint regarding KEA was that one of
the terms of the sale agreement was that KEA’s rental
would be
increased by 9% per annum and that the first respondent of his own
accord informed the other members that KEA is only
prepared to pay an
increase of 8% per annum, and not the 9% agreed upon. The applicant
contends that, based on an initial rental
of R4,000 per month in
2011, KEA should now be paying rental of R6,708.38 per month. She
states that, from a recent bank statement,
it appears that KEA only
paid rental in an amount of R5,441.96 for March 2016. This complaint
thus appears to be based on KEA or
the first respondent receiving
preferential treatment, and the applicant not having full access to
the documentation relating to
the KEA lease and rentals.
[14]
The respondents addressed each of the issues raised regarding KEA, in
some detail. In the answering affidavit, which was deposed
to by the
third respondent, it is pointed out that as neither the applicant nor
the third respondent are estate agents, and because
the second
respondent has his own agency, the first respondent was the obvious
choice to take over the business of KEA. The third
respondent denies
that the first respondent acted in a devious manner. To illustrate
that the first respondent was not treated
preferentially, the
respondents mention that prior to the sale to the first respondent,
KEA was valued at R382 340. The first respondent
initially objected
to this valuation, claiming that the business had been overvalued, as
he had valued KEA at R80 000 in January
2011. The applicant, the
third respondent and the accountant who valued the business, Roger
Reece (‘Reece’), held the
first respondent to the
valuation, ‘against his protestations’.
[15]
It appears from contemporaneous correspondence annexed to the
answering affidavit, that the applicant supported the decision
to
defer the payment of rental by KEA for the first year, and, as an
alternative to KEA receiving 10% on Pierre Senior’s
residential
property, agreed that KEA could stay its rentals until it had built
up some capital.
[16] Lastly, the first respondent
did in fact sign a draft lease agreement on behalf of KEA, however
the applicant sought to impose
stricter requirements on KEA than on
other tenants, which delayed the signing of a lease by both parties.
On 16 May 2016, prior
to the application being launched, the
respondents proposed as a resolution that the draft lease agreement
for KEA be accepted
and brought to final approval, with the necessary
terms and conditions. This resolution was duly adopted by Swan Lodge
on 20 May
2016. Regarding the annual escalation, the respondents
annexed a schedule, prepared by the applicant, in which she recorded
that
from 1 April 2012 (one year after the sale of KEA to the first
respondent), there was an 8% escalation in the KEA rental, which
they
submit was fair as KEA only charges 5% (half the industry norm) in
respect of commission for the work which it does for Swan
Lodge.
Accordingly, there appears to be no merit to this complaint.
Alleged
failure to provide documentation
[17]
I now turn to deal with the second ground relied upon by the
applicant for relief in terms of section 49. The applicant alleges
that the first respondent, as a member of KEA, acted unilaterally in
concluding lease agreements with new tenants without consulting
with
the applicant and the other members. She states that Swan Lodge had
become his ‘personal fiefdom’, and that he
did not regard
himself as being answerable to the other members.
[18]
According to the applicant, an issue which caused significant tension
between the applicant and the first respondent was that
he allegedly
failed to provide her with copies of rental invoices until she
consulted with an attorney in 2014. To the applicant’s
consternation, the invoices which she was provided with reflected
rental income, but also reflected apparent deductions where such
deductions ought ‘more properly to have been reflected as
general expenses of the fourth respondent.’ This caused the
applicant to address a formal demand to the respondents to provide
her with all relevant documentation pertaining to the financial
affairs of the fourth respondent. The applicant states that she
previously requested this documentation from Reece, however he
never
responded to such requests. Reece, apparently does not use the
internet, and therefore does generally reply to emails.
[19]
The applicant made much ado about the fact that there was no
indication that the ‘purported deductions’ reflected
on
the rental invoices were necessary or reasonable expenses, and she
was not consulted regarding the inclusion of such expenses.
As an
example, deductions were made for palisade fencing between certain of
the tenants’ properties, which the applicant
claims to have
been unaware of and which she could not understand.
[20]
The respondents’ answer to these complaints was that it was
never a condition of KEA’s appointment that lease agreements
had to be signed by all the members. They alleged that there was a
well-balanced tenant mix, which has been to the benefit of Swan
Lodge, as confirmed by Reece. It is apposite to note that the
applicant does not complain that the tenants selected by KEA have
defaulted or acted in breach of their agreements to the detriment of
Swan Lodge. It appears that the sole basis for her complaint,
is that
she was not consulted prior to the selection of the tenants, nor the
conclusion of lease agreements with them. She does
not even go so far
as to say that there is any specific tenant which she would have
objected to, had she been consulted prior,
or the basis of her
objection to any of the tenants. It is also not clear when the lease
agreements complained of were concluded
and whether this was before
or after the breakdown of her relationship with the respondents.
[21]
The respondents confirmed in their answering affidavit that the
members were often involved in important issues concerning
the
tenants, including, if it was of sufficient significance, the
selection thereof. Where members were not consulted, KEA acted
in
accordance with its mandate, which included the selection of tenants
to occupy the properties. The respondents’ evidence
was that
the applicant was granted full access to the financial documentation
relating to Swan Lodge. In 2014, she spent four days
at KEA’s
office, where she had full access to all relevant documentation, and
could make copies of any documentation required,
including lease
agreements, rental invoices and rental schedules. It bears mentioning
that the respondents alleged that a majority
was not required to
select new tenants, and that KEA was mandated to select tenants on
Swan Lodge’s behalf. Based on the
Plascon-Evans
rule, I
am bound to accept the evidence of the respondents in this regard.
[22] On 19 March 2015, after the
applicant had already involved her attorneys, copies of,
inter
alia
rental invoices were made available to the applicant for
collection at the offices of the respondents’ attorneys. On 7
May
2015, the applicant collected what she described as a ‘jumble
of documents’. According to Natalie Szot-Myburg
(‘Szot-Myburg’),
an employee of the respondents’
attorneys, the documentation was neatly collated in a file and was
not a jumble. During argument,
a dispute arose as to whether the
documents made available for collection in fact included all the
documents requested by the applicant
in a letter from her former
attorneys, Strauss Daly. There is a handwritten annotation on the
memo which the applicant signed confirming
collection of the
documents, which provides that ‘docs not checked according to
letter from Strauss Daly’
.
To my mind this is a storm in
a teacup. The fact is that approximately 650 pages of documents were
provided to the applicant. If
any specific documents which she
required was not in the bundle, it was incumbent upon the applicant
to point this out to the respondents
and to request such documents.
It must be borne in mind that the evidence regarding alleged
non-disclosure of relevant documentation
is relevant only to show
whether there was in fact such non-disclosure, and, if there was,
whether this omission was unfairly prejudicial,
unjust and
inequitable to the applicant. This is the onus which the applicant is
required to discharge.
[23]
Reverting to the deductions, and specifically the deduction for
palisade fencing, it appears for the first time from the respondents’
affidavit that, not only did the respondents consult with the
applicant prior to taking the decision to erect palisade fencing,
but
that it was in fact the applicant that suggested that such fencing be
erected. This appears from an email from the applicant,
which
suggestion was accepted by the respondents. It is peculiar that this
expense is relied upon by the applicant to cast aspersions
on the
other members and KEA, and that her involvement in the decision to
put up the fencing is not disclosed in the founding affidavit.
It is
unfortunate that this appears to be one of several examples where the
conduct complained of by the applicant was in fact
agreed to by her,
or was undertaken with her knowledge and in the absence of any
objection by her. This will be further dealt with
below.
[24]
It is common cause that the applicant was afforded access to the
financial documentation pertaining to Swan Lodge. Despite
clear
evidence to the contrary, the applicant relies on a breakdown of
trust, and her subjective perception that she was being
disregarded
and marginalised by the respondents. She states that ‘in
the latter part of 2014’ she was ‘totally
in the dark’
regarding:
a) an accurate
and up to date account of the income and expenditure of Swan Lodge;
and
b) why no
clear steps were being taken to sell Swan Lodge or thee properties,
despite all the members agreeing to sell in 2014.
[25]
The respondents aver that they did not ignore the applicants’
requests, and that as it was not feasible to continually
send
specific documents to her on an
ad hoc
basis, they granted her
unfettered access to the KEA offices to access and copy any documents
which she required. The applicant
avers that she contacted Reece
regarding her concerns in January 2014, and that he failed to
respond, which gave her the impression
that ‘he regarded
himself as being answerable only to First Respondent.’ In
response, the respondents point out that
Reece was not the accounting
officer of Swan Lodge and that it is thus clear that the applicant
was under a mistaken impression
regarding to whom Reece considered
himself answerable.
[26] A further
cause for concern is the allegation by the applicant in paragraph
21.12 of her founding affidavit that ‘
by
September 2014, it had become apparent to me that my requests for
financial information relating to Fourth Respondent were being
ignored particularly by First Respondent and the accounting officer
of Fourth Respondent (Reece).’
This
is not borne out by the undisputed facts.
Consistent
with the evidence of Szot-Myburg, in the minutes of the members
meeting of 14 December 2015 it is recorded that:
‘
Nola acknowledges has
(
sic
)
received all account information as well as all rentals payments and
financials for 2015 as requested by Nola.’
[27]
The final issue raised relating to this aspect is that ‘after
it had become apparent that her requests were being ignored
and she
felt that she was not receiving any support from the second and third
respondents’, the applicant consulted attorney
Chris Fick, who
addressed a letter to the respondents, on behalf of the applicant, on
26 September 2014, in which he stated as
follows:
‘
I
have been consulted by your sister, Mrs Nola Oosthuizen, and write to
you on her behalf.
With regard
to your joint interests in the properties owned by Swan Lodge CC as
well as the house and plot owned by the siblings
jointly, she would
appreciate to meet with you in a mediation session to discuss the
current situation and the way forward. Of
specific importance would
be a discussion in regard to the sale or buying out of her share in
the properties and her membership
interest in the CC.
It is of
importance to our client that a proper negotiation can be entered
into in an amicable and civil manner in order to resolve
all issues
in this regard and to agree on the way forward. Negotiation under the
guidance of a mediator seems to us the preferred
option in this
matter and we would appreciate your agreement to the process and the
appointment of a mediator.
In regard
to these matters, please correspond/contact us without referring to
her directly.’
[28]
In response, the respondents stated that they consulted with Guthrie
regarding the proposal, and as none of the members had
the means to
buy the applicant out, Guthrie’s advice was that a mediation
would be fruitless and would result in the incurrence
of unnecessary
costs. The respondents furthermore remained committed to selling the
business or property of Swan Lodge, so there
was nothing to mediate
in that regard. It was not a case of the applicant and the
respondents disagreeing about selling Swan Lodge.
All the members
wished to sell at the earliest possible opportunity.
[29]
It is apposite to note that no mention is made in Fick’s letter
of any unjust, inequitable or unfairly prejudicial conduct,
entitling
the applicant to relief in terms of section 49.
[30]
On 18 December 2014, the applicant addressed an email to the
respondents advising them that she did not object to ‘a
legitimate new account with proper agreements’, provided she
could obtain copies of each lease agreement and the lease invoices
‘from 1 April 2014 to date’. The applicant also asked for
a meeting to be held to ‘discuss all concerns’,
and
requested the other members to respond within seven days, which
expired on Christmas Day.
[31]
The third respondent replied on the same day, advising that he was
happy to meet, but that as it was a busy time of the year,
the
applicant would need to arrange a suitable date and time for all the
members. On 23 December 2014, before the expiry of the
seven-day
period, the applicant wrote the following email to the respondents:
‘
Jacques
pierre and anton I have requested as a matter of urgency dates and
times which will be suitable for a meeting but it is
ignored. My last
mail addresses the urgency for a meeting which also addresses the
account.
If
by the end of today I receive no response from the members giving
date and times that would suit them for an URGENT ONE HOUR
meeting I
will accept this as a blatant refusal to act in the best interest for
the business
.’
(underlining added)
[32]
According to the respondents, the applicant had access to the
documents but did not want to attend at KEA’s offices.
In any
event, there was no urgency to the request nor any reason given why
the meeting was required to be held as a matter of urgency
on 23
December. Furthermore, the respondent failed to give notice of a
meeting in terms of section 48 of the Act, which she was
entitled to
do. Considering the applicant’s unreasonable demand for a
meeting at a very busy time of year, the refusal or
failure by the
respondents to meet on short notice was neither unjust nor unfairly
prejudicial.
The
bank account issue
[33]
It is appropriate to now deal with what would appear to be the last
arrow in the applicant’s quiver, the issue regarding
Swan
Lodge’s bank accounts. In her founding affidavit, the applicant
states that, on 3 October 2014, the applicant was given
notice of a
meeting of the members of Swan Lodge on 10 October 2014. One of the
resolutions proposed at the meeting was for a new
bank account to be
opened in the name of the corporation and for all funds held in the
Swan Lodge Maintenance account to be transferred
to the new account.
It was proposed to resolve that two of the existing members would
have to act together to operate any bank
account, save for major
capital expenditure which would requirement the agreement of three of
the four members. A copy of the Notice
of Meeting was annexed to the
founding affidavit.
[34]
The applicant stated that during October 2014, without any prior
consultation with her, the respondents approached the manager
at FNB
in Fish Hoek, and requested that the Swan Lodge Maintenance current
account be closed, and that a new current account for
Swan Lodge be
opened. It is puzzling that the applicant alleges that this was done
without any consultation with her. On her version,
she received
notice of the meeting at which it was proposed to resolve that the
partnership accounts be closed and new current
account in the name of
Swan Lodge be opened. A new account was opened at another branch, and
the applicant was called upon to sign
the necessary forms for the
Financial
Intelligence Centre Act, 38 of 2001 (‘
FICA’)
compliance.
[35]
On 13 October 2014, after the meeting on 10 October 2014, the
applicant addressed an email to the respondents, annexing a
‘response’ to the meeting. It is not clear whether she
objected to the proposed resolutions, and it appears that the
only
new issue raised in this response is the VAT issue, which is dealt
with more fully hereunder, to the effect that VAT registration
above
a certain level is mandatory and as Swan Lodge has exceeded this
threshold amount this issue needs to be regularised.
[36]
In November 2014, after the resolution to open a new bank account and
for the transfer of all funds from the old bank accounts,
the
applicant used a blank cheque which the third respondent had signed,
without his knowledge, to transfer the sum of R280 000
of Swan
Lodge’s fund to the Swan Lodge Money Market account. Because
this partnership account required the applicant’s
and the third
respondent’s joint authorisation, the third respondent was
unable to access the funds to pay Swan Lodge’s
expenses. The
respondents alleged that in so doing the applicant knowingly acted in
direct contravention of resolutions passed
by Swan Lodge, thereby
placing Swan Lodge at significant financial and reputational risk. As
a result, the debit order for the
mortgage bond instalment was
returned as unpaid from the transactional account from which the
funds had been transferred.
[37]
The applicant used the account in which the funds were held as
leverage to bargain for payment of the sum of R150,000 to her
in
‘part settlement of her loan account’. The respondents
contend that this demand was neither lawful, nor appropriate,
and
constituted a breach of her fiduciary duties towards Swan Lodge. The
respondents accordingly deny that the issue of the bank
account could
legitimately support the applicant’s application.
[40] In an email to FNB on 15
December 2014, the applicant states that the new account was opened
illegally as she did not give
permission for the account to be
opened, and did not sign the necessary documents. She threatened to
sue FNB for any fraud committed.
Even if the applicant opposed the
resolution regarding the bank account, there was still a quorum and
the resolution complied with
the Act.
Swan
Lodge Meetings held in December 2015 and May 2016
[41]
A meeting of the corporation was held on 14 December 2015. All four
members were in attendance. The applicant addressed a letter
to the
other members in which she acknowledged receiving the agenda for the
meeting on 2 December 2015, but demanded copies of
the proposed
resolutions to obtain legal advice and consider her position.
Curiously this letter is dated 14 December 2015 and
the meeting was
to be held, and in fact went ahead, at 08h00 on the same day. In the
letter the applicant noted as follows:
‘
The
above has resulted in me not being able to meaningfully participate
in this meeting. I suspect that what was going to be discussed
at
this meeting was more fully known between the three other members
than me.
Whilst I
understand that the principle of the majority prevails, this is
counterbalanced by the provisions of the
Close Corporations Act which
does not allow a member to be unfairly treated or prejudiced by other
members.’
[42]
It appears that the only contentious issues raised at this meeting
were that the applicant required R300,000 towards the repayment
of
her loan account, and as there were insufficient funds, the other
members agreed to a payment of R100,000 to each member. The
minutes
of this meeting are instructive, and include a recordal of issues
which the applicant purports to rely upon in the present
application.
The minutes recorded
inter alia,
the following:
a)
‘
Nola
still objects that FNB had opened an account in the name of the Swan
Lodge CC;
b)
Nola
was again informed and noted that she was informed to go to FNB and
sign documents as a signatory on the account, but still
refuses to do
so;
c)
Nola
had been advised to go to FNB and sign banking documents to allow
access to information, and that all other information had
been
distributed. It was further noted that the applicant acknowledged
that she had received all information requested, including
account
information, rental payments and financials for 2015;
d)
Nola
acknowledges that she has received all account information as well as
rentals payments and financial for 2015 as requested..;
[1]
e)
Nola
unhappy with the cheqs and accounting practice and wants proper
invoices?? We have given invoices;
f)
Suggested
Pierre to draft a document re sale of Swan lodge that the new owner
will be liable to take over all the rental/lease contracts
with KEA;
g)
According
to Nola no mandate was given to Pierre to sell Swan Lodge;
[2]
h)
Pierre,
Nola and Jacques had agreed on a selling net price no less than 16
million and 3,5 net for the plot, Noted that Anton disagreed
on
selling price and wanted 18 million net for swan lodge and 4 million
for the plot; and
i)
Nola
confirmed that litigation will continue against all members.’
Section
49 of the Act – What is the applicant required to prove?
[43]
The applicant seeks final relief on motion. As stated above, the
facts must thus be adjudicated in accordance with the
Plascon-Evans
rule.
[3]
There is no suggestion that the respondents’ version is
far-fetched or implausible, or that there is any basis upon which
to
reject it.
[44]
Section 49 (1) and (2) entitles a member of a corporation to apply
for relief under the section as follows:
‘
(1)
Any
member of a corporation who alleges that any particular act or
omission of the
corporation
or of one or more other members is unfairly prejudicial, unjust or
inequitable to him or her, or to some members including
him or her,
or that the affairs of the corporation are being conducted in a
manner unfairly prejudicial, unjust or inequitable
to him or her, or
to some members including him or her, may make an application to a
Court for an order under this section.
(2)
If on any such application it appears to the Court that the
particular act or omission is unfairly prejudicial, unjust or
inequitable
as contemplated in subsection (1), or that the
corporation's affairs are being conducted as so contemplated, and if
the Court considers
it just and equitable, the Court may with a view
to settling the dispute make such order as it thinks fit, whether for
regulating
the future conduct of the affairs of the corporation or
for the purchase of the interest of any member of the corporation by
other
members thereof or by the corporation.’
[43]
Approaching
the facts, on this basis, the court must be satisfied that the
applicant has demonstrated that:
a)
A
particular act or omission of the close corporation (or a member) was
itself unfairly prejudicial, unjust or inequitable;
and
b)
that
it had results that were unfairly prejudicial, unjust or inequitable;
c)
or
if
reliance is placed on the manner in which the close corporation’s
business is conducted, that both the conduct and the
result of the
conduct is unfairly prejudicial, unjust or inequitable;
[4]
and
d)
it
just and equitable, with a view to settling the dispute, to make such
order as it thinks fit.
[44]
The provisions of section 49 are modelled on those of section 252 of
the Companies Act 61 of 1973 (‘the 1973 Act’),
the
antecedent of
section 163
of the
Companies Act 71 of 2008
Act (‘the
2008 Act’). Section 163 differs markedly from section 252
of 1973 Act. In interpreting the principles
applicable to section 49,
it is therefore appropriate to obtain guidance from the cases dealing
with section 252.
[45]
Interestingly, the term ‘oppressive’ does not appear in
the body of either section 49 or section 252, however the
title of
section 252 is ‘Relief from Oppression’. It thus appears
that from the legislature’s point of view,
the purpose of the
remedy was to provide minority member’s with relief from
oppressive conduct.
[46]
The commentary by
Henochsberg
on section 252 is instructive.
[5]
The purpose of the section is described as empowering the Court to
come to the assistance of a member of a company
who
legitimately complains of any act or omission by the company or the
conduct of its affairs.
[6]
[47]
The starting point is for the Court is to determine whether the
applicant has proved that the act or omission or the manner
of the
conduct of the company’s affairs was or is unfairly
prejudicial, unjust or inequitable to the complainant. Thereafter,
the Court must also consider whether it is just and equitable that it
should intervene. The court’s powers to intervene are
wide and
are designed ‘with a view to bringing to an end the matters
complained of.’
[7]
Put differently, the question which the Court must answer is, has the
member’s rights been adversely affected by the conduct
complained of?
[48] The
SCA in
Louw
and Others v Nel,
[8]
held that
its:
‘jurisdiction to make an order does not arise until the
specified statutory criteria had been satisfied. As Buckley J
put it
in
Re
Five Minute Car Wash Service Ltd:
“The
mere fact that a member of a company has lost confidence in
the manner in which the company's affairs are
conducted does not
lead to the conclusion that he is oppressed; nor can resentment at
being outvoted…”.’
[9]
[49]
In
Louw
supra, Ponnan JA went on to say that:
‘
Fairness,
according to Lord Hoffmann […] is the criterion by which a
court must decide whether it has jurisdiction to grant
relief.
Generally speaking, an application of this kind, based upon the
partnership analogy cannot succeed if what is complained
of is merely
a valid exercise of the powers conferred on the majority. To hold
otherwise would enable a member to be relieved from
the consequences
of a bargain knowingly entered into by him. For, as Trollip JA put it
in
Sammel
and Others v President Brand Gold Mining Co Ltd
:
“By becoming a shareholder in a company a person undertakes by
his contract to be bound by the decisions of the prescribed
majority
of shareholders, if those decisions on the affairs of the company are
arrived at in accordance with the law, even where
they adversely
affect his own rights as a shareholder, […] that principle of
the supremacy of the majority is essential
to the proper functioning
of companies.”’
[10]
[50]
To invoke section 252 (or section 49), it is not sufficient for an
applicant to show that an act or omission is prejudicial.
It must
further be shown to be unfair.
[51]
Analogous to the present case and as quoted, with approval, by the
SCA in
Louw
supra
,
in
Re
a company
[11]
,
Lord Hoffman put it thus:
“
Mr
Hollington's submission comes to saying that, in a
quasi-partnership company, one partner ought to be entitled at
will
to require the other partner or partners to buy his shares at a
fair value. All he need do is to declare that trust and confidence
has broken down….’
'I do not
think that there is any support in the authorities for such a
stark right of unilateral withdrawal. There
are cases,
such as
Re
a company (No 006834 of 1988)
,
ex
p Kremer
[1989]
BCLC 365
, in which it has been said that if a breakdown in relations
has caused the majority to remove a shareholder from participation in
the management, it is usually a waste of time to try to investigate
who caused the breakdown. Such breakdowns often occur (as in
this
case) without either side having done anything seriously wrong or
unfair. It is not fair to the excluded member, who will
usually have
lost his employment, to keep his assets locked in the company. But
that does not mean that a member who has not been
dismissed or
excluded can demand that his shares be purchased simply because he
feels that he has lost trust and confidence
in the others. I
rather doubt whether even in partnership law a dissolution would be
granted on this ground in a case in which
it was still possible under
the articles for the business of the partnership to be continued. And
as Lord Wilberforce observed
in
Ebrahimi
v Westbourne Galleries Ltd
[1972]
2 All ER 492
at 500,
[1973] AC 360
at 380, one should not press the
quasi-partnership analogy too far: A company, however small, however
domestic, is a company not
a partnership or even a quasi
partnership. . . .'”
[12]
[52]
In the recent decision of Plasket J in
Feni
v Gxothiwe (‘Feni”),
[13]
the
court was called upon to decide an application in which relief was
claimed in terms of section 49. The facts in that case were
markedly
different to that in the present case. In
Feni
there
was not simply a breakdown of trust leading the disgruntled member to
seek an order that the other member buy her interest
in the
corporation. The applicant’s relief was premised upon facts
placed before the court which showed that her co-member
had
effectively hijacked the management and business of the corporation.
In summing up the grounds made out for the relief sought,
the learned
judge stated as follows:
‘
Indeed,
so gross in its oppression of the applicant was the conduct of the
first respondent that his acts and omissions only have
to be stated
for their unreasonableness to be manifest […]’
[14]
[53]
In
Feni
the first respondent refused to repay a loan, despite
the funds to do so being available, resulting in the applicant
forfeiting
her security for such loan; unilaterally donated 500 ewes
and 8 rams, belonging to the corporation, to his brother, with the
result
that the ability of the corporation to farm profitably was
compromised; and the assets of the corporation were unreasonably
diminished to
the detriment of the applicant's interest in it.
Moreover, he in the absence of any authority to do so, withdrew over
R1 600 000
from the corporation for his own purposes, and used the
funds of the business to purchase motor vehicles for two nephews and
the
brother of his lover, with the result of prejudicing the
applicant's interest in the corporation. Lastly, he ejected the
applicant
from the farm and totally excluded her from the management
and the benefits of the business of the corporation, amounting to the
hijacking of her interest in it.
[54]
The learned judge went on to say that, whilst he accepts that s
ection
49 was
designed for ‘extraordinary situations’, as was held by
Jones J in
Gatenby
v Gatenby and Others
[15]
,
so
oppressive was the conduct of the first respondent in
Feni,
that
it is a ‘case study’ of precisely the type of
circumstances that s
ection
49 is intended
to remedy.
[16]
[55]
In
Gatenby
[17]
supra,
the following
dictum
of
Cillié J in
Livanos
v Swartzberg and Others
[18]
was
cited:
‘
In any
event it is not the motive for the conduct that the Court must look
at
but
the conduct itself and the effect
which
it has on the other members of the company.’
[56]
Unfair conduct, in the context of s
ection
252 of the
1973 Act, is described by Preiss J in the case of
Donaldson
Investments (Pty) Ltd and Others v Anglo-Transvaal Collieries Ltd: SA
Mutual Life Assurance Society and Another Intervening:
[19]
'[…]
the applicants must establish a lack of probity or fair dealing,
or a visible departure from the standards of fair
dealing, or a
violation of the conditions of fair play on which every shareholder
is entitled to rely. Couched in another form,
I agree that the
applicants must establish that the majority shareholders are using
their greater voting power in a manner which
does not enable the
minority to enjoy a fair participation in the affairs of a company.
The emphasis is upon the unfairness of
the conduct complained of. It
must be conduct which departs from the accepted standards of fair
play, or which amounts to an unfair
discrimination against the
minority.'
[57]
If the applicant can overcome the first, and not insignificant,
hurdle of proving that the conduct or omission of the other
members
was unfair and that she was prejudiced thereby, she must still
overcome the further hurdle of showing that the
result
of the conduct of the affairs in that manner is unfairly
prejudicial.
[20]
[58]
Lastly, an application under s
ection
252 (or under
s
ection
49), ought not
to be brought with the object, of obtaining the relief claimed, but
of exerting pressure to achieve a collateral
purpose which can
otherwise not readily be achieved.
[21]
Failure
to adduce evidence necessary to determine fair value
[59]
An applicant who seeks relief in terms of s
ection
49 bears the
onus of proving that he is entitled to the relief which he or she
seeks, and it is incumbent upon him or her to place
before the Court
the necessary evidence to enable the Court to decide that it would be
appropriate for it to grant the order sought.
[60]
Where an applicant
seeks an order that the member's interest be acquired at fair value,
it is required to disclose the financial
position of the close
corporation and the manner in which such fair value is to be arrived
at, to enable the court to exercise
its discretion in terms of
section 49(2) or then the application must fail.
[22]
[61]
In
Feni
[23]
Plasket J further
observed that:
‘
As with s 36, a member of
a close corporation who seeks relief in terms of s
ection
49 bears the onus of establishing
that the court should exercise its discretion in favour of ordering
the disposal of a respondent’s
interest in the close
corporation and as to the terms and conditions of that disposition,
and, I would add, any other ancillary
relief that may be claimed.’
[62]
In her founding affidavit the applicant concedes that she has not
adduced the necessary evidence as to fair value. The applicant
relies
on her alleged inability to gain access to financial information, in
particular, lease agreements and rental invoices, to
justify her
failure to do so.
[63]
In
Feni,
the
Court excused the applicant’s failure to adduce necessary
evidence as to fair value as ‘that evidence is not before
me
precisely because of the oppressive conduct on the part of the first
respondent, that entitles the applicant to relief. To dismiss
her
application for want of evidence as to the value of the first
respondent’s interest – information that is not available
to her because of his
hijacking
of the management and the business
of Westondale Farming – would defeat the purpose of s 49.’
[24]
[64]
On 16 May 2016 at 06h59, before the founding affidavit was deposed to
and prior to the present application being issued, the
applicant was
provided with,
inter alia
, a proposed resolution for debate,
which was subsequently passed, which addressed the manner of
receiving and obtaining access
to documents. On the facts set out
hereinabove the applicant had possession of financial information
(including, lease agreements
and rental invoices) and had consistent
access to such information. There is, accordingly, no justification
for the applicant’s
failure to provide necessary evidence as to
the value of the applicant’s interest in the fourth respondent.
[64]
I am bound to accept the version of the respondents, which clearly
shows that the exceptional facts, which were present in
the
Feni
case, are not present in this application. By all accounts, it
would appear that the applicant was granted full and unfettered
access
to the financial records and documentation of Swan Lodge. The
applicant’s complaint regarding the failure by the respondents
to grant her access thereto appears to be somewhat contrived to make
out a case of exclusion or unfairly prejudicial conduct, which
is not
supported by even the common cause facts, nor the contemporaneous
correspondence exchanged between the applicant and the
respondents.
Is
the bank account issue a basis upon which the applicant is entitled
to s
ection
49 relief?
[65]
I now turn to deal with the applicant’s complaint regarding the
conduct of Swan Lodge’s banking account. It is
common cause
that, as a signatory on the partnership accounts of Swan Lodge, the
applicant at all times had access to the bank
statements for those
accounts. An account was opened in the name of Swan Lodge CC only in
December 2014.
[66]
As a nominated signatory on Swan Lodge’s bank account, the
applicant had a right to obtain copies of the bank statements
(and
account information), once she provided FNB with the requisite
information required in terms of the relevant provisions of
FICA,
and submitted a
specimen signature. Despite being repeatedly requested to do
so, the applicant failed to submit a specimen
signature to FNB.
[67]
In October 2014, with the full knowledge of the applicant, the
majority of the members of the fourth respondent duly passed
resolutions to open a new bank account, and to transfer its funds
from the partnership accounts, held by the applicant and third
respondent, to the new account. In November 2014, the applicant
impermissibly used a blank cheque that the third respondent, as
her
co-signatory had signed for an unrelated purpose, in order to
transfer R280, 000.00 of Swan Lodge’s funds to a money
market
account held by the applicant and the third respondent. Because this
partnership account required their joint authorisation,
the third
respondent was unable, without the applicant’s consent, to make
the funds available to pay Swan Lodge’s expenses.
The
respondents averred that in so doing the applicant knowingly acted in
direct contravention of resolutions passed by Swan Lodge
in October
2014, and thereby subjected the corporation to significant financial
and reputational risk. As a consequence the mortgage
bond repayment
was returned as unpaid.
[68]
It appears that the partnership account, which was at threat of being
frozen (due to the applicant ignoring requests in terms
of FICA), was
being used by the applicant as leverage to bargain for payment of a
significant sum to the applicant, contrary to
the interests of the
Swan Lodge. A number of months after the funds were effectively
frozen, the applicant said that she would
only agree to transfer the
funds in the partnership account, then R400, 000.00, ‘on
condition that R150, 000.00 be paid from
the R400, 000.00 in part
settlement of her loan account.’
[69]
Without deciding whether it is indeed so, the applicant’s
conduct in leveraging her authority as signatory to obtain
repayment
of her loan account, contrary to the interests of Swan Lodge, may
have constituted a breach of her fiduciary duties to
the corporation.
[70]
It appears that the applicant was not prevented from becoming a
signatory on the new FNB account, but chose not to do so. In
the
circumstances there is no indication that the so-called bank account
issue amounts to unfairly prejudicial or inequitable conduct
as
envisaged in terms of s
ection
49.
The
applicant’s credibility
[71]
A further ground for relief relied upon by the applicant in her
founding affidavit related to a letter from which she says
that it is
‘clear to [her] that the fourth respondent’s status as a
separate entity was being abused because of the
fact that the
content’ of the letter ‘is false’. The applicant
stated that she had no knowledge to whom the letter
was given and
that she ‘came across’ it during her preparation in the
instant matter. It became apparent, from the
allegations in the
respondents’ answering affidavit (supported by documentation),
that it was in fact the applicant who authored
and circulated the
letter. In reply the applicant did a
volte-face,
recalling,
with surprising precision, the very documents which she claimed to
know nothing about.
[72]
A further unwarranted criticism was levelled against the respondents
by the applicant for not ‘dealing with’ the
salary to be
paid to the fourth respondent. In answer, Reece confirms that it was
the applicant who gave him the salary instruction.
The applicant
failed to deal with Reece’s response in reply.
[73]
The applicant either ignores these anomalies in her replying
affidavit, or fails to adequately explain why the true position
was
misstated in her founding papers. To my mind this raises serious
concerns regarding the applicant’s credibility. It is
of course
not necessary to decide whether to reject her evidence on this basis,
as the Court is only required to make a finding
on the facts alleged
by the respondents, together with the undisputed facts alleged by the
applicant, unless the respondents’
version is so implausible as
to be rejected outright, which is not the case in this application.
Was
the applicant marginalised or excluded?
[73]
The applicant contended that in running the business of Swan Lodge,
‘discussions between the respondents take place as
if they were
in one camp and [the applicant] in another’. This is not borne
out by the minutes of the meetings, from which
it is apparent that
not only did the applicant fully participate, when she chose to do
so, in the running of the business and in
decision-making, but that
there were several issues where the members were split or where the
applicant formed part of the majority.
[74]
One email from the applicant, in particular, gives cause for concern
that the application was brought with an ulterior purpose.
In the
email, sent to the first respondent but addressed to the applicant’s
attorney, she stated as follows:
‘
Morning Danie So excited…
I
think kea is nipping straws
.
We are the ones to make demands now..I don’t think pierre from
kea knows he sent the email to me as it was addressed to
Guthrie.
I
really want Dad’s house but they are not getting away this
easily
…’
[25]
[75]
The applicant argues that the failure by the respondents’ to
give her a quarter share of the monthly rental received
from the
renting out of the residential property is because the first
respondent adopted a ‘vindictive attitude’ towards
her.
This is not borne out by the correspondence emanating from the
applicant, in terms of which she proposed how these funds
were dealt
with, which the other members accepted and which arrangement has been
in place ever since.
Application
to strike out and the VAT issue
[76]
On 11 November 2016 the respondents delivered an application to
strike out certain paragraphs of, and annexures to, the applicant’s
replying affidavit, on the basis that these paragraphs and annexures
contain a new matter.
[77]
The new matter related to allegations by the applicant concerning
VAT, and the fact that the respondents had allegedly failed
to take
heed of the applicant’s concern regarding the failure to
register Swan Lodge as a VAT vendor, notwithstanding the
fact that it
had exceeded the threshold turnover of R1 million per annum.
[78]
The applicant did not raise the VAT issue in her founding affidavit,
save for, as alleged by the respondents ‘relying
on an obscure
comment on the third page of one of the 58 comments referred to in
her founding affidavit to justify doing so.’
The respondents
argued that if not struck out, this new matter is prejudicial
because, absent an explanation or answer by the respondents,
it
creates the ‘incorrect (unfair) impression that Swan Lodge was
required to register for VAT in 2014, that the applicant
raised ‘the
alarm about the issue’ in October 2014, and that the
respondents ignored her.
[79]
It appears from the affidavit filed in support of the application to
strike out, that the advice given to Swan Lodge, and to
the third
respondent, by two duly qualified professionals, one of which was
Reece, was that the taxable supplies did not exceed
the threshold of
R1 million. The taxable supplies at that time were, so the
respondents say, below the threshold because the letting
and hiring
of the flats, a significant source of Swan Lodge’s turnover,
constituted an exempt supply in terms of section
12(c) of the Value
Added Tax Act No. 89 of 1991. Acting on the advice received at the
time, Swan Lodge did not register for VAT.
[80]
The respondents have, in practical terms, effectively been afforded
an opportunity to answer these allegations, and have done
so in the
abovementioned affidavit. In any event, I am of the view that a
failure to register for VAT in the circumstances described
does not
constitute unfairly prejudicial conduct, nor has evidence been led by
the applicant to show that the omission had an unfairly
prejudicial
result, as envisaged in s
ection
49.
[81]
It is therefore not necessary to deal in any detail with the striking
out application, particularly given the view I take of
this matter
and the fact that it will in any event have no impact on the order
which I intend to make.
CONCLUSION
[82]
For all the reasons set out above, it is my view that the applicant
has failed to discharge the onus imposed on her in terms
of s
ection
49. There is no clear evidence
that the applicant has been excluded from the management of the
business, nor that she has been marginalised
as a result of the
conduct of the respondents. I can also see no evidence that the
respondents have used their greater voting powers
for nefarious
purposes, or in order to unfairly prejudice the applicant.
[83]
It is clear that the applicant has lost confidence and trust in her
siblings as her co-members in the corporation, however
this,
unfortunately, does not vest her with a right to withdraw as a member
from Swan Lodge, or to invoke the protection provided
for in terms of
the provisions contained in s
ection
49. To my mind the respondents
have not acted in such a manner which prevented the applicant from
enjoying a fair participation
in the affairs of the corporation, and
the applicant has failed to make out a case for the relief sought.
[84]
In the circumstances, I make the following order:
The
application is dismissed with costs, save for the costs of the
chamber book application brought by the applicant, which shall
be
borne by the first, second and third respondents, jointly and
severally, the one paying the others to be absolved.
________________
HOLDERNESS, AJ
ACTING
JUDGE OF THE HIGH COURT
APPEARANCES
For
the Applicant:
Adv D Stephens
Instructed
by:
Attorneys West & Rossouw
33 Longboat Street
Sunnydale
CAPE TOWN
For
the Respondent(s):
Adv B Studti
Instructed
by:
Guthrie Colananni Attorneys
102 Fish Hoek Centre
Main Road
FISH HOEK
Date(s)
of Hearing:
28 November 2016 and 14 December 2016
Judgment
delivered on:
14 March 2017
[1]
Emphasis
added
[2]
Emphasis
added.
[3]
Visser
Sitrus (Pty) Ltd v Goede Hoop Sitrus (Pty) Ltd and Others
2014
(5) SA 179
(WCC) para 2.
[4]
Emphasis
added.
Gatenby
v Gatenby & others
1996
(3) SA 118
(E) at 124B-H;
Feni
v Gxothiwe and another
2014 (1) SA 594
(ECG) para 24.
[5]
Henochsberg
on the
Companies Act,
Vol
1 (Issue 33), at 477.
[6]
Emphasis
added
[7]
s
252 (3) of the 1973 Act.
[8]
2011
(2) SA 172 (SCA)
.
[9]
Louw
n
7 paras 23 – 24.
[10]
Louw
n
7 para 22.
[11]
(No
00709 of 1992) O’Neill and another v Phillips and others
[1999] UKHL 24
;
[1999]
2 All ER 961
at 966.
[12]
Louw
n
7 para 24.
[13]
Feni
n
4.
[14]
Feni
n
4 para 30.
[15]
Gatenby
n
4 at 123G-H.
[16]
Feni
n
4 para 31.
[17]
Gatenby
n
4 at 124E-F.
[18]
1962
(4) SA 395
(W) at 399H.
[19]
1979
(3) SA 713
(W) at 722E-G.
[20]
Emphasis
added.
[21]
Henochsberg
n
5 at 484 and the authorities there cited.
[22]
Feni
n
4 paras 28 and 33.
[23]
Feni
n
4
para
27.
[24]
Feni
n
4 para 33 (
underlining
supplied).
[25]
Underlining
added.