Minister of Environmental Affairs v Recycling and Economic Development Initiative of South Africa NPC, Minister of Environmental Affairs v Recycling and Kusaga Taka Consulting (Proprietary) Limited (9675/2017, 10123/17) [2017] ZAWCHC 101; [2017] 4 All SA 783 (WCC); 2018 (3) SA 604 (WCC) (15 September 2017)

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[2017] ZAWCHC 101
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Minister of Environmental Affairs v Recycling and Economic Development Initiative of South Africa NPC, Minister of Environmental Affairs v Recycling and Kusaga Taka Consulting (Proprietary) Limited (9675/2017, 10123/17) [2017] ZAWCHC 101; [2017] 4 All SA 783 (WCC); 2018 (3) SA 604 (WCC) (15 September 2017)

IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
[
REPORTABLE
]
Case No: 9675/2017
In
the matter between:
THE
MINISTER OF ENVIRONMENTAL AFFAIRS
Applicant
and
RECYCLING
AND ECONOMIC DEVELOPMENT
INITIATIVE
OF SOUTH AFRICA NPC
(Registration
number 2010/022733/08)
Respondent
AND
Case
No: 10123/17
In
the matter between:
THE
MINISTER OF ENVIRONMENTAL AFFAIRS
Applicant
and
KUSAGA
TAKA CONSULTING (PROPRIETARY)
LIMITED
Respondent
JUDGMENT:
15 SEPTEMBER 2017
Henney
J:
Introduction
[1]
This is a consolidated application, brought by
the Minister of Environment Affairs (hereinafter referred to as “the
Minister”
or “the Applicant”) for the final
liquidation of two entities that has an association with each other.
[2]
The Minister, on 1 June 2017, brought an
application, under case number 9675/2017, for the provisional
liquidation of the Respondent,
the Recycling and Economic Development
of South Africa (“Redisa”), a non-profit, solvent company
before Cloete J, which
was granted. Cloete J also issued a rule nisi
that required the Respondent and any
other party
with a legitimate interest to show cause, if any, on Tuesday, 25 July
2017:
1)
Why the Respondent (Redisa) should not be placed
under a final winding-up order;
2)
Why the liquidator of the Respondent (Redisa)
should not be directed to distribute the entire net value of the
Respondent to the
Waste Management Bureau; and
3)
Why the costs of this application should not be
cost in the winding-up of the Respondent (Redisa).
[3]
In the second application, on 8 June 2017 under
case number 10123/2017, the Minister brought the application for the
provisional
liquidation of Kusaga Taka Consulting (Pty) Ltd (“KT”),
a privately owned, solvent company before Le Grange J, who also

granted the application. The court also issued a rule nisi that
required the Respondent and any other party with a legitimate
interest, to show cause, if any, on Tuesday, 25 July 2017:
1)
Why the Respondent (KT) should not be placed
under a final winding-up order;
2)
Why the liquidator of the Respondent (KT) should
not be directed to distribute the entire net value of the Respondent
to the Waste
Management Bureau; and
3)
Why the costs of this application should not be
cost in the winding-up of the Respondent (KT).
The
basis upon which the Minister sought an application for the
liquidation of KT was because KT acted as the management company
of
Redisa.
[4]
In respect
of both applications,
[1]
the Minister was granted an order for the provisional liquidation of
both Respondents’ in terms of section 81 (1)(c)(ii)
and/or 81
(1)(d)(iii) read with section 157 (1)(d) of the Companies Act 71 of
2008 (“the
Companies Act&rdquo
;). Both these applications were
brought on an ex parte basis. The Applicant in both these
applications was also granted leave in
terms of the provisions of
section 157
(1)(d) of the
Companies Act to
bring the application for
the provisional and final winding-up of the Respondents in terms of
section 81
(1)(c)(ii) or
81
(1)(d)(iii).
[5]
Both Respondents’ in the respective
applications anticipated the return day in terms of
Rule 6(8)
and
caused the matter, in respective of both cases, to be set down on 22
June 2017. Whereby they sought an order that their respective

applications be heard on an
urgent basis and the
rule nisi be discharged in respect of both provisional applications
with costs, including the cost of two counsel
to be borne by the
Applicant on the scale as between attorney and client.
[6]
On 22 June 2017, the matter came before Sher AJ
who postponed the matter for hearing on the urgent roll on Wednesday,
5 July 2017.
The Applicant was ordered to file a replying affidavit
on or before 28 June 2017. On 29 June 2017 the Applicant provided the
Respondents’
with an electronic copy of her replying affidavit
which contained new evidence. This resulted in the Applicant having
to apply
on 5 July 2017 for condonation for the late filing of her
replying affidavit which contained new evidence as well as the late
filing
of her supplementary affidavits to the founding affidavit and
the supporting affidavits to her replying affidavit.
[7]
This condonation application was strenuously
opposed by both Respondents. This court after hearing this
application granted condonation
for the late filing of the replying
affidavit, supplementary affidavits and new evidence contained in the
replying affidavit and
further supplementary affidavits, in support
of this new evidence. Leave was granted to the Respondents to file
rebutting affidavits
in answer to this further evidence, which they
did. Thus the matter was heard before me on an urgent basis during
the recess on
the 5
th
and 6
th
of July
2017.
[8]
The Respondents also raised the following points
in limine, which the court will deal with at a later stage during
this judgment.
These are:
1)
That the Minister had no locus standi to bring
these applications;
2)
That the Minister could not have launched the
application for a provisional liquidation order on ex parte basis;
3)
That the ground for urgency relied upon by the
Minister denies that scrutiny and that the ex parte application
should be struck
from the roll with reasons; also
4)
That the Minister failed to disclose highly
relevant facts to the court when the ex
parte
application was moved.
[9]
The application in both matters are opposed on
these further additional grounds:
1)
That there is no prima facie case made out by the
Minister for the relief sought; and
2)
That it would not be just and equitable to
wind-up the two companies.
[10]
The appearances in the Redisa application were as
follows: Adv Woodland SC with the assistance of Adv Rust appeared on
behalf of
the Applicant; Adv Burger SC and Adv Smalberger SC appeared
for the Respondent. In the KT application the appearances were: Adv

Muller SC and Adv Swart SC, with the assistance of Mr Myburgh, on
behalf of the Applicant; with Adv Dickerson SC, assisted by Adv

Reynolds, for the Respondent. This court is indebted to counsel for
the comprehensive heads of argument and supplementary submissions,

which have been of great assistance in preparing this judgment.
Background
[11]
Redisa
submitted a proposed integrated industry waste tyre management plan
to the Minister for approval in terms of the Waste Tyre
Regulations,
2009 (“the Waste Tyre Regulations”).
[2]
This proposed plan also referred to as the “
Redisa
Plan
”
was approved on 29 November 2012, subject to the conditions of
approval as set out in paragraph 2 and 3 of the Minister’s

letter of approval.
[3]
[12]
These conditions relates to reporting, targets,
collection of stockpiles, and the amendment and review of the plan.
This plan
together with the Ministerial approval was published in
terms of Regulation 11(4) of the Waste Tyre Regulations and was
published
in the Government Gazette by way of Government Notice 988
of 30 November 2012.
[13]
The Redisa Plan is an integrated industry waste
tyre management plan, as contemplated in Regulation 9 and 10 of the
Waste Tyre Regulations.
This plan was approved for an initial period
of five years from the date of publication, which will expire by
operation of law
on 30 November 2012. It is also the only waste
management measure in place for the management of waste tyres.
[14]
A broad overview of the plan is that it seeks to
manage tyres and casings that enter the South African economy, either
through local
production and manufacturing, or through
the
importation thereof, after they had been consumed and become waste.
The purpose is to generate zero waste from tyres.
[15]
Under this plan, every producer and importer of
tyres and casings had to pay a contribution fee to Redisa, the
manager of the plan,
which was used to facilitate the collection,
transport, distribution and storage of these waste tyres. These waste
tyres had to
be subjected to the new waste management hierarchy,
which was introduced by section 3 of the National Environmental
Management:
Waste Act, 59 of 2008 (“the Waste Act”). The
components of this waste management hierarchy include waste avoidance
and reduction, and to ensure that waste is re-used, recycled and
recovered.
[16]
As part of this waste tyre management hierarchy
these tyres inter alia have to be collected by waste tyre collectors,
stored in
waste tyre depots and transported to firms in industries
that can use the waste tyres to develop new products or uses for
tyres,
such as recyclers, tyre-derived fuel manufacturers, tyre crump
producers, pyrolysis, processors or other downstream industries.
[17]
Originally, the Redisa Plan provided for the
compulsory subscription by all tyre producers as defined in Part 3 of
the Waste Tyre
Regulations and has been prescribed by Regulation 9
(1)(k) [before it was repealed with effect from 1 February 2017]. In
terms
of this provision, a waste management fee of R2,30 plus VAT per
kilogram of manufactured and/or of imported tyres and casings was

levied and collected by Redisa from all the subscribers and/or the
members who were compelled to subscribe. The fee provided Redisa
with
an income stream intended to be used for the sole purpose of
implementing and administering the Redisa Plan.
[18]
A tyre
producer’s failure to subscribe to an integrated industry waste
tyre management plan (“IIWTMP”) and who
continues
producing tyres would constitute an offence. The legal nature of the
Redisa Plan as an “
integrated
industry waste tyre management plan
”
has been described by the Supreme Court of Appeal to be an instrument
of subordinate legislation which came into legal existence
or force
after Ministerial approval of the Redisa Plan under the Waste Tyre
Regulations.
[4]
[19]
Redisa is registered as a non-profit company, and
according to the Minister, it is also
an organ of
state, which is engaged in the administration and implementation of
subordinate legislation. KT on the other hand acted
as a management
company, appointed by Redisa, to manage the operations of the plan.
According to the Redisa Plan, which was accepted
by the Minister,
Redisa will have a Memorandum of Incorporation (“MOI”)
governing its activities.
[20]
An aim of
the MOI was to ensure the independence of the Redisa board. The board
members should consist of: two executive directors,
one legal expert,
one financial, five captains of industry and higher learning, and one
from the informal business sector. The
terms and conditions for the
remuneration of an incorporator, a director or any person appointing
a director of the company is
set out in the MOI.
[5]
[21]
In terms of Regulation 9 (1)(jA) of the Waste
Tyre Regulations (as amended), it provided, with effect from 2
December 2016, that
an integrated industry waste tyre management plan
(such as the Redisa Plan) must at least be aligned to the pricing
strategy for
waste management charges.
[22]
The
“
National
Pricing Strategy for Waste Management”
or
“
Pricing
Strategy
”
was published under Government Notice 904 of 11 August 2016,
[6]
in terms of the legislative requirement under the newly inserted
section 13A (1) of the Waste Act.
[7]
This resulted in various legislative changes in terms of the Waste
Act, such as an amendment to the Revenue Laws Act 13 of 2016,
which
commenced on 19 January 2017, which further resulted in an amendment
of the Customs and Excise Act 91 of 1964, which was
amended with
effect from 1 February 2017.
[8]
[23]
The effect
and consequence of all these amendments introduced a tyre tax or an
environmental levy on tyres for collection by SARS.
[9]
As from 1 February 2017, SARS is now charged by law with the
responsibility to collect this tyre tax and or environmental levy
on
tyres from the manufacturers, importers or producers of tyres and to
pay these funds into the National Revenue Fund, as contemplated
in
section 213(1) of the Constitution.
[24]
Redisa is no longer charged with the
responsibility to collect its contribution from tyre producers or
importers in South Africa
in terms of the Redisa Plan. Redisa is
prohibited from continuing with the collection of the Redisa
contribution unless such a
contribution was due before 1 February
2017, which in practical terms means that Redisa would have continued
collecting such contributions
for a period of three months up to 31
May 2017.
[25]
This resulted in numerous interactions with
Redisa, as well as representatives of the entire tyre industry in
South Africa, with
regard to the amendment of the Waste Tyre
Regulations and the required alignment of the Redisa Plan. Since
2014, the Department
had various interactions
with Mr Hermann Erdmann (“Erdmann”), the Chief Executive
Officer (“CEO”) of Redisa,
and various representatives of
Redisa to discuss the alignment of the Redisa Plan to the amended
Waste Act, the Pricing Strategy
and amended Waste Tyre Regulations.
The
Minister’s case against the Respondents’ in the two
applications:
Against
Redisa
[26]
What is clear from the papers is that there is
some dissatisfaction on the part of Redisa and in particular Erdmann
about the new
funding model for Redisa. He made various
representations either to the Department of Environmental Affairs
(“the Department”)
and/or Treasury to which reports from
PricewaterhouseCoopers (“PwC”) were attached, to persuade
the Minister, the Department
as well as National Treasury not to
implement the new Pricing Strategy. The Minister’s case against
Redisa, as well as KT,
is largely set out in the founding affidavit
as well as the further evidence presented in the replying affidavit
and the further
supplementary affidavits, which upon application she
was admitted to file.
[27]
In the Redisa application, the Minister submits
that:
1)
The Respondent (Redisa) is resisting the changes
in the funding model and it has launched two separate applications in
the Gauteng
Division of the High Court to review and set aside the
Pricing Strategy and the amendment of the Waste Tyre Regulations,
respectively.
These applications are still pending.
2)
That Redisa has set up a management company, KT,
to handle all operational aspects of the plan, and instead of
implementing the
Redisa Plan with an independent board, it handed the
complete executive control of the Redisa Plan over to KT.
[28]
The Minister further submits that despite several
requests for copies of the contract or contracts with full details of
the terms
of the contractual relationship between Redisa and KT,
Redisa has failed to provide this information to her or the
Department.
This information
was only provided at
a later stage to iSolveit Consulting (“iSolveit”), a
company instructed by the Department to undertake
a performance
assessment audit of Redisa. The Minister submitted in her founding
affidavit that this management agreement, which
was requested and
deliberately withheld from the Department and from iSolveit, clearly
indicates that Redisa has something to hide.
[29]
According to the Minister, three of the executive
directors of Redisa, including Erdmann, are shareholders and/or have
a direct
financial interest in KT. The Department only discovered
this during May 2016, when the Department received a report from
iSolveit.
The board of directors, therefore, cannot be regarded as
independent.
[30]
The Minister further submits that over the period
of approval of the Redisa Plan, the staggering amount of R662 281
million
collected by Redisa was channelled to KT. In fact, Redisa is
conducting business in the same building, on the same floor, in
another
wing of that building from where KT conducts its business.
[31]
It emerged that a company by the name of Nine
Years Investments (“NYI”), which is a private profit
company, owns 75%
of KT. The directors of NYI are Erdmann, his son
Alexander Erdmann, Charline Kirk (“Kirk”) and Christopher
Crozier
(“Crozier”). The other 25% shareholding of KT is
held by Avranet (Pty) Ltd (“Avranet”), of which another

director of Redisa, Stacey Davidson (“Davidson”), is the
sole shareholder. Erdmann, himself, owns 80% of the shareholding
in
NYI, while Crozier and Kirk each holds a 10% shareholding. Crozier,
who is a director of KT, the company that manages Redisa,
is also a
shareholder in NYI. Erdmann, who is the CEO of Redisa, owns 80% of
the shares in NYI, which holds 75% of the shares in
KT, being the
company that manages Redisa and over which Erdmann exercises control.
[32]
The Minister contends, therefore, that Erdmann
directly controls KT through being the majority shareholder in the
company that owns
KT, and is therefore directly remunerated through
his majority shareholding in the company NYI. This, according to the
Minister,
is in
direct contravention of the
Companies Act as
well as the MOI of Redisa. Erdmann therefore
directly benefited from his involvement in Redisa a non-profit
company.
[33]
Erdmann failed to disclose his interest in NYI
and KT to the Minister or the Department. He further failed to
disclose any conflict
of interest as required in paragraph 5.3 of the
MOI. The Minister in her replying affidavit further states that the
Department
was placed in possession of the employment contract of
Erdmann, the actual management agreement between Redisa and KT, as
well
as the different amendments thereto, and the sublease agreement
between the Respondent and KT, which further fortifies her view
that
Erdmann as well as KT and Redisa has failed to make proper disclosure
as to the real situation that existed between these
two entities and
Erdmann and the other directors interests therein.
[34]
It further came to light that the full PwC report
was not disclosed to the Minister or the Department, and especially
the negative
aspects of that report. Erdmann also did not share the
contents of that report which he received on 30 March 2017, or in his
answering
affidavit deposed to on 19 June 2017.
[35]
The Minister in her replying affidavit also
refers to a report by Accountants @Law (Pty) Ltd (“A@L”),
who was appointed
by the liquidators after the provisional order was
granted against both entities. A@L had to conduct a forensic
accounting investigation
into the trade, dealings and affairs of
Redisa and KT. The investigation confirmed that the affairs and
operations of the two entities
are inextricably intertwined in that
they shared premises, and accounting and information systems.
[36]
Many staff functions straddle both businesses and
there are numerous agreements between them and the related entities
of Erdmann,
and certain other executives of both entities.
Furthermore, that the entire day-to-day management of Redisa has been
subcontracted
to KT in terms of the management agreement. According
to the Minister, this contradicts Erdmann’s averments that
there is
a separation of operations, powers and
roles
of the two entities.
[37]
The Minister submits that it is the cursory
opinion of the forensic investigators that the executives of Redisa,
who was entrusted
with the obligation to manage waste tyres on a
national scale which involves large sums of money, have abused their
fiduciary duties.
It was also never disclosed in the Redisa
Plan that there would be a relationship between the executives of
Redisa and the management
entity KT, which would result in any
conflict of interest.
[38]
Notwithstanding Erdmann’s contract of
employment, which was not produced to the Department despite numerous
requests, wherein
he warrants that he is free of any conflict of
interest between the duty owed to Redisa and his private interests,
numerous conflicts
of interest were found. The forensic investigators
also made preliminary conclusions that breaches may have been
committed in terms
of the
Companies Act, the
Income Tax Act 58 of
1962 and the
Prevention and Combating of Corrupt Activities Act 12 of
2004
.
[39]
In terms of
the employment contract it required Erdmann to have disclosed any
conflict of interest in any trade, business or occupation,
whether
that business is for his personal benefit, or that of his family
including his wife. The investigators found such conflict
of
interest,
[10]
but no such disclosures were made to the Minister or the Department.
[40]
The investigation also revealed that Erdmann’s
salary would be R140 000,00 per month, to be reviewed annually
by the
board of directors in February of each consecutive year. In
January 2013, the cost to company of Erdmann’s salary was
R171 805,00
per month which increased in May 2017 to R347 070,00
per month. According to A@L, this is an increase of 102% and some
246%
more than CPI over the same period.
[41]
Erdmann is permitted to be reimbursed for
out-of-pocket expenses necessary to fulfil his duties, provided that
those expenses are
supported by proper vouchers. None of the expenses
he incurred is supported by the necessary vouchers. The A@L forensic
investigation
into these two entities revealed the following:
1)
Payments were made to Westfalen Management
Services (Pty) Ltd, of which the wife and son of Erdmann are the
directors, in the amount
of R495 900,00 purportedly for
reimbursement of expenses without any supporting
documents. This according to A@L constitutes a breach of Erdmann’s
employment
contract.
2)
On 2 February 2013, a director of Redisa signed a
resolution in terms of which Redisa entered into a lease agreement of
24 months
in respect of residential accommodation for Erdmann. Redisa
paid a deposit of R160 000,00 to the owner of the property.
Redisa
further paid the monthly rental of R65 000,00 over the 24
months for the residential accommodation of Erdmann. It also made

other payments in respect of residential accommodation.
3)
Redisa paid some R270 880,00 for a security
upgrade at a private residence, which seems to be the property of the
HE &
ME family trust of which the sole beneficiary appears to be
Alex Erdmann. The trustees are Erdmann, his wife, his son and a
certain
Mr Botha.
4)
Redisa has been paying for private full-time day
and night security at the residences of two of its directors, namely
Erdmann and
Davidson. The payments in respect of Davidson continued
even when she no longer resided at the specific address. No employee
fringe
benefit tax had been deducted in respect of these payments.
The total costs expended by the same, amounts to R2 182 579,42.
5)
The intellectual property of KT, which according
to the Minister can only be sourced from fulfilling its management
functions for
Redisa, was transferred at no value to another private
profit company, NYI, which is controlled by Erdmann. The shareholding
of
Erdmann in this entity is set out above in paragraph 30.
6)
NYI receives 2.5% of the 18% administration costs
from the revenue that Redisa previously collected from tyre producers
as royalty.
7)
Redisa paid
R76 748 million for the cost of the NCCS
[11]
to supplement the Redisa Plan and reimbursed KT for the setup cost
and expenses, including the IT costs, which inclusive of the
R76
million amounted to about R97 million.  According to A@L, KT is
now claiming ownership of the IT and finance systems and
the right to
the IP which should properly vest in Redisa. Thus this means that KT
not only gave away the IP belonging to Redisa
but also agreed to pay
NYI (in which Erdmann has the controlling share) royalties
for
the use of the same IP.
8)
KT received R662 281 million of the total
R2, 256 billion of the public funds Redisa collected in terms of the
Redisa Plan.
9)
According to A@L, KT entered into another
agreement with NYI in terms of which KT recorded that it required
additional management
services for which NYI would be paid a monthly
management fee of R650 000,00 escalating at 7.5%. In 2017, the
fee of the additional
management services amounted to R868 055
per month excluding VAT. According to the Minister, this further
extravagant expense
on the public funds that was previously collected
by Redisa was paid to NYI in addition to the royalties that KT agreed
to pay
Erdmann and his other associates.
10)
KT paid dividends to the shareholders, inclusive
of Erdmann and the other executive directors of Redisa, in the amount
of R84 million
over the past four years; while NYI received an amount
of R121.6 million in dividends, management fees and royalties.
11)
Erdmann owns 80% of the shares in NYI and
would have benefitted from dividends in the amount of R97 million.
12)
Redisa has spent some R23 million on
residential property in Bryanston, purportedly for free accommodation
for the staff of Redisa,
which according to the Minister, is not
authorised in the Redisa Plan.
13)
Redisa also spent a total of R121 million in an
unauthorised investment in an non-profit company,  the Product
Testing Institute.
14)
The seven executive directors employed by Redisa
received remuneration, since 2013 to date, to the amount of R7 883
million. Certain
executives are paid as independent contractors and
PAYE is not deducted. This, according to A@L, maybe a contravention
of the Income
Tax Act. Furthermore, the residential accommodation
provided for Erdmann and the private security arrangement for certain
directors
at their homes, is potentially a component of remuneration
to these executives, which if not declared for income tax purposes
would
attract penalties.
15)
The salaries of executives and personnel appear
to be significantly above market for Cape Town or South Africa. This,
according
to A@L, requires further investigation.
16)
NYI has a lease agreement for the head office of
Redisa which it subleases to KT, who then further subleases it to
Redisa. In terms
of this sublease, Redisa until 28 February 2015 paid
30% of the cost and thereafter 50% thereof.  Redisa only employs
10 people
while KT has more than 100 people in its employment. Redisa
is overcharged to the tune of about 40%, which amounts to in excess

of R2.4 million per annum.
17)
Redisa made investments in excess of R20 million
in Imvelo Rubber and Waste Beneficiation (two different private
profit companies
in which Erdmann has direct interest), which is
allegedly subsidiaries of Redisa. A@L is of the view that this
requires further
investigation.
18)
Redisa has spent in excess of R16 million on
costs, purportedly for other waste streams, not authorised in terms
of the Redisa Plan.
This amount was initially misrepresented as far
lower to the forensic investigators. The invoices disclosed to the
investigators
did not contain any company number, or
director/executive, or contact telephone number, or contact person.
19)
Some R9.8 million was paid by Redisa to McKinsey
for research into other waste streams other than those permitted in
the Redisa
Plan.
20)
The minutes of the board meeting of Redisa dated
4 October 2011 record that Helen Kente Makgae, a director, was
authorised to sign
the management agreement between Redisa and KT.
There is no evidence according to the investigators that the
executive directors
being Erdmann, Kirk and Davidson recused
themselves from this decision.
21)
Redisa, according to the Minister, also deviated
from the Redisa Plan by exporting the waste tyres.
[42]
Thus for these stated reasons, the Minister
argues, it would be just and equitable for
Redisa
to be wound up. She further contends that subsequent to the
representations made by Redisa on 23 May 2017, Erdmann sent a
notice
to all interested parties tentatively on 31 May 2017, to inform them
that as from 1 June 2017: (a) Redisa will no longer
collect waste
tyres from the waste collection points, including micro-collectors;
(b) that Redisa’s depots will remain open
but will not accept
any deliveries; (c) that deliveries to the processors will continue
as scheduled until further notice; and
(d) that all enquiries should
be directed to the Waste Management Bureau of the Department.
To
the contracted transporters in the downstream industry that Redisa
was supposed to establish, Erdmann expressed a similar intention
that
it will scale down its operations.
[43]
The
Minister, with reference to the case of
Kia
Intertrade Johannesburg (Pty) Ltd v Infinite Motors (Pty) Ltd
[12]
,
submits that Redisa’s effective repudiation of the
implementation of its plan, constituted the loss of its substratum as

the realisation of its main object as well as the ancillary objects,
as determined by reference to its MOI, became objectively
impossible.
Against
KT
[44]
One of the main reasons cited by the Minister why
the relief against KT is being sought, is because the Minister was of
the view
that KT and Redisa was involved in a scheme to divert public
funds that was earmarked for the furtherance of a specific
environmental
objective. In addition, Redisa’s executive
directors have abused KT’s corporate identity to achieve this
goal.
[45]
According to the Minister, contrary to the
suggestion by Crozier (the CEO of KT), she never stated in her
founding affidavit that
she was not aware that Redisa would conclude
a management agreement. This is clearly stipulated in the Redisa
Plan. The undisputed
fact is that she has attempted since 2014 to
obtain a copy of the management agreement concluded by Redisa in
terms of the Redisa
Plan. She has only received copies of the
agreement and addendums thereto, that was attached to the
Respondents’ answering
affidavit, which became available during
the course of these proceedings. The Minister once again, in the case
of KT, relied on
the A@L report that was furnished to the liquidators
regarding the relationship and operations of Redisa and KT, which was
referred
to earlier on.
[46]
In reference to the shareholders of KT, the
Minister once again submits that it is common cause that the only
shareholders of KT
are two companies, i.e. NYI and Avranet.
Moreover, three of Redisa’s executive directors are also (i)
directors of
NYI or Avranet, and (ii) shareholders of either NYI or
Avranet, and thus indirect shareholders of KT. None of Redisa’s
directors
are directors of KT, thus there is no overlap between the
board of Redisa and the board of KT. However, according to the
Minister,
Crozier chose not to disclose the details of the
shareholding. It was also never disclosed in the Redisa Plan that
there would
be a relationship between the executives of Redisa and
the management entity KT, which could create a conflict of interest.
[47]
The Minister’s case against KT is based on
the manner in which KT had been used as the management company of
Redisa, a non-profit
company, to benefit the directors and
shareholders of NYI and Avranet, and in particular Erdmann. The
Minister also relies on the
contents of the A@L report to establish
the relationship between all the role-players as set out above in
paragraph 30 of the judgment,
where the same grounds and facts are
used by the Minister as in the Redisa application.
[48]
In particular, the Minister submits it would be
just and equitable for KT to be wound up on one or more of the
following grounds.
Firstly, the executive directors of Redisa (all
indirectly own 100% of the shareholding in KT) have unconscionably
abused the corporate
personality of KT by utilising it to unlawfully
divert and misappropriate public funds generated by the non-profit
company, Redisa:
1)
This was done by means of:
(a)
Redisa paying KT a management fee of some R432
million.
(b)
Redisa renting office space from KT, which in
turn rents the exact space from NYI. As stated previously, pursuant
to the lease agreement
between Redisa and KT, Redisa is obliged to
pay 50% of the cost of renting the office space. Despite
the
fact that it only occupies approximately 10% of the official rented
office space.
(c)
By allocating 50% of the rental expense to
Redisa, the executive directors of Redisa (who own 90% of the company
from which the
property is leased i.e. NYI) do not have to utilise
the funds they have already received from Redisa (in terms of the
management
agreement) to pay for all the office rental. They simply
recover an amount (50% of the office rental) from Redisa. This time,
according
to the Minister, under the guise of rent. In this way, the
Minister submits Redisa’s executive directors, with the
assistance
of KT, are able to divert more funds away from Redisa to
NYI.
2)
The Minister submits that NYI forms part of a web
of companies that is used to siphon money away from Redisa and which
is beneficially
owned by Erdmann (80%) and Kirk (10%), both of whom
are executive directors of Redisa, and Crozier (10%) who is a
director of KT
and deponent to the answering affidavit.
3)
Redisa made payment to KT of at least R97 million
to enable KT to acquire assets, which included the NCCS to the value
of R76 million.
These payments were made by Redisa:
(a)
With the object of benefiting Redisa’s
executive directors;
(b)
In direct contravention of section 10 read with
Item 1(3) of Schedule 1 of the Companies Act, 2008;
(c)
In direct contravention of subordinate
legislation (the Redisa Plan), which contemplated that the computer
system is owned by Redisa,
and merely implemented and managed by the
managing company; and
(d)
In direct contravention of Redisa’s MOI.
[49]
Secondly,
the Minister submits that Redisa and KT are, for all intents and
purposes, merged. In this regard, she submits that there
is objective
evidence from the forensic auditors appointed by the provisional
liquidator, which states: “
The
operations of Redisa and KT are intertwined. They share premises on
the fourth floor of the Sunclare building in Claremont Cape
Town
(each having a separate physical portion of the offices with their
own swipe card security), accounting and information systems
and many
staff functions
struggle
both business units. There are numerous agreements between them and
related parties of Hermann Erdmann (Erdmann) and certain
other
executives of both entities. The entire day-to-day management of the
business of Redisa has been subcontracted to KT in terms
of a
management agreement.”
[13]
The
Minister submits that the one can thus no longer exist without the
other. This was done in direct contravention of the subordinate

legislation (the Redisa Plan) and in direct contravention of Redisa’s
MOI.
[50]
The last ground, which according to the Minister
would be just and equitable to grant an application for the
liquidation of KT,
is that KT’s only client, Redisa, gave
notice on 1 June 2017 that it would seize all operations with effect
from 1 June 2017.
She therefore submits that the substratum of KT,
who only exists to conduct the day-to-day activities of Redisa, has
thus disappeared.
KT’s stance is simply that it is a private
company that earns an income from rendering services to Redisa, which
fails to
take into account the stark reality that the persons in
actual control of Redisa are for all intents and purposes the same
people
that effectively control KT.
[51]
Given these facts and realities, the Minister
stated that it is not surprising that Crozier as deponent to the
answering affidavit
simply denied all allegations against it. Crozier
further failed to mention that he himself is a 10% shareholder of one
of KT’s
shareholders, i.e. NYI. Erdmann, the deponent to
Redisa’s application and whose entire affidavit was
incorporated and attached
to KT’s answering affidavit, is the
ultimate financial beneficiary of not only KT but also of the other
related companies
that arise income from Redisa.
[52]
The Minister further submits that the clearest
indication of KT’s lack of independence is evident from the
fact that KT elected
not to respond to specific paragraphs of the
founding affidavit, but instead chose to incorporate the affidavit
that was deposed
by the ultimate beneficiary of the scheme, i.e.
Erdmann. The Minister submits that KT’s mostly bald denials are
far-fetched
and clearly untenable and the court will be justified in
rejecting them merely on the papers.
Redisa
and KT’s Case:
Points
in Limine
[53]
Both Redisa and KT’s
main attack against the application brought by the Minister in
respect of both applications is raised
by means of the following
points in limine.
(1)
Locus Standi
[54]
Firstly, the Minister
has no locus standi to bring these applications, which were brought
in terms of section 81 (1)(d)(iii) read
with
section 157
(1)(d) of
the
Companies Act. They
contend, that
section 79
(2) of the
Companies
Act expressly
stipulates that the winding-up of a solvent company is
governed by Part G of Chapter 2, read with Item 9 of Schedule 5 to
the
Companies Act. These
provisions, more especially
section 79
(1),
provides that a solvent company may only be wound up voluntarily by
the company or its creditors (under
section 80)
, or by an order of
court (under
section 81).
[55]
Section 81
prescribes
the categories of persons who may apply to court for the winding-up
order.
Section 81
(1)(c)(ii) provides that one or more creditors of a
solvent company may apply to court to wind up the company if it is
just and
equitable to do so.
Section 81
(1)(d)(iii) affords standing
to the company, one or more of its directors and one or more of its
shareholders to apply to court
for a winding-up order, were such an
order would be just and equitable.
[56]
They submit that the
Minister being alive to the fact that she does not fall within the
categories of persons afforded standing
under these provisions,
sought to rely on
section 157
(1)(d) of the
Companies Act which
provides for extended standing to persons “
acting
in the public interest, with leave of the court”.
[57]
Both parties contend
that the Minister’s reliance on
section 157
is misconstrued as
the section applies to the alternative procedures for addressing
complaints or securing the rights contained
in
section 156.
They
state that both sections are contained in Part A of Chapter 7, which
is headed “
Remedies
and Enforcement
”.
The contention is
thus that
section 157
does not provide the basis to extend the
categories of persons authorised to apply for the winding-up of a
solvent company under
Part G of Chapter 2. On the contrary, it is
limited to those procedures as set out in
section 156
contained in
Chapter 7.
[58]
The alternative
procedures for addressing complaints or securing rights as envisaged
therein may be applied for by a person:
a)
Directly contemplated in the particular provision of the Act;
b)
Acting on behalf of persons contemplated in paragraph (a), who cannot
act in
their own name;
c)
Acting as a member of, or in the interest of, a group or class of
affected persons,
or an association acting in the interest of its
members; or
d)
Acting in the public interest, with leave of the court.
[14]
[59]
Redisa and KT further
submit that there is a textual reason why section 157 does not apply.
And that is because
section 79
(2) of the
Companies Act expressly
confines the procedures for the winding-up of solvent companies
“
whether
voluntary or by court order”
to Part G of Chapter 2 (i.e.
sections 79
to
83
).  Redisa
submitted that even if
section 157
(1)(d) were to have applied to
applications for winding-up as envisaged in
section 79
and
81
of the
Companies Act, there
would be a reason why
section 157
should not
have been relied upon by the Minister. The simple reason is that it
would not be in the public interest to wind up a
solvent company at
the instance of a third party and against the wishes of the company
itself.
[60]
The Minister’s
contention, namely that they are dealing with public funds which were
collected by Redisa before 1 February
2017, is wrong. Redisa contends
that the funds are administered at the behest of the producers (as
defined in the Redisa Plan)
and are not paid into the National
Revenue Fund. If a producer does not subscribe to the Redisa Plan, it
has to subscribe to an
integrated waste management plan prepared in
terms of the Waste Act. This fee is not spent, in accordance with the
new legislation,
by Redisa in a predetermined ratio. It is as little
public funds as are the fees collected by a private school from
parents of
students attending the school. This contention cannot be
relied upon as a just and equitable ground, on the basis that Redisa
deals
with public funds. According to Redisa, this is still the
position even after the intervention of Act 13 of 2016. Once monies
collected by the
National Revenue Fund from the producers are paid to Redisa, this
position may change but as yet no such payments
have been made.
[61]
The
Respondents’ further submitted that even if section 157 (1)(d)
were to apply, the Minister was required to have applied
for this
court’s leave to do so before launching her application.
KT, in particular argued, that even if the Minister
properly obtained
leave under section 157 (1)(d), she failed to demonstrate why KT a
solvent private company should be wound up
in the “
public
interest”
.
KT further argued that courts are circumspect in granting standing on
the ground of public interest. In this regard, the
Constitutional
Court
[15]
has held that an applicant is required to demonstrate that he or she
is genuinely acting in the public interest, and that in determining

whether to grant standing on this basis regards must be had to: (i)
whether the applicant has another reasonable and effective
remedy;
(ii) the nature of the relief sought; and (iii) the range of persons
who may be affected by the order and the opportunity
they had to
present evidence or argument.
[62]
Furthermore, it is
argued that the Minister’s application is defective for at
least the following reasons. Firstly, the Minister
has a variety of
other reasonable and effective remedies at her disposal. After she
approved the Redisa Plan, in terms of which
Redisa was authorised to
conclude the management contract with KT, she could have exercise
her  right to initiate a review
of the amendment of the plan.
She did not exercise that right. It was also open to her to challenge
the conclusion of the management
contract on public law grounds, if
as she contends that Redisa is a public body. Either in terms of the
Promotion of Administrative Justice Act 2 of 2000
or on the basis of
the principle of legality. Secondly, the Minister seeks the
liquidation of a privately owned, solvent company,
contrary to the
wishes of its shareholders and directors. She does this by way of a
final order, whereby she wants the liquidators
of KT to transfer the
entire net value to the Waste Management Bureau or the liquidators of
Redisa. She does not seek to achieve
the ordinary consequence of the
liquidation of a solvent company (namely the payment of creditors and
the distribution of the surplus
to shareholders). She seeks to
effectively expropriated (for no consideration), the company’s
assets by transferring them
to an entity under her control.
[63]
Lastly, neither persons
with a direct interest in KT (its shareholders and directors), nor
affected persons in the waste industry
(including those who pay a
levy under the Redisa
Plan)
were given notice of the Minister’s application, let alone
afforded the opportunity to make submissions.
Minister’s
Response to Locus Standi
[64]
The Minister, in turn, argues that in bringing
this application she acts in the public interest in seeking the
winding-up of the
two entities, as contemplated in
section 157(1)(d)
of the
Companies Act. She
further submits that the legal standing for
claims based on statute is determined with reference to the relevant
statute and its
purpose. Under the 1973
Companies Act, the
Minister
of Trade and Industry has circumscribed powers to make an application
for the winding-up of a company on just and equitable
grounds. In
this regard, it cannot be gainsaid, that Parliament was aware of this
narrow approach to standing when it drafted the
2008 Act, and that it
enacted section 157 in order to expand the class of persons who may
institute legal proceedings under the
Act.
[65]
The Minister in argument, in respect of both
applications, submits that a generous and purposive interpretation
should be given
to section 157 (1). This section has a striking
resemblance to section 38 of the Constitution. The interpretation
relied upon by
KT, as well as Redisa, is entirely inconsistent with
the interplay between section 157 (1)(a) and 157 (1)(d). Section 157
(1)(a)
provides that when an application can be made to a court, the
right to make the application or bring the matter may be exercised
by
“
a person … directly contemplated
in the particular provision of this Act
”.
Those
persons
inter
alia refers to a company’s directors, shareholders, the
commission or panel, or the company itself, in the contents
of a
winding-up order under section 81.
[66]
Section 157 (1)(d), however, extends such
standing to “
a
person … acting in the public interest,
with leave of the court
.” By necessary
implication these will be other than those contemplated in section
157 (1)(a), thus persons other than those
directly contemplated in a
particular provision in the Act. The Minister further argues that in
any event, had it been the intention
of the lawgiver in section 157
(1) to restrict the remedies
available to the
applicants contemplated in section 157 (1)(a) – (d) only those
remedies in Chapter 7, the introductory phase
in this section would
have read “
when in
terms of this
chapter,
an
application can be made to… a Court.”
Instead,
the Minister argues, the phrase reads “
when
in terms of this
Act,
an
application can be made…”.
In this regard, the section is very clear.
[67]
Moreover, the Minister argues,
in its material part section 156 reads: “
[a]
person referred to in section 157 (1) may … enforce any
provision of … this Act, … by… (c) applying
for
appropriate relief to the division of the High Court that has
jurisdiction over the matter”.
Section
81, so, Mr Muller argues, is clearly a provision of the Act which the
Minister, acting in the public interest with leave
of the court,
seeks to enforce in terms of section 157 (1)(d).
[68]
Mr
Muller further argues that neither
Henochsberg
[16]
nor
Contemporary
Company Law
[17]
suggest otherwise. The Minister further argues that one of the
objects of the
Companies Act is
to promote compliance with the Bill
of Rights in the application of company law. Both applications
centers around the application
and implementation of the approved
integrated industry waste tyre management plan (“the Redisa
Plan”), which the Supreme
Court of Appeal has found constitutes
subordinate legislation.
[69]
The Minister is responsible
for the oversight and implementation of South Africa’s
environmental management systems (inclusive
of the Redisa Plan).
This responsibility the Minister has in terms of section 7 (2) of the
Constitution, which obliges her
“
to
respect, protect, promote and fulfil
”
that rights in the Bill of Rights, amongst others, the fundamental
right enjoyed by everyone “
to
an environment that is not harmful to their health or wellbeing
”
as entrenched in section 24 (a) of the Constitution. This
responsibility is also enshrined to her in terms of the Waste
Act.
[70]
The Minister submits that the
applications makes it clear that she has good grounds for believing
that KT and Redisa are involved
in a scheme to divert public funds,
earmarked for the furtherance of specific environmental objectives,
to Redisa’s executive
directors who have abused KT’s
corporate identity to achieve their goal. She further submits that
the public has a clear
and obvious interest not only in the proper
application
and
spending of public funds, but also in the protection of the
environment.
[71]
The Minister being the Member
of Parliament tasked with protecting the environment and overseeing
the implementation of legislation
that was enacted for that goal, is
best suited to protect the public’s interest in these matters.
According to the Minister,
Redisa who was responsible for drafting
the Redisa Plan acknowledges this fact.
[72]
The Minister further makes the
submission that as she is privy to the manner in which KT and Redisa
have implemented the Redisa
Plan and applied the public funds, she is
also in the best position to place the information before the court
that is relevant
for the protection of the public interests. Section
157 (1)(d) does not define or explain what would constitute action in
the public
interest by the applicant contemplated in that section.
According to the Minister, this is clearly deliberate, as each case
would
have to be assessed on its own merits.
[73]
The Minister submits that she is clearly acting
in the public interest, as contemplated in section 157 (1)(d) in
bringing these
respective applications.  She submits this for
the following reasons:
1)
The considerable monies collected by Redisa under
the plan is clearly public monies, in the form of tax, collected from
a large
number of entities in the tyre manufacture and distribution
industry.
2)
The purpose of the plan is to dispose of and
recycled tyres in an environmentally responsible fashion for the
benefit of the general
public, however, at the same time to create
sustainable employment, underpinned by transformation objectives,
also in the public
interest.
3)
She further submits that for reasons which are
evident in the papers, KT is in essence an alter ego of Erdmann and
the directors
of Redisa, which is in direct contravention of the
plan.
4)
Furthermore, substantial sums of public money, in
the form of income generated
by Redisa through
the implementation of the plan, had been funnelled to KT.
5)
That a further investigation into the flow of
monies and the recovery of these substantial sums is clearly in the
public’s
interest.
It
is for these reasons that the Minister submits that she is acting in
the public interest, and that she has the requisite locus
standi.
[74]
In reply to the contention that section 79 (2)
confines winding-up procedures to Part G of Chapter 2, based on a
so-called textual
reason or interpretation of that section cannot,
according to the Minister, be correct. That is because the provisions
in the 2008
Companies Act, must
be interpreted purposively and as a
whole, and not separately or in isolation. The purpose of the Act was
intended to broaden not
narrow questions of standing in general.
[75]
Reliance on this so-called textual approach,
according to the Minister, also does not assist the Respondent
because all that section
79 (2) provides is that the procedures for
winding-up a solvent company are governed by Part G of Chapter 2.
Such procedures would
include, for example, those prescribed in
section 80, for a voluntary winding-up, and the Masters certification
prior to dissolution
of the company as prescribed by section 82.
According to the Minister section 79 (2) does not, in its terms or by
necessary implication
deal with non-procedural issues such as the
legal standing of those that may be entitled to employ its
provisions.
[76]
The Minister further argues that KT and Redisa’s
submission that she first had to require the court’s leave in
terms
of section 157 (1)(d) before the winding-up application, is
wrong. She says so for the following reasons:
a)
Section 157 (1)(d) does not, in its terms,
require “
prior leave
”.
It simply requires “
the leave of the
Court”.
b)
Furthermore, there is no logical reason why the
leave of the court cannot be sought, and granted, in the same
application and at
the same time as a
substantive
relief for which the leave of the court is sought.
[77]
The
Minister states that none of the authorities which KT relies on in
the heads of argument supports a different proposition. In
the
authorities cited, the Constitutional Court
[18]
was dealing with the proposed class action in terms of section 38 (c)
of the Constitution. It goes without saying that if the leave
of the
court is required, action proceedings, by definition, cannot be
instituted before the leave of the court has been granted.
The matter
is entirely different in application proceedings.
[78]
The
Constitutional Court in the
Mukaddam
case was not dealing with a similarly worded provision to section 157
(1)(d), but laid down a matter of practice. Those wishing
to issue
summons setting to bring class actions under section 38 (c) of the
Constitution must require the prior leave of the court.
The earlier
case of
Mukaddam
and Others v Pioneer Foods (Pty) Ltd and Others
[19]
in the Supreme Court of Appeal, simply followed the
approach/requirements in the
Children’s
Resource Centre
[20]
case which was also concerned with certification of a class action
under the common law.
[79]
This point
is also not squarely addressed by Justice Chris Jafta (“Jafta”)
[21]
in his discussion
of the provisions of section 157 (1)(d), where the learner judge
simply made an observation that, before a party
launched proceedings
in the public interest, it must apply for leave to do so. He did not
discuss the question in issue here, which
is whether there is any
reason why leave cannot be sought in the same application in which
substantive relief is sought.
[80]
The Minister further argues
that the further objection that was raised against the locus standi
on the grounds that the Applicant
fails to demonstrate why KT, a
solvent company, should be wound up in the public interests, is not
an legitimate objection to the
Minister’s locus standi and
should be more accurately described as a reason proffered why the
court should decline to confirm
the provisional winding-up order on
the ground that the public interest is not served by the winding-up
of KT.
[81]
The further submission by KT
that the Minister may have had other remedies at her disposal cannot
be a bar to a winding-up order.
So, the Minister submits, provided
that the public interest is served by a winding-up.  Initiating
a review and amendment
of the plan, the Minister argues, is of no
assistance in dealing with the defalcations and misappropriation
which have already
taken place. According to the Minister, the
investigation and recovery machinery available to liquidate in
winding-up is quintessentially
what
is required for this.
[82]
For the same reasons, she
says, challenging the execution of the management agreement is of no
assistance in relation to that which
has already taken place. It
would not be of assistance in relation to the many millions which
have flowed from Redisa to KT for
reasons which is entirely
unexplained by and apparently unrelated to the management contract,
and subsequently flow out of KT by
way of dividends and other
payments.
[83]
The Minister further submits
that it is no surprise that the shareholders and directors of KT
oppose the winding-up application
because the directors and
shareholders frequently adopt this position when they perceive that
the winding-up of the company is
inimical to their personal
interests.  Their mere opposition in the present case doesn’t
make the Minister’s application
defective but merely makes it
oppose.
[84]
The Minister further states
that the reasons why the creditors and the shareholders were not
notified are because they do not have
a legal interest to be cited as
parties in the winding-up proceedings. Notice, however, was given as
directed by the court, to
interested parties, subsequent to the
provisional order that was granted against KT by the court on 8 June
2017. This included
service on KT’s employees and publication
thereof in the Government Gazette and in two local newspapers.
(2)
The Ex Parte Application
[85]
Redisa further submits
that the ex parte application in terms of rule 6 (4)(a) is not
suitable to wound up a solvent company, especially
where neither the
company nor any of its creditors are the applicant. In terms of the
practice directives of the Western Cape Division
of the High Court,
notice of intention to apply for the provisional order of liquidation
shall be given to the company concerned
prior to the filing of the
application except when a court is satisfied that it would be in the
interests of the company or the
creditors to do so or that the
company has knowledge that such application is to be made. No such
allegation could have been made
in the founding papers.
[86]
According to Redisa the
purported reason for the ex parte application explained by the
Applicant as being an alleged fear that knowledge
of the application
by Redisa would expedite endeavours to dissipate public funds under
its control, that Redisa would sabotage
the computer system used by
it or that the evidence may be destroyed, no evidence to substantiate
these allegations has been produced.
[87]
According to Redisa, a
further example of an unfounded allegation made by the Minister in
regard to the alleged dissipation of funds
is where she states in her
founding affidavit that Redisa may have “
succeeded
to transfer R30 million of public funds, independent of the
implementation of the Redisa plan out of the country”.
As
stated in the answering affidavit, this money was used to acquire
machinery required for the implementation of the plan.
[88]
The Minister was fully
informed about this machinery. The reasons suggested by the Minister
cannot be relied upon for an ex parte
winding-up order. What the
Minister’s seeks under the guise of a winding-up application is
a form of a Mareva injunction
coupled with an Anton Piller. The
Minister has not shown the requirements of an anticipatory order in
her founding papers. Redisa
argues that on this ground alone, the
rule should be discharged and a special order of costs should be
granted against the Minister.
[89]
Redisa further submits
that the scope of the order is overbroad, which states in paragraph
7, that the powers of the provisional
liquidator be extended to
include the power and authority to continue to conduct the business
of the Respondent as a going concern.
The effect of this order, is
that it is not capable of being in force as it does not address where
the funding for the business
of Redisa should come from, how the
provisional liquidators will conduct the business without the
co-operation of their employees
and how the provisional liquidators
are to proceed without the amendment of the plan, which amendment has
not been agreed to or
promulgated.
(3)
Non-disclosure
[90]
Redisa argued that the
Minister in the founding papers discusses the final iSolveit report
dated 3 February 2017, but had failed
to furnish this document to
Redisa. This omission was not brought to the attention of the court
or explained.  Redisa only
saw it as an annexure to the founding
affidavit.  The Minister made innuendos about Redisa’s
probity in the founding
papers that was clearly unwarranted. On this
basis, Redisa submits that the rule should be discharged and that the
Minister should
be ordered to pay the costs of the application on an
attorney and client scale.
[91]
KT in their submission
on this point states that the Minister was under a strict duty to
disclose all relevant facts to this court.
The information she
furnished to the court was incorrect or misleading, and omitted
relevant information. On this basis alone,
the court should discharge
the rule nisi.  In this regard, KT submits that the Minister’s
affidavit is replete with
broad allegations that it and Redisa are
involved in a covert scheme for the diversion and misappropriation of
public funds, which
scheme is characterised by a lack of transparency
and secrecy and by the withholding of important information from the
Minister.
It was on this basis it seems that the court granted
the Minister ex parte relief.  These allegations were false.
[92]
First,
her claim that she only discovered that the four executive directors
of Redisa are also shareholders in KT via a report commissioned
by
the Department from iSolveit, is manifestly false. According to them,
the Minister would have been aware since the implementation
of the
Redisa Plan that the executive directors of Redisa are shareholders
of KT.
[22]
[93]
In
fact, KT submits that the Minister raised this matter in a letter
dated 1 November 2016.
[23]
This fact was more over disclosed in financial statements, submitted
since its inception, and representatives of Redisa advised
the
Minister’s Department of this in meetings during the
formulation of the Redisa Plan.
[24]
[94]
Second, the Minister
claimed that there is some mystery surrounding Redisa’s
appointment of KT to attend to the administration
of the Redisa Plan,
and that the management contract between Redisa and KT has not been
provided to her or to her Department. These
allegations, KT submits,
are scandalous and entirely without foundation, there is nothing
undisclosed or unauthorised about Redisa’s
appointment of
KT
to manage the business operations. The management of Redisa’s
operations to a management company is expressly provided
for in the
Redisa Plan, which was gazetted by the Minister.
[95]
It
further contends that the portion of the levy to be allocated towards
the cost of the functions (20% of the total) is also expressly

provided for in the gazetted plan. Redisa provided iSolveit with a
copy of the plan on 17 March 2016 and again on 21 July 2016.
This
management agreement is also expressly disclosed in Redisa’s
annual financial statements.
[25]
[96]
The Minister complained
that the management agreement itself was held from her and the terms
“
kept secret’
,
but failed to disclose that KT was never asked for a copy which would
have been provided. It is furthermore untrue that Redisa
withheld the
management contract because, the Minister was informed by Redisa in a
letter dated 30 November 2016 that it had provided
the management
contract to iSolveit on 17 March 2016 as well as 21 July 2016.
[97]
It is therefore KT’s
submission that the misrepresentations made by the Minister are
sufficiently material in the context
of this case and justify the
setting aside of the ex parte order.
Minister’s
Reply to Non-Disclosure
[98]
The Minister submits, in the
Redisa application, that she has made full disclosure of all the
facts that have a bearing on the relief
sought in the application at
hand. The litigation which the Minister and Redisa are currently
involved in, is completely irrelevant
to the application at hand. In
this regard, Redisa confuses the administrative process of giving
notice to the Minister’s
intention to consider the withdrawal
of approval of the Redisa Plan with this application which is for the
liquidation of the Respondent
which has complete and separate
processes to be addressed in two separate forums.
[99]
The Minister in the KT
application submitted that the allegations by KT that she has failed
in her duty to make full proper disclosure
of facts in the ex parte
application are vague and unfounded, especially when tested against
the principles that govern such a
duty to disclose.
1)
Firstly, KT is wrong in
stating that the Minister had not disclosed the existence of the
pending application between Redisa and
the Minister. This fact was
disclosed.
2)
Secondly, the
Respondent fails to explain why the Minister allegedly omitted to
deal with the two pending applications in any detail
in the
application for the winding-up of the Respondent. The Minister
submitted that there is clearly no merit in this complaint
for the
following reasons:
2.1
The Respondent (KT) is not a party to the pending litigation;
2.2
The pending application concerns the review and setting aside of the
National Pricing Strategy
or Regulation 9 (1)(jA) of the Waste Tyre
Regulations, 2009;
2.3
This application is concerned with the misappropriation of public
funds and the abuse of
the Respondent’s corporate personality -
something that clearly has nothing to do with either the National
Pricing Strategy
or Regulation 9 (1)(jA) of the Waste Tyre
Regulations, 2009.
3)
Thirdly, the Minister
did not allege that she was not aware of the fact that the management
agreement was entered into between Redisa
and KT. What the Minister
said was that Redisa failed and/or refused to provide a copy of the
actual agreement to the Minister.
4)
Fourthly, that KT is
incorrect in saying that the Minister did not disclose that she was
aware of the fact that a portion of the
levy was to be allocated to
the cost of administering the Redisa Plan. She expressly acknowledges
in the founding affidavit that
the Redisa Plan makes provision for
20% of the levy to be expended on administration costs.
5)
Lastly, the KT is
incorrect in alleging that the Minister withheld from the court that
she was aware that the executive directors
of Redisa were the
indirect shareholders of the Respondent. She clearly stated in the
founding affidavit that she was aware of
this.
These
facts therefore demonstrate that KT has failed to show that any
material facts were withheld from the court when the ex parte

application was heard.
(4)
Not Just and Equitable
[100]
Redisa
argues that the just and equitable ground in
section 81
(1)(d) of the
Companies Act should
not be interpreted so as to include any matter
similar to the other class of action in
section 81
(1), and that the
examples of deadlock given in
section 81
(1)(d) are exhaustive and do
not limit
section 81
(1)(d)(iii) but submits that it extends to all
cases of deadlock. And it is usually in the context of the deadlock
that this provision
is relied upon.
[26]
Furthermore, it submits that the “
just
and equitable”
ground
for winding-up’ should not only be based on facts, but the
broad conclusion of law, justice and equity.
[101]
Redisa in addition
submitted that a court in coming to a conclusion as to what is just
and equitable, have to balance the interests
of the individuals
affected with the interests of good governance and the administration
of justice. It further entails a judgment
on the facts and the
exercise of judicial discretion.
[102]
It
submitted that subject to the comments made by the court in
Rand
Air
,
[27]
section 81
(1)(d) of the
Companies Act is
not confined to cases
analogous to the grounds mentioned in other parts of the section. The
submission further is that there is
no general rule as to the nature
of the circumstances that have to be present, or a fixed category of
circumstances which provide
the basis for just and equitable
winding-up. The ordinary categories identified would include the
following: (1) the disappearance
of the companies’ substratum;
(2) illegality of the objects of the company and fraud in connection
therewith; (3) a deadlock
in the management of the company’s
affairs; (4) grounds analogous to those for the dissolution of a
partnership; and (5)
oppression.
[103]
Of the five categories
identified by the court in
Rand
Air
, only one would
find application in this case. This is where there is an illegality
of the objects of the company and fraud was
committed in connection
therewith. Which on the Minister’s version that there was a
disappearance of public funds, is clearly
wrong.
[104]
This version is not
sustainable and cannot constitute as a ground upon which the Minister
can argue that it is just and equitable
to wound up Redisa, for the
following reasons. Prior to Act 13 of 2016, the levy on tyres was not
paid into the National Revenue
Fund; the levy was to be collected and
spent, as agreed to in the plan; the only obligation that Redisa had
to discharge vis-a-vis
the Minister via the NCCS was to have the plan
audited in terms of IFRS requirements and provide that statistical
data.
[105]
Furthermore, the
management of the plan was Redisa’s responsibility; it was
proposed by Redisa a non-profit company representing
persons who
produce waste in the tyre industry; it was conceptualised by Redisa
after consulting all those concerned; and it envisage
a further
contract between Redisa and third parties to implement the plan. The
idea that on the so-called “polluter pay principle”,
the
producer levy will be used by Redisa to dispose of the producers’
waste products at no cost to them while creating business
and private
opportunities in the process, was that of Redisa.
[106]
Redisa was to have
independent auditors and was to appoint an external management
company. The waste tyre management fee provided
for in the plan is
not collected by SARS, but by Redisa. It is not spent in accordance
with revenue legislation, but by Redisa
in a predetermined ratio.
Therefore the just and equitable ground relied upon, on the basis
that Redisa deals with public funds,
is without foundation.  KT
also argues that the Minister has failed to show that it would be
just and equitable to wound up
the company.
[107]
Her contention that the
substratum of KT’s business has fallen away because Redisa
would be finally wound up, has no legal
or factual basis.  KT’s
main source of income is the management agreement, which remains
extant; the mere fact that
Redisa has been placed under provisional
liquidation does not affect the contract. And it is for the
provisional liquidators to
determine the steps that they consider
appropriate in relation to the Redisa contracts.
[108]
The fact that they may,
subject to their powers and also Redisa’s MOI and the Redisa
Plan, terminate the management agreement
with KT does not make it
just and equitable for KT to be wound up.  The Minister’s
further allegation that KT is part
of the scheme involving the abuse
of its corporate personality and the further allegation that Redisa
outsourced its functions
to KT, and that KT was at all times the
alter ego of Redisa, are also without foundation.  KT argues
that in a case where
the corporate or separate
legal
entity is being abused, the remedy which the court will on occasion
admit to is to look beyond the legal fiction of separate
personality
to the real controllers of the company.
[109]
Liquidation of the
company is not a remedy for the abuse of the legal fiction. They
further argue that there is in any event no
merit to the allegation
that there has been an abuse of the separate legal personality, in
this case. Common ownership and control
of two entities is one of the
factors which must be demonstrated for finding that the separate
legal personality of the two entities
is being abused. In this case
Redisa has no shareholders or members. While, KT is privately owned.
Redisa and KT have no common
directors. There is no common ownership
and control.
[110]
It is common cause that
the Redisa Plan expressly provides for the outsourcing of certain
functions by Redisa to a third party which
in this case is KT. Such
agreements are commonplace and the fact that the service provider, by
agreement with its client, performs
such functions on behalf of the
client does not render the service provider the client’s alter
ego.
[111]
The fact that there is
a management agreement in existence between Redisa and KT is
consistent with the fact that they are two separate
entities and
properly treated as such by the other. KT has not received any
payments from Redisa other than the agreed management
fee, in return
for attending to the administrative functions.
Evaluation
[112]
This court will firstly make a
determination on the facts and circumstances upon which the
respective applications are based. Thereafter
it will consider and
make a determination on the points in limine raised by the two
Respondents’ in this consolidated application.
Lastly, the
court will determine whether based on the facts it would be just and
equitable to grant an order for the winding-up
of both Respondents.
Determination
of the facts which underpins this application
[113]
Apart from the points raised in limine by
the Respondents’ which are disputes of a
legal
nature, most of the facts raised in the Minister’s founding
papers upon which the applications was based are vehemently
disputed
by the Respondents in their answering papers. In coming to a
conclusion as to the real and true facts of this case, the
court
should also have regard to the Minister’s replying affidavit
and further evidence which the court admitted on behalf
of the
Minister, together with the rebutting affidavits that was presented
into evidence by Erdmann on behalf of Redisa and Crozier
on behalf of
KT.
[114]
It is clear that the Minister’s case
as set out in its founding affidavit regarding the broad allegations
of impropriety by
the Respondents’ were further expanded upon
and substantiated by the further evidence as presented in her
replying affidavit
and further supplementary affidavits and evidence
that was admitted. The Minister’s case in reply evolved around
mainly the
shareholdership of the directors of Redisa; the Minister’s
knowledge about the agreement between Redisa and KT; whether the

directors of Redisa received any benefit or income directly or
indirectly from Redisa, to which they were not entitled to; and

whether such income or benefit were in contravention of the MOI as
well as Schedule 1, Item 1(3) of the Companies Act.
[115]
This court in its attempt to determine the
actual facts upon which this application is based will not seek to
deal with each and
every fact that was raised by the Minister in her
founding affidavit, which is placed in dispute by the Respondents,
either in
the answering affidavit and/or replying affidavit. In my
view, given the fact that we are dealing with motion proceedings in
which
the Minister seeks final relief, it would be rather appropriate
to deal with this application on the basis of those facts, as stated

by the Respondents, together with the admitted facts or facts which
are not in dispute, in the Minister’s affidavits (founding
as
well as replying affidavits) that warrant the granting of the relief
being sought by the Minister.
[116]
In my view, in this case, there are
sufficient facts not in dispute or disputed facts which are not
material, and which are also
not real and genuine disputes of fact,
on which
relief can nevertheless be granted.
Those facts which are in dispute would therefore be accepted as facts
in favour of the Respondent.
The court is of the view that this
approach is consistent with the law expressed in various cases on
this issue.
[117]
In
Wightman
t/a JW Construction v Headfour (Pty) Ltd and Another
,
[28]
it states:
“
[13]
A real, genuine and bona fide dispute of fact can exist only where
the court is satisfied that the party who purports to raise
the
dispute has in his affidavit seriously and unambiguously addressed
the fact said to be disputed. There will of course be instances
where
a bare denial meets the requirement because there is no other way
open to the disputed party and nothing more can therefore
be expected
of him. But even that may not be sufficient if the fact averred lies
purely within the knowledge of the averring party
and no basis is
laid for disputing the veracity or accuracy of the averment. When the
facts averred are such that the disputing
party must necessarily
possess knowledge of them and be able to provide an answer (or
countervailing evidence) if they be not true
or accurate but, instead
of doing so, rests his case  on a bare or ambiguous denial the
court will generally have difficulty
in finding that the test is
satisfied. I say ‘generally’ because factual averments
seldom stand apart from a broader
matrix of circumstances all of
which needs to be borne in mind when arriving at a decision. A
litigant may not necessarily recognise
or understand the nuances of a
bare or general denial as against a real attempt to grapple with all
relevant factual allegations
made by the other party. But when he
signs the answering affidavit, he commits himself to its contents,
inadequate as they may
be, and will only in exceptional circumstances
be permitted to disavow them. There is thus a serious duty imposed
upon a legal
adviser who settles an answering affidavit to ascertain
and engage with facts which his client disputes and to reflect such
disputes
fully and accurately in the answering affidavit. If that
does not happen it should come as no surprise that the court takes a
robust
v
i
ew of the matter.”
[118]
Erasmus:
Superior Court Practice
[29]
with reference to
certain cases it states:
“
A bare denial of the
applicant’s allegations in his affidavits will not in general
be sufficient to generate a genuine or
real dispute of fact. It has
been said that the court must take ‘a robust, common-sense
approach’ to a dispute on motion
and not hesitate to decide an
issue on affidavit merely because it may be difficult to do so. This
approach must, however, be adopted
with caution and the court should
not be tempted to settle disputes of fact solely on the probabilities
emerging from the affidavits
without giving due consideration to the
advantages of
viva voce
evidence.”
[119]
I will now proceed to determine the facts
on the basis as set out above.
[120]
It is common cause, that KT was
established as a management company for the administration and
implementation of the Redisa Plan.
There is no evidence that KT
conducted any other business. KT’s existence and functioning is
totally dependent on
Redisa. KT has also not
shown any evidence to this effect, that it has any other source of
income or business other than that generated
in terms of the
management agreement between it and Redisa. KT is therefore dependent
on Redisa for its existence. In fact it has
been shown that the
management agreement in terms of which KT would manage the Redisa
Plan had been concluded between the two entities
almost a year before
the Minister had approved the Redisa Plan.
[121]
Redisa can or could have always appointed
another management company, because its existence does not depend on
KT. As things stand
at present and without KT having any other
business or function and source of income, it cannot exist without
Redisa. On the papers
filed of record there is an ineluctable
conclusion that Redisa is the lifeblood of KT. Should Redisa
therefore be wound up, the
lifeblood of KT will be cut off.
[122]
Erdmann, as well as Crozier, were very
vague and ambiguous and were also reluctant to reveal the extent of
their involvement in
NYI (in which Erdmann is an 80% shareholder and
Crozier 10 %), which holds 75 % in KT. Both of them made the bald,
unsubstantiated
and sparsely proven allegation that the Minister and
the Department knew all along that the directors of Redisa have an
interest
in KT. This they claimed by stating the following:
1)
Erdmann in
his answering affidavit says that “
Stacey
Davidson is not a director of Nine Years”
and
that “Nine
Years
is the company which holds my interest in KT”.
[30]
He does not disclose the true nature and extent of his interests
which NYI holds in KT. He fails to reveal that Davidson, a director

of Redisa, is the 100% shareholder in Avranet, which holds 25% in KT.
He further failed to disclose that Kirk, holds the other
10% in NYI.
2)
That the relationship between Redisa and KT is
nothing more than a pure business relationship wherein the two
entities acts independently
of each other whereby which KT in terms
of the management agreement renders management services.
3)
That the only evidence both Crozier and Erdmann
relies on to show that they have informed the Minister and the
Department is either
by stating that they have revealed it in the
meetings that were held with either the Minister or officials of the
Department, or
that it
was disclosed in the
financial statements of Redisa from the outset.
4)
The
proof they rely on, as evinced in the financial statements of Redisa,
were the following:
[31]
“
Directors’
interests in contracts
The
executive directors are shareholders of Kusaga Taga Consulting
Propriety Limited, which has been contracted as a service provider
by
Redisa to support it in the implementation of the Plan that has been
promulgated by Government Gazette. The executive directors
recuse
themselves from the discussion of the appointment of non-executive
directors (sic) concluded the contract. This interest
had furthermore
been declared to the relevant government institutions and industry
bodies beforehand”
And
that … “
The management company, Kusaga Taka
Consulting Propriety Limited, is related to Recycling and Economic
Development Initiative of
South Africa NPC as the executive directors
are shareholders of this company.”
5)
He however failed to disclose the true state
and exact nature of the relationship as well as the true nature of
his and the other
directors’ shareholding in the entities or
related entities as earlier referred to.
6)
Crozier in
his answering affidavit says that the only shareholders of KT are the
companies, NYI and Avranet. However, three of Redisa
directors are
also directors of either NYI or Avranet and shareholders of either
NYI or Avranet, and thus indirect shareholders
of KT.
[32]
7)
He further stated that none of the directors of
Redisa are directors of KT.  However later, in paragraph 9 of
his rebuttal
affidavit, stated that there is no mystery to the
shareholding in KT. This was after it was revealed in the A@L report
that 25%
is held by Avranet and 75% is held by NYI.
8)
He says the Minister has always known that 100%
of the shares in KT are held by these two companies. He however
failed to produce
any evidence of this fact. He conveniently and full
well knowing the true facts failed to reveal what the exact interests
and shareholding of these three, which either
holds shares in NYI or Avranet, is.
9)
Namely that Erdmann holds 80% while Kirk holds a
10% in NYI, both of whom are directors of Redisa, which in turn holds
75% shareholding
in KT.  That Davidson is the 100% shareholder
in Avranet, which holds the other 25% in KT. This means that Erdmann,
Davidson
and Kirk, who are all directors in Redisa, hold either a
direct share or indirect share in KT either through NYI or Avranet.
He
also failed to reveal that he as a director of KT holds a 10%
share in KT through NYI.
[123]
Nowhere in the answering affidavits of
both Erdmann and Crozier, as stated earlier, was the exact nature of
their respective shareholding
revealed. Only sparse and unspecified
references were made to it. It was only revealed after the
liquidators appointed A@L to conduct
a forensic accounting
investigation into the trade, dealings and affairs of Redisa and KT.
And as stated earlier, Erdmann in his
answering affidavit never
disclosed that he is a 80% shareholder in the company, NYI, which
holds 75% shareholding in KT.
[124]
Further,
as the CEO of Redisa never revealed that another director of Redisa,
Kirk holds 10% in NYI and that, Davidson, also a director
of Redisa
holds 100% shareholding in Avranet, which in turn holds 25%
shareholding in KT. In his rebutting affidavit, following
on to the
Minister’s replying affidavit where she refers to the new facts
that were discovered as a result of the report
by A@L, he states that
he has disclosed the fact that he is a shareholder of the company,
which is a shareholder KT.
[33]
[125]
Crozier creates the impression in the
rebutting affidavit that this fact was revealed to the Minister and
the Department all along,
without providing substantial proof of this
fact, except that he says so and the vague and unspecified references
to it in the
financial statements.
[126]
The question that needs to be asked is why
Erdmann and Crozier were reluctant from the onset to disclose and
reveal the exact nature
of their direct or indirect shareholding in
KT, the management company of Redisa, from which they directly
benefited? They all along tried to create the
impression that they were honest, played open cards and forthcoming
about their involvement
in KT, which is not true.
[127]
It is inconceivable that if these facts
were known to the Minister or the Department, that she would not have
been concerned about
the benefits that the directors of Redisa had
acquired through KT. And she would have referred to it in her
founding affidavit
or would not have stated that she and the
Department had not known that he was an 80% shareholder and Kirk was
a 10% shareholder
in NYI, which holds 75% shares in KT. The Minister
would also have stated that she had known Davidson is the 100%
shareholder in
Avranet, which holds 25% in KT.
[128]
Similarly, if these facts were known to
the Minister, Crozier as a director of KT would have stated that the
Minister knew that
he held a 10%, Erdmann an 80%, and Kirk a further
10% shareholder in NYI, which has 75% shareholding in KT. Neither
Erdmann, nor
Crozier as far as the papers reveal, has emphatically
disclosed the exact nature and manner of the shareholdership that the
directors
of Redisa has either directly or indirectly in KT. Except
the vague and unspecified references thereto in the financial
statements
as referred to above. It can be safely accepted that this
was never revealed to the Minister.
[129]
If
this is an attempt to create a dispute of fact as to what really was
in the knowledge of the Minister and as to what was disclosed
to the
Minister, when such dispute is not a real, genuine, bona fide dispute
of fact as borne out by the objective evidence.
[34]
[130]
KT
and Redisa are correct in saying that the Minister knew all along
that there was an agreement to render management services to
Redisa.
The Minister throughout the papers in respect of both applications
also did not deny that she was aware that there was
a management
agreement. The evidence clearly shows that the plan was approved by
the Minister on 29 November 2012. It is common
cause as per the plan
that provision is made for the appointment of a management company to
be appointed by Redisa to handle all
operational aspects of the plan.
It seems, however, that nowhere in the approved plan was it mentioned
that KT would be that management
company. Furthermore, it seems that
KT as the management company was appointed on 10 November 2011,
almost a year before
the
plan was approved by the Minister.
[35]
Which Erdmann,
Crozier and the other directors knew all along and knew that they
would benefit if the plan would be approved. They
failed to disclose
this from the onset when the Minister approved the plan. Erdmann
would have known that this would be contrary
to the MOI and the
Schedules of the
Companies Act as
will be shown later.
[131]
This clearly shows that the agreement
between KT and Redisa was concluded long before the Minister approved
the plan or could have
known about the agreement between the two
entities, because the agreement already existed. This maybe one of
the reasons why they
were reluctant, since 2014, to disclose the
actual agreement to the Minister or the Department.
[132]
I
agree with the argument of the Minister that in doing so, Redisa
acted as KT’s front in presenting the plan to the Minister

because on KT’s and Redisa’s own version, KT was the
creator of the plan. Crozier
[36]
states that the
Minister and the Department were well aware of the respective roles
of KT and Redisa in the implementation of the
plan should it be
approved, and that the Department and the Minister were also well
aware of the identity of KT’s shareholders.
[133]
Nowhere in the plan mention is made that
prior to the approval of the plan by the Minister, that KT and Redisa
has agreed that KT
will be the company that would be responsible for
the management of the plan as the management company. This fact could
easily
have been disclosed or have been mentioned in the plan because
at that time the agreement was already in existence between KT and

Redisa. It is strange why this was not done if there was a genuine
attempt by the two entities to fully disclose KT’s involvement

in Redisa right from the onset. They could easily have at that time,
if they really wanted to, present the Minister or the Department
with
a copy of the management agreement
[134]
Once again just as in the case of the true
nature of Erdmann and Crozier’s as well as
the
other directors shareholdership in the different entities and
associated entities, Crozier states that KT is not able to provide

proof of this.  He states this was discussed informally with the
Minister and the Department, and no minutes of such meetings
were
kept. Once again, this is a vague and sparsely proven fact, which is
intended to create a dispute of fact, on the papers.
[135]
What makes this allegation further
unconvincing is that the evidence shows that in a meeting between
officials of the Department
and Redisa dated 12 August 2016, it was
recorded that one of the outstanding issues on which action is to be
taken was the fact
that the Department needed to be placed in
possession of the contract between KT and Redisa, and the procurement
process for the
appointment of KT. When the Minister, however, on 31
October 2016 raised her concerns in respect of the plan and various
other
issues, she once again stated the following to Erdmann about
the appointment of KT:
“
Redisa
has appointed Kusaga Taga Consulting (KT) as the external management
company. Redisa has, however, confirmed via the annual
financial
statements that the executive directors of Redisa are also
shareholders of KT. This creates an untenable conflict of
interest
when dealing with public funds, despite the fact that these are
directors allege that they recuse themselves when a conflict
arises.
Despite several requests to Redisa, it has not been forthcoming with
information related to KT i.e
The
process followed in appointing KT;”
[37]
Despite
the evidence, revealing that on 12 August 2016 in a meeting between
Redisa and the Department, this information was requested,
Redisa in
reply, states that
“…
this
information was not requested.”
[136]
It is also not in dispute that since 2014
the Minister had requested a copy of the management contract that was
entered into between
Redisa and KT. It is common cause that the
Minister only received a copy of the contract, not directly, but
through iSolveit for
the
first
time in March 2016. Once again, one needs to ask the question why,
just as in the case as to the exact nature of the shareholdership
by
the directors of Redisa in KT and the associated entities, were they
so secretive about the management agreement that was concluded

between KT and Redisa.
[137]
Both Erdmann and Crozier has cleverly
managed to understate the true facts by clothing it with an
alternative version to place the
version of the Minister in respect
of these aspects in dispute, which they wanted this court to believe.
This was nothing but an
attempt to obfuscate the true facts of this
case relating to these aspects.
[138]
As regards the allegations by the Minister
as set out in paragraph 15 of the replying affidavit about the
financial gain Erdmann,
Crozier and Kirk and the other office-bearers
and shareholders of either KT and/or Redisa had acquired either
directly or indirectly
from Redisa through Avranet and NYI, such
allegations is not denied by Crozier or Erdmann and the other
directors of Redisa.
[139]
Erdmann,
rather states in his rebutting affidavit
[38]
that:
“
[t]he
financial arrangements concluded between KT and its shareholders Nine
Years Investments (Pty) Limited is private business.”
He also does not
even comment as CEO of Redisa, of which Davidson is also a director,
on the financial benefit which Davidson had
gained through her
shareholdership of Avranet in KT.
[140]
It may well be so, but it becomes relevant
to the question whether Redisa transferred directly or indirectly any
portion of its
income or of its assets, regardless how it was derived
to Erdmann, Kirk and Davidson, who in terms of Schedule 1, Item 1(3)
of
the
Companies Act, was
either was was an incorporator, or member
or director of Redisa a non-profit company. Which was payment of R97
million for Erdmann,
R12 161 million for Kirk and an amount of
R21 million for Davidson, through their respective shareholdership in
these entities.
And an amount of R11 million
was
paid to these companies for royalties and R63 million members paid in
dividends. Then there were suspicious payments made to
Erdmann in
respect of accommodation in the amount of respectively R160 000
and R65 000; and the amounts for security
upgrades at the
private residence of Erdmann and Davidson. The further suspicious
payments in respect of the cost of the NCCS in
the amount of R76
million and the manner in which the liquidators claimed the IP
belonging to
Redisa was transferred to NYI. Even
if these further amounts could be properly accounted for the
suspicion surrounding these payments
needs to be addressed.
[141]
It will at this stage be convenient to
refer to the provisions of
Schedule 1-
Provisions Concerning Non-Profit Companies
,
Item 1(3)
, that
states:
“
(3)
A non-profit company must not, directly or indirectly, pay any
portion of its income or transfer any of its assets, regardless

whether the income or asset was derived, to any person who is or was
an incorporator of the company, or who is a member or director,
or
person appointing a director, of the company, except –
(a)
as reasonable –
(i)
remuneration for goods delivered or services rendered to, or
at the direction of, the company; or
(ii)
payment of, or reimbursement for, expenses incurred to advance
a stated object of the company; …”
[142]
It is common cause that the management fee
was directly paid by Redisa to KT, of which NYI and Avranet are the
shareholders. Erdmann,
Crozier and Kirk owned 75% shares in KT
through NYI. Davidson owned 25% shares in KT through Avranet. There
may well have been
a bona fide agreement between KT and Redisa, for
management services rendered. There was however no bona fide
agreement between
Redisa, Erdmann, Davidson and Kirk, in the case of
Erdmann as incorporator, Davidson as a director and Kirk also as a
director,
to have directly or indirectly been given any portion of
its income or transfer of the assets of Redisa to them.
[143]
Erdmann, as incorporator held 80% shares
in NYI of the 75% share in KT. He indirectly through KT and NYI
received a large portion
of the income of Redisa as incorporator or
director. Davidson, by means of the 25% share Avranet has in KT, has
also substantially
been paid in an indirect manner a portion of the
income of Redisa.
Kirk, another director of
Redisa through the 10% share of NYI, has received 10% indirectly of
the income of Redisa.
[144]
Under
clause 4.1 and 4.2 of the MOI
[39]
of Redisa, the
provisions of Item 1(3) of Schedule 1 is repeated and forms part of
the MOI. In terms of clause 8 of the MOI
[40]
under the heading –
Special
Provisions Relating To Tax Exemption
the
following provisions are relevant to this case:
“
8.1
It is envisaged that the Company shall apply to the Commissioner for
approval as a public benefit organisation, as contemplated
in s 30
(3) of the Income Tax Act, and that and accruals of the company will
be exempt normal tax. In order for to qualify for
such tax exemption
the company shall at all times comply with the provisions of clause
8.2 to 8.15.
8.2
As recorded in clauses 4.1 and 4.2 of this Memorandum of
Incorporation, the income and property of the company howsoever
derived
shall be applied solely towards the promotion of the
Company’s objects or be invested and no portion thereof shall
be paid
or transferred, directly or indirectly, to any person other
than in the cause of the promotion of the Company’s objects;
provided, that nothing herein contained shall prevent the payment in
good faith of a reasonable human remuneration to any officer
or
servant of the Company in return for any services actually rendered
to the Company.
8.3
The company shall take reasonable steps to ensure that each activity
carried on by the company is for the benefit of, or is
widely
accessible to, the general public at large, including any sector
thereof (other than small, exclusive groups).
8.4
The Company shall comply with such conditions, if any, as the
Minister of Finance, may prescribe the way of regulation to ensure

that the activities and resources of the company are directed in the
furtherance of his objects…”
A
further relevant provision under clause 8 is the following:
“
8.10
The Company will not pay any remuneration, as defined in the Fourth
schedule of the Income Tax Act to any employee, office
bearer,
Director or any other person, which is excessive, having regard to
what is generally considered reasonable in the sector
and in relation
to the services rendered and will not economically benefit any person
in a manner
which is not consistent objects of the company….”
[145]
Although the Minister questions the
reasonableness of the remuneration paid to Erdmann and the other
directors, Erdmann’s
assertion is that this remuneration is
fair and competitive in respect of what would ordinarily be paid to a
person holding such
a position and  cannot be gainsaid or
disputed on the papers.
[146]
The income that he and the other directors
through an indirect manner have received through KT and the other
entities, cannot be
justified in terms of Item 1(3), Schedule 1 of
the
Companies Act, as
well as clause 4.1 and 4.2, read with clause
8.2 and 8.10 of the MOI. Erdmann, Davidson and Kirk in any event, do
not state that
the income they indirectly received through KT and the
other companies are in accordance with the exceptions as set out in
Item
1(3) of Schedule 1 or clauses 4.1, 4.2, as well as 8.2 and 8.4
(except for the remuneration) of the MOI. The income they therefore

received indirectly from KT and the companies which hold shares in
KT, were indirectly received from Redisa, which is unlawful
and not
in accordance with Schedule 1, Item 1(3) or the provisions of the
MOI. The Minister therefore is correct at the very least
in her
assertion that these funds are misappropriated through KT to its
directors. And that the other suspicious payments made
in respect of
accommodation and other benefits, which according to the Redisa Plan
and MOI, is allegedly part of this misappropriation
of public funds.
[147]
Erdmann,
Kirk, Davidson, as well as Crozier have clearly abused the corporate
personality of KT, NYI and Avranet to unduly benefit
themselves. In
such a case it would not be improper to disregard the separate legal
personality of these entities.
Henochsberg
[41]
under the discussion of
section 19
of the
Companies Act states
the
following:
“
Lifting
the veil
.
– In some cases the Court has disregarded the company’s
separate legal personality, ie it has focused on the natural
person
or persons ‘behind’ the company as if there were no
dichotomy between such person or persons and the company.”
They
also after referring to some cases state:
“
It does
not appear that the law is settled as to the circumstances in which
the Court can or should, as it has been put, ‘lift’
or
‘pierce the veil’ of corporate personality
.
”
[42]
[148]
The
authors states further with reference to a case of this division in
Ex Parte
Gore and
Others NNO
[43]
quoting from para 4 that: “
[W]hat
is entailed on any approach, whether it be called a ‘piercing’
or a ‘lifting’, is a facts-based determination
by the
courts in certain cases to disregard some or all the characteristics
of separate legal personality that statute law ordinarily
attributes
to a duly incorporated company.”
[149]
According
to the authors “
only
when
fraud,
dishonesty or improper conduct are present should the separate legal
personality of the company be balanced against policy
considerations
favouring the piercing of the corporate veil
.”
[44]
(Emphasis
added)
[150]
In
Die Dros
(Pty) Ltd and Another v Telefon Beverages CC and Others
[45]
Van Reenen J held:
“
[23]
Courts do not have a general discretion to disregard a company’s
separate legal personality whenever they consider it just
or
convenient to do so. The then Appellate Division (per Smalberger JA ,
who wrote the majority judgment) in
Cape Pacific Ltd v Lubner
Controlling Investments (Pty) Ltd and Others
[1995] ZASCA 53
;
1995 (4) SA 790
at
803G - H  and I - J expressed the view that it is a salutary
principle that courts should not lightly disregard a company’s

separate legal personality, but should strive to give effect to it,
as to do otherwise would negate and undermine the policy and

principles that underpin the concept of separate corporate
personality and the legal consequences that attach thereto, but held
that where fraud, dishonesty or other improper conduct is
present, other considerations come into play, in which event, the
need
to preserve the separate corporate personality of a company has
to be balanced against policy considerations favouring the piercing

of the corporate veil
.”
(Emphasis
added)
[151]
In
Hülse–Reutter
and Others v Gödde
[46]
the test as to whether it would be appropriate to pierce the
corporate veil has been formulated as follows as referred to by
Henochsberg
:
“
there
must at least be some misuse or abuse of the distinction between the
corporate entity and those who control it which results
in an unfair
advantage afforded to the latter
.”
(Emphasis added)
[152]
In my view based on this test as
formulated by the Supreme Court of Appeal, there was clearly a misuse
or abuse of the distinction
between the corporate identity of KT, NYI
and Avranet and those who control it like, Erdmann, Crozier, Davidson
and Kirk which
resulted in an unfair advantage to them. This unfair
advantage was that as directors of Redisa (except Crozier) they
indirectly
received income which they were not entitled to in terms
of the provisions of the MOI and Schedule 1, Item 1(3) of the
Companies Act. This
was unlawful.
[153]
It is for that reason that they failed to
disclose the exact and true nature of their shareholdersship in these
companies. By doing
so they abused and misused the distinction
between the corporate identity of these entities and themselves. They
were not
entitled to any benefits or income of
the non-profit organisation in the manner in which they did, and
tried to conceal the exact
nature of such income or benefits. Except
of course where they were entitled to reasonable compensation and
remuneration for their
services, as directors of Redisa.
[154]
Before dealing with the question whether
the Minister had the necessary locus standi to bring this
application, I am of the view
that it has been shown that Redisa is
without any doubt an organ of state for the following and the further
reasons that follow
later in the judgment.
[155]
In terms of s 239 of the Constitution an
“
Organ of State”
is defined as:
“
(a)
any department of
state or administration in the national, provincial or local sphere
of government; or
(b)
any other functionary or institution –
(i)
exercising a power or performing a
function terms of the Constitution or a provincial constitution; or
(ii)
exercising a public power or performing a
public function in terms of any legislation,…”
[156]
In terms of this constitutional provision
and in the light of the functions Redisa performs, it is without a
doubt an organ of state.
It also seems that Redisa in its own MOI
regard themselves as an organ of state. Where in terms of clause 8.3
it states that the
company shall take reasonable steps that each
activity carried on by the company is for the benefit, or is widely
accessible to
the general public, including any section thereof
(other than small, exclusive groups). In terms of clause 8.4 of the
MOI the company
shall comply with such conditions, if any, the
Minister of Finance may prescribe by way of regulation, to ensure
that the activities
and resources of the company are directed to the
furtherance of its objectives.
[157]
What is clear from these two provisions of
the MOI, as opposed to an entity that is
not an
organ of state, is that the company must carry out its functions for
the benefit or should be widely accessible to the general
public or
any section thereof. If it was not an organ of state, why would such
a provision be included in the MOI. Furthermore,
what business would
the Minister of Finance have in subscribing conditions by way of
regulation to ensure that the activities and
resources of the company
are directed for the furtherance of its objectives? This provision,
in my view, which was adopted by the
company in its MOI, is nothing
other than to make the company accountable in the manner it operates
to ensure that its activities
and resources are directed solely in
the furtherance of its objectives. The power was given to the
Minister of Finance and not
to the board of directors of Redisa.
[158]
It is common cause that the collection of
waste tyres and the prevention of pollution by means of these waste
tyres are primarily
a government function, mandated in terms of the
Constitution to the relevant state department which is the Department
of Environmental
Affairs. It is common cause that the Minister
delegated this function to Redisa in terms of the Redisa Plan. It is
common cause
that the Minister in accepting and endorsing the Redisa
Plan, by publication thereof in the Government Gazette, elevated it
to
the status of subordinate legislation. In dealing with the
question of whether the Minister has the necessary locus standi, it
will also become apparent why Redisa can be regarded as an organ of
state.
[159]
The next question to consider is whether
the fees that were collected by Redisa before 1 February 2017 can be
considered public
funds. Mr Burger’s submission that the fees
payable to Redisa under the Redisa Plan does not constitute public
funds, is
based on the fact that these fees are paid by producers who
subscribe to the Redisa Plan, and those who do not subscribe to the

Redisa Plan has subscribe to an integrated waste management plan
prepared in terms of the Waste Act. Further, this waste management

tyre fee is collected by Redisa and not collected by SARS.
[160]
It is therefore not spent in accordance
with the revenue legislation, but by Redisa in the prescribed ratio.
He therefore argues
that it is as little public funds as are fees
collected from parents of students attending a private school. I do
not agree with
this submission. It is clear that a tyre producer’s
failure to subscribe either to the Redisa Plan or to an IIWTMP and
still
continues to produce tyres constitute an offence.
[161]
There is therefore no voluntary
contribution that is made by any tyre producer. If a producer does
not contribute they would contravene
the provisions of the Waste Act.
The failure to contribute would constitute an offence and is enforced
by an act of Parliament.
When Parliament exercises its function in
enacting legislation it exercises a public function in terms of the
Constitution. When
it enacted this legislation, it did not do so for
the benefit of a few privileged individuals as would be the case in
the example
cited by Mr Burger in his heads of argument where he
compared the fees collected in terms of the Redisa Plan and fees
collected
by a private school.
[162]
The basis and the purpose of the Redisa
Plan is for the overall public benefit which tyre producers has to
pay as a result of the
tyres that they produce, which would end up as
waste and which would be harmful to the general public. Furthermore
Redisa fulfils
a constitutional function, as stated earlier, for the
benefit of the public. The Minister in accepting the Redisa Plan, on
26 November
2012, clearly explains for what government and public
purpose the funds collected by Redisa should be utilised for.
[163]
Some
of the aims of the Redisa Plan would be to create jobs and small
businesses. While in the analogy and comparison given by Mr
Burger in
relation to the private school, the benefits that derive from the
fees collected by the school would only accrue to those
children
attending that school. Whereas the benefits and purpose of the Redisa
Plan would be to mainly benefit the public at large.
No real and
tangible benefits accrue to the tyre producers who must contribute
towards the Redisa Plan. It is in the same manner
which the public at
large benefits from the Road Accident Fund to which only motorists
make a contribution but which is regarded
as public funds.
[47]
[164]
The Minister’s contention therefore
that the money collected by Redisa, that ended up in the pockets of
the directors of Redisa
through KT, is public funds is therefore
correct.
[165]
The question to consider now was whether
the Minister had the necessary locus
standi to
bring the application for the liquidation of these two entities.
Ordinarily the winding-up a solvent company by an order
of court is
provided for in
section 81
of the
Companies Act. This
can only be
done, in the following circumstances, where:
“
a)
the company has –
(i)
resolved, by special solution, that it be
wound up by the court; or
(ii)
applied to the court to have its voluntary
winding-up continued  by the court;
b)
a practitioner of a company appointed during business rescue
proceedings has  applied for
liquidation in terms of
section 141
(2)(a), on the grounds that there is no reasonable prospect of the
company being rescued; or
c)
one or more of the company’s creditors have applied to the
court for an order to wind
up the company on the grounds that –
(i)
the company’s business rescue proceedings have ended in the
manner contemplated in
section 132
(2)(b) or (c)(i) and it appears to
the court that it is just and equitable in the circumstances for the
company to be wound up;
or
(ii)
it is otherwise just and equitable for the company to be wound up;
d)
the company, one or more of its directors or one or more shareholders
have applied to the court
for an order to wind up the company on the
grounds that –
(i)
the directors are deadlocked in the management of the company, and
the shareholders are unable
to break the deadlock, and –
(aa)
irreparable injury to the company is resulting, or
may result, from the deadlock; or
(bb)
the company’s business cannot be conducted to the
advantage of shareholders generally, as a result of the
deadlock;
(ii)
the shareholders are deadlocked in voting power, and have failed for
a period that includes at least
two consecutive annual general
meeting dates, to elect successors to directors whose terms have
expired; or
(iii)
it is otherwise just and equitable for the company to be wound up;
e)
a shareholder has applied, with leave of the court, for an order to
wind up the company
on the grounds that –
(i)
the directors, prescribed officers or other persons in control of the
company are acting in a
manner that is fraudulent or otherwise
illegal; or
(ii)
the company’s assets are being misapplied or wasted; or
f)
the Commission or Panel has applied to the court for an order to wind
up the company on the
grounds that –
(i)
the company, its directors or prescribed officers or other persons in
control of the company are acting
or have acted in a manner that is
fraudulent or otherwise illegal, the Commission or Panel, as the case
may be, has issued a compliance
notice in respect of that conduct,
and the company has failed to comply with that compliance notice; and
(ii)
within the previous five years, enforcement procedures in terms of
this Act or the Close Corporations
Act, 1984 (Act No. 69 of 1984),
were taken against the company, its directors or prescribed officers,
or other persons in control
of the company for substantially the same
conduct, resulting in an administrative fine, or conviction for an
offence.”
[166]
It is clear that
section 81
of the
Companies Act does
not directly grant the Minister the necessary
standing to bring an application for the winding-up of a solvent
company. The category
or categories of persons or entities that can
bring such an application is restricted in terms of this section.
These are either:
the company itself; its directors and shareholders;
a business rescue practitioner; a creditor where the company’s
business
rescue proceedings have ended in the manner as contemplated
in section 132 (2) of the Act; or the Commission or Panel under the

conditions and circumstances as set out in section 81.
[167]
In
dealing with the interpretation of any document including a statute,
which includes the interpretation of section 157 (1),  a
court
has to be mindful of the decision
in
Natal
Joint Municipal Pension Fund v Endumeni Municipality
[48]
where Wallis JA stated the following about the present state of the
rule of interpretation:
“
The
present state of the law can be expressed as follows: Interpretation
is the process of attributing meaning to the words used
in a
document, be it legislation, some other statutory instrument, or
contract, having regard to the context provided by reading
the
particular provision or provisions in the light of the document as a
whole and the circumstances attendant upon its coming
into existence.
Whatever the nature of the document, consideration must be given to
the
language
used in the light of the ordinary rules of grammar and syntax; the
context in which the provision appears; the apparent
purpose to which
it is directed and the material known to those responsible for its
production. Where more than one meaning is
possible each possibility
must be weighed in the light of all these factors. The process is
objective, not subjective. A sensible
meaning is to be preferred to
one that leads to insensible or unbusinesslike results or undermines
the apparent purpose of the
document
.
Judges must be alert to, and guard against, the
temptation
to substitute what they regard as reasonable, sensible or
businesslike for the words actually used
.
To do so in regard to a statute or statutory instrument is to cross
the divide between interpretation and legislation; in a contractual

context it is to make a contract for the parties other than the one
they in fact made. The ‘inevitable point of departure
is the
language of the provision itself’, read in context and having
regard to the purpose of the provision and the background
to the
preparation and production of the document.” (Emphasis added)
[168]
The Minister argues that her standing to
bring the application is based on the provisions of section 157
(1)(d). At this stage it
would be appropriate to deal with the
provisions of section 157 of the Act which has the heading “
Extended
standing to apply for remedies
”. It
states:
“
157.
(1) When, in terms of this Act, an
application
can be made to, or a matter can be
brought
before, a court
, the Companies
Tribunal, the Panel or the Commission,
the
right to make the application
or bring
the matter may be exercised by a person –
(a)
directly contemplated in the particular
provision of this Act;
(b)
acting on behalf of a person contemplated
in paragraph (a), who cannot act in their own name;
(c)
acting as a member of, or in the interest
of, a group or class of affected persons, or an association acting in
the interest of
its members; or
(d)
acting in the public interest, with leave
of the court.” (Emphasis added)
[169]
I do not agree with the submissions of the
Respondents that section 157 (1)(d), due to the fact that it is
listed under Chapter
7 of the
Companies Act which
deals with remedies
and enforcement, do not extend to other applications that may be
brought in terms of the
Companies Act, more
especially to
applications under section 81 (1) of the Act. I also do not agree
that because section 157 (1) forms part of Chapter
7 it should be
restricted to alternative procedures for addressing complaints or
securing rights contained in section 156.
[170]
I also do not agree that it does not
provide the basis to extend the categories of persons authorised to
apply for the winding-up
of a solvent company under Part G of Chapter
2. On a plain reading of section 156, it does not only deal with
alternative procedures
for addressing complaints or dispute
resolution or securing rights. And whilst it makes provision for
alternative procedures for
addressing complaints or securing rights
to a person referred to in section 157, it also grants such a person
the right to apply
for appropriate relief to the division of the High
Court that has the jurisdiction over the matter. See in this regard
section
156 (c).
[171]
In my view section 157 (1) is clear where
it states, “
when, in terms of this Act,
an application can be made to,
or
a matter can be brought before
, a court
… the right to make the application … may be exercised
by a person.”
(Emphasis
added)
[172]
I
f regard is to be had to the words in
section 157 (1) which states “
when in
terms of this Act application can be made to a court”,
it
would be absurd and nonsensical to exclude an application which can
be made in terms of section 81 (1) of the Act. There is no
other
provision in the Act or rule of interpretation which would exclude an
application in terms of section 81 (1) that can be
found in the words
“
when an application in terms of this
Act”
can be made before a court. I also
do not understand the provisions of section 156 to exclude such an
interpretation. I agree with
Mr Muller that the words of section 157
do not restrict the remedies available to the applicants contemplated
in section 157 (1)
(a)-(d) to only those remedies in terms Chapter 7.
I agree with the submission that the introductory phrase “
when
in terms of this
Chapter
,
an application can be made to a court”
,
that instead, the phrase reads “
when in
terms of this
Act,
an application can be made.”
[173]
What would then be the purpose of section
157, if such an interpretation on a clear and plain understanding of
the words of a section
cannot be given to it? The section permits the
categories of persons to make an application to a court when the
circumstances as
set out in subsections (a) to (d) are present or is
justified. If an interpretation is given to section 157 (1), to
exclude persons
other than those mentioned in section 81 (1) and not
include persons as mentioned in subsections (a)-(d),  it would
defeat
the purpose of Chapter 7 which grants certain remedies and
enforcement of rights to people other than those mentioned in any
other
provision of the Act. And in particular those mentioned in
section 81 (1) of the Act.
[174]
The
title of section 157, clearly intends to extend locus standi to the
categories of people referred to in subsection 1 (a) to
(d), which
makes provision as stated in the title “
Extended
standing to apply for remedies”,
this is an indication of a clear intention to extend locus standi to
bring applications or bring matters before a court in instances
where
such a person or persons mentioned in subsections (a)-(d), explicitly
in terms of other provisions of the Act, do not have
such standing. I
am also in agreement with Mr Muller that this provision gives effect
to one of the stated goals of the Act which
is to promote compliance
with the Bill of Rights in the sphere of company law. Which accords
with section 39 (2)
[49]
of the
Constitution which influenced the formulation of section 157, which
in turn resemble section 38
[50]
of the Constitution.
[175]
Justice
Jafta in the article titled
Critical
analysis of the extended legal standing provisions under section
157(1) of the companies act 71 of 2008 to apply for legal

remedies
[51]
says the following:
“
At
common law, legal standing is ordinarily linked to the party’s
own interest. It must be the identified interest of the
party
instituting the proceedings which forms the subject matter of the
case. Legal standing, therefore, is limited to this narrow
class of
litigants. Barring the few exceptions, no party is entitled to
institute proceedings on behalf of another party where
none of its
own interests are affected.
But
where a claim is grounded in statute, legal standing is determined
with reference to the relevant statute and its purpose. The
issue is
decided in the light of both the facts and the statute conferring the
right or interest which the applicant seeks to protect.
For instance,
if a statute contains a prohibition that was enacted in the interests
of a particular group or class of persons,
any member of the group
would be entitled to institute proceedings to enforce the
prohibition, without proof of damages suffered
personally by him or
her.
Therefore,
in passing the
Companies Act, Parliament
must have been aware of the
narrow approach to standing at common law and the fact that in the
case of a statutory claim, legal
standing is determined with
reference to the relevant statute. It cannot be gainsaid that the aim
of the legislature, encapsulated
in
s 157
, was to alter the
common-law position on legal standing and expand the class of persons
who may institute legal proceedings. The
section has revolutionised
legal standing in matters where the Act applies.” (footnotes
omitted)
[176]
Whilst the provisions of section 157
(1)(a) to (d) is similar to the provisions of section 38 of the
Constitution and whilst both
provisions seeks to broaden the standing
of persons as mentioned in the respective provisions, the purpose of
section 38 of the
Constitution, in my view, is totally different to
that of
section 157
(1) of the
Companies Act. The
purpose of
section
38
is to broaden the standing of persons who may approach a competent
court in which they may seek relief where a right in the Bill
of
Rights has been infringed or threatened. Whereas
section 157
(1)
seeks to broaden the standing of persons who would ordinarily not
have such standing to bring a matter before the court in
terms of the
Companies Act. Put
differently, the extended standing in
section 157
(1) clearly has not as its purpose to extend or broaden standing of
persons to approach a court in which it may seek relief where
a right
in the Bill of Rights has been infringed or threatened.
[177]
It seeks to give standing to persons  not
ordinarily clothe with such standing to bring  a matter before a
court or make
an application to a court in terms of provisions of the
Companies Act. Section
38, therefore, deals with standing in a
constitutional context, whereas
section 157
(1) deals with standing
in terms of the provisions of the
Companies Act. In
both provisions,
however, the common law requirements for legal standing have been
substantially broadened. Jafta says the following
in this regard:
“
Although
s 157
of the
Companies Act is
not a carbon copy of s 38 of the Constitution, there are striking
similarities between these provisions. Consequently, decisions
which
construe s 38 would be helpful to the interpretation of s 157.
However, because s 157 forms part of a statute it should not
be
approached as if it were a provision in the Constitution. Its
interpretation is regulated by s 39(2) of the Constitution. Section

39(2) obliges courts ‘to promote the spirit, purport and
objects of the Bill of Rights’ when they interpret legislation
.
As
the heading of s 157 suggests, its purpose is to extend legal
standing in proceedings brought in terms of the
Companies Act. The
meaning assigned to it must achieve this purpose. Put differently,
the section must be given a purposive interpretation. Over and
above
that, the interpretation must advance the objects of the
Companies
Act, for
the section does not expand legal standing simply for the
sake of wider standing. It does so in order to promote the goals of
the
Act.”
[52]
(footnotes omitted)
[178]
After
having found that those persons or categories of persons as mentioned
in section 157 (1)(a) - (d), may bring an application,
or matter
before a court, the question that still needs to be answered is
whether the Minister in terms of the provisions of section
157 (1)(d)
could bring this application for the winding-up of Redisa and KT in
the “
public
interests”
.
CF Swanepoel (“Swanepoel”) in an article titled
The
judicial application of the “interests” requirement for
standing in constitutional cases: “A radical and deliberate

departure from the common law”
[53]
discusses albeit in a constitutional context the requirements of
public interests. The learned author after having referred to
various
cases discusses what a court would consider in determining what
entails the broader public interests in the application
of section
38.
[179]
In
my view these principles would also find application in the
determination of what the public interests would be in terms of
section 157
(1)(d) of the
Companies Act. It
would appear that the
broader public interests, as identified by Swanepoel which would find
application in this case could include
“
the
need to obtain legal certainty for the proper administration of
justice
;
an
interest in ensuring that public power is exercised in accordance
with constitutional and legal prescripts; and
the need
for the rule of law to be upheld”,
[54]
amongst others
.
Especially
if regard is to be had to the other purposes of the Act which is to
promote compliance with the Bill of Rights, as provided
for in the
Constitution and in the application of company law.
[180]
The further purposes of the Act relevant
to this case is set out in section 7 (h), (i) and (j), which
respectively provide for the
formation, operation and accountability
of non-profit companies in a manner designed to promote, support and
enhance the capacity
of such companies to perform their functions;
balance the rights and obligations of shareholders and directors
within companies;
and encourage the efficient and responsible
management of companies.
[181]
If regard is to be had to these
requirements, in my view, the Minister has established that she has
the necessary locus standi to
have brought these applications in the
public interests in terms of the provisions of section 157 (1)(d).
The Minister as a member
of the executive took an oath to uphold the
Constitution, which includes the values of openness, accountability
and transparency,
which underpins the Constitution. She and the
Department of Environmental Affairs also has a responsibility to
ensure in terms
of section 24 of the Constitution that everyone has
the right to an environment that is not harmful to the health or
well-being,
and to have the environment protected for the benefit of
present and future generations, through reasonable legislative and
other
measures that prevent pollution and ecological degradation,
promote conservation and secure ecologically sustainable development

and use of natural resources or promoting justifiable economic and
social development.
[182]
The Redisa Plan, which she adopted, can be
regarded as “
a reasonable legislative
and other measures to prevent pollution and ecological degradation
”
which clearly gives effect to this constitutional obligation placed
upon the Minister and the Department. In this regard
it is a function
of the Minister to execute and protect the environmental rights of
South Africans, which had been delegated to
Redisa. In doing so she
was acting in the broader public interest. Redisa exercised a
function in terms of Chapter 3 (section 24)
of the Constitution as
well as a broader public function in terms section 239 thereof. In
this regard, the Minister apart from
the public interest therefore
has as the responsible Minister a direct interest in the litigation.
But given the allegations of
impropriety made against Redisa an organ
of state, as will be shown hereunder, the interests of justice or the
public interests,
compels this court to scrutinise the action
even where the Minister’s standing is questionable.
[183]
In
this regard, I refer to the judgment of Cameron J in
Giant
Concerts CC v Rinaldo Investments (Pty) Ltd and Others
[55]
where the learned judge said the following:
“
[33]
The separation of
the merits from the question of standing has two implications for the
own-interest litigant. First, it signals
that the nature of the
interest that confers standing on the own-interest litigant is
insulated from the merits of the challenge
he or she seeks to bring.
An own-interest litigant does not acquire standing from the
invalidity of the challenged decision or
law, but from the effect it
will have on his or her interests or potential interests. He or she
has standing to bring the challenge
even if the decision or law is in
fact valid. But the interests that confer standing to bring the
challenge, and the impact the
decision or law has on them, must be
demonstrated.
[34]
Second, it means that an own-interest litigant may be denied standing
even though the result could be that an unlawful decision
stands.
This is not illogical. As the Supreme Court of Appeal pointed out,
standing determines solely whether
this
particular litigant is
entitled to mount the challenge: a successful challenge to a public
decision can be brought only if ‘the
right remedy is sought by
the right person in the right proceedings’.
To
this observation one must add that the interests of justice under the
Constitution may require courts to be hesitant to dispose
of cases on
standing alone where broader concerns of accountability and
responsiveness may require investigation and determination
of the
merits. By corollary, there may be cases where the interests of
justice or the public interest might compel a court to scrutinise

action even if the applicant’s standing is questionable. When
the public interest cries out for relief, an applicant should
not
fail merely for acting in his or her own intere
st
.”
(Emphasis added)
[184]
The
next question to consider is whether the Minister was required to
have applied for this court’s leave do so before launching
this
application. According to the Respondents, she failed to do so. In
this regard they rely on the decision of
Children’s
Resource Centre
[56]
paragraphs 34 to 41 as well as the decision of
Mukaddam
[57]
paragraphs 15 and 27. They also rely on
Jafta
(supra) at p 35. In my view these cases are distinguishable from the
present, even though it deals with the question of extended
standing.
In both these cases the court dealt with extended standing in respect
of class actions. These were also matters that
were brought in action
proceedings as opposed to this matter which was brought on
application. The
Children’s
Resource Centre
case had its own peculiar difficulties in trying to determine which
factors
[58]
a court has
to take into consideration before it grants certification. Factors
such as the definition of a class action, and whether
a cause of
action raising a triable issue, had to be determined in that case.
[185]
Furthermore, as said earlier, they had the
further difficulty in trying to ascertain what precisely the cause of
action was in that
matter. The difficulty the court had to deal with
was whether there was a prima facie case made out on the papers in
the absence
of draft particulars of claim in order to come to a
conclusion whether to certify this case and grant standing. In this
case, we
are dealing with motion proceedings based on affidavits. The
relief being sought by the Minister was clearly identified as set out

in the papers. She further did not rely on extended standing based on
section 38 of the Constitution in which she wanted to enforce
a right
in terms of the Bill of Rights, but based on
section 157
(1) of the
Companies Act, to
enforce a remedy which is clearly defined in
section 81
of that Act.
[186]
During the provisional stage of both
applications, the judges seized with the matter clearly understood
that the Minister did not
have standing in the ordinary course in
terms of section 81, but had to be permitted on the basis of extended
standing in terms
of
section 157
(1) of the
Companies Act, to
bring
such an application.
[187]
Based on the relief that was sought in the
notice of motion it was very clear from the onset, to the judges who
granted the provisional
application, that this was an issue that was
raised by the Minister in both applications. It is a factor which
they had to consider
not in isolation, but against the background of
the totality of the facts before them.
[188]
It
is implicit, therefore, in the order they granted for provisional
liquidation that they must have considered whether the Minister

should be permitted to bring the application. In my view Le Grange J,
as well as Cloete J, must have been mindful of what Jafta
J stated in
the
Mukaddam
case, where he held that: “
It
is important that the rules of court are used as tools to facilitate
access to courts rather than hindering it. Hence rules are
made for
courts and not that the courts are established for rules. Therefore,
the primary function of the rules of courts is the
attainment of
justice. But sometimes circumstances arise which are not provided for
in the rules. The proper course in those circumstances
is to approach
the court itself for guidance. After all, in terms of
section 173
each superior court is the master of its process.”
[59]
[189]
In action proceedings, which are usually
more delayed than proceedings on motion, where sometimes as in this
case the exigencies
of the matter would dictate whether the court can
ascertain on the papers whether relief should be granted without a
special application
or whether a separate substantive application
should be brought to determine whether the matter should be certified
in order to
grant extended standing. It would therefore be unduly
onerous in most urgent applications brought on motion to bring a
separate
substantive motion for certification. Such an approach would
be absurd and not in the interest of justice, if in the determination

of the merits of the application a court as a matter of course, has
to decide whether extended standing should be granted.
[190]
Further,
what clearly makes this case different from the
Children’s
Resource Centre
case and the
Mukaddam
case is
that both those cases dealt with class actions which would require a
much more controlled manner of certification than a
case where
standing would be found on the basis of public interest. In this
regard, Jafta J says: “
Courts
must embrace class actions as one of the tools available to litigants
for placing disputes before them. However, it is appropriate
that the
courts should retain control over class actions. Permitting a class
action in some cases may, as the Supreme Court of
Appeal has observed
in this case, be oppressive and as a result inconsistent with the
interests of justice. It is therefore necessary
for courts to be able
to keep out of the justice system class actions which hinder, instead
of advancing, the interests of justice.
In this way prior
certification will serve as an instrument of justice rather than a
barrier to it.”
[60]
[191]
Nothing in these two cases made a
reference to extended standing on the basis of public interest being
sought and stated that prior
leave should be sought in these cases.
In my view, therefore, the judges’ in granting the
respective provisional applications had, as referred to earlier,
adequate
grounds to grant the orders.
Non-disclosure
[192]
Given the findings I have made thus far,
especially in regard to whether the Minister failed to disclose
certain facts which the
Respondent says were known to her, nothing
turns on this point. In my view, the opposite is rather true. That is
that given the
facts of this case based on the papers, it was the
Respondents’ who were economical with the truth and failed to
disclose
the true nature of what really occurred between them and the
Minister.
Urgency
[193]
The Minister submitted that due to various
factors and circumstances it was obliged to bring the application on
an urgent basis.
It is common cause that on 23 May 2017, Erdmann made
a presentation to the Waste Management Bureau, which raised certain
concerns
with the Minister and the Department about the financial
position of Redisa. Most of the interactions between the Department
and
Redisa were to discuss the alignment of the Redisa Plan to the
amended Waste Act, the Pricing Strategy and amended Waste Tyre
Regulations.
[194]
It is clear that Redisa vehemently
objected to the proposals and to the fees being collected in future
by SARS. However, prior to
23 May 2017, various submissions were made
about the financial position of Redisa, with the sole purpose of
trying to convince
either the Minister or the Department or SARS
about the negative implications it would have on Redisa if the
contributions made
by the tyre producers were not paid directly to
it. The financial position and income seems to have fluctuated to the
extent where
some of the funds which it had collected were not
reflected in either the submissions or the financial statements
presented by
Redisa. This was reflected as follows:
1)
On 13 November 2015 in a submission made to the
National Treasury, Redisa submitted that they generated an annual
income of approximately
R575 million, which would be lost to Redisa
if it is not directly collected by them.
2)
On 5 February 2016, a further submission was made
in which Redisa stated that it would be able to continue operating
without receiving
any funding in the 2016 annual budget, and that
they had an amount of cash and cash equivalents to the value of R276
million, which
would last for approximately 7 months.
3)
In the February 2016 annual financial statements,
it was indicated that they had a reserve which included cash and
assets in the
amount of R665 million, which would be more than
sufficient to ensure continued operations in terms of the Redisa Plan
until either
30 November 2017 (the date on which the approval of the
Redisa Plan expires) or for the rest of the fiscal year.
4)
In a further submission dated 5 April 2016 about
the implications of stopping the revenue of Redisa as from 1 April
2016 (the original
date for the implementation of the new funding
model, which was later implemented with effect from 1 February 2017),
in a review
prepared by PwC on their behalf, the following emerged:
that Redisa recorded more cash in its trial balance dated 31 January
2016
than in the bank statements over the same period; and that it
would only be able to operate for a period of 8.38 months until it

became factually insolvent. This presentation by PwC does not however
take into account the collection of further contributions
to Redisa
after 4 February 2016 nor the investment income of Redisa. This would
likely have increased or extended the period in
which Redisa would
have been able to operate, which would have enabled Redisa to operate
after 1 February 2017 and carry on its
business for the rest of the
financial year.
5)
In a further report submitted to the Department
under the heading “
DEA Report 31
December 2016”
it indicated that there
is an implementation reserve of R728 709 million, an item for
accounts payable in the unsubstantiated
amount of R28 572 million
with total
equity and liabilities in the amount
of R757 281 million of public funds.
6)
Then again in a report dated 28 February 2017,
Redisa indicated to the Department, that as at 31 January 2017 an
amount of R160
975 million was receivable, that it had an amount of
R106 144 million as cash reserves in investments and in the bank
accounts,
and cash in the amount of R59 220 million available which
constitute an amount of R426 339 million of public funds.
7)
On 23 May 2016 Redisa once again made a
presentation to the Waste Management Bureau and the Department, which
alerted the Department
to the fact that Redisa’s directors made
the following decisions:
(a)
to place on hold Redisa’s financial year
2018 growth business plan until funding uncertainties is resolved;
(b)
that should insufficient funding be allocated as
from 1 June 2017, it would commence an industry wind down to meet the
directors
fiduciary responsibilities;
(c)
that even if it should receive a cash injection
of R210 million in July 2017, it would only allow them to suspend
their intention
to wind down its operations to 1 October 2017; and
(d)
that Redisa’s cash balance in May 2017
amounted to only R150 million, and since their revenue has stopped it
is currently
operating off its remediation reserve and is currently
incurring a monthly burn rate of R36 6 million.
[195]
I am in agreement with the Minister given
these facts, it is clear on the objective evidence that no
justifiable explanation had
been given for the depletion and
disappearance of the reserves they had repeatedly confirmed they had
available to be able to continue
with the implementation and
administration of the Redisa Plan for several months after the change
in the funding model would be
effected. It is clear, therefore, that
somehow without proper explanation, the reserves had dissipated or
the previous information
given was not correct.
[196]
Furthermore, subsequent to this
presentation on 31 May 2017 it had informed all interested parties
that as from 1 June 2017 they
will no longer collect waste tyres from
collection points, including micro-collectors; that Redisa’s
depots will remain open,
but will not accept any deliveries; that
deliveries to processes will continue to schedule until further
notice. And that all enquiries
should be directed to the Waste
Management Bureau or the Department. It was clear also that Erdmann
send a notice to the contracted
transporters in the downstream
industry that it intends to terminate their contracts; he also
informed the transporters that they
will only be permitted to deliver
tyres directly to the depot until 16:00 hours on Friday, 2 June 2017;
thereafter no further deliveries
will be accepted.
[197]
I am in agreement with the Minister that
this constitutes an effective repudiation of the implementation and
administration of a
substantial and important component of the Redisa
Plan. In my view, the Minister has made out a sufficient case to
launch these
proceedings on an urgent basis.
Ex
parte
[198]
Courts
are loath to grant orders against a party on an ex parte basis. It
would usually discourage litigation by stealth or ambush
unless there
are compelling reasons to do so. In only a limited number of
situations, matters can be brought ex parte. One of those
would be
where immediate relief is sought even though temporary nature because
of imminent harm that would ensure should the relief
not be
granted.
[61]
[199]
In my view in respect of both the
application against Redisa as well as KT, the Minister has made out a
sufficient case why this
application should be brought ex parte. It
is also clear if one should have regard to the totality of the
evidence, especially
the underhand and secretive manner in which the
directors, some of whom are also shareholders in KT and the
associated companies
as shown above, had conducted themselves, it is
clear that urgent and drastic action on the part of the Minister and
the Department
had to be taken after they had been made aware of the
conduct of Erdmann and the other directors of Redisa and the manner
in which
funds had been spirited towards KT.
[200]
As said earlier, the fees that were
collected were public funds, which were misappropriated and diverted
through KT for the benefit
of Erdmann, Davidson, Crozier and Kirk.
This was done secretively and in a manner which the Minister and the
Department would not
have been aware of.
Just
and Equitable
[201]
The question now to consider is whether it
would be just and equitable, in respect of both Respondents to grant
a final order for
liquidation.
[202]
In both applications, the Minister after
having been granted standing in terms of section (1) (d) relies on
the provisions of section
81 (1)(c)(ii) and or
section 81
(1)(d)(iii)
of the
Companies Act. Those
categories of persons therefore as
referred to in these subsections of
section 81
will have to be
substituted by the Minister as the person or entity who brought the
application. If the application should proceed
in terms of the
provisions of
section 81
(1)(c)(ii) such an application would be on
the grounds that the Minister (being substituted as one or more of
the company’s
creditors) have applied to the court for an order
to wind up the company on the grounds that it is otherwise just and
equitable
to do so. In this regard, the Minister is therefore
regarded as a creditor.
[203]
If the application should proceed in terms
of the provisions of
section 81
(1)(d)(iii), then such an application
would be brought on the grounds of the Minister (being substituted as
the company itself
or one or more of its directors or one or more of
its shareholders) having applied to the court for an order to wind up
the company
on the grounds that it is otherwise just and equitable to
do so. The courts have in the past dealt with the just and equitable
ground for winding-up of a company in terms of the provisions of
these two subsections.
[204]
In terms of
section 81
(1)(c)(ii), the
Minister (as the substitute for a creditor), cannot obtain an order
on this ground merely because in a winding-up
there will be the
ordinary advantages thereof, such as having a liquidator control and
investigate the company’s affairs.
Courts have always
referred to five categories of circumstances which have to be present
to determine whether it is just and equitable
to liquidate a solvent
company. These were as set out in
Rand Air
,
as stated above in paragraph 101. It is trite
that these categories do not constitute any kind of numerus clauses
and it was left
open to the courts to devise other categories in
future.
[205]
But
as pointed out by
Henochsberg
[62]
it is nevertheless useful and instructive to list them in this
fashion so as to illustrate the kind of thing which can be complained

of under this heading. And that the courts have for a number of
decades not deemed it necessary to devise further categories. The

learned authors further state that it is indeed difficult to think of
anything else, which could possibly fall into this genus
of category.
A court would be hesitant to wind up a solvent company where a
creditor, or in this case the Minister, does not establish
a ground
falling within one of these categories.
[206]
However,
in
Kia
Intertrade
[63]
Wush J, having found that even though that specific case did not fit
into any of the five categories as listed by Coetzee J in
Rand
Air
,
held that: “
The
just and equitable ground for winding-up is not a catch-all to simply
liquidate a company that is, for example, running its
business at a
loss or reducing its scale. But, in my opinion, where a company (a)
has closed a number of branches of his business,
(b) has retrenched
staff to a considerable extent, (c) has virtually closed its head
office, (d) is diverting funds which should
be used to pay its debts
to an overseas concern on grounds which are not satisfactorily
explained, (e) to excuse the non-payment
of its liabilities sets up a
contrived and baseless counterclaim, and (f) has transferred assets
outside the ordinary course of
business, it is just and equitable
that the creditors should be protected from further losses and that
it should be prevented from
disposing of assets and incurring further
liabilities.”
[207]
In
Cuninghame
and Another v First Ready Development 249
[64]
(“
Cuninghame
”)
it has been held that the just and equitable ground for winding-up
postulates not facts but a broad conclusion of law,
justice and
equity. In that case, a non-profit company in terms of
section 21(1)
(b) and (c) of the
Companies Act of 61
of 1973, conducted it business
as a commercial enterprise in contravention of this section and also
in contravention of its MOI,
and it was held that in such a case, the
company is conducting an unlawful business which should be terminated
by way of a liquidation
order. The court further held that it is
therefore unnecessary to consider the further grounds as advanced by
the applicant in
that matter as to why the winding-up order of the
respondent would be just and equitable.
[208]
In
Cilliers
NO and Others v Duin & See (Pty) Ltd
[65]
(“
Duin
& See
”)
this court held that liquidation in terms of the provisions of
section 81
(1) (d), would be just and equitable to wind up the
company where there is deadlock in the sense of a breakdown of trust
between
the members and the company.
[209]
In
Pienaar
v Thusano Foundation and Another
[66]
(“
Thusano
”),
the respondent an association not for gain had been incorporated in
terms of section 21 of the Companies Act 61 of 1973,
in order to
consolidate, administer and finance an existing vast all-embracing
project as known as “Drought Relief’,
which operated 75
depots in Bophuthatswana distributing rations to approximately 12,500
families, and rendering substantial service
to families in need. The
company was funded by the governments of Bophuthatswana and South
Africa. Its members, including its chairperson
(the Minister of
Finance), its managing director (the second respondent) and the
applicant, became members by virtue of being state
appointees or
nominees and were not members in their own right. They had no
commercial or pecuniary interest in the company, nor
shareholders in
the commercial sense of the term. Complaints concerning the company,
led to the appointment by its chairman of
a board of enquiry to
investigate allegations of irregular activities. At some stage the
South African government discontinued
its funding. An application was
then made for the provisional liquidation of the company on the
ground that it was just and equitable
to so. On the basis that the
company was mismanaged, it lacked proper control, dissatisfaction
with its management and specifically
with the competence and ability
of the second respondent, and the ensuing deadlock. And the fact that
South Africa had discontinued
its funding.
[210]
The court found that in considering
whether to grant a final winding-up order on the grounds that it is
just and equitable to do
so, it had to be satisfied that the
applicant had established this on a balance of probabilities and had
to exercise a judicial
discretion based on the broad principles of
law, justice and equity. It further found that taking the applicant’s
case in
its totality, there was powerful and uncontroverted facts
that the government of both South Africa and Bophuthatswana, that
previously
subsidised the company, decided not to do so and the
workforce had been discharged, that it was inconceivable that the
company
could discharge the vast and numerous projects to which it
had committed itself without the injection of finance from its former

sources.
[211]
The court had to consider, and balance the
justice and equity of the competing interests of the applicant, on
the one hand, who
was the managing director of a large
state-controlled organisation, and supported by the Minister of
Finance and other functionaries,
who were in favour of the final
liquidation for a variety of reasons. These reasons included the fact
that the substratum of the
company had disappeared, as well as for
reasons of mismanagement and lack of confidence in the management of
the company. While
on the other hand, the interests of the second
respondent, who was opposed to the granting of the final order. It
was also a fact
that the second respondent’s membership of the
company derived from his employment in a government funded
institution and
not in his own right and he had no financial interest
or stake in the company, such as was held by the government.
[212]
In balancing his interests as against that
of the government on any basis of justice and equity there was no
comparison between
the competing interests, and the interests of the
government in this respect and consequently those of the public had
to take precedence
over the interests of the second respondent who
really had no financial interest in the matter. As a substantial
issue the court
took into consideration that the company was in
effect a state company and due weight had to be given to the wishes
of the members
of the government who were charged with administering
and being responsible for the company.
[213]
The court took into consideration the
structure and membership of the company and the fact that the money
invested in it was, in
the main, taxpayers money and in such an
instance, the court held it was entitled to broaden the ambit and
extend the catalogue
of cases where it was just and equitable to wind
up a company. In doing so, it should take into account cases of this
nature, where
there was a wastage or indeed mismanagement of public
funds and it could not countenance or permit the situation to
continue. It
was further of the view that if there was mismanagement
and its main object was no longer capable of achievement, it was a
proper
case where the court might grant a final winding-up order.
[214]
In
its final analysis, the court came to the following conclusion: “
In
the
instant case there is clearly a concatenation of certain important
factors, for example, the mismanagement of the company, loss
of
confidence coupled with the lack of finance, each of which would be
sufficient to justify an order for the final winding-up
of the
company on the grounds that it is ‘just and equitable’ to
do so. The cumulative effect of these factors, coupled
with the
disappearance of the substratum of the company, point overwhelmingly
in the direction that on the principles of ‘justice
and equity’
it is right and proper to place the company into final liquidation,
which I have done by confirming the rule
nisi.”
[67]
[215]
In coming back to this case and in dealing
firstly with the application for the liquidation of Redisa and in
applying the above
principles, as set out in the cases, the following
facts clearly emerge:
a)
That on the objective and undisputed facts, there
is acrimony between the Minister and Redisa, and by extension KT,
about the manner
in which Redisa should be funded. This has led to a
situation where the two parties are currently involved in litigation
in two
matters before the North Gauteng High Court.
b)
That, despite numerous attempts by Redisa to
persuade the Minister and the government not to implement the new
funding proposal,
the Minister and the National Treasury has
proceeded to implement as of 1 February 2017, this new funding
proposal. The parties
with the Minister on the one hand and Redisa on
the other are clearly deadlocked on this issue.
c)
This deadlock can also further be seen in the
manner which these proceedings had been conducted where the Minister
and the Department
has made serious allegations against Redisa and
KT, and Redisa and KT on the other hand has made counter allegations
against the
Minister and the Department. There clearly seems to be a
breach of trust between the two parties which would not be in the
best
interest of Redisa. Redisa would be dependent on the Minister
and the Department, as well as National Treasury for further funding

and it seems that there was reluctance to provide such funding to
Redisa. This is a fact which is based on Redisa’s own version.

The lack of adequate funding due to the animosity and breach of trust
between the two parties would ultimately lead to a situation
where
Redisa would find itself in dire financial difficulties.
d)
Redisa had  already as of 31 May 2017,
started with a suspension of its services to organisations and
entities which they have
to support in terms of the Redisa Plan, due
to the fact that it believed that it will not be adequately funded by
the Department
or National Treasury to proceed with its operations.
They
have on more than one occasion remarked in presentations they made to
the Minister and/or Department as well as a National
Treasury that
with the existing resources they have, they may not be able to fulfil
their obligations in terms of the Redisa Plan
and might become
insolvent.
e)
That on an evaluation of the reports and
financial statements they have presented to the Minister since 2015,
there seems to have
been a gradual disappearance of
the
reserves they have reported in the past, which had confirmed they had
available funds to continue with the implemented and administration

of the Redisa Plan.
f)
That as has been shown there has been an unlawful
misappropriation of public funds by the directors of Redisa, namely
Erdmann, Davidson
and Kirk,  through KT to Avranet and NYI, of
which Erdmann had a substantial shareholding in KT through NYI and
Davidson through
Avranet. As well as Kirk and Crozier, the CEO of KT,
through NYI. These unlawful payments were in direct contravention of
the Companies
Act, as well as Redisa’s MOI.
g)
The true nature of the shareholdership of
Erdmann, Davidson, Kirk and Crozier were not disclosed to the
Minister or the Department
as well as these unlawful payments. They
were secretive and clandestine in the manner in which funding was
disbursed through Redisa
to KT and onto the other entities.
h)
It would therefore be difficult for the Minister
or the Department as well as National Treasury to fund Redisa in
future if such
funding which is public money would unlawfully accrue
to its directors. This will lead to a situation where no funding
would be
given to Redisa to comply with the Redisa Plan, which would
have dire consequences for the company.
These
are factors and circumstances similar to those as cited in the cases
of
Kia Interlude
,
Cuninghame
,
Duin
& See
,
Thusano
and some of those mentioned in
Rand Air
.
[216]
In my view, therefore, there is sufficient
grounds in terms of the provisions of section 81 (1)(c)(ii) or
section 81 (1)(d)(iii)
of the Companies Act where the Minister, in
substitution of those persons or entities as mentioned in these two
sections, has
made out a case that it is just and equitable to
wind up Redisa.
[217]
As regarding the question whether it would
be just and equitable to wind up KT, the court will consider the
following facts:
a)
That KT’s own existence as a company
depends on Redisa and the implementation of the Redisa Plan. And as
stated earlier, KT
cannot independently exist without Redisa. Redisa
and the Redisa Plan is a substratum of KT.
b)
It is also totally dependent on its funding or
financial well-being on Redisa.
c)
Should Redisa’s funding, therefore, be
discontinued from the Department or National Treasury, KT’s
lifeblood and existence
will be cut off, it will therefore be
difficult to function independently as a company. There is no
evidence that it will be able
to exist without the funding it
receives from Redisa.
d)
KT as a private entity through its CEO, Crozier,
had been implicit in using KT as a vehicle through which money had
been misappropriated
to Erdmann, Davidson and Kirk, through the
shareholders of KT, NYI and Avranet in direct contravention of
Schedule 1, Part 3 of
the Companies Act as well as the MOI of Redisa.
e)
The Minister and the Department given the manner
in which KT had been used as a vehicle to enrich Redisa’s
directors would
clearly be opposed to it receiving any funding
through Redisa.
These
are clearly some of the grounds referred to in
Rand
Air
, which among others would be the
disappearance of the company’s substratum, the illegality of
some of its conduct in relation
to the role it serves to enrich
Redisa’s directors and the breach of trust between it and the
Minister.
[218]
In my view, therefore, there is also
sufficient grounds in terms of the provisions of section 81
(1)(c)(ii) or section 81 (1)(d)(iii)
of the Companies Act, where the
Minister, in substitution of those persons or entities as mentioned
in these two sections, has
made out a case that it is just and
equitable to wind up KT.
[219]
In the result therefore I make the
following order:
(a)
In respect of case number 9675/2017:
I)
That the Respondent is placed in final
liquidation.
II)
That the liquidator of the Respondent be directed
to distribute the entire net value of the Respondent to the Waste
Management Bureau,
a juristic person established in terms of
section
34A
of the
National Environmental Management: Waste Act 59 of 2008
,
in terms of section 30(3)(b)(iii)(bb) of the Income Tax Act 58 of
1962, read with clause 8.5.2 and/or 8.5.3 of the Memorandum
of
Incorporation of the Respondent.
III)
That the cost of the application, which cost
shall include the cost of two counsel, shall be the cost in the
winding-up liquidation
of the Respondent.
(b)
In respect of case number 10123/17:
I)
That the Respondent is placed in final liquidation.
II)
That the liquidator of the Respondent be directed to distribute the
entire net value of the Respondent to
the Waste Management Bureau, a
juristic person established in terms of
section 34A
of the
National
Environmental Management: Waste Act 59 of 2008
and in terms of
section 30(3)(b)(iii)(bb) of the Income Tax Act 58 of 1962.
Alternatively, to the liquidator of Recycling and Economic

Development Initiative of South Africa NPC (registration number
210/022733/08) as appointed by the Master of the High Court, Cape

Town under Master’s reference C 361/2017.
III)
That the cost of the application, which cost shall include the cost
of two counsel, shall be the cost in the winding-up
liquidation of
the Respondent.
HENNEY J
Appearances:
Case
No. 9685/2017
Counsel
Applicant:
GW Woodland SC
J Rust
Respondent:
S F Burger SC
A M Smalberger SC
Attorneys
Applicant:
State Attorney
Respondent:
Cliffe Dekker Inc.
Case
No. 10123/17
Counsel
Applicant:
IJ Muller SC
B H Swart SC
J Myburgh
Respondent:
JD Dickerson SC
K Reynolds
Attorneys
Applicant:
State Attorney
Respondent:
Werksmans
[1]
Redisa and KT will individually be referred to as “the
Respondent” or collectively as “the Respondents”.
[2]
Under Government Notice R. 149 of 2009 published in Government
Gazette No. 31901 of 13 February 2009, as amended by Government

Notice R. 1493 of 2016, published in Government Gazette 40470 of 2
December 2016.
[3]
Attachment BM 4 – page 276-277 [Redisa record].
[4]
Retail Motor Industry
Organisation and Another v Minister of Water and Environmental
Affairs and Another
2014
(3) SA 251
(SCA) paras 30-32.
[5]
Attachment BM3 - paragraph 4.2 read with paragraph 8.2 and 8.10 of
the MOI – page 240 [Redisa record].
[6]
Government Gazette No. 40200.
[7]
See paragraph 2.2 of the Pricing Strategy.
[8]
As set out by the Minister in paragraph 17 of the founding affidavit
of the Redisa application – page 16 [Redisa record].
[9]
Currently Redisa, the Minister and SARS are involved in litigation
in the North Gauteng High Court regarding these provisions.
[10]
Paragraph 33 of the A@L report – page 2007 [Redisa record].
[11]
Defined in the Redisa Plan as “National Centralised Computer
System” under paragraph 6.
[12]
[1999] 2 All SA 268 (W).
[13]
Paragraph 6 of the A@L report – page 2004 [Redisa record].
[14]
Section 157 of the Companies Act.
[15]
Ferreira v Levin NO and
Others; Vryenhoek and Others v Powell NO and Others
1996
(1) SA 984
(CC) para 234.
[16]
P Delport & Q Vorster
Henochsberg
on the
Companies Act 71 of 2008
[May 2017 – SI 14] at 548.
[17]
F Cassim
Contemporary
Company Law
2011 Juta&Co
at 827.
[18]
Mukaddam v Pioneer Foods (Pty) Ltd and Others
2013 (5) SA 89
(CC)
(“Mukaddam”).
[19]
2013 (2) SA 254
(SCA) para 4.
[20]
Children’s Resource Centre Trust and Others v Pioneer Foods
(Pty) Ltd and Others
2013 (2) SA 213
(SCA) para 26 (“Children’s
Resource Centre”).
[21]
Jafta C “Critical analysis of the extended legal standing
provisions under
section 157(1)
of the
Companies Act 71 of 2008
to
apply for legal remedies” 2015 (1)
Journal
of Corporate and Commercial Law & Practice (JCCL&P)
35.
[22]
Page 51 [KT record].
[23]
Page 1366 [KT record].
[24]
Page 1021 para 215 [KT record].
[25]
Page 1021 [KT record].
[26]
With reference to
Thunder
Cats Investments 92 (Pty) Ltd and Another v Nkonjane Economic
Prospecting & Investment (Pty) Ltd and Others
2014 (5) SA 1
(SCA) para 14.
[27]
Rand Air (Pty) Ltd v Ray
Bester Investments (Pty) Ltd
1985 (2) SA 345
(W) (“Rand Air”).
[28]
2008 (3) SA 371 (SCA).
[29]
Van Loggerenberg
Erasmus:
Superior Court Practice
(Vol
2) 2
nd
edition Service 4, 2017 D1-74.
[30]
Page 1074 - paras 311.3.5 and 311.3.6 [Redisa record].
[31]
Page 1410 and 1430 [Redisa record].
[32]
Page 1020 - para 45 [KT record].
[33]
Page 2301 - para 62 [Redisa record].
[34]
See
Plascon-Evans Paints
Ltd v Van Riebeeck Paints (Pty) Ltd
[1984] ZASCA 51
;
1984 (3) SA 623
(A) at 634;
Wightman
n 28 para 13.
[35]
Annexure CC3 - page 1059 [KT record].
[36]
Page 1166 - para 215 [KT record].
[37]
Page 621 [Redisa record].
[38]
Page 2307 - para 89 [Redisa record].
[39]
Page 257 [Redisa record].
[40]
Page 258-259 [Redisa record].
[41]
Delport
et al
n 16 p 85.
[42]
Delport
et al
n 16 p 85.
[43]
2013 (3) SA 382
(WCC).
[44]
Delport
et al
n 16 p 86.
[45]
2003 (4) SA 207 (C).
[46]
2001 (4) SA 1336
(SCA) para 20.
[47]
See in this regard
Road
Accident Fund v Timis
(29/09)
[2010] ZASCA 30
(26 March 2010) para 13 and
Madzunye
and Another v Road Accident Fund
2007
(1) SA 165
(SCA) paras 17-18.
[48]
2012 (4) SA 593
(SCA) para 18.
[49]
Section 39
(2)
:
“When interpreting any legislation, and when developing the
common law or customary law, every court, tribunal or forum
must
promote the spirit, purport and objects of the Bill of Rights.”
[50]
Section 38
:
“Anyone listed in this section has the right to approach a
competent court, alleging that a right in the Bill of Rights
has
been infringed or threatened, and the court may grant appropriate
relief, including a declaration of rights. The persons
who may
approach a court are–
(a)
anyone acting in their own interest;
(b)
anyone acting on behalf of another person who cannot act in
their own name;
(c)
anyone acting as a member of, or in the interest of, a
group or class of persons;
(d)
anyone acting in the public interest; and (e) an association
acting in the interest of its members.”
[51]
Jafta n 21 at 36.
[52]
Jafta n 21 at 37.
[53]
2014
De Jure
63.
[54]
Swanepoel n 53 at 83.
[55]
2013 (3) BCLR 251 (CC).
[56]
Children’s Resource
Centre
n 20.
[57]
Mukaddam
n
18.
[58]
Children’s Resource
Centre
n 20 paras 26 and
28.
[59]
Mukaddam
n
18 para 32.
[60]
Mukaddam
n
18 para 38.
[61]
Van Loggerenberg n 29 D1-60.
[62]
Delport n 16 p 326.
[63]
Kia Intertrade
n 12 at 279-280.
[64]
2010 (5) SA 325
(SCA) para 3.
[65]
2012 (4) SA 203 (WCC).
[66]
1992 (2) SA 552 (BGD).
[67]
Thusano
n 66 at 592B-C.