Off-Beat Holiday Club and Another v Sanbonani Holiday Spa Share Block Limited and Others (20231/2014) [2016] ZASCA 62; [2016] 2 All SA 704 (SCA); 2016 (6) SA 181 (SCA) (25 April 2016)

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[2016] ZASCA 62
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Off-Beat Holiday Club and Another v Sanbonani Holiday Spa Share Block Limited and Others (20231/2014) [2016] ZASCA 62; [2016] 2 All SA 704 (SCA); 2016 (6) SA 181 (SCA) (25 April 2016)

THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
No.: 20231/2014
In
the matter between:
OFF-BEAT
HOLIDAY
CLUB

FIRST APPELLANT
FLEXI
HOLIDAY CLUB

SECOND APPELLANT
and
SANBONANI
HOLIDAY SPA SHARE
BLOCK
LIMITED

FIRST RESPONDENT
SANBONANI
DEVELOPMENT
(PTY)
LIMITED

SECOND RESPONDENT
HANS
MICHAEL
HARRI

THIRD RESPONDENT
HANS
MICHAEL HARRI
NO

FOURTH RESPONDENT
HELEEN
DUPORETHA HARRI
NO

FIFTH RESPONDENT
VINCENT
CHRISTOPHER CALACA
NO

SIXTH RESPONDENT
SANBONANI
HOTEL
MANAGEMENT
(PTY) LTD

SEVENTH RESPONDENT
THE
REGISTRAR OF
COMPANIES

EIGHTH RESPONDENT
Neutral
citation
:
Off-Beat Holiday Club v Sanbonani
Holiday Spa
(20231/2014)
[2016] ZASCA
62
(25 April 2016)
Coram:
Maya ADP and Cachalia, Leach, Tshiqi and Zondi JJA
Heard:
27 August 2015
Delivered:
25 April 2016
Summary:
Prescription – extinctive
prescription – whether claims brought by minority shareholders
under ss 252 and 266 of the
Companies Act 61 of 1973 constitute
‘debts’ as envisaged in
s 10
of the
Prescription Act 68
of 1969
and are susceptible to prescription – whether
s
13(1)
(e)
of
the
Prescription Act insulates
a claim brought under s 266 of the
Companies Act from prescription.
ORDER
On
appeal from:
North
Gauteng High Court, Pretoria (Bertelsmann J sitting as court of first
instance):
1
The applicants’ condonation application is granted. They are
ordered to pay the wasted costs including the costs of two
counsel.
2
The application for leave to appeal is granted and the appeal is
upheld, with costs including those consequent upon the employment
of
two counsel, to the extent that the order of the court a quo is
amended by the addition to paragraphs 3 and 4 of sub-paragraph
(iii)
which, for purposes of paragraph 3, reads:
‘
the
fact that the third respondent has wrongfully allowed or caused the
first respondent to unjustifiably pay VAT refunds in the
sums of
R2 169 897.04 and R120 309.13 to the second
respondent.’
JUDGMENT
Maya ADP
(Cachalia, Tshiqi and Zondi JJA concurring):
[1]
This application for leave to appeal, brought against the judgment of
the North Gauteng High Court, Pretoria (Bertelsmann J),
was referred
for oral argument by this court.
[1]
It
follows a series of legal skirmishes between the applicants and the
first to seventh (and mainly the second and third) respondents
in
various fora
[2]
and
is itself mired in procedural difficulties as described below. The
basis of the disputes is essentially a complaint by the applicants,

who are minority shareholders in the first respondent, that the
majority shareholders (the second to seventh respondents) acted
in
various ways to the detriment of the first respondent which the third
respondent allegedly ‘treats like his own private
fiefdom’.
[2]
The applicants (the clubs) are associations not for gain and
timesharing clubs.
[3]
The
second applicant, Flexi Holiday Club (Flexi), carries on business as
a timeshare points club and forms part of Club Leisure
Group (Pty)
Ltd.
[4]
The
first respondent, Sanbonani Holiday Spa Share Block Ltd (Shareblock),
carries on the business of a timeshare and share block
resort and
owns the land on which the resort is situated (the land).
[5]
The
second respondent, Sanbonani Development (Pty) Ltd (Development), is
a timeshare and share block resort and property owner and
has been
responsible for the development of the resort and the timeshare
scheme. The third respondent, Mr Hans Michael Harri, is
a property
developer and a director of Shareblock and Development since their
inception in 1987, save for a short spell between
February 1992 and
December 1993. He is also sued in his nominal capacity as trustee of
the Duleda Family Trust (the trust) together
with his co-trustees,
the fifth and sixth respondents, Ms Heleen Duporetha Harri and Mr
Vincent Christopher Calaca. The seventh
respondent, Sanbonani Hotel
Management (Pty) Ltd (Management),
[6]
is
an hotelier which conducts a hotel and restaurant business on the
resort under a lease it concluded with the trust in 1999. The

Registrar of Companies was cited in his official capacity and no
relief was sought against him
.
[3]
The clubs’ respective principals are Messrs Stewart John Lamont
and Anthony Nicholas Ridl who were founding members of
the Club
Leisure Group.
[7]
At
all material times, Lamont was Shareblock’s director and a
director of the clubs. Ridl was a serving director of Flexi,

Shareblock and Development. As mentioned above, the clubs are
shareholders in Shareblock and own 29,14 per cent of its share
capital.
The trust and Development own substantial shares in
Shareblock in respect of the hotel and central complex forming part
of the
resort and other share blocks. Incidentally, Lamont is also
the managing member of Resort Administration Services CC (RAS),
Shareblock’s
company secretary and managing agent since 1994,
which did the allocation of the shares held by Development and the
trust in June
2000. Harri and his three daughters own approximately
80 per cent (Harri 5 per cent, his daughters 75 per cent) and Mr JNJ
Koos
Van Rensburg, the original owner of the land and Shareblock’s
founding director, 20 per cent of the shares in Development.
[4]
A narrative of the events leading to the disputes is necessary to
place the issues in their proper context. In the mid-1980s,
Harri and
Van Rensburg concluded a partnership with a view to develop the
land,
[8]
which
is situated in a prime tourist and holiday location near Hazyview and
the Kruger National Park. Consequently, in September
1987, Shareblock
was registered and incorporated as a share block company as defined
in the Share Blocks Control Act 59 of 1980
(the Shareblocks Act).
[9]
It
assumed ownership of the land, with Harri and Van Rensburg as its
directors and shareholders, to establish ‘a composite
scheme
with some accommodation being subject to permanent occupancy rights
and other accommodation being used for time-sharing’.
Thus, its
articles of association provided for different categories of share
blocks to which different rights attached: Shareblock
would own the
land and a share block developer,
[10]
Development,
which was formed at this stage,
[11]
would
develop the hotel facility (which Development and its successors
would own) and timeshare chalets which would be owned through

timeshare owners on the basis of their shareholding in Shareblock.
Accordingly, Development acquired more than 50 per cent
of
Shareblock’s issued share capital upon its formation. It
immediately commenced developing the land and constructed, in
phases,
76 chalets operated on a timeshare basis; ten private chalets owned
by itself, Lamont and Ridl and Harri; a central complex
and common
facilities
[12]
including
the hotel, which would be available for use to timeshare owners of
the chalets and the public, sports grounds and staff
accommodation.
[5]
Following notice of a special general meeting, given in August 1988
and the meeting subsequently held in September 1988, to
consider the
amendment of Shareblock’s article among other resolutions,
[13]
Shareblock’s
articles were indeed amended. The original articles were replaced by
a new set of articles (the current articles)
on the ground that they
did not adequately cater for the nature of the intended development.
[14]
Only
47 sales of share blocks conferring timeshare interests had been
confirmed when notice was given of the intention to amend
the
original articles.
[15]
The
holders of the shares did not object to the special resolution
adopting the current articles which, thereafter, governed their

rights. The clubs did not own shares in Shareblock at the time and
appear to have acquired interest in Shareblock in 1991 when
Ridl was
appointed as one of its directors.
[6]
The current articles bore certain differences from the original
articles which gave Development greater control over Shareblock.
[16]
For
example, the definition of ‘common facilities’ was
amplified. Previously it referred to ‘the new Club House,

existing facilities and laundry, new staff village . . . and any
further improvements effected by [Shareblock] which are for the

common benefit of all Holders’. The designation was now defined
as meaning any area of the land ‘on which improvements
of a
permanent nature may be erected by the [Development] which are only
for the common benefit of all holders
and
the public
in
terms of and subject to the Management Regulations and which are
situate or to be situate on the land marked . . . on Annexure
“B”’.
It would, therefore, refer to areas of the development in respect of
which timeshare holders would have
no particular rights above those
of the public by virtue of their timesharing interest.
[7]
Shareblock’s authorised share capital was increased from 70 768
ordinary shares to 168 528 ordinary shares,
[17]
145 600
of which Development was now granted the right to allot in terms of
its articles without dividing them among the various
sites on the
resort. Towards that end, article 3.5 of the current articles
conferred upon Development such interest as it may from
time to time
decide, ‘including a permanent continuous right of use for
permanent residential or commercial purposes’,
in the shares
relating to a proposed staff area and sections of the land upon which
timesharing units were to be built in accordance
with an annexed
diagram. This article further gave Development the discretion to
consolidate the sites and to deal with individual
sites or
consolidated sites as the articles may provide and conferred upon it
the rights to sub-divide a particular share block
into as many shares
as it decided in order to confer upon the holders of such sub-divided
shares a timesharing interest in the
relevant site or sites.
Development was also given ‘a permanent continuous right of use
of the common facilities subject
to the rights of other holders in
terms of the Management Regulations until [Shareblock] is liquidated
or the said Share Blocks
are cancelled’.
[18]
No
levy would be payable by Development as holder of the shareblock
which confers the right of use in respect of the common facilities

and the common property.
[19]
And
these facilities would be made available to timeshare purchasers and
the public at such charges as Development ‘may from
time to
time determine’.
[8]
The development of the resort took place from late 1987 until 1994.
Its
value was
substantial. According to Harri, it was reflected in Shareblock’s
balance sheets for the year ended in 2003 at its
historical cost,
which was funded by unsecured loans to Shareblock by Development, in
the sum of R40 608 000. (This alleged
loan constituted a
bone of contention between the parties because according to the clubs
there was no corresponding entry in Development’s
own books of
account and its existence was not supported by Shareblock’s
financial statements, which reflected a different
amount of
R40 620 000, listed as interest free unsecured loans from
members repayable only by special resolution or in
the event of
Shareblock’s winding-up.) When Harri’s answering
affidavit was filed in July 2012 the loan value attributed
to the
chalets alone was in the region of R28 million and the central
complex and hotel built on it, which opened in 1990, were
valued at
about R30 million.
[9]
During 1999 various disputes arose between Shareblock and Development
and the trust. The disputes related to the payment by
Shareblock to
Development of a sum in excess of R2 million allegedly due to
Shareblock in respect of a VAT refund; Shareblock’s
rights on
the other hand, and the obligations of those holders to contribute
towards the levy; and what the clubs viewed as an
appropriation by
Harri, as the controlling mind of both Shareblock and Development, of
land meant to be used for the common benefit
of all Shareblock’s
members. In respect of the latter dispute, Harri was accused of
inducing Development to build otherwise
than in accordance with a
diagram forming part of the current articles and reflecting the
allocation of various areas of the land
to particular uses defined in
the articles and instead building hotel rooms operated for its
exclusive benefit on a portion of
the land intended for the erection
of a central complex the benefit of which would be enjoyed by all
members of the company.
[10]
The clubs were further aggrieved by Development’s non-payment
of the common levy or any levy at all.
[20]
They
also challenged the allocation of shares in the central complex.
These shares were initially owned by Development as the developer.
In
May 1995, Development and two associated entity’s in the Flexi
Club Group
[21]
concluded
an agreement termed ‘the Delitrade agreement’.
[22]
In
terms of this agreement Flexi agreed to purchase from Development
shares in Shareblock, including the shares in the central complex
and
those relating to the hotel rooms. The clubs consequently purchased
certain of these shares. It was declared on their behalf
shortly
thereafter that all disputes between Shareblock and Development, ie
the dispute pertaining to Development’s non-payment
of the
levy, had been resolved.
[11]
The clubs also impugned the manner in which some of Shareblock’s
shares had been reallocated arising from the following
facts. After
Development’s incorporation there was confusion regarding the
number of shares which should have been allocated.
By 1999 there were
still shares pertaining to various sites on the resort which had been
allocated to Development but remained
undeveloped and unsold by it.
In October 1999, Harri instructed RAS to reallocate the shares still
retained by Development. Thereafter,
in June 2000, RAS issued the
share certificates evidencing Development’s ownership of those
shares. These allocations form
part of the clubs’ complaints
which resulted in litigation between the parties.
[12]
The other source of conflict related to a lease concluded by
Development and the trust in 1999 pursuant to which Management
became
the lessee of the hotel. In 1997 the trust had signed a five-year
lease agreement in respect of the hotel and central complex,

effective from January 1995 and terminating in November 1999, with
Online Hotel Management CC. Shortly before the expiration of
this
lease Shareblock, represented by its directors including Lamont and
Ridl, launched an urgent application in the high court
seeking to
interdict the trust, Management and Development from interfering in
the management of the hotel and from placing Management
in possession
of the hotel or any other portion of the land. The application was
opposed but the parties subsequently settled their
issues in terms of
an agreement which provided that Management would operate the central
complex comprising the hotel and the conference
pending arbitration
proceedings between the parties.
[23]
[13]
The arbitration was ultimately settled in May 2000 on the basis of a
settlement agreement (which ultimately lapsed although
it was
implemented to a limited extent) concluded by Shareblock, represented
by Lamont (and Mr SM Rothbart) who was also involved
in the
proceedings in his personal capacity and on RAS’ behalf, and
Development. The arbitration agreement provided, inter
alia, that by
31 December 2000 the shareblock scheme would be converted to a
sectional title development to be owned by Shareblock
including
certain common facilities.
[24]
This
was meant to ensure that the hotel, convention centre, administration
and central complex building and other facilities owned
by
Development and the trust would be excised from Shareblock and
constitute sectional title units owned by the latter entities.

Moreover, Shareblock acknowledged that the trust is the holder of the
share blocks relating to the essential services’ equipment,

hotel suites and single rooms, restaurant and staff quarters on the
central complex. In terms of the agreement Shareblock and the
trust
would commission RAS to prepare use agreements, some which had been
delivered to the latter, relating to the facilities and
areas on the
land owned by or under the control of the trust.
[14]
The arbitration agreement also provided for the settlement of a claim
by Shareblock against Development relating to alleged

misappropriation by the latter of certain VAT refunds in the sum of
R2 169 897.04 due to Shareblock.
[25]
According
to Flexi these tax input credits, which Harri sought in Shareblock’s
name for Development’s benefit without
consulting Shareblock’s
board or managing agent, were an asset in Shareblock’s hands
because the South African Revenue
Service (SARS) decreed that they
could be claimed only by the share block company and not by the share
block developer. Development,
on the other hand, claimed the funds on
the basis that it had initially paid the VAT which Shareblock was
reclaiming and argued
that Shareblock had a legal duty by virtue of
its position as operator of the share block scheme to cooperate with
the developer
in order to claim the funds and pay them over to the
developer. In this scheme, Development would retain a sum of
R1 059 125
paid over by SARS as VAT input credit to
Shareblock in its capacity as the registered owner of the land, which
Shareblock had then
paid over to Development. Shareblock would also
pay Development a sum of R1 111 814.81 which it had
received from SARS
as a VAT refund in May 1999 in respect of the
development of the hotel. Harri was further accused of creating
fictitious entries
in Shareblock’s books in order to inflate
Development’s loan account artificially and facilitate
procuring the refund
to which it was not in law entitled.
[15]
From about 2001 a dispute arose between Shareblock, on the one hand,
and Development and the trust on the other regarding the

implementation of the arbitration agreement. The issues in dispute
concerned whether the common facilities holder (initially Development

then the trust) was obliged, on conversion to sectional title, to
make a contribution to the levy in respect of the facilities
and the
rights of the holder of the common facility share blocks. In order to
have the dispute resolved once and for all Harri,
with the support of
his co-directors in Shareblock and RAS, then sought expert
advice.
[26]
The
primary question was whether in law a shareblock in a shareblock
scheme, here Development’s or the trust’s, can
be so
structured that it is not obliged to contribute to the levy. In the
expert’s view, the creation of different categories
of share
blocks and the powers conferred upon Development under clauses 3.4
and 3.5 of the current articles were proper. He was
also of the
opinion that the current articles legitimately absolve the holder of
share blocks relating to the common facilities
and the common
property from paying levies and that Development’s obligations
in this regard would be treated differentially
from those of ordinary
timeshare holders.
[27]
[16]
Tensions continued to simmer and erupted in 2003 when the clubs
launched unsuccessful interdict proceedings in the Durban and
Coast
Local Division (the Durban proceedings) to prevent Shareblock’s
shareholders and Development or the trust from voting
certain of
their shares at a general meeting of the company held in October
2003. The clubs had threatened in their affidavits
to seek the
expungement of the disputed shares from the share register and apply
for the
appointment
of a curator in terms of s 266 of the Companies Act 61 of 1973 (the
Companies Act)
[28]
to
investigate the matter which gave rise to the disputes. But no such
steps were taken and nothing of significance happened until
the clubs
launched these proceedings in October 2008.
[17]
The proceedings were brought under ss 266 and 252 of the Companies
Act
on
the basis of various unlawful acts allegedly perpetrated by Harri.
Section 266
[29]
created
a remedy for minority shareholders to act on behalf of a company
‘whereby delinquent officers of a company can be
compelled to
compensate the company for a wrong committed by them, whilst seeking
to minimise the risk of unmeritorious claims
being brought against
the company by disaffected shareholders . . . [through] a dual
screening process’.
[30]
At
the first stage an order for the appointment of a provisional curator
ad
litem
could
be granted to the aggrieved shareholder if the court was satisfied
that prima facie grounds existed for the proceedings that
the
shareholder sought to institute against the company and that an
investigation into those grounds and the desirability of the

institution of the proposed proceedings was justified. At the second
stage, on the return day, the court would have the advantage
of the
curator’s report in deciding whether to discharge the
provisional order or confirm the curator’s appointment.
Section
252,
[31]
on
the other hand, vested a shareholder with the right to institute a
personal action
against
a company where the shareholder’s rights in terms of the
contract created between the company and its shareholders
by virtue
of the memorandum and articles of association had been infringed by
the company’s act.
[18]
The clubs mainly attacked the substance of Shareblock’s
articles, which they contended were unlawfully registered and

oppressive to Shareblock’s minority shareholders, and certain
allocations of the shares. Accordingly, they sought orders
declaring
(a) certain provisions of Shareblock’s articles invalid and (b)
certain shares in Shareblock to have been improperly
issued and to
have the holders of those shares barred from voting them. On that
basis they asked for an order, in terms of s 252,
to
substitute certain provisions in Shareblock’s articles for the
allegedly invalid ones. The clubs further invoked s 266
to have
a curator
ad
litem
appointed
to Shareblock for the purpose of instituting a claim ‘for the
recovery of damages or loss and the compensation for
the deprivation
of benefits suffered by [Shareblock] as a result of wrongs, breaches
of trust and breaches of faith by [Harri]’.
[19]
The court a quo issued a rule nisi as prayed and granted an order
provisionally appointing Martin Chaitowitz SC as a curator
ad
litem
to
conduct an investigation into the grounds for the envisaged
litigation on behalf of Shareblock against Harri. The curator duly

furnished a report in which he made various findings. Regarding the
VAT refund paid to Development, he found that it remained an
asset in
the hands of Shareblock and was wrongfully transferred to Development
as a result of Harri’s manipulations. He advised
that
Shareblock should take steps against Harri for the recovery of the
amount and the interest thereon. The curator further found
that the
construction of the hotel was in conflict with Shareblock’s
registered plan and the diagram prepared for the development
of the
shareblock scheme as the common facilities were diverted to the hotel
run by Management for its sole benefit, without an
amendment to
Shareblock’s articles to provide for a compliant diagram.
[20]
Harri had also transferred shares relating to the original common
property to Development, then into his own name and thereafter
to the
trust contrary to Shareblock’s articles. Thus, he appropriated
common facilities for his or his entities’ exclusive
benefit to
the prejudice of Shareblock’s other members. In addition to not
receiving rental from Management, which is Harri’s
alter ego,
for the use of its land to which it was entitled, Shareblock did not
share in the profits of the hotel operation or
receive any levies for
the use of the common property as contemplated by its articles.
Instead, it had to pay annual rental in
excess of R500 000 for
the use of the hotel’s laundry, linen storage and shelving.
[32]
Ordinary
members were therefore subsidising the upkeep of the hotel and
central complex without deriving any financial benefit in
return.
And Harri planned to expand the hotel in a manner which would further
encroach upon Shareblock’s common facilities
and common
property. As to the R40 million loan purportedly advanced by
Development to Shareblock, the curator found no evidence
thereof in
either entity’s books. According to Development’s
financial statements it was never in a financial position
to make
such a loan and in the curator’s view the entry was made to
facilitate a claim which would accrue through Development
to Harri,
if it was ever liquidated, to the loss of Shareblock and its
shareholders. The curator also found the entries in Shareblock’s

financial statements relating to the valuation of the improvements to
its land arbitrary and suspect.
[21]
On the basis of this report, the court a quo confirmed the curator’s
final appointment to institute action against Harri
for damages or
loss suffered by Shareblock arising from the non-payment of rental by
the hotel and being caused to pay rental to
the hotel operators for
the use of the hotel’s facilities which the court considered as
continuing wrongs. However, the court
found that ‘the VAT
claim, the claims arising from the wording of the articles and the
allocation of shares as well as the
construction of the hotel and the
manipulation of the financial statements . . . and the invocation of
s 252’ were debts
within the meaning envisaged in the
Prescription Act 68 of 1969 (the
Prescription Act) and
were
susceptible to extinctive prescription. In its view they constituted
single acts, albeit with long term consequences, which
had become
prescribed after three years. The application was accordingly
dismissed without the adjudication of the merits of the
causes of
action.
[22]
On 2 October 2012, the clubs filed two applications for leave to
appeal which the court a quo heard and dismissed on 7 December

2012.
[33]
This
court thereafter granted them leave to argue the present proceedings.
But the parties were at odds about the precise grounds
of appeal
arising largely from the clubs’ unprecedented piecemeal
approach of filing several notices of applications for
leave to
appeal. According to the respondents neither the Uniform Rules of
Court nor the Supreme Court of Appeal Rules permit a
multiplicity of
applications for leave to appeal and notices of appeal. (This
unfortunate trend carried on in the appeal proceedings
during which a
proliferation of documents meant to patch the clubs’ case was
filed on their behalf right up to the hearing.)
Thus, they argued,
the only question properly before this court is that relating to the
claim for statutory relief under s 266
argued in the court a quo on 6
December 2012 ie whether the court a quo was correct in dismissing
the VAT input refund claims on
the basis that any rights which the
clubs might have to seek, derivatively and in terms of s 266, to
enforce this relief, have
become prescribed.
[23]
In the court a quo, two notices of applications for leave to appeal
dated 2 October 2012, were filed. The first one was directed
only at
the discharge of the rule nisi in respect of the claim arising from
the VAT refund claim (the s 266 issue) and the order
authorising the
institution of an action in respect of Shareblock’s payment of
rental to the hotel operators. It made no
reference at all to the
clubs’ attack on Shareblock’s articles and the contested
allocation of shares (the s 252 issue).
These issues were raised in
the second notice, of which, as it turned out, the respondents’
attorneys of record and counsel
were unaware and which the clubs did
not argue in court a quo.
[34]
Pursuant
to the dismissal of this application the clubs filed a further
application for leave to appeal and condonation, out of
time, on 12
December 2012 in respect of the rule pertaining to the s 252 issue.
They sought condonation on the basis that they
had made a bona fide
mistake with regard to the effect of the court a quo’s silence
on whether or not the rule nisi was confirmed
and erroneously
believed that it survived the dismissal of the proceedings. The court
a quo dismissed the application. The clubs
have not sought leave to
appeal this decision and properly conceded that the application was
misconceived.
[24]
In their application for leave to appeal against the judgment of 7
December 2012 before this court, filed on 19 June 2014,
the clubs
also sought condonation for the late filing of the application which
included the s 252 issue. The basis of the condonation
application,
which was accompanied by a tender of wasted costs, was that the late
filing was caused by their attorney’s erroneous
belief
initially that the court a quo had not considered the s 252 issue on
7 December 2012. Also, the attorney had arranged with
his opponent
for an extension of the relevant time limits in respect of the s 252
issue whilst awaiting the court a quo’s
judgment on the
ill-fated third application for leave to appeal. He had then
calculated the time period within which to file the
application for
leave to appeal from the date of the dismissal of the third
application, brought on the advice of the clubs’
erstwhile
counsel, on 19 May 2014.
[25]
It was contended on the clubs’ behalf that they amply
demonstrated their intention to pursue the s 252 issue throughout
and
that the errors which resulted in the delay were reasonable. Both
notices dated 2 October 2012 were served on the correspondents
of the
respondents’ attorneys. But the one dealing with the s 252
issue, which was overlooked because the correspondent
attorneys did
not anticipate two discrete notices, was not forwarded to the
instructing attorneys. Both notices were nonetheless
filed with the
court a quo. And the indications are that they were both considered
by the court as its judgment of 7 December 2012,
refusing leave to
appeal, made reference to ‘the various notices filed’ and
the heads of argument in which the s 252
issue was raised. It was
also contended that the respondents had not suffered any prejudice
and neither had this court been inconvenienced
by the slip-ups.
[26]
Condonation of the non-observance of the rules is by no means a mere
formality and the power of the court to grant the relief
should be
exercised with proper judicial discretion and upon sufficient and
satisfactory grounds being shown.
[35]
It
is firmly established that an applicant for condonation must give a
full explanation for the delay which must not only cover
the period
of the delay but must also be reasonable.
[36]
Prospects
of success on appeal, the importance of the case, absence of
prejudice to the parties, the respondent’s interest
in the
finality of its judgment and the convenience of the court are some of
the factors that the appeal court will weigh, one
against the other,
in deciding whether or not to grant condonation.
[27]
The clubs have accounted for the entire period from the delivery of
the judgment of 7 December 2012 to the one dismissing the
third
application almost two years later. They were not responsible for the
intervening time lapse because although the latter
application was
filed on 12 December 2012, as indicated, it was heard only a year
later. Judgment thereon was delivered six months
later. And having
been acting on legal advice, bad as it was, in pursuing the
ill-conceived application, once they realised that
it was a
brutum
fulmen
they
promptly launched this application. There does not seem to be any
prejudice to the respondents that could not be ameliorated
by an
appropriate award of costs if condonation were to be granted in all
the circumstances.
[28]
But the question remains whether Uniform Rule 49, the Supreme Court
of Appeal Rules 6, 7, 8 and 10 and
ss 16
and
17
of the
Superior
Courts Act 10 of 2013
,
[37]
which
govern appeal procedure, permit more than one application for leave
to appeal and notice of appeal to accommodate grounds
of appeal which
were initially omitted. The court a quo answered this question by
assuming, without deciding, that such a procedure
‘may be
permissible if the circumstances are such that the interests of
justice demand that an extraordinary leave to appeal
be granted’.
I too incline towards that approach particularly in the present
circumstances where the applications in issue
were simultaneously set
down for hearing and duly considered at that same hearing. And in the
view I take of the proposed appeal’s
prospects of success, that
the claims are arguable, I would allow the condonation application in
its entirety, with an appropriate
costs order against the clubs.
[29]
Turning to the merits, the following contentions were made on the
clubs’ behalf. It was argued, first, that the knowledge
of the
relevant disputes by Ridl and Lamont long before the proceedings were
launched could not be attributed to the clubs and
that the relief
sought by the clubs did not, in any event, constitute a ‘debt’
susceptible to prescription as contemplated
in
ss 10
,
11
and
12
of
the
Prescription Act.
[38
]
Regarding
the
s 252
issue, it was argued that it was not the enforcement of a
right or the performance of an obligation that was sought. They
sought
a declarator that the creation and allocation of the shares
were invalid and the offending articles liable to be cancelled
because
the existence of share blocks, which were created unlawfully,
constituted ‘a continuous wrong in the course of being
committed’.
The right to bring the
s 252
application was
akin to a claim for rectification and has no correlative debt which
can be extinguished by prescription. As to
the
s 266
issue, it was
argued that a debt arises under these provisions only upon the
provisional appointment of the curator ad litem to
investigate and
compile a report and after the court has assessed the contents of the
report and confirmed the provisional appointment.
Thus the question
of prescription did not arise on the present facts. A new point of
law was also raised to the effect that because
of
s 13(1)
(e)
of
the
Prescription Act, in
terms of which prescription is delayed if
‘the creditor is a juristic person and the debtor is a member
of the governing
body of such juristic person,
the
payment of the VAT refund amount, which is a debt owing to Shareblock
by Harri, its director (in respect of which the defence
of
prescription had not been raised in any event) had not
prescribed.
[39]
[30]
It is evident from the narrative set out above that the disputes
between the parties, which the court a quo correctly characterised
as
‘single acts, albeit with long-term consequences’, have
dogged Shareblock and the timesharing resort for many years,
long
before the institution of these proceedings.
[40]
As
far back as 2003 the clubs, which acquired their shares in Shareblock
well aware of the articles and the allocation of shares
they now
challenge, clearly knew what legal options were available to them to
resolve the disputes. This knowledge is shown, for
example, by a
statement made by Mr RB Brandt, then a trustee of the clubs and one
of Shareblock’s directors, in the clubs’
papers in the
Durban proceedings to which he deposed. He said:
‘
The
Applicants are at present faced with a choice of instituting
proceedings for the expungement of the disputed shares . . . from
the
share register or they may, seek to initiate proceedings in terms of
section 266 of the Companies Act for the appointment of
a curator ad
litem to investigate the matters which form the subject matter of the
disputes raised above. In view of the history
of the disputes between
the parties the Applicants take the view that it would be preferable
that they initiate proceedings in
terms of section 266 of the
Companies Act for the appointment of a curator to investigate the
matters described in this application.’
[31]
The attempt to hide behind Ridl and Lamont is therefore difficult to
fathom in the circumstances. And the description of the
relief sought
by the clubs as a mere request for a declarator does not tally with
what is set out in their Notice of Motion and
is patently wrong. So
too is the clubs’ contention that the defence of prescription
was not alleged in the respondents’
papers. It is factually
wrong as was ultimately conceded in argument before us. The defence
was pertinently raised in the answering
affidavits as a general
defence to all the s 266 and s 252 claims brought by the clubs.
To my mind, the real issues are rather
whether the claims are ‘debts’
susceptible to extinctive prescription under s 11(
d
)
of the
Prescription Act, which
stipulates a general prescriptive
period of three years in respect of most debts, and the impact of
s
13(1)(
e
)
thereof, if any, for purposes of the
s 266
claims.
[32]
As our courts have frequently observed, the
Prescription Act does
not
define the term ‘debt’. However, it is established that
for purposes of this Act the term has a wide and general
meaning;
that it includes an obligation to do something or refrain from doing
something and entails a right on one side and a corresponding

obligation on the other.
[41]
The
answer to whether a claim is a debt susceptible to prescription after
a period of three years is to be found in the basic distinction
in
our law, which has its origin in Roman law, between a real right (
jus
in re
),
and a personal right (
jus
in personam
).
[42]
[33]
Our case law
[43]
has
steadfastly acknowledged the distinction between real rights, which
are primarily concerned with a relationship between a person
and the
thing he claims, and personal rights, which are concerned with the
relationship between two persons, ie a creditor and
a debtor who is
under a legal obligation to pay the creditor what is due to him.
[44]
This
distinction was explained as follows in
National
Stadium South Africa (Pty) Ltd & others v Firstrand Bank Ltd
[2010]
ZASCA 164
;
2011 (2) SA 157
(SCA) para 31:
‘
Real
rights have as their object a thing (Latin:
res
;
Afrikaans: saak). Personal rights may have as their object
performance by another, and the duty to perform may . . . arise from

a contract. Personal rights may give rise to real rights, for
instance, a personal obligation to grant someone a servitude matures

into a real right on registration. Real rights give rise to
competencies: ownership of land entitles the owner to use the land
or
to give others rights in respect thereof.’  (Footnote
omitted)
[34]
In
Absa
Bank Ltd v Keet
Zondi
JA took the discussion further and said:
[45]
‘
The
person who is entitled to a real right over a thing can, by way of
vindicatory action, claim that thing from any individual
who
interferes with his right. Such a right is the right of ownership,
If, however, the right is not absolute, but a relative right
to a
thing, so that it can only be enforced against a determined
individual or a class of individuals, then it is a personal right.
.
.
The
obligation which the law imposes on a debtor does not create a real
right . . . but gives rise to a personal right. . . . In
other words,
an obligation does not consist in causing something to become the
creditor’s property, but in the fact that
the debtor may be
compelled to give the creditor something or to do something for the
creditor or to make good something in favour
of the creditor.
The
manner in which the
Prescription Act is
structured reflects this
distinction – acquisitive prescription of real rights is dealt
with in Chapters 1 and 2 and the
extinctive prescription of
obligations is dealt with in Chapter 3.’ (Footnote omitted.)
He
concluded (para 25):
‘
In
the case of acquisitive prescription one has to do with real rights.
In the case of extinctive prescription one has to do with
the
relationship between a creditor and a debtor. The effect of
extinctive prescription is that a right of action vested in the

creditor, which is a corollary of a “debt”, becomes
extinguished simultaneously with that debt. In other words, what
the
creditor loses as a result of operation of extinctive prescription is
his right of action against the debtor, which is a personal
right.’
[35]
It is clear from this exposition that the clubs’
s 252
claims
are founded on personal rights. For their attempt to equate the
claims to rectification claims, the clubs relied upon decisions
of
this court which held that claims for the rectification of (a) a
contract (
Boundary
Financing Ltd v Protea Property Holdings (Pty) Ltd
[2008]
ZASCA 139
;
2009 (3) SA 447
(SCA)), (b) a deed of transfer (
Bester
NO & others v Schmidt Bou Ontwikkelings CC
[2012]
ZASCA 125
;
2013 (1) SA 125
(SCA)); and (c) a company’s register
of members in terms of s 115 of the Companies Act
where
the dominium of the shares in issue always remained in the estate
which sought to have its ownership reflected in the register
(
Gafoor
& another NNO v Vangates Investments (Pty) Ltd & others
[2012]
ZASCA 52
;
2012 (4) SA 281
(SCA)) do not have correlative debts which
could be extinguished by prescription.
[36]
Indeed, in principle all rights are susceptible to prescription
except for rectification claims (and other claims rooted in
real
rights) in the case of extinctive prescription. The basis for this
exclusion is that this type of common law claim has no
correlative
debt within the meaning of the word. Thus, it does not alter the
rights and obligations of the parties and create a
new contract for
the parties – it merely corrects the erroneous reflection of
those rights or obligations in the written
memorial to accord with
the true facts and give effect to what has always been the actual
intention of the parties.
[46]
[37]
But the clubs’ case is entirely different from the
rectification cases discussed above. The golden thread running
through
them is that the rectification would neither constitute any
delivery of property nor alter the rights and obligations of the
parties
– it would simply correct the erroneous recordal of
those rights. Here, there is no question of such a correction (of
Shareblock’s
articles) because they do not reflect an incorrect
state of affairs in the above sense. And, in my view, the very fact
that the
claims were brought under the aegis of the oppression remedy
provisions of s 252 instead of s 115 of the Companies Act (which
provides
for rectification of the register of members by a court,
upon application, where ‘the name of a person is, without
sufficient
cause, entered in or omitted from [it] or if there is
default or unnecessary delay in ‘entering in the register the
fact
of any person having ceased to be a member’), for which no
case was made out in any event, signals the clubs’ cognizance

of this position.
[38]
Shareblock’s articles were amended and registered in 1988 with
the consent and intention of the members. The reallocation
of the
disputed shares to Development, which the latter now holds, occurred
in accordance with the current articles (which were
approved at a
general meeting of Shareblock) with the consent and intention of
Shareblock and RAS. The clubs’ success in
obtaining the s 252
relief, ie cancellation, rectification and amendment of the articles,
would obviously result in the alteration
of rights and obligations of
the parties. That is the very antithesis of the rationale underlying
the exclusion of rectification
claims from the operation of
extinctive prescription. Interestingly, what the clubs effectively
seek is a new set of articles and,
therefore, a new contract which
the parties should perhaps have concluded but patently did not. That
is impermissible.
[47]
[39]
It remains to consider whether s 13(1)(
e
)
of the
Prescription Act insulates
a shareholder’s right to seek
relief under s 266 of the Companies Act from extinctive prescription.
We are at large to consider
this point of law despite the fact that
it was raised for the first time in this court as it has a foundation
in the affidavits
and its adjudication will not prejudice the
respondents.
[48]
And
even though the point was not argued a quo, that court made the
following comments which are apposite:
‘
[I]t
is important to remember that both [ss 252 and 266 of the Companies
Act] grant the right to institute proceedings to a member,
albeit on
behalf of the company where s 266 is concerned. The rationale of
granting these rights to a member is clear – only
a person
having a direct and usually financial interest in the orders that the
court might make should be allowed to set the law
in motion.
It
follows that the fact that the company itself is unable to institute
action because it is in the hands of the majority cannot
suspend the
running of prescription until the composition of its board has
changed. The actions that are available in terms of
the above
sections of the old Companies Act to prevent or terminate abusive
exploitation of the company accrue to aggrieved members’.
[40]
As indicated above, the provisions of s 266 vest a shareholder with
the right to compel a company to take action against its
delinquent
directors or officers. It was rightly not disputed that the company’s
claim against the delinquent director or
officer, does not prescribe
in the circumstances envisaged by the plain wording of s 13(1)(
e
)
of the
Prescription Act. What
is in issue is the nature of the
minority shareholder’s right to compel the company to take
action against the delinquent
directors or officers and whether the
right imposes a corresponding obligation on the company to take such
action. In the respondents’
submission, the minority
shareholder is the creditor and the company is the debtor. Therefore,
the company’s obligation falls
within the definition of the
debt envisaged in the
Prescription Act and
a minority shareholder who
becomes aware of a director’s wrongdoing in the company is
therefore obliged to invoke the
s 266
mechanism within a period of
three years. I do not agree.
[41]
It is settled that a claim brought under
s 266
is a statutory
derivative action which a shareholder may invoke, on the company’s
behalf, where the company’s management
is unwilling to enforce
its rights for illegitimate reasons or due to the fact that the
directors or officers are themselves the
wrongdoers, to have the
delinquent directors or officers compelled to compensate the company
for loss suffered as a result of their
wrongdoing.
[49]
The
claim belongs to the company and the shareholder vindicates it only
to recover not his or her own damages but those suffered
by the
company itself.
[50]
In
that case the company (Shareblock in this instance), and not the
shareholder
(the clubs), is the creditor and the delinquent director or officer
(Harri) is the debtor. The debt arises only when
the court grants the
relief sought by the shareholder under
s 266
and appoints a
curator
ad
litem
to
launch the relevant proceedings on the company’s behalf
[51]
or
the delinquent directors or officers are no longer members of the
company’s governing body in control of thereof. Those
are the
only stages at which prescription can start running. As Harri’s
debt to Shareblock has not prescribed, by reason
of
s 13(1)(
e
),
the clubs’ entitlement to invoke the
s 266
remedy as
Shareblock’s minority shareholders, which has no correlative
debt, remains extant alongside Shareblock’s
own right to sue
Harri. The clubs must succeed in this regard and in light of their
substantial success in these proceedings they
are entitled to the
costs thereof.
[42]
In the result the following order is made:
‘
The
applicants’ condonation application is granted. They are
ordered to pay the wasted costs including the costs of two counsel.
2
The application for leave to appeal is granted and the appeal is
upheld, with costs including those consequent upon the employment
of
two counsel, to the extent that the order of the court a quo is
amended by the addition to paragraphs 3 and 4 of sub-paragraph
(iii)
which, for purposes of paragraph 3, reads:
‘
the
fact that the third respondent has wrongfully allowed or caused the
first respondent to unjustifiably pay VAT refunds in the
sums of
R2 169 897.04 and R120 309.13 to the second
respondent.’
____________________
MML Maya
Acting Deputy President
Cachalia JA
[43]
I agree with the order of Maya ADP and her reasoning in coming to
this conclusion. I wish to add my own reasons for why I differ
with
the finding of the high court that the VAT claim instituted under s
266 of the Companies Act had prescribed. In my view a
shareholder’s
entitlement to approach a court to appoint a
curator
ad litem
under
this section to recover a ‘debt’ from a delinquent
director
on
behalf
of
a company is not susceptible to prescription where the company’s
claim remains extant, as in this case.
[44]
In disallowing the VAT claim to proceed following the curator’s
final appointment on the ground of prescription, the
high court
considered that the entitlement to approach a court to appoint a
curator under s 266 fell into the same category as
a liquidator’s
right under the
Insolvency Act 24 of 1936
to reclaim assets removed
from an estate before insolvency in certain circumstances. And,
therefore it is capable of prescription
just as a liquidator’s
right to recover assets from impeachable transactions is.
[52]
The
‘debt’ arising from this claim was thus held to have
prescribed because the shareholders – the appellants
–
were aware of the circumstances giving rise to it more than three
years before they had launched the present application.
[45]
In my view the two situations are not comparable. The provisions of
the
Insolvency Act (ss
26-31) and of the Companies Act (s 424(1))
referred to in
Duet
and Magnum Financial Services v Koster
,
[53]
which
the high court considered comparable to a shareholder’s
entitlement under s 266, dealt with declarations that had the
effect
of bringing into existence a debt that did not previously exist.
[54]
The
liquidator’s right to approach the court for such relief arises
when certain events occur, for example, a disposition
of property
under
ss 26
-
31
of the
Insolvency Act. The
liquidator becomes
entitled to approach the
court
to set the disposition aside and to declare the liquidator entitled
to recover the property. And the corresponding ‘obligation’

or ‘liability’ of the debtor arises immediately upon the
liquidator’s entitlement to recover the property
.
[46]
However, under s 266 of the Companies Act, a shareholder’s
‘right of action’ to institute proceedings for
a curator
to be appointed does not have a correlative ‘debt’ within
the meaning of the
Prescription Act. This
is because the exercise of
this right does not itself bring any debt into existence; it calls
for no immediate action on the part
of the ‘debtor’ –
the delinquent director – or obligation to submit to this
right. Put differently no ‘obligation’
or ‘liability’
arises on the part of the debtor
[55]
until
the court acts under
s 266(4)
to authorise the curator to institute
proceedings in the name of the company and on the company’s
behalf.
[47]
By invoking s 266 of the Companies Act, the remedy a shareholder
seeks is to vindicate a wrong done to the company and the
consequent
loss it has suffered. The loss is not the shareholder’s. As
this court said recently in
Itzikowitz
v Absa Bank Ltd
[56]
when
referring to
Prudential
Assurance Co Ltd v Newman Industries Ltd (No 2)
[1982]
1 All ER 354
(CA) at 366-367, that:
‘
.
. . [s]uch a “loss” is merely a reflection of the loss
suffered by the company. The shareholder does not suffer any
personal
loss. His only “loss” is through the company, in the
diminution in the value of the net assets of the company
. . . . The
plaintiff’s shares are merely a right of participation in the
company on the terms of the articles of association.
The shares
themselves, his right of participation, are not directly affected by
the wrongdoing. The plaintiff still holds all the
shares as his own
absolutely unencumbered property.’
[48] The right to
institute proceedings for the loss arising from the wrong done to the
company therefore vests in the company,
and not the shareholder. And,
as I have mentioned above, until the curator is authorised to step
into the shoes of the company
to institute proceedings for recovery
of the loss, no obligation or liability on the part of the debtor can
arise.
[49] So under s 266
no ‘debt’ – an obligation or liability on the part
of the debtor – exists until a court
confirms the curator’s
appointment under s 266(4) for the purpose of instituting proceedings
against its directors or officers.
And only then does prescription
begin to run.
[50] Relevant to
this appeal is ss 13(1)(
e
) and 13(1)(
i
) of the
Prescription Act, which
was not drawn to the attention of the high
court and featured for the first time in this appeal. Read together
they provide:
‘
(1)
If . . .
(e)
The creditor
is a juristic person and the debtor is a member of the governing body
of such juristic person . . . the period of prescription
shall not be
completed before a year has elapsed after the date referred to in
para (
i
)’
And
s 13(1)(
i
):
‘
(T)he
relevant period of prescription would, but for the provisions of this
subsection, be completed before or on, or within one
year after, the
day on which the relevant impediment referred to in paragraph . . .
(
e
)
. . . has ceased to exist. . . .’
[51]
The payment of the VAT amount is a debt the third respondent (Harri)
owes to the company (the first respondent). Harri is a
director of
the first respondent. Harri, not the company, is therefore the
debtor. And the company, not the appellants, is the
creditor. The
‘debt’ Harri owes to the company has thus not prescribed
by virtue of
s 13(1)(
e
)
of the
Prescription Act. Prescription
may only begin to run against
this debt if the impediment to the institution of proceedings against
Harri is removed by a court
sanctioned appointment of a curator, who
is authorised to institute proceedings on behalf of the company
against him, or if he
ceases to be a director, which would place the
company in a position to institute proceedings against him. Under
s
13(1)(
i
)
prescription would be completed before or on, or within one year
after, the day on which the relevant impediment referred to in

paragraph (
e
)
has ceased to exist.
[52]
To conclude, in my view a shareholder’s entitlement or right to
use
s 266
to protect the company, and indirectly itself, from
delinquent directors and officers cannot prescribe where the ‘debt’

to the company itself has not prescribed. This entitlement does not
have a correlative debt, whereas the right of a company (the
first
respondent) to sue Harri does. A shareholder’s ‘right’
to bring this action therefore remains alive so
long as the company
is capable of enforcing its rights, as it does in this case.
[53]
Were it otherwise anomalies would abound. If the shareholder’s
‘right’ to institute proceedings for the appointment
of a
curator under
s 266
is capable of prescription, what would happen to
a company that has many shareholders? Would their claims also
prescribe at the
same time? What if the shareholder’s claim
were delayed for a reason not affecting the other minority
shareholders? Or what
if the appellants sold their shares; would the
new shareholder not have a ‘right’ to institute such
proceedings because
the debt arising from the predecessor’s
claim had prescribed?
[54]
For these additional reasons I concur with Maya ADP that the
appellants’ right to institute proceedings under s 266 of
the
Act for the appointment of a curator has not prescribed.
________________________
A Cachalia
Judge of Appeal
Leach
JA
[55]
I have read the judgments of my colleagues, and I too agree with the
order proposed by Maya ADP. However my views differ, to
a limited
extent, from theirs in regard to prescription of the claim relating
to the VAT refund brought under s 266 of the Companies
Act 61 of
1973. I should immediately record that to a large extent our views
overlap on this issue, but in my opinion it is unnecessary,
for the
reasons I shall set out, to deal with whether prescription can only
start running once a curator is appointed under the
section.
[56]
It is common cause that the alleged delinquent director, Mr Harri,
has been a director of Shareblock at all material times.

Consequently, as Cachalia JA correctly points, under the provisions
of s 13(1)(
e
)
of the
Prescription Act 68 of 1969
the debt which Mr Harri allegedly
owes the company in respect of the VAT claim has, by reason of his
directorship, not prescribed.
As a result, Mr Harri could not offer a
plea of prescription to such a claim if sued by the company (an
unlikely event considering
his position on the board of the company -
and it is precisely to deal with eventualities such as this that
s
266
was created). Indeed, as pointed out by Maya ADP, the respondents
did not contend that any claim Shareblock might have against Mr
Harri
has prescribed.
[57]
That being the case, the effect of the respondents’ argument is
that although the debt allegedly owed by Mr Harri to
the company is
extant and may be enforced by the company, it cannot be enforced by
shareholders acting ‘on behalf of the
company’ under
s
266
as in their hands the same claim has prescribed. That this would
be anomalous is self-evident, and I can think of no reason why
the
legislature would have envisaged that an enforceable debt owed to a
company would not be enforceable under the specific provisions
it
provided to enable shareholders to take action to recover such a debt
on behalf of a company.
[58]
The answer to this conundrum is in my view clear. It has been
recognised both by the courts
[57]
and
in academic writings
[58]
that
a claim under
s 266
is a statutory derivative action. Prof Blackman,
in his seminal work M Blackman
Commentary
on the Companies Act
vol
2,
[59]
explains
that the section was introduced on the recommendation of the Van Wyk
De Vries Commission as the common law derivative action,
and its
procedural aspects, were associated with so many difficulties that it
was felt necessary to create a statutory remedy under
which
delinquent directors could be compelled to compensate companies for
loss suffered as a result of their wrongs.
[60]
That
being so, the section provides a remedy described as being ‘unique’
in that it allows a person to bring an action
that in fact belongs to
someone else
[61]
(and
it is for this reason that the leave of the court is required to
commence action, which would not have been required in the
event of
the shareholder seeking to recover for a personal wrong
[62]
).
[59]
That the claim in the present case is the claim of the company and
not of its shareholders has been made abundantly clear in
Johnson
v Gore Wood
[63]
in
which Lord Bingham, in a passage subsequently quoted with approval in
this court,
[64]
said:
‘
Where
a company suffers loss caused by a breach of duty owed to it, only
the company may sue in respect of that loss. No action
lies at the
suit of a shareholder suing in that capacity and no other to make
good a diminution in the value of the shareholder’s

shareholding where that merely reflects the loss suffered by the
company. A claim will not lie by a shareholder to make good a
loss
which would be made good if the company’s assets were
replenished through action against the party responsible for the

loss, even if the company, acting through its constitutional organs,
has declined or failed to make good that loss.
’
[65]
[60]
Consequently the derivative action the appellants seek to bring under
the section must be distinguished from any personal action
they might
have to enforce a debt owed to them. It is brought not to recover
damages suffered by the shareholders due to the wrongs
of a director
but damages suffered by the company itself.
[61]
For this reason, in regard to the issue of prescription of a claim
under s 266, it would be wrong to regard the shareholder
as
effectively being the creditor and the company the debtor in respect
of the claim. At all times the company remains the creditor
and the
delinquent director the debtor. All the section does is to allow the
shareholder to bring the claim on behalf of the company.
And as
long as that claim exists it may be enforced, either by the company
itself or by an aggrieved shareholder acting under s
266.
[62]
In these circumstances, for these reasons alone, as Shareblock’s
claim against Mr Harri has not prescribed, the appellants
are
entitled to invoke s 266 to enforce it on behalf of the company. In
my view this conclusion, in itself, renders it unnecessary
to
consider whether my learned colleagues are correct in their
conclusion that no obligation or liability arises until the court

acts under s 266 to authorise the curator to institute
proceedings in the name of the company and on the company’s
behalf. I do not necessarily disagree with that conclusion; I merely
find it unnecessary to deal therewith. On all the remaining
issues we
are ad idem.
__________________
L
E Leach
Judge
of Appeal
APPEARANCES
Appellants:

H Epstein SC (and SS
Cohen)
Instructed by:
David C Feldman Attorneys c/o Kruger
& Sharp Attorneys, Pretoria
Lovius
Block, Bloemfontein
First to
Seventh  Respondents:  GI Hoffman SC (and GB Rome)
Instructed by:
David Oshry & Associates c/o
Jacobson & Levy, Pretoria
Webbers, Bloemfontein
[1]
In
terms of s 21(3)
(c)
(ii)
of the Supreme Court Act 59 of 1959.
[2]
Interdict
proceedings were initially instituted in the Transvaal Provincial
Division and were followed by arbitration proceedings
which the
parties ultimately settled in 2000.
[3]
The
clubs’ business is to sell points to consumers who become
members of the clubs. The members are entitled to use the
points in
exchange for holidays at locations secured by the clubs and pay
annual club membership fees and levies for the maintenance
and
services of the properties available to the clubs.
[4]
The
Club Leisure Group began operating in 1990 with the formation of
Flexi. It is a massive entity with 16 clubs of which Flexi
is the
biggest, a host of property, sales, service and management companies
and a property portfolio for the leisure and business
accommodation
clubs with an inventory of holiday destinations running into
billions of rand in over 150 resorts. It shares half
of its 200 000
members with Flexi and earns its income from the sale of points and
management fees.
[5]
The
resort is situated on immovable property, Portion 5, Perry’s
Farm, Number 171 Kruger Road, Hazyview at the confluence
of the Sand
and Sabie Rivers in the district of White River, Mpumalanga.
[6]
Previously
known as Jade Hotel Management CC and converted into a limited
company during 2000.
[7]
Lamont and Ridl
each own a trust, the
Lamont
Trust and the Ridl Trust, which respectively own 50 per cent of the
shares in the Club Leisure Group’s holding company
and sole
owner, Club Leisure Holdings (Pty) Ltd.
[8]
Then
valued at R500 000.
[9]
Defined
in s 1 of the Shareblocks Act as
a
company the activities of which comprise or include the operation of
a share block scheme.
[10]
Defined
in s 1 of the Shareblocks Act as ‘any person by whom, on whose
behalf or for whose benefit more than 50 per cent
of the shares of a
share block company are held or controlled and, where two or more
persons, by whom, on whose behalf or for
whose benefit more than 50
per cent of the shares of such a company are jointly held or
controlled, act in concert in relation
to or are jointly connected
with the business of the company, each of such persons’.
[11]
Initially
as a close corporation but later changed, in 1990, to a company with
limited liability.
[12]
Defined
in the articles as ‘the new Club House, existing facilities
and laundry, new staff village referred to in Annexure
A and any
further improvements effected by [Shareblock] which are for the
common benefit of all Holders’.
[13]
In
addition to the resolution to substitute the original articles on
that meeting’s agenda were resolutions to increase

Shareblock’s share capital and replace the use agreement with
a new one.
[14]
The
articles were amended again in 2003 at a general meeting of
Shareblock’s shareholders but those amendments are not
relevant to these proceedings.
The
current articles have, therefore, effectively remained unchanged
since their registration in 1988.
[15]
These
sales amounted to 1 410 shares ie 47 three-bedroom units.
[16]
The
main reason for the amendment was explained in Harri’s
answering affidavit as having been to provide for (a) a greater

definition of Development’s rights to extend the scheme in
more detail to make it more flexible, (b) the creation of

Shareblock’s holders’ rights of use for purchaser in
perpetuity to make the scheme more marketable, and (c) the
differentiation
between categories of share blocks to accommodate
the fact that Development was to finance the hotel and central
complex construction
on the basis that the commercial benefits
flowing therefrom as compensation to it and its successor would not
be for the particular
benefit of timeshare shareblock holders.
[17]
Article
3.1.
[18]
In
Article 3.4. Management Regulations are defined in clause 1 of both
sets of articles as ‘such regulations, directions,
procedures,
rules or the like, made by the directors of the company, or the
Managing Agent in terms of the Use Agreement referred
to in Articles
3.2 and 3.3’.
[19]
Article
28.11. Section 13 of the Shareblocks Act provides that:
(1)
A shareblock company shall in
respect of the share block scheme it operates establish and maintain
a levy fund sufficient, in
the opinion of its directors, for the
repair, upkeep, control, management and administration of the
company and of the immovable
property in respect of which it
operates the share block scheme, for the payment of rates and taxes
and other local authority
charges on the said immovable property,
any charges for the supply of electric current, gas, water, fuel and
sanitary and any
other services to the said immovable property, and
services required by the company, for the covering of any losses
suffered
by the company, for the payment of any premiums of
insurance and of all expenses incurred or to be incurred to effect
the opening
under section 5 of the Sectional Titles Act of a
sectional title register in relation to the said immovable property,
and for
the discharge of any other obligation of the company.
(2)
Save as otherwise provided in
the memorandum or articles of a share block company or in any
agreement or arrangement between the
company and its members, every
member of the company shall contribute monthly to the levy fund in
the proportion of the number
of his shares to the total number of
issued shares of the company or, if the company does not have share
capital, all its members
shall so contribute equally.’
[20]
Article
28.3 of the current articles provides for a ‘common levy’
defined as generally comprising such costs as land
rates and taxes,
water and electricity charges and the timeshare levy generally
comprising all costs relating to timesharing
interests such as
management fees, costs of reception, costs of cleaning, maintaining,
controlling and administering common property,
common facilities and
accommodation and such matters relating to the utilisation of
timesharing interests.
[21]
Delitrade
2 (Pty) Ltd and Vacation (Pty) Ltd.
[22]
Development
subsequently terminated the agreement when the clubs failed to meet
turnover guarantees set out therein.
[23]
In the
latter proceedings Shareblock claimed, inter alia, ownership of the
land and the improvements thereon, control over areas
of the land
and the common facilities thereon to which certain share blocks
related, the right to determine the purpose of those
common
facilities and the right to operate them or in its discretion to
appoint a person to do so.
[24]
The contemplated
sectionalisation did not take place. At an annual general meeting
held in 2006 the clubs, represented by Ridl,
voted against its
approval because, according to Harri, the general body of
shareholders was misinformed as to the real reasons
for the
sectionalisation. This is what led to the agreement’s lapse as
was resolved by Development’s board of directors
and
Shareblock.
[25]
Clause
10 of the arbitration agreement.
[26]
From
Professor DW Butler, a law academic at Stellenbosch University at
the time and a co-author of
Sectional
Titles  Share blocks and Time-sharing
(1985)
and author of ‘Time-sharing and shareblocks’ in 27
Lawsa
2
ed.
[27]
In
terms of article 28.11 thereof which provides that ‘[t]he
[registered owner of the shares comprising the share block
in terms
of Section 133 of the Companies Act] acknowledges that no levy is
payable by the holder of the Share Blocks which confer
the right of
use in respect of the common facilities and the common property.’
[28]
This
Act has since been repealed by the
Companies Act 71 of 2008
.
[29]
These
provisions read:
‘
266
Initiation of proceedings on behalf of company by a member
(1)
Where a company has suffered damages or loss or has been deprived
of
any benefit as a result of any wrong, breach of trust or breach of
faith committed by any director or officer of that company
or by any
past director or officer while he was a director or officer of that
company and the company has not instituted proceedings
for the
recovery of such damages, loss or benefit, any member of the company
may initiate proceedings on behalf of the company
against such
director or officer or past director or officer in the manner
prescribed by this section notwithstanding that the
company has in
any way ratified or any act or omission relating thereto, condoned
any such wrong, breach of trust or breach of
faith or any act or
omission relating thereto.
(2)
(
a
)  Any such member shall serve a written notice on the
company calling on the company to institute such proceedings within

one month from the date of service of the notice and stating that if
the company fails to do so, an application to the Court
under
paragraph (
b
) will be made.
(
b
)
If the company fails to institute such proceedings within the said
period of one month, the member may make application
to the Court
for an order appointing a
curator ad litem
for the company
for the purpose of instituting and conducting proceedings on behalf
of the company against such director or officer
or past director or
officer.
(3)
The Court on such application, if it is satisfied –
(
a
)
that the company has not instituted such proceedings;
(
b
)
that there are
prima facia
grounds for such proceedings;
and
(
c
)
than an investigation into such grounds and into the desirability of
the institution of such proceedings is justified,
may
appoint a provisional
curator ad litem
and direct him to
conduct such investigation and to report to the Court on the return
day of the provisional order.
(4)
The Court may on the return day discharge the provisional order

referred to in subsection (3) or confirm the appointment of the
curator ad litem
for the company and issue such directions as
to the institution of proceedings in the name of the company and the
conduct of
such proceedings on behalf of the company by the
curator
ad litem
, as it may think necessary and may order that any
resolution ratifying or condoning the wrong, breach of trust or
breach of faith
or any act or omission in relation thereto shall not
be of any force or effect.’
[30]
Ghersi
& others v Tiber Developments (Pty) Ltd & others
[2007]
ZASCA 43
;
2007 (4) SA 536
(SCA) para 3.
[31]
The section
provides as follows:
252
Member’s remedy in case of oppressive or unfairly prejudicial
conduct
‘
(1)
Any member of a company who complains that any particular act or
omission
of a company is unfairly prejudicial, unjust or
inequitable, or that the affairs of the company are being conducted
in a manner
unfairly prejudicial, unjust or inequitable to him or to
some part of the members of the company, may, subject to the
provisions
or subsection (2), make an application to the Court for
an order under this section.
(2)
Where the act complained of relates to –
(
a
)
any alteration of the memorandum of the company under
section 55
or
56
;
(
b
)
any reduction of the capital of the company under
section 83
;
(
c
)
any variation of rights in respect of shares of a company under
section 102
; and
(
d
)
a conversion of a private company into a public company or of a

public company into a private company under
section 22
,
an
application to the Court under subsection (1) shall be made within
six weeks after the date of the passing of the relevant
special
resolution required in connection with the particular act concerned.
(3)
If on any such application it appears to the Court that the
particular
act or omission is unfairly prejudicial, unjust or
inequitable, or that the company’s affairs are being conducted
as aforesaid
and if the Court considers it just and equitable, the
Court may, with a view to bringing to an end the matters complained
of,
make such order as it thinks fit, whether for regulating the
future conduct of the company’s affairs or for the purchase
of
the shares of any members of the company by other members thereof or
by the company and, in the case of a purchase by the
company for the
reduction accordingly of the company’s capital, or otherwise.
(4)
Where an order under this section makes any alteration or addition

to the memorandum or articles of a company –
(
a
)
the alteration or addition shall, subject to the provisions of
paragraph
(
b
), have effect as if it had been duly made by
special resolution of the company; and
(
b
)
the company shall, notwithstanding anything contained in this Act,

have no power, save as otherwise provided in the order, to make any
alteration in or addition to its memorandum or articles which
is
inconsistent with the order, except with the leave of the Court.
(5)
(
a
)
A copy of any order made under this section which alters or adds to

or grants leave to alter or add to the memorandum or articles of a
company shall, within one month after the making thereof,
be lodged
by the company in the form prescribed with the Registrar for
registration.
(
b
)
Any company which fails to comply with the provisions of paragraph

(
a
),
shall be guilty of an offence.’
[32]
In the
curator’s view, Shareblock ought to have received rental from
the various hotel operators, from 1992 until 2011,
of the sum of
R36 380 381 and was entitled to claim back the rental it had
paid for the use of the hotel facilities totalling
R2 522 344.
[33]
The respondents
also sought leave to appeal against the relief granted to the clubs
conditional upon the grant of the clubs’
application for leave
to appeal but this was not argued.
[34]
The grounds
thereof were that ‘[i]n prayer 2 of the Notice of Motion the
applicants sought a rule nisi for the relief contemplated
in
paragraphs 2(a), 2(b), 2(c), 2(d) of the Notice of Motion . . . The
learned judge granted a provisional order and thereafter
on the
return day discharged the order . . . The learned judge erred in law
and/or in fact in discharging the order inasmuch
as [he] held that
the relief sought in the rule nisi had prescribed . . . [and] erred
in law and /or in fact in finding that
the relief (the claims)
sought in the rule nisi constituted “a debt” or “debts”
as contemplated in
section 12
of the
Prescription Act.’
[35
]
Reeders
v Jacobz
1942
AD 395
at 396.
[36]
Van
Wyk v Unitas Hospital & another (Open Democratic Advice Centre
as Amicus Curiae)
[2007]
ZACC 24
;
2008 (2) SA 472
(CC) para 22.
[37]
The
successor of the Supreme Court Act 59 of 1959.
[38]
These
provisions read, in relevant part:
‘
10
Extinction of debts by prescription
(1)
Subject to the provisions of this Chapter and of Chapter IV, a debt
shall be extinguished by prescription after the
lapse of the period
which in terms of the relevant law applies in respect of the
prescription of such debt.
(2)
By the prescription of a principal debt a subsidiary debt which
arose from such principal debt shall also be extinguished
be
prescription.
(3)
Notwithstanding the provisions of subsections (1) and (2), payment
by the debtor of a debt after it has been extinguished
by
prescription in terms of either of the said subsections, shall be
regarded as payment of a debt.
11
Periods of prescription of debts
The
periods of prescription of debts shall be the following:
(
a
)
thirty years in respect of –
(i)
any debt secured by mortgage bond;
(ii)
any judgment debt;
(iii)
any debt in respect of any taxation imposed or levied by or under
any law;
(iv)
any debt owed to the State in respect of any share of the profits,
royalties or any similar consideration payable in
respect of the
right to mine minerals or other substances;
(
b
)
fifteen years in respect of any debt owed to the State and arising
out of an advance or loan of money or a sale or lease
land by the
State to the debtor, unless a longer period applies in respect of
the debt in question in terms of paragraph
(a)
;
(
c
)
six years in respect of a debt arising from a bill or exchange or
other negotiable instrument or from a notarial contract,
unless a
longer period applies in respect of the debt in question in terms of
paragraph (
a
) or (
b
)
(
d
)
save where an Act of Parliament provides otherwise, three years in
respect of any other debt.
12
When prescription begins to run
(1)
Subject to the provisions of subsections (2), (3), and (4),
prescription shall commence to run as soon as the debt is
due.
(2)
If the debtor wilfully prevents the creditor from coming to know of
the existence of the debt, prescription shall not
commence to run
until the creditor becomes aware of the existence of the debt.
(3)
A debt shall not be deemed to be due until the creditor has
knowledge of the identity of the debtor and of the facts from
which
the debt arises: Provided that a creditor shall be deemed to have
such knowledge if he could have acquired it by exercising
reasonable
care.’
[39]
In
terms of
s 17(2)
of the
Prescription Act ‘[a
] party to
litigation who invokes prescription, shall do so in the relevant
document filed of record in the proceedings: provided
that a court
may allow prescription to be raised at any stage of the
proceedings.’
[40]
For
example, the clubs were
aware
of the VAT input claims and the payments to Development as early as
7 June 1999 or at the latest by May 2000 when a settlement
agreement
of an arbitration between Shareblock and Development was concluded.
[41]
Electricity
Supply Commission v Stewarts and Lloyds of SA (Pty) Ltd
1981 (3) SA 340
(A)
at 344F-G;
Oertel
en Andere NNO v Direkteur van Plaaslike Bestuur en Andere
1983
(1) SA 354
(A) at 370A-C;
Desai
NO v Desai & others
[1995]
ZASCA 113
;
1996 (1) SA 141
(A) at 146I-J;
Bester
NO v Schmidt Bou Ontwikkelings
[2012]
ZASCA 125
;
2013 (1) SA 125
(SCA) para 9.
[42]
See
Staegemann
v Langenhoven & others
2011
(5) SA 648
(WCC) para 16;
Absa
Bank Ltd v Keet
[2015]
ZASCA 81
;
2015 (4) SA 474
(SCA) para 20.
[43]
See
for example,
Smith
v Farrelly’s Trustee
1904
TS 949
at 958;
Ex
Parte Geldenhuys
1926
OPD 155
at 164;
Lorentz
v Melle & others
1978
(3) SA 1044
(T) at 1050D-F; and
Erlax
Properties (Pty) Ltd v Registrar of Deeds & others
[1991]
ZASCA 187
;
1992 (1) SA 879
(A) at 884H-885A.
[44]
Reinhard
Zimmerman
The
Law of Obligations
(1990)
at 6-7; CG van der Merwe ‘Things’ in 27
Lawsa
2
ed para 59.
[45]
A
t
paras 20 and 23 to 25.
[46]
See
for example,
Boundary
Financing
v
Protea Property Holdings (Pty) Ltd
[2008]
ZASCA 139
;
2009 (3) SA 447
(SCA);
Gaffoor
& another NNO v Vangates Investments (Pty) Ltd & others
[2012] ZASCA 52
;
2012 (4) SA 281
(SCA) paras 34 and 35
;
Bester NO & others v Schmidt Bou Ontwikkelings CC
[2012]
ZASCA 125
;
2013 (1) SA 125
(SCA) at 130B-131G.
[47]
Burroughs
Machines Ltd v Chenille Corporation of SA (Pty) Ltd
1964
(1) SA 669
(W) at 670F-671B.
[48]
Quartermark
Investments (Pty) Ltd v Mkhwanazi & another
[2013] ZASCA 150
;
2014 (3) SA 96
(SCA) para 20.
[49]
Wimbledon
(Pty) Ltd v Gore NO & others
2002
(2) SA 88
(C);
McCrae
v ABSA Bank Ltd
[2009]
ZAGPJHC 7 para 54;
Louw
& others v Richtersveld Agricultural Holdings Company (Pty) Ltd
& others
[2010]
ZANCHC 54
; Helena H Stoop ‘The derivative action provisions in
the Companies Act 71 of 2008’ (2012) 129 SALJ 527.
[50]
Prudential
Assurance Co Ltd v Newman Industries Ltd & others
(No
2)
[1982] 1 All ER 354
(CA) at 366-367;
Itzikowitz
v Absa Bank Ltd
[2016]
ZASCA 43
para 10; Lindi Coetzee ‘A comparative analysis of the
derivative litigation proceedings under the Companies Act 61 of 1973

and the Companies Act 71 of 2008’
(2010)
Acta
Juridica
290
at 294.
[51]
In
terms of
s 266(4)
of the
Companies Act.
[52
]
Duet and
Magnum Financial Services CC (in liquidation) v Koster
[2010] ZASCA 34
;
2010 (4) SA 499
(SCA) paras 12, 13 and 27.
[53]
Ibid para
13.
[54]
Ibid para 11
[55]
Ibid.
Compare para 24.
[56]
Itzikowitz
v Absa Bank Ltd
[2016]
ZASCA 43
para 10.
[57]
See eg
Wimbledon
Lodge (Pty) Ltd v Gore NO &
others
2002 (2) SA 88
(C)
at 97 C-D.
[58]
Eg H H Stoop ‘The
derivative action provisions in the Companies Act 71 of 2008’
(2012) SALJ 527.
[59]
At
9-177.
[60]
See further L
Coetzee ‘A Comparative analysis of the derivative litigation
proceedings under the Companies Act 61 of 1973
and the Companies Act
71 of 2008’
(2010)
Acta
Juridica
290
at 294-295.
[61]
L
Griggs ‘The Statutory Derivative Action: Lessons that may be
learnt from the Past!’ (2002) 4
University
of Western Sydney Law Review
para
1.2 [Coetzee 292].
[62]
Griggs part 3.
[63]
Johnson
v Gore Wood & Co (a firm)
[2001]
1 All ER 481.
[64]
Itzikowitz v
Absa Bank Ltd
(20729/2014)
[2016] ZASCA 43
(31 March 2016) para 11.
[65]
At
503.