Bresler v Xigo (Pty) Ltd and Others; Bresler v Quickberry (Pty) Ltd and Others; Scott v Quickberry (Pty) Ltd and Others; Scott v Xigo (Pty) Ltd and Others (817/17; 818/17; 4602/17; 4603/17) [2018] ZAWCHC 134 (12 October 2018)

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[2018] ZAWCHC 134
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Bresler v Xigo (Pty) Ltd and Others; Bresler v Quickberry (Pty) Ltd and Others; Scott v Quickberry (Pty) Ltd and Others; Scott v Xigo (Pty) Ltd and Others (817/17; 818/17; 4602/17; 4603/17) [2018] ZAWCHC 134 (12 October 2018)

IN
THE HIGH COURT OF SOUTH AFRICA
[WESTERN CAPE DIVISION, CAPE TOWN]
Case
nos. 817/17;
818/17
4602/17;
4603/17
In
the matters between:
ANDRE
CHRISTIAN
BRESLER
Applicant
and
XIGO
(PTY)
LTD
First
Respondent
RICHARD
CLIVE
POPLE
Second
Respondent
ANDREW
DAVID
BAHLMAN
Third
Respondent
GAVIN
SCOTT
Fourth
Respondent
ANDRE
CHRISTIAN
BRESLER
Applicant
and
QUICKBERRY
(PTY)
LTD
First
Respondent
RICHARD
CLIVE
POPLE
Second
Respondent
RICHARD
BRIAN
GRANTHAM
Third
Respondent
GAVIN
SCOTT
Fourth
Respondent
GAVIN
SCOTT
Applicant
and
QUICKBERRY
(PTY)
LTD
First
Respondent
RICHARD
CLIVE
POPLE
Second
Respondent
RICHARD
BRIAN
GRANTHAM
Third
Respondent
ANDRE
CHRISTIAN
BRESLER
Fourth
Respondent
GAVIN
SCOTT
Applicant
and
XIGO
(PTY)
LTD
First
Respondent
RICHARD
CLIVE
POPLE
Second
Respondent
ANDREW
DAVID
BAHLMAN
Third
Respondent
ANDRE
CHRISTIAN
BRESLER
Fourth
Respondent
JUDGMENT DELIVERED ON
12 OCTOBER 2018
SHER, J:
1. I have before me four
related applications which by agreement between the parties were
consolidated and heard together. They
concern a number of
shareholders and directors of two sister companies Xigo (Pty) Ltd and
Quickberry (Pty) Ltd, which offer brokerage
services in company
mergers and acquisitions. Xigo concentrates on transactions where the
value of the share capital or turnover
is in excess of R 50 million
and it largely operates on international markets, whilst Quickberry
operates primarily in the local
markets where the values concerned
are less.
2.
In two of the applications, which were launched
[1]
on 19 January 2017 by Bresler (who was at the time the financial
director of Xigo), orders were sought winding up both companies
on
the grounds that it was just and equitable as the relationship of
trust and confidence between the shareholders had allegedly
broken
down irretrievably.
3.
Save for Scott, the applications were opposed by Bresler’s
co-directors and shareholders. Although they agreed that they
were
‘deadlocked’ and their relationship had been irrevocably
damaged
[2]
they contended that
it would be inappropriate and commercially undesirable to wind up the
entities as they were viable and commercially
solvent companies which
were trading at a profit. Consequently, on 10 February they in turn
launched counter-applications in each
matter in which they sought
orders in terms of s 163(1) and (2) of the Companies Act
[3]
whereby second and third respondents ie Pople and Bahlman in the Xigo
application and Pople and Grantham in the Quickberry application,

would be authorised to acquire Bresler’s 29.9% and 20%
shareholding in these companies respectively at values to be
determined
by 2 independent chartered accountants and auditors.
[4]
4.
Although a large part of the founding affidavits which were filed by
Bresler in both applications detailed various attempts by
the parties
(from June 2016 already) to arrive at a parting of the ways on the
basis that the respondents were to acquire Bresler’s

shareholdings at values which were to be determined independently,
and Bresler expressed his frustration at what he perceived to
be
continued intransigence on the part of the respondents, the offer
which was put forward by them in February 2017 by way of their

counter-applications was not acceptable to him as far as its
formulation was concerned, and he filed opposing affidavits in
respect
of both.
[5]
5.
Although he was in agreement that the respondents should acquire his
shareholding in both companies he contended that their proposal
as to
the manner in which his shareholdings should be valued was ‘vague’
and ‘lacking in substance’ inasmuch
as it did not set out
any details in regard to the effective date for the proposed
acquisition thereof, the method which was to
be adopted by the
valuers, the information on which they were to base their valuation,
how any disputes would be dealt with and
how the acquisitions would
be financed. He also said he did not trust that the respondents would
follow a fair procedure and he
referred in this regard to
correspondence in which he said they had made it clear that they
wished to acquire his shareholding
at minimal values. He said there
was no need to obtain independent valuations as the respondents had
prepared a draft share sale
agreement in June 2016 in terms of which
Bahlman was to acquire the second tranche of an additional 10% of the
total issued share
capital in Xigo from him, Scott and Pople in equal
proportions (ie 3.33% from each of them). Based on these discussions
his shareholding
in Xigo at the time was valued at R 7.5 million.
Although in October 2016 the company’s auditor Lanfear had
subsequently
valued his shareholding in Xigo at R 9.25 million he had
nonetheless indicated in November 2016 that he was prepared to accept
the June value. However, he had also asked Grant Thornton, an
independent firm of chartered accountants, to prepare a report as
to
the appropriate methodology for arriving at a valuation of the equity
in both companies and duly annexed a copy thereof,
[6]
which was dated 27 February 2017. It is common cause that the authors
of the report recommended that a valuation be performed on
a
so-called discounted cash flow basis ie on the basis of the net
present value of the likely future income which was to be derived
by
the companies over a certain period of time, capitalized and
discounted.
6. The respondents
seemingly did not engage Bresler in regard to his proposed valuation
method and between 6 and 19 April 2017 gave
notice that they intended
to withdraw their counter-applications in both matters. On 19 April
they also filed a notice of withdrawal
of their opposition to the
winding up of Xigo.
7. On 3 May 2017 Bresler
obtained a provisional order for its winding up which was made final
on 15 June 2017. For reasons which
are not apparent from the papers
he did not proceed to move for an order winding up Quickberry.
However, a month later, on 14 July
2017, he gave notice that he
intended to amend the notice of motion in both matters, by
introducing an alternative order in similar
terms to that sought by
the respondents ie one whereby second and third respondents in each
application were to be directed to
acquire his shareholdings in terms
of s 163(2) of the Act. To this end he sought to rely on the report
which he had obtained from
Grant Thornton, in which the proposed
methodology for arriving at a valuation of the members shareholdings
had been set out.
8.
That then by way of introduction as far as the two winding up
applications by Bresler are concerned. In the two remaining
applications
[7]
which were
launched on 10 March 2017, Scott who similarly holds a 29.9% and 20%
shareholding in each of the two companies and who
also was a director
in both, also sought an order in terms of s 163(1) and (2) of the
Act, directing the selfsame respondents to
acquire his shareholdings
in both entities at a value to be determined by two independent
chartered accountants, as per the proposed
methodology set out in
the  report by Grant Thornton. And in the alternative, he too
sought an order winding up the companies.
9. The respondents did
not file opposing papers in regard to the principal relief which was
sought in the applications which were
brought by Scott. On 13 June
2017 Scott filed supplementary founding affidavits in which he
pointed out that although he sought
an order based on the Grant
Thornton report, inasmuch as it was silent as to the date at which
his shareholdings were to be valued
he asked that the court should
direct that it was to precede the date when he was suspended as a
director  ie 20 December
2016. To this end he proposed 30
November 2016 as this was the last month-end date, prior to his
suspension, in which financial
statements were available.
10. Following this,
Bresler too sought to propose in later affidavits which he filed that
the applicable date for the valuation
of his shareholdings should be
fixed at a date prior to the launch of his winding-up applications,
and he also suggested that 30
November would be appropriate.
11. The respondents in
turn dispute that a date prior to the commencement of proceedings by
Bresler in January 2017 would be fair
or appropriate, for either the
Bresler or the Scott applications.  They aver that inasmuch as
Bresler deliberately chose to
institute winding up proceedings and to
prosecute these to the end in Xigo notwithstanding their
‘longstanding’ offer
to purchase his shares, and given
that he pressed on and obtained not only a provisional order but also
a final order even after
they had again made an offer to purchase his
shares by way of their counter-application, which he had spurned, he
should not be
allowed to benefit from his actions at their expense.
They said that as a result of Xigo being placed in liquidation it had
suffered
severe reputational damage and had lost all value to the
point where it was now commercially insolvent and its shares were
worthless.
They alleged that the destruction in value had already
been wrought when the provisional order was granted and as a result
they
had decided that there was little point in resisting the winding
up any further, or in proceeding with their counter-application
in
terms of s 163. They averred that Quickberry had suffered a
contagious similar reduction in value following the demise of Xigo.
12. They further
contended that in any event, at least insofar as Xigo was concerned
it was no longer legally permissible for the
relief which Bresler now
sought in terms of s 163 to be granted. In this regard they contended
that the court became
functus officio
once the final order of
winding up had been granted. They submitted further that by
deliberately electing to proceed with an order
for the winding up of
both entities Bresler had waived any rights which he might have had
to claim relief in terms of s 163, in
the alternative.
13. As far as Scott was
concerned they claimed that inasmuch as he had associated himself
with the winding up applications which
Bresler had launched by also
seeking orders in this regard in his applications, he too should not
be allowed to obtain a date for
the valuation of his shareholdings at
any time before the launch of his proceedings in March 2017. They
pointed out that in his
applications he had only sought orders in
terms of s 163 without any reference to a date for the valuations of
his shareholdings
and without motivating initially why valuations
should be made on any date prior to the grant of an order in this
regard. They
contended that inasmuch as he only sought to propose
valuations based on an earlier date by way of supplementary papers
which he
filed on 13 June 2017, some 2 days before Bresler took a
final order for the winding up of Xigo, by which time there was no
longer
any value in its share capital or that of Quickberry, it would
be unfair and inappropriate to set the date for the valuation of

Scott’s shareholding in Xigo or Quickberry at any time prior to
the grant of an order in terms of s 163, or at the very earliest
as
at the date when the final winding up order for Xigo was made.
14. That then by way of a
general introduction. What I am required to determine therefore is
whether the applicant parties have
made out a case for relief in
terms of s 163 of the Act and if so, what date to fix for a valuation
of their shareholdings
in both companies, and whether or not,
as far as Bresler is concerned an order in terms of s 163 is
competent in relation to his
shareholding in Xigo.
15.
It is common cause that in relation to the first question which
requires an answer I am required to arrive at a determination
which
is fair to both sides
[8]
having
due regard for the circumstances which gave rise to any order which
might eventuate in terms of the aforesaid provision.
In the context
of the applications which are before me whereby orders are sought in
terms of s 163(2)(e) of the Act directing certain
shareholders to
acquire the shareholdings of others the applicants must show either
1) that any act or omission of the companies
or any ‘related’
person has had a result which is ‘oppressive or unfairly
prejudicial’ to them or which
‘unfairly disregarded their
interests
[9]
or 2) that the
business of the companies or the powers of any of the directors were
conducted or exercised in a manner which was
‘oppressive or
unfairly prejudicial’ to them or which ‘unfairly
disregarded their interests.
[10]
In order to determine whether such acts, omissions or conduct took
place I will of necessity have to have regard for the long and

troubled history of the  relationship between the parties and
how it soured and ultimately broke down, and will have to try,
where
possible, to attempt to attribute blame and ‘oppressiveness’
or unfair conduct, if any, to those responsible.
16. There are a number of
aspects which make this exercise a difficult one. In the first place,
as will already be apparent from
the brief remarks which were made by
way of introduction, both sides blame one another for the break-down
in their relationships
and there are a number of factual disputes as
to who was responsible for what, and the papers are rambling and
vituperative in
their scope with much posturing and manoeuvring
apparent on all sides. In addition, the parties did not stick to the
long-established
and accepted rule that, unless special circumstances
warrant it, only 3 sets of affidavits are to be filed. The papers in
the applications
are unnecessarily prolix and repetitive,
encompassing many thousands of pages. In like fashion when it came to
argument the parties
also did not restrict themselves to one bite at
the cherry, and numerous sets of heads of argument were filed. Oral
argument itself
also was fragmented, unnecessarily lengthy and
repetitive, at least insofar as second and third respondents are
concerned. An initial
attempt during June-July last year to argue
only Scott’s applications was halted and postponed in order to
allow the four
applications to be heard together with a view to
avoiding the possibility of contrary decisions by different courts.
This was accompanied
by further sets of affidavits being filed
followed in quick succession by further heads of argument.
17. It is extremely
disheartening that notwithstanding that all the parties were in
agreement that the relationship between them
had long broken down
irretrievably and their commercial marriage was at an end, and
notwithstanding that they were basically all
in agreement that there
should be a share buy-out of the applicants’ shareholdings
(save in respect of Bresler’s shareholding
in Xigo), and
notwithstanding the court’s repeated entreaties that they
should consequently attempt to resolve their differences

extra-judicially, the war raged on regardless, a year after the
winding up of Xigo and long after the
dramatis personae
were
clearly engaged in other ventures.
The factual background
18. In their voluminous
affidavits the parties made frequent reference to emails which were
exchanged between them during the sorry
history of the decline in
their relationships. As is to be expected, by and large these
references were chosen or quoted from selectively
and with a view to
furthering a particular point of view. In Bresler’s case this
was with a view to bolstering the assertion,
central to his
application to wind up the two corporate entities, that relationships
between the shareholders and directors had
completely degenerated to
the point where the administration and operation of these entities
had become dysfunctional and it was
accordingly just and equitable
that they be wound up. In the case of Scott this was with a view to
illustrating how unfairly he
had been treated in order to bolster his
claim that there had been oppressive conduct within the meaning of s
163 of the Act, which
would justify making an order that the other
shareholders were to buy him out.
19. In order to obtain as
accurate and ‘neutral’ a reflection of what transpired as
is possible I have attempted, in
what is set out below, to refer to
the actual contents of the emails which were exchanged without such
an inadvertent bias, by
relying on the actual language which was used
rather than the spin which the parties sought to place on it. I have
also attempted
to set out a single chronological history with
reference to all the parties in order to set out a holistic picture
of events instead
of a separate account in respect of each of the
applicants, as foreshadowed in their individual applications.
20. Xigo was formed by
Scott, Bresler and Pople. At the time Scott had his own consultancy
in the field of mergers and acquisitions
after being exposed thereto
whilst in the employ of various audit firms, and he and Bresler
thought there was an opportunity for
them to work together in this
area. Bresler identified a UK company BCMS Corporate Ltd (‘BCMS‘)
which was active in
the same field on an international level and they
recognized that there was an opportunity to start a similar venture
in South
Africa, in alliance with it. Pople was known to Bresler as a
potential investor and he agreed to join forces with them. Initially

he was in charge of sales and managed the relationship with BCMS and
Scott performed the role of Deal Leader which involved him

facilitating transactions between potential sellers and buyers.
Bresler was employed as the company’s financial director.
With
the expansion of the business Bahlman was employed as a second Deal
Leader and later as the MD, after Pople indicated he wanted
to
emigrate to Maurituis, at which point Pople was Chairman of the
Board. After a while they realised there was an opportunity
for
another entity to be established in order to deal with smaller, local
transactions where the client turnover was between R
10- 50 million
or less, which led to the formation of Quickberry. Although Xigo and
Quickberry were 2 separate corporate entities
they were effectively
run and operated together by a largely common group of shareholders
and directors. Bresler, Scott and Pople
were directors of both
companies and each held a 29.9% shareholding in Xigo.  Bresler
and Scott each held a 20% shareholding
in Quickberry. The remaining
10% shareholding in Xigo and 40% in Quickberry was held by Bahlman
and one Rick Grantham, respectively.
21. Although Scott was a
major fee earner for both businesses, quite early on there was some
dissonance in regard to the direction
he and Bresler were taking the
businesses. In September 2015 Bahlman and Pople indicated that they
did not consider him to fit
in as part of the executive team and they
suggested that it would perhaps be better if he exited the
businesses. In the latter
part of 2015 Pople suggested to Scott that
since his focus should be on doing deals it would not be necessary
for him to be involved
in meetings of Exco which at that stage
consisted of the other shareholder directors. Although Scott was not
happy with this proposal
and was told that all major decisions would
still be taken by all the directors he began to notice that he was
being slowly side-lined
and excluded from the decision-making
processes. Directors’ meetings became mere formalities where
resolutions which had
previously been taken by Exco were signed off,
without debate and without Scott being involved with the policy or
strategic decision-making
behind such decisions.
22. On 9 May 2016 Scott
informed Bahlman, then the managing director of Xigo, that he felt
‘lost and isolated’ as he
was not part of Exco. He also
thought the relationship between Xigo and BCMS was very tenuous,
which he attributed to Bresler’s
involvement which he saw as
‘destructive’. He said he was concerned with the
‘schizophrenia’ in the business
when Bresler was present
and there was a significant ‘fear factor’ (sic) amongst
staff who were concerned for their
jobs, as Bresler seemed to be very
proud of the fact that he regularly fired employees.
23. On 3 June 2016 Pople
(then Chairman of Xigo), informed Bahlman and fellow director Pudney
that Scott and Bresler needed to be
formally reprimanded. He said
Bresler was allowing his abrasive manner to undermine the company’s
best interests and their
business relationship with BCMS and he felt
this issue needed to be formally addressed, as the MD of BCMS had
requested that Bresler
no longer deal with their staff. Bahlman was
of the view that they needed to weigh up what was best for the
business before determining
how to ‘drop the hammer’ on
Bresler ie sanctioning him.
24. On 26 July Bahlman
informed Pople that he and Pudney would be meeting with Bresler the
following week at which time they would
insist that he move into the
sales side of the business and thereby avoid any operational risk in
their relationship with BCMS.
25. Bresler did not take
kindly to this request. On 3 August he sent Pople an email in which
he said that he had enough of the unpleasantness
and had reached the
point where he did not want to work with people who did not want to
work with him. As far as he was concerned
BCMS was at fault and
should take bold steps to demonstrate that it wished to continue
working with him by removing one of the
staff members with whom he
was having difficulties, and holding a disciplinary enquiry in
respect of another. In the alternative
Xigo should consider moving on
as a company and forming a working relationship with other
international companies who might not
have an African footprint, but
with whom they could easily partner. In his view the third option was
that he ‘moved’
on and the board continued to take the
business forward ‘without the noise’ his involvement
generated for them.
26. On 4 August Bahlman
informed Pople and Pudney that the business appeared to have outgrown
Bresler ‘in all aspects’.
As they were committed to BCMS
in the short-term and it was not prepared to move forward with them
if Bresler remained operationally
involved, he queried whether a
solution would not be for them to set up their own research and data
business which Bresler would
run as a separate entity. Xigo would
then contract it for sales data, lead generation and locally focused
research data. Following
this, on 12 August Pople met with Bresler
and offered him a non-executive position in Xigo. This too did not
sit well with him.
27. On 5 August Bahlman
issued a written warning to Scott in which it was recorded that he
had failed to discharge his duties in
regard to a proposed deal. In
this regard it was contended that he had not properly attended to
closing the underlying transaction
which resulted in the client
bypassing them and concluding a transaction with another entity
whilst its mandate with Xigo was still
in place, which resulted in
Xigo having to embark on litigation in order to enforce its rights in
relation to the payment of commission.
28. Scott objected to the
written warning and contended that he had not been afforded an
opportunity to offer his explanation of
events. According to him the
incident was not his fault and was simply a case of the client
deliberately circumventing Xigo.
29. On 18 August Bahlman
and Pudney set up a meeting with Scott in which they indicated that
there was still dissatisfaction with
his performance since their
prior discussion in September 2015 and they informed him that his
co-shareholders and directors would
like him to leave by the end of
the year ie December 2016. Although he did not agree that he was not
performing as required Scott
said he would think about their request
and would revert. He said that given that his colleagues clearly
wanted to take the business
forward without him he was in principle
not averse to exiting provided that he received fair value for his
shareholding and was
given a fair chance to pursue other
opportunities.
30. Further to
discussions which Bahlman had with BCMS early in September 2016 it
was agreed that Bresler would be removed from
the operational side of
their inter-company dealings. On 13 September Bahlman told Bresler
and Pudney that they needed to ‘drop
the hammer’ on Scott
as he had allegedly delayed in closing a deal for over a year, as a
result of which it had been cancelled.
31. On 29 September
Pudney wrote to his fellow directors regarding Scott’s possible
exit pursuant to discussions they had
held between themselves in this
regard, in his absence. He pointed out that in terms of clause 8.6 of
the shareholders agreement
upon his termination as an employee (for
whatever reason) Scott would be deemed to have offered his shares to
the remaining shareholders
on the terms and conditions set out in
clause 8. These provisions provided that two independent auditors had
to determine the fair
value of his shareholding and an offer for it
would then lie open for acceptance by the remaining shareholders for
a period of
12 months. If after 12 months none of the remaining
shareholders had elected to accept his offer Scott would have 30 days
within
which to sell his shareholding to an outside third party at a
price equivalent to or better than the fair value price which had

been put on it by the auditors. Pudney was of the view that before he
continued ‘pressurising’ Scott into resigning
the
remaining shareholders should seek to arrive at an agreement amongst
themselves as to the likely value of Scott’s shareholding
and
whether they were still prepared to acquire it at that price, and
should also consider how they would raise the necessary funds
in
order to do so.
32. Pople responded that
based on certain valuations which he had obtained in March that year
he would be willing to take up a share
of Scott’s
shareholdings, and they should not let Scott sell or dispose of them
to an outsider. Bresler felt that they had
to be fair, regardless of
the history involved, and needed to adopt an honest view on fair
value and then try and negotiate a disposal
without ‘ripping
the business apart’. He said that he had been advised that a
‘back to back sweetheart deal’
(from Scott to Pople) was
‘dangerous’ as it was not ‘legal’ and if they
proceeded down that path they could
be seen as trying to compromise a
minority shareholder. He warned that although none of them wanted to
overpay for Scott’s
shares the risk of ‘going too low’
was something that they should be careful of.
33. In reply to this
Pople said that values for Scott’s shareholdings would be
determined independently and not on the basis
of the valuation that
had been done for him earlier in the year. He was of the view that
immediately upon Scott’s exit from
the companies’ employ
they should ‘pull the share sale trigger’ and use the
next 12 months in order to fund the
acquisition of his shares. He was
of the view that it might be possible to negotiate staggered payments
with Scott.
34. On 4 October Bahlman
expressed the view that Scott had been a problem ever since he had
been in the business, and had proven
to be a ‘risk and a
liability’ despite the success fees he had recently generated,
and according to him his exit was
long overdue.
35. Grantham (the MD of
Quickberry) responded that they should get Scott out of his
shareholding sooner rather than later and ‘at
the lowest price
possible’. He agreed that the first step towards this process
was to obtain an auditors’ valuation.
He said that as per
Bresler’s numbers they were probably looking at a base
valuation of Xigo as a company with a previous
profit before tax of R
3.5 mil and a current profit of R 7 mil for the year, with future
profits forecast to be around R 10 million.
36. Pursuant to the
aforesaid exchange on 5 October Pudney addressed an email to Scott in
which he reminded him of their discussions
on 18 August where they
had talked about him resigning as an employee of Xigo, and the
consequent sale of his shares in terms of
the shareholders’
agreement. Given their proposed ‘completion’ date of 15
December 2016 he asked for a meeting
to be held the following week
with a view to discussing Scott’s exit on an amicable basis
without having to resort to a ‘destructive
legal process’.
37. On 16 October 2016
Pople noted that having reflected on Scott’s contribution over
the last 6 years he agreed with Bahlman
that he should be paid ‘as
little as possible’ for his shares. In order to put pressure on
Scott and the valuation
of his shareholding he suggested that they
call for shareholder loans in order to support Xigo during November,
regardless of the
current discussions they were having with BCMS.
38. On 18 October Bahlman
informed Pople and Pudney that Xigo was facing yet another cash flow
‘crunch’ which would
result in directors not being able
to take a salary for a few months and would delay them getting rid of
Scott, as they were not
in a financial position to bring someone in
to replace him. He said that although he had indicated he was in the
business for the
long haul the ‘history’ with Scott and
Bresler had reached a point where it was just too much for him to
handle.
39. In his response Pople
said that he had considered calling upon shareholders to provide a
loan to the company in order to assist
it with its cash flow
problems, and as Bahlman was financially strapped they could lend him
his share thereof. He also thought
that Scott ‘needed to go’
and that they shouldn’t ‘hold back on this’ if at
all possible. In addition,
he considered that Bresler was being
substantially overpaid for his current role in the business and his
remuneration needed to
be brought back in line with the market. He
suggested that they could perhaps cancel his bonus if his salary
could not be ‘touched’,
and hopefully this would be
enough to get him to ‘leave’. He thought a forced sale of
his shares was dependent on whether
they could alter his appointment
as an executive director, to a non-executive one.
40. On 27 October Bahlman
reported to Pople and Pudney that Bresler had told him he was
concerned that he was ‘in the same
boat’ as Scott, as
there were ‘things happening behind the scenes’ which
could result in his exit. Bahlman reiterated
that in his opinion
Bresler ‘had to go’ as the ‘opportunity cost’
of keeping him on was too great and had
set the business back a year.
He was of the view that they should exclude Bresler from discussions
in relation to a number of issues
which needed to be addressed
including the company’s structure, their long-term relationship
with BCMS and their long-term
business plan.
41. Between 27 October
and 1 November Grantham interviewed a candidate from Deloittes who
they thought could possibly be employed
as a deal leader in place of
Scott, and in order to put ‘further pressure’ on him
Grantham and Pople proposed that
they should wait until the end of
November before declaring a dividend in Quickberry as this would ‘tie
in better’
with the ‘plan’ they had for him. As it
turned out a dividend was declared somewhat sooner, largely at the
insistence
of Bresler.
42. In his founding
affidavit Scott pointed out that at the time he was effectively being
pressurised from two sides by his co-shareholders
and directors. By
not releasing a dividend in Quickberry whilst at the same time
expecting him to make a shareholder loan to Xigo
they were
restricting his cash flow with the aim of placing him under pressure
to sell his shares at a discount. At the time they
were also planning
to hold separate meetings on 8 and 9 November at which they would
strategize on how to ‘exit’ him
and Bresler from the two
companies.
43. Subsequent to the
aforesaid meetings Pudney (acting on behalf of the other
shareholders) had two lengthy telephonic discussions
with Bresler.
During the first of these, which took place on 8 November, they
considered a number of issues including renegotiating
Xigo’s
contract with BCMS, which Bresler threatened to veto. He said he felt
that his rights as a shareholder and director
were not being
respected as the others were not prepared to buy him out for value,
and if this were allowed to continue it could
end up with him winding
up the company. Pudney suggested that this could be avoided by having
a proper valuation of his shareholding
done and then buying him out
at that value. He asked why, notwithstanding their proposal not to
pay out a dividend in Quickberry,
Bresler  had ‘forced’
one to be declared. Bresler said he had done so because Pople had
wanted to ‘starve’
Scott out of his share thereof and at
the same time ‘force’ him to put money in on the ‘other
side’ ie
into Xigo.
44. During further
discussions which Bresler and Pudney had on 11 November they explored
the question of what would constitute fair
value for Bresler’s
shareholding in Xigo. Bresler indicated that the number which he had
in his head was R 11.8 mil, because
after tax that would leave him
with an amount of R 10 mil net, but at a stage he also seemed to
suggest that he would possibly
consider accepting an offer at R 9
mil. As such he didn’t think it was necessary for a formal
valuation to be carried out.
This was in contrast to the position he
apparently adopted the previous day, when he confirmed in an email
exchange with Pudney
that a formal valuation of his shareholdings in
both companies would be made by two independent auditors. In the same
email he
said that he had objected to some of the decisions they had
taken in their efforts to ‘suppress’ Scott’s
rights,
over which he had been accused of being ‘soft’,
decisions which he felt exposed them to risk.
45. On 11 November Pople
informed BCMS that they were proceeding to remove Bresler and Scott
from the business and there was a possible
opportunity for BCMS to
acquire a 25-30% stake in Xigo.
46. Following his
discussions with Bresler, on 14 November Pudney sent out an email to
the other directors and shareholders (including
Grantham) in which he
set out what he considered to be a range of possible options which
they had ‘on the way forward’.
These included acquiring
Bresler’s shareholding for R 9 mil as Bresler had proposed.  He
was of the view that if they
did this it would inevitably impact on
the value which was to be placed on Scott’s shareholding and
would effectively mean
that their combined 60% shareholding in Xigo
was worth in the order of between R 14 and R 15 mil, which was too
high.  As
alternative options he suggested that either Pople or
Bresler could resign as non-executive director and employee of Xigo
respectively
in which event the provisions of cl 8.6 of the
shareholders’ agreement would equally be triggered, or Bahlman
could take
up a further 10% shareholding which was available to him
in Xigo (thereby diluting Bresler’s shareholding) or he could
resign
from Xigo and establish a new corporate entity, or Xigo could
be liquidated. Finally, if all other options failed he suggested that

they could remove Bresler from Exco which would ‘certainly make
his life uncomfortable’, and this could be ‘coupled’

with removing the financial/accounting functions from him and
reducing his salary commensurately in line with his revised job
description.
47. In his response,
Bahlman agreed that Bresler and Scott needed to be ‘exited’
as soon as possible. He was of the
view that they could no longer
afford the ‘misalignment’ as Bresler’s veto was
blocking them from finalising
strategy and business plans with BCMS
and they were unable to trade effectively because of a ‘dysfunctional
executive with
damaged relationships’ at director and
shareholder level, but he expressed doubt as to whether some of the
options suggested
by Pudney would work. He felt that attempting to
‘performance manage’ Bresler out of the business either
by shutting
down the Cape Town office or by reducing his remuneration
would not succeed, as he was quite capable of commuting to
Johannesburg
and achieving sales targets that would make ‘working
him out of the business potentially difficult’. In addition, he

was concerned that by ‘playing with remuneration’ and
company ‘structure’ Bresler could make out a case
for
constructive dismissal. He was also concerned that Bresler and Scott
could combine forces and utilise their joint 60% shareholding
to put
them ‘on the back foot’, or Bresler could block Scott’s
exit or ‘provide evidence that would stack
up’ against
them should Scott sue for unfair dismissal. He suggested that they
should make an offer for Bresler and Scott’s
shares,
non-acceptance of which would result in an ‘automatic trigger
mechanism’ detrimental to the value of Xigo,
which would leave
Scott and Bresler ‘carrying an empty can’.
48. In his response Pople
set out a series of steps which should be taken. In the first place
they needed to ‘get rid’
of Scott as soon as possible by
obtaining an independent valuation of his shareholding and persuading
BCMS to subscribe for it
in full, failing which he would be prepared
to take up the balance. Thereafter Bahlman should take up his 10%
option in Xigo, thereby
diluting Bresler’s shareholding below
30%. In the meantime they would put up with Bresler in their employ
but would close
the Cape Town office and retrench all Cape Town
staff, who would have to reapply for sales and marketing positions in
Johannesburg.
Simultaneously, Bresler’s package and
responsibilities would be adjusted ‘as severely as possible
without labour recourse’
(sic) with discussions commencing in
this regard in January 2017 so that he would ‘get the picture
early on’ (sic).
Any ‘slip in sales’ would be taken
up with him in writing in order to put ‘performance pressure’
on him.
Pople also agreed with the suggestion that they should take
away the financial function from Bresler. In his opinion even if
Bresler
continued to earn the same it would ‘hurt him’ if
they cut him off from the company’s finances and he wouldn’t

want to stay on for ‘long’ thereafter. After Bresler had
left via ‘retrenchment or pressure or performance’
(sic)
they could then deal with his shareholding in the same manner as they
were proposing for Scott’s. Pople concluded his
email by asking
Pudney (as an attorney) what the ‘dangers’ were with this
‘plan’ as he was concerned that
Bresler could team up
with Scott and with their combined majority shareholding they could
call a board meeting and take control,
before they could get Scott’s
shares ‘off him’.
49. On 15 November Pople
further commented that Bresler wouldn’t want to stay on
indefinitely if he was no longer on Exco,
his remuneration had been
‘minimised’ and he had no future in a company which
didn’t want him, whilst having
to commute to Johannesburg, and
he was confident that under those circumstances Bresler would
eventually resign. In the meantime,
they could ‘force’
Scott to sell his shares and he also believed they had enough to
dismiss him, although Bresler could
perhaps provide email evidence
which would prove a constructive dismissal. If Bresler did so they
would have to ‘play hardball’
with him and get him to
realise that his behaviour could cause the company to collapse and
leave him with nothing, and he needed
to ‘understand’
that keeping the company to himself and Scott was not an option which
was open to him.
50. At about this time
Pople, Bahlman and Pudney considered recruiting someone to take over
from Bresler with effect from January
2017 and they had discussions
in regard to the possible remuneration that they would need to pay
her, based on what she was earning.
51. On 16 November Pudney
reported that he had obtained legal advice that if they sought to
remove the financial and accounting
function from Bresler they would
be acting in conflict with clause 7.14 of the shareholders agreement
which required the consent
of more than 70% of the shareholders in
order to amend, vary or substitute any of the directors’
service agreements or fees.
In response Bahlman said they were
‘treading on dangerous ground’.
52. Later that same day
Bahlman forwarded calculations he had done in support of a business
case for closing the Cape Town office,
and the savings which would be
achieved after retrenchments and rehiring of certain staff for sales
and marketing positions in
Johannesburg. Pursuant to this Pudney
formally advised Bresler that they would no longer be entering into a
proposed lease which
they were considering with ACSA, for premises in
Cape Town.
53. On 18 November Cliffe
Dekker Hofmeyr attorneys addressed a letter to the shareholders and
directors of both entities on behalf
of Bresler (with the support of
Scott) in which it was pointed out that although it had been agreed,
subsequent to the meeting
which was held on 8 November, that the
other shareholders would revert with an offer for the possible
acquisition of their interests
in the 2 companies, such an offer was
not yet forthcoming. The letter warned against shareholders who were
minded to go about their
separate commercial ways in a manner
destructive of the underlying value of the companies and their own
shareholdings, and cautioned
against the temptation of making use of
provisions of the shareholders’ agreement in order to
‘engineer’ the
exit of Bresler and Scott on forced terms.
The letter also ‘respectfully’ cautioned against
shareholders making use
of their managerial prerogatives at board
level, to secure stronger bargaining positions with a view to
procuring Bresler and Scott’s
exit under the deemed offer
provisions of the shareholders agreement. It proposed that a ‘better’
way to achieve a
non-destructive and non-litigious outcome was for
the parties to sit down and attempt to reach agreement on a plan for
a commercially
sensible and amicable parting of the ways as soon as
possible. To this end, an invitation was extended to the other
shareholders
and their legal representatives to facilitate a process
of engagement. In the meantime, it was suggested that whilst
negotiations
were underway there should be no change to any of the
directors’ conditions of employment in order to preserve value
and
avoid allegations of bad faith, which would undermine a
negotiated outcome.
54. To this open
invitation Pudney only responded on behalf of the other shareholders
and directors on 29 November, after a further
email prompt from
Bresler’s attorneys. His response can at best be described as
dismissive. He said the letter from Cliffe
Dekker was both
‘unexpected’ and ‘unfortunate’ because
whereas every effort had been made to have ‘open’

discussions with Bresler and Scott, the letter from Cliffe Dekker had
now changed the ‘position’(sic). He said that
whilst it
was noted that Bresler was interested in selling his shares there was
no urgency on the part of the shareholders and
directors he was
representing, and they were of the view that no purpose would be
served in having any discussions in this regard.
55. On the same day
Pudney circulated a number of proposed ‘round-robin’
resolutions to members of Exco for their approval
and signature. In
the preamble thereto it was recorded that Xigo and BCMS were
considering extending their contractual relationship,
which was due
to terminate in June 2017. As such, BCMS had invited Bahlman to visit
them for a period of 5 days (commencing on
28 November) with a view
to mending the fractured relationship between their companies
(following the decision by BCMS that its
staff would not interact
with Bresler as a result of what it perceived to be ‘continued
verbal abuse and destructive behaviour’
towards them) and in
order for Bahlman to make a presentation to BCMS on possible
opportunities in southern Africa which they could
jointly explore. It
was further recorded in the preamble that Bresler had unilaterally
decided not to approve the costs of Bahlman’s
trip to BCMS and
had deducted such costs from his salary for the month of November,
without prior approval and authority of Exco.
Consequently, it was
proposed that Bahlman’s visit to BCMS should be formally
approved and the reasonable costs thereof should
be borne by Xigo,
and Bahlman should be reimbursed for such costs as had already been
incurred by him. Further to this it was proposed
that Exco should
condemn Bresler’s actions in making unauthorised deductions
from Bahlman’s salary.
56. Thirdly, it was
proposed that Exco should in the exercise of its managerial
prerogative divest Bresler of his responsibility
for Xigo’s
financial and accounting functions with immediate effect, and
Grantham should take these over in the short-term.
Lastly, it was
proposed that Xigo should reverse its decision to enter into a lease
agreement with ACSA for the rental of premises
in Cape Town and
should close its Cape Town office and retrench the CT staff.
57. On 30 November
Bresler queried the proposed resolutions by Exco. He said that
insofar as he had the existing authority to approve
expenditure in
Xigo, resolutions by Exco which purported to override this ‘had
no standing’. He averred that as differing
motivations for
Bahlman’s visit to BCMS had been put forward he needed clarity
as to how the visit would benefit Xigo. Consequently,
he asked to be
provided with a copy of the agenda for the meetings which were to be
held, as well as of the business plans and
presentations which were
(to be) made, and details of the persons who would be attending. On 2
December he followed this up with
a further communication in which he
stated that Exco resolutions had never been part of Xigo’s
standard business practices.
58. On 16 December
Bahlman forwarded him a copy of the draft business plan which had
been approved by Exco on 9 November together
with a copy of the
presentation that he had made to BCMA, and reminded him that he
needed to decide whether he was going to sign
the Exco resolutions or
not. In the meantime, he was asked to give immediate effect to the
last two resolutions which had already
been approved by the majority
of Exco members and in this regard to liase with Grantham in regard
to handing over the accounting
functions and records.
59. A further copy of the
Exco resolutions which had been signed by the other members was
forwarded to Bresler on 12 December by
Pudney, together with a copy
of the ‘timetable’ for Bahlman’s visit to BCMS, and
he was again requested to advise
whether he intended to sign the
resolutions or not. This prompted Bresler to respond that he would
consider them on his return
from leave the following week, but in the
interim he wanted a copy of the YE (presumably the ‘year-end’)
presentation
which had been made to BCMS as well as (another copy of)
the business plan and Bahlman’s ‘visit report’. He
followed
this up with a further request for sundry information from
Bahlman which he (again) said he needed so that it might ‘clarify’

(sic) what benefits the visit had for Xigo.
60. What then followed
between the parties over the following two weeks or so is an exchange
of emails of which the tone was increasingly
frosty and hostile, on
all sides, and in which Bresler continued to adopt what might fairly
be described as an obdurate approach.
He took the position that the
purported resolutions were impermissible as they amounted to an
attempt to circumvent the entrenched
provisions in the shareholders
agreement and informed Bahlman that he could not implement strategic
business plans which did not
have the approval of all the
shareholders. Pudney then sent him a series of angry emails in which
he accused Bresler of misquoting
him in his exchanges with other
members and warning that if he continued in this vein he would take
legal action against him, and
he attempted to explain how resolutions
such as those proposed did not fall foul of the shareholders
agreement and had regularly
been taken by Exco since March 2016.
Pudney also accused him of mischievously misconstruing what they had
discussed in relation
to the costs of Bahlman’s visit to BCMS
in order to create discord between himself and the others. In
response Bresler said
that he did not believe debating the issues via
correspondence was constructive as it was causing Pudney’s tone
to become
‘increasingly aggressive’ and his email had
become ‘populated’ with much ‘professional legal
terminology’,
and he suggested that they should meet at his
attorneys’ offices early in January to review the
correspondence. He warned
that if they were to try and implement the
proposed resolutions in the meantime his ‘rights’
remained ‘reserved’.
61. Shortly before 10 a.m
on 20 December Scott sent out an email to the directors and
shareholders in both entities, in which he
called for board and
shareholder meetings be held on 7 February 2017 in order to deal with
a ‘multiplicity’ of issues
details of which
would be set out by him in due course. In his founding affidavit he
said that he took this step as a result
of the refusal by his
co-shareholders to engage in negotiations with him.
62. In the email he
alleged, somewhat cryptically, that many decisions were being taken
without the requisite ‘authorities’(sic)
and it was time
for governance to be ‘entrenched’, and he requested that
the parties apply their minds to what needed
to be considered in
order that an agenda could be prepared by the third week of January
2017. He also asked them to consider whether
a ‘Texas auction’
could not be an option, if they were unable to arrive at consensus on
certain matters which were
to be discussed. It is common cause that
what he was referring to in this regard was a situation where, in the
absence of agreed
values for their shareholdings, offeror members
would engage in a process whereby they would bid to buy other
member’s shareholdings
at a certain value or price, failing
acceptance of which the offeree members could in turn buy the
offeror’s shareholdings
at the selfsame price or value, in
proportion to their shareholdings.
63. Approximately 30 mins
after Scott’s email went out Bahlman sent an email to Pople and
Pudney in which he informed them
that he had obtained legal advice
that they could ‘unfortunately’ not dismiss Scott without
a disciplinary hearing,
but he would be suspending him ‘with
immediate effect’. He said that although he had received
contradictory legal advice
on this ‘the key’ was that
their process was ‘bulletproof’ and they would still get
Scott ‘out of
the business’ that day. He copied them in
on a notice of suspension and a notice of a disciplinary hearing
(with enclosed
charge-sheet) which he had prepared and suggested that
Pudney should chair the hearing, which was scheduled for 18 January
2017.
Scott’s averment that the disciplinary process against
him was launched directly as a result of his call for board and
shareholder
meetings stands uncontroverted.
64. At 12h00 the same day
Bahlman called Scott to a meeting at their offices in Illovo, which
Scott assumed was in order to review
his current work portfolio.
Scott prepared minutes of this meeting later that same day.
65. From these it appears
that after an initial discussion of their personal and family health
issues, their children and their
holiday plans Scott reported back on
the status of a number of deals that were underway. Almost an hour
after the meeting had commenced
Bahlman then asked him what plans he
had for the business and what he felt about previous discussions
between himself and Pudney
in relation to his exiting the company. He
replied that he found it difficult being in an environment where he
was not wanted,
but he enjoyed what he was doing. He said he was
happy to have a fair discussion about a parting of the ways and that
is why he
had sent out the notice earlier that day calling for a
meeting of shareholders and directors in February. Bahlman responded
by
saying there were a number of issues that he was concerned about
and a disciplinary hearing should ‘probably’ take place,

and he believed he had to put Scott ‘on ice’ until the
hearing was held. When Scott asked what he meant by this he
informed
him that he was being suspended with immediate effect pending a
disciplinary hearing which was to be held on 18 January.
He said he
was concerned about how Scott had handled certain deals and they were
lucky not to have incurred any liability arising
from them. He then
handed him the aforesaid notice of suspension and notice of the
disciplinary hearing with the charge-sheet enclosed
therein.
66. The notice of
suspension informed him that he had been suspended on (full) pay with
immediate effect as a result of his ‘actions
as highlighted’
(sic) in the charge-sheet and alleged that this was not the first
time that he had not acted in the best
interests of the company, as
had previously been pointed out in the written warning which was
issued to him on 5 August. He was
further informed that his access to
company email accounts and all company information, systems,
processes, staff and customers
had been terminated and he was to hand
in his access cards and keys.
67. The notice of the
disciplinary hearing set out 5 charges which ranged from alleged
gross insubordination and gross negligence
(alternatively gross
dereliction of duty) to gross dishonesty. In substantiation of these
offences it was alleged that 1) he had
breached company policies by
instructing a business analyst (one Barford) in September 2016 to
consult with one of the company’s
clients in Durban for the
purpose of preparing a financial package for prospective buyers 2)
when questioned by Bahlman as to why
he appointed the analyst he had
maintained that there had been a misunderstanding by the analyst as
to what he had been asked to
do 3) he had failed to take timely and
active steps to maintain and protect the company’s reputation
as a result of which
a client had registered their dissatisfaction
and sought to claim a refund 4) a number of business risks had
eventuated due to
inactivity and lack of communication on his part in
regard to certain projects he was managing 5) he had taken a
‘significant’
amount of time off from work during 2016
without the necessary leave being granted therefor and 6) he had
failed or refused to
provide Bahlman with certain correspondence or
documentation which had been requested from him.
68. On the very same day
that Scott sent out a request for board and shareholder meetings to
be held in February 2017, Pople sent
out a counter notice that a
directors meeting would be held on 10 January. According to the
accompanying draft resolution which
was to be proposed at that
meeting, all Exco resolutions which had been taken previously were to
be ratified and it was to be resolved
that Xigo would in future be
managed by Exco, instead of its Board.
69. Given that Scott had
already requested meetings for 7 February (at which the proposed
resolutions could also be tabled) Bresler
requested an explanation
for the urgency of the meeting Pople had called. He pointed out that
he would still be on leave on 10
January and said he believed that it
would be prudent for them to wait until he had obtained legal opinion
on the validity of the
proposed resolutions (which according to him
were at odds with the entrenched provisions in the shareholders
agreement), before
they proceeded to take a vote on them. He pointed
out that they were in the ‘throes of a buy and sell discussion’
of
their respective shareholdings as a result of a dispute. He asked
that, in the event that they were nonetheless minded to push ahead

with the meeting and to table the resolutions regardless, they should
advise him whether they would be ‘rescuing’ (sic)
ie
recusing themselves from voting on the extension of the BCMS contract
given the apparent conflict of interest.
70. On 23 December Scott
pointed out that he had requested that the board and shareholder
meetings be held in February as he was
also going to be on leave
until mid-January. In relation to the resolutions which were being
proposed he too sought further information.
He asked for a copy of
the initial resolution which had been taken at the outset, approving
the formation of Exco and setting out
its powers and authority, and
enquired on what basis certain of its members had exercised executive
authority while serving on
it, even though one of them (Pople) was a
non-executive director of Xigo, and another (Grantham) was not even a
director of Xigo.
He said that in his view the creation of Exco was
contrary to provisions of the shareholders agreement.
71. On Xmas eve Bresler
noted that he had informed Pople of his objections to the meeting
which was proposed for 10 January and
the proposed resolutions which
were to be tabled and had formally requested a postponement which had
been refused. He asked Pople
to circulate the minutes of the earlier
meeting which they had held on 9 November at which the proposed
resolutions had been discussed.
He pointed out that neither he nor
Scott or another director Deon Wolfaardt, had been invited to attend
the meeting and they had
not had the benefit of being present when
the proposed resolutions had been considered.
72. On 26 December Pople
informed Scott that he had no ‘ulterior’ motive in
calling the meeting for 10 January. He said
the reason why he had
chosen that date was simply because he would be in Johannesburg at
the time and wanted to be present. He
said it was ‘coincidence’
that his notice calling for the meeting had gone out on the same day
that Scott had been
suspended, and that he found it ‘inconceivable’
that Scott did not know that since March 2016 management of the
company
had been effected by Exco, which consisted of the ‘majority’
of the directors. He alleged that s 72 of the Companies
Act read with
article 6.8 of the memorandum of incorporation made provision for the
establishment of committees as the shareholders’
agreement was
silent on this aspect. In his view the shareholders agreement was
thus of ‘no consequence’.
73. On 26 December Scott
addressed a lengthy and important email to Pople in which he raised a
number of legal issues pertaining
to the legality and validity of
Exco and of the numerous decisions which had been taken by it. He
pointed out that in terms of
clause 6.6 of the shareholders agreement
the board was the entity empowered to manage the company, and its
day-to-day management
was to be undertaken by the managing director
who was appointed by the board. As he understood it  s72 merely
provided that
the board of a company may delegate some of the
authority and functions which reside in it to a committee, but the
provision could
not be construed to allow a board to delegate its
entire power and authority to manage a company to a committee. In his
view that
would amount to an abdication of authority as opposed to a
delegation of part thereof. He pointed out that when he had been
requested
not to attend board meetings it was on the understanding
that Exco would not act in place of the board and would not usurp any
of the responsibilities of any shareholder or director. He again
queried on what basis Grantham, who was not a director of Xigo,
was a
member of Exco. He also asked to be provided with information as to
the proposed terms and ambit of the partnership agreement
they
envisaged entering into with BCMS and said that without being
properly informed in this regard it was not possible for shareholders

or directors to properly consider the proposed resolution pertaining
to BCMS.
74. Bresler, in turn,
again reiterated that both the Companies Act and the shareholders
agreement would be breached should the resolutions
proposed be
adopted. He too contested Pople’s interpretation of s 72 which
he said was intended to deal with the establishment
of committees
such as audit and ethics committees, but did not authorise the entire
management of the company to be taken over
by a committee instead of
by its board of directors. He said he also felt it was important to
place on record that Pople’s
attempts to steer the company in
favour of an extension of their contract with BCMS to the exclusion
of others, and to exit Scott
on disciplinary grounds, would undermine
the ‘buy and sell’ negotiations they were currently
engaged in, as well as
any efforts to find a third party who might
acquire his and Scott’s shares. He accordingly again proposed
that the resolutions
which were to be proposed be deferred until they
had received legal advice as to their validity. The following day he
sent a further
communication to Pople informing him that in his view
they were ‘treading on dangerous ground’ as the entire
process
seemed to be a bid to take advantage of a majority board
position in order to compromise the entrenched rights of
shareholders.
75. Notwithstanding the
numerous objections and queries which were raised by Scott and
Bresler, on the morning of 28 December Pople
resolutely informed all
the parties that the board meeting would be going ahead on 10 January
and the proposed resolutions would
be tabled and voted upon.
76. On 30 December
Bresler suggested to Pople (somewhat cheekily) that he use the
January meeting to ask Bahlman to step aside as
MD and let him get
back into the position, as had apparently happened in 2013, and when
Pople curtly rejected his suggestion he
responded that although they
had a ‘good run’ he agreed that it was ‘time to
part ways’ and to this end
he was happy to sell his shares or
to buy out Pople’s, if that was what he preferred.
77. On 7 January the
respondents (excluding Scott and Bresler) held meetings with
representatives of BCMS and two days later Pople,
Grantham and
Bahlman held a report-back meeting with Xigo and Quickberry staff
(once again excluding Scott and Bresler).
78. On 10 January the
meeting of the board of Xigo took a number of resolutions based ‘on
at least a single majority’(sic).
In the first place the
meeting resolved (per Pudney, Pople and Bahlman) that all previous
resolutions taken by Exco on the basis
of a simple majority were to
be ratified and approved. Secondly, it was resolved that the company
should enter into negotiations
with BCMS in regard to   a
renewal of their partnership agreement. Finally, it was resolved that
management of the company
would be ‘vested’ in Exco
during 2017, purportedly in terms of s 72 of the Companies Act.
79. Two days after these
resolutions were passed Bahlman reminded Bresler that he had not yet
given effect to the earlier resolutions
which had been adopted by
Exco in relation to reimbursing the expenses he had incurred in his
visit to BCMS in November 2016, and
in relation to his handover of
the financial and accounting records to Grantham, and he was reminded
that a failure to comply with
these resolutions would constitute an
act of gross insubordination, which would be dealt with
‘appropriately’.
80. Scott’s
disciplinary hearing was held before Grantham as Chairperson on 18
January, at which time he was apparently found
guilty on all the
charges which were preferred against him, even though each of them
had both a main as well as an alternative
count, and even though no
formal finding to this effect can be found, either in the notes of
the proceedings or in the Chairperson’s
notes on ‘assessment’.
Although a more detailed evaluation as to the significance thereof in
the broader context of
the matter as a whole is set out below, it is
necessary at this juncture to make some brief comments on the form
and content of
the proceedings.
81. According to the
notes of the proceedings the only witnesses who were called were
Barford and a staff member Alex
Crellin. For the rest it
appears that the principal ‘outline’ of the company’s
case against Scott, such as it
was, was provided by Bahlman who also
acted as the so-called initiator of the charges.
82. It is very apparent
that much of what was said by Bahlman during the proceedings
constituted little more than thirdhand hearsay
and his own subjective
contention of what he alleged was client dissatisfaction with Scott.
83. As far as Barford is
concerned, he simply ‘testified’ that Scott had asked him
to oversee the ‘compiling’
(sic) of a client’s
accounts, which were in a mess, in order that they could obtain the
necessary proof and substantiation
of certain expenses, for the
purposes of a presentation which was to be made to prospective
parties. It appears that he and Crellin
complained to Bahlman about
having to do this, as they believed it was not a good use of
Barford’s time. Crellin felt that
the process of ‘collecting
and filing slips’ was essentially the work of an auditor and
not an analyst. How this evidence
justified a finding on the relevant
charges viz that by giving the instruction which he did to Barford
(as ill-advised and as cost-inefficient
as it might have been) Scott
breached company policy (charge 1) or somehow misled Bahlman as to
what he had asked Barford to do
(charge 2) is not evident at all from
the Chairperson’s notes of the evidence or his assessment of
the proceedings.
84. In addition, it
appears that over and above the few charges which were listed in the
charge-sheet Bahlman proceeded to go much
further by providing a
‘generic representation’ (sic) in regard to a number of
issues which he alleged had come to
light in discussions with
clients, even though Scott was not charged in respect of these
infractions. As the name of the alleged
clients he referred to was
redacted in the notes it is not possible to properly evaluate whether
or not the various statements
made by Bahlman throughout the course
of the proceedings correlated in any way with the charges which were
preferred against Scott,
but even a cursory comparison thereof shows
that what was presented went far beyond what was alleged in the
charge-sheet. And curiously,
after each and every utterance
pertaining to these alleged clients was made by Bahlman, Grantham
simply recorded that Scott ‘provided
no evidence to the
contrary’, as if the hearing was run in a piecemeal
charge-by-charge fashion and there was some sort of
onus on Scott,
even though what had been presented by Bahlman was little more than
his own personal, subjective interpretation
as to what he had
allegedly heard from third parties who were not called to confirm
such allegations before the disciplinary hearing.
As such these
utterances hardly constituted ‘evidence’ which Scott
could have been expected to refute. In fact, all
that they served to
do was to graphically illustrate why hearsay evidence is generally
unreliable and for this reason is ordinarily
of little value, even if
it is properly admitted. It is common cause from the numerous emails
referred to above that Bahlman had
an axe to grind with Scott, and it
would accordingly have been very easy and convenient for him to make
sweeping and unsubstantiated
allegations of client dissatisfaction,
when in fact this was not the case, or was grossly exaggerated. As
Scott pointed out in
his affidavit, none of the alleged complaints or
issues which clients had with him were even mentioned in the
portfolio review
meetings which were held with him on 17 August and
22 September 2016, and I was similarly unable to find anything of
substance
in this regard in the minutes of the portfolio review
meeting which was held with him by Bahlman on 20 December 2016, just
before
he was suspended. The generally poor quality of what was put
forward by Bahlman in lieu of hard substantiation of the allegations

in the charge-sheet is encapsulated in the ‘general statement’
(sic) that he made that a number of ‘clients were
relatively
unhappy with Scott or at best unfazed’ (sic) by the change from
him to another deal leader.
85. In his single-page
assessment of the proceedings the Chairperson rightly pointed out
that although Bahlman had declared that
for each of the charges there
was ‘some form of evidence’ in most instances he did not
provide anything over and above
the allegations which were set out in
the charge-sheet. As far as charges 1 and 2 were concerned the
Chairperson pointed out that
what the witnesses testified to ‘did
not exactly match’ the allegations contained in the charges. As
far as charge
4 was concerned, once again, the Chair pointed out that
Bahlman ‘did not provide detailed evidence’ regarding the
charge
and had simply stated that Scott had taken ‘extensive’
time off from work without informing other staff, and it is notable

that not only were no attendance records provided or even referred
to, but not even an indication of the alleged dates when Scott
had
been absent without leave was provided. However, notwithstanding
these material defects in relation to both the weight and
quality of
the evidentiary material which was put before him the Chair was of
the view that because Scott had produced ‘little
to no counter
evidence’ (sic) and had not cross-examined the witnesses or the
‘evidence’ (sic) he had ‘little
choice’ but
to accept Bahlman’s statements and to ‘agree’ with
the charges as stated, and to recommend
a sanction of dismissal. In
the circumstances it does not take a lawyer with even a modicum of
knowledge of labour law to appreciate
that the findings and
conclusions of the Chairperson were wholly inadequate and materially
and fundamentally defective, and the
hearing as a whole was a
travesty.
86. As was pointed out in
the introduction, the day after Scott’s disciplinary hearing
was held Bresler launched proceedings
for the winding up of both
companies.
87. Between 2 and 9
February Bahlman carried out a retrenchment exercise in respect of
the Cape Town office staff complement, and
on 9-10 February the
respondents filed their answering affidavits in the winding up
applications, together with their counter-applications
for orders in
terms of s 163.
88. On 17 February Pople
gave notice of a meeting of directors of Xigo which was to be held on
8 March, at which it was to be proposed
that Bresler be suspended
with immediate effect pending a disciplinary enquiry ‘into
whether or not the company should terminate
his employment’ (it
will be noted there wasn’t even a cursory attempt to state that
the suspension or the disciplinary
hearing was being effected on the
grounds of any alleged misconduct), and removing his authority to act
as a signatory and guarantor
on the company’s bank accounts. In
addition, it was to be proposed that the company launch 1) an
application in terms of
the Companies Act declaring Bresler to be a
delinquent director and 2) investigations in regard to and (if
appropriate) actions
for damages incurred by the company arising out
of the winding up application and/or for ‘invasion of privacy’
(sic)
and/or 3) the launch of criminal charges against Bresler
including charges of fraud (allegedly for directing mandates away
from
the company (sic)) and/or charges for allegedly violating the
Communications Related Information Act 70 of 2002.
89.
Once again no attempt was made to even suggest on what basis such
investigations, applications and/or actions were to be brought
and
the respondents’ answering affidavits are completely silent as
far as the basis for the proposed resolutions authorising
these steps
are concerned. One is left to speculate that the proposed
investigations and/or actions concerning the alleged ‘loss
of
privacy’ and violation of Act 70 of 2002 had to do with the
trove of compromising emails which Bresler had managed to
lay his
hands on, and which he annexed liberally to his affidavits in support
of the winding up applications. On what basis the
company had a right
in law to sue for breach of privacy, which traditionally is a
personal right, was also not dealt with at all.
90.
On 3 March 2017 Bresler launched an urgent application
[11]
in which he sought an order interdicting the taking of the proposed
resolutions pertaining to his suspension. On 7 March an order
was
made
[12]
by agreement between
the parties suspending the implementation of any resolution in this
regard pending the outcome of Bresler’s
application in relation
to Xigo.
[13]
Two days later,
on 9 March Scott issued his applications for relief in terms of s
163. As at that date he was still in limbo following
his suspension
almost 3 months earlier. On 31 March Bahlman and Pudney resigned as
directors of Xigo.
The law
91.
The central question which I am required to determine in relation to
the statutory provisions on which the applicants seek to
rely
[14]
is whether the business of the companies or the powers of any of
their directors were conducted or exercised in a manner which
was
‘oppressive or unfairly prejudicial’ to them or which
‘unfairly disregarded’ their interests. As was
pointed
out by the Supreme Court of Appeal in
Grancy
[15]
much of the jurisprudence in regard to these terms is derived from
the interpretations that were afforded to them in relation to

predecessor legislation, being s 252 of the 1973 Companies Act
[16]
and s 111
bis
of
the Companies Act of 1926.
[17]
92. S 111
bis
provided that where a member of a company complained that its affairs
were being conducted in an oppressive manner and the underlying
facts
justified a winding up on the grounds that it was just and equitable,
but this would unfairly prejudice that member (or other
members), the
court could, by way of an alternative and ‘with a view to
bringing to an end the matters complained of’
make such order
as it saw fit to remedy the situation, including an order that the
shares of a member be purchased.
93.
In seeking to interpret this provision in
Aspek
Pipe
[18]
Tebbutt AJ (as he then was) set out
[19]
a useful survey of the meaning which had been afforded to conduct
which was defined as ‘oppressive’, in various decisions

in the UK and in our courts. He pointed out that it ranged from
conduct which was ‘unjust or harsh or tyrannical‘
[20]
to that which was merely ‘burdensome, harsh and wrongful’
[21]
or which involved a  lack of probity or a failure to adhere to
the ‘standards of fair dealing’
[22]
in regard to a company’s affairs or the ‘conditions of
fair play’ on which every shareholder is entitled to rely.
[23]
He held that such conduct was present where shareholders (who in
casu
were in the majority) used their greater voting power unfairly in
order to ‘prejudice’ another, or acted in a manner
which
did not allow that shareholder ‘to enjoy a fair participation’
in the affairs of the company.
[24]
94. S
252 of the 1973 Act did away with the requirement that the remedy
serve only as an alternative to a winding up order and it
was thus no
longer dependent on the underlying requirements for it, and its ambit
was extended beyond oppressive conduct
[25]
to any conduct or omission which was ‘unfairly prejudicial,
unjust or inequitable’ to the member of a company. However,

inasmuch as the court was still empowered to exercise its powers to
grant appropriate relief ’with a view to bringing to
an end the
matters complained of’
[26]
it was nonetheless still generally seen as the first alternative to a
winding up order, inasmuch as such an order was understood
to put an
end to a company’s commercial existence. In
Irvin
& Johnson Ltd v Oelofse Fisheries
[27]
it was assumed that because of this limitation it would not be
a remedy which would be available once a company had been
finally
wound up.
95.
But, in
Scottish
Co-operative
[28]
the House of Lords held
[29]
with reference to a
similarly worded provision in English law that although the words of
the section suggested that the legislature
had in mind some remedy
whereby the company might continue to operate, instead of being wound
up, it would be wrong to infer therefrom
that the remedy was limited
to situations where the company was still in active business:
‘
The
object of the remedy is to bring “to an end the matters
complained of”, that is the oppression, and this can be
done
even though the business of the company has been brought to a
standstill. If a remedy is available when the oppression is
so
moderate that it only inflicts wounds on the company, whilst leaving
it active, so also it should be available when the oppression
is so
great as to put the company out of action altogether.’
96.
In endorsing this dictum in
Louw
[30]
the Supreme Court of
Appeal accepted, without deciding so, that the grant of a winding up
order was in itself no bar to an order
for relief against oppressive
conduct being granted in terms of s 252. I will return to this aspect
in due course.
97.
With the enactment of s 163 of the 2008 Companies Act protection
against such conduct was extended to directors as well as
shareholders
[31]
and relief
was made available not only in circumstances where a company had
acted in an oppressive or unfairly prejudicial manner,
but also where
a ‘related person’ had done so, or where the powers of a
director or ‘prescribed officer’
had been exercised in
such a manner, or as a result of which a shareholder or director’s
‘interests’ had been
‘unfairly disregarded’.
In addition, liability has been extended to encompass not only acts
of commission, but also
to circumstances where a company or any such
person has failed ie omitted to act, as a result of which the
consequences referred
to have occurred. In the circumstances it is
clear that the legislature’s intention was to widen the scope
of the remedy.
In
Aspek
Pipe
[32]
the court held that a
liberal construction should be adopted when interpreting the
statutory provisions which provide for the remedy
against such
conduct.
[33]
98.
Before turning to consider whether any of the shareholders or
directors acted in a manner which falls within the purview of
s 163,
some final remarks as to the law on the subject need to be made. In
the first place, I am mindful of the well-established
principle of
the supremacy of the majority, which is fundamental to our company
law and the proper running of companies. According
to this principle,
by becoming a shareholder in a company a person undertakes to subject
himself to and to be bound by the rule
of the prescribed majority of
shareholders, provided their decisions are in accordance with the
law, even though the majority’s
decisions may adversely affect
his rights as a shareholder.
[34]
99.
Secondly, one must be mindful of the fact that it is the board of a
company which is empowered to manage its affairs and to
direct the
operation of its business from day to day, and not its shareholders,
and it is well-established that neither mere dissatisfaction
with the
way the board manages a company nor loss of confidence in it or some
of its directors
per
se
entitles a shareholder to interfere in terms of s 163, under the
guise of seeking protection.
[35]
Neither does disharmony or deadlock between directors or opposing
sets of shareholders, unless such lack of confidence, disharmony
or
deadlock arises as a result of oppressive conduct, or conduct which
is unfairly prejudicial to, or which unfairly disregards
the
interests of, a shareholder or director.
[36]
A court should thus also be careful when evaluating the conduct which
is complained about, not to substitute its own ‘business

judgment’ for that of the functionaries entrusted with that
power in terms of the company’s constitution.
[37]
100.
Finally, it may be pointed out that neither the pursuit of personal
profit nor of any pecuniary advantage on the part of an
oppressor
need be shown in order to successfully rely on the provision in
question,
[38]
which requires
an objective and not a subjective determination. In the circumstances
the underlying motive for the conduct in question
is not necessarily
relevant to a consideration of whether or not relief should be
granted, unless it goes to show a lack of probity
or unfair dealing,
or a pattern of conduct. As was explained in
Aspek
[39]
primarily the ‘result rather than the motive is the material
thing and it is not the motive for the conduct but the conduct
itself
to which the Court must look and the effect which it has’ (sic)
on the member (or director).
The law applied
101. In my view, if one
steps back and considers the history of the deterioration in the
relationship between the applicants and
their co-shareholders and
directors as outlined above it was characterised by egregious
oppressive conduct to the applicants, which
was both unfairly
prejudicial to them and unfairly disregarded their interests as
shareholders and directors.
102. In arriving at this
conclusion I make full allowance for the fact that the applicants’
co-shareholders and directors
may well have had cause for
dissatisfaction in regard to the way in which both of them conducted
themselves in relation to the
businesses of the two companies, and
that they may well have been a major cause of the breakdown in
interpersonal relationships
in what were essentially small ‘domestic’
entities, run almost as quasi-partnerships. Bresler, in particular,
was the
subject of a fairly vituperative attack by his colleagues. He
was variously described in the answering affidavits as abrasive,
ascerbic, antagonistic, aggressive, confrontational, condescending
and lacking managerial and negotiation skills.
103. Although he
strenuously denied being the fly in the ointment as far as BCMS was
concerned and sought to blame the fracture
in the relationship
between it and Xigo on the incompetence of its own staff, there are
objective indications in the correspondence
that was exchanged
between the two companies, particularly that emanating from BCMS,
that it was indeed his obnoxious behaviour
which caused ructions in
their inter-company dealings. This is borne out by the fact that a
number of BCMS’ staff refused
point-blank to have any dealings
with Xigo, if he was involved. In blaming him for the deterioration
in their relationships the
respondents pointed out that because he
had set his face against BCMS he tried to frustrate their attempts at
repairing the damage
he had caused and was opposed to their decision
to extend their dealings with BCMS by renewing their contractual
relationship.
In the exercise of his authority as financial director
he spitefully refused to allow Bahlman’s travel expenses to
visit
BCMS to be paid from the company’s coffers, and kept on
obtusely asking them to motivate why the company should pay for such

expenses, when they were clearly incurred in the interests of the
company’s business.
104. At the end of
December 2016 he caused Pople to be removed as an approved and
authorised signatory on Quickberry’s bank
account and in
January 2017 he allegedly breached company confidences by informing
staff of the Cape Town offices of Xigo that
they were going to be
retrenched. After he had launched his winding up applications, which
had a negative and depressing effect
on both businesses, he allegedly
set about informing staff members that there was a danger that they
would not be paid what was
due to them, causing anxiety and a drop in
morale. He was accused of deliberately refusing to agree to salary
increases or the
payment of bonuses and creating a ‘toxic’
working atmosphere at Quickberry which resulted in the loss of key
personnel.
Whilst the litigation was ongoing he allegedly took up
employment with a competitor, Benchmark International M&A
Advisors,
and a number of Xigo’s staff left to join him.
105. In addition, the
respondents claimed that he was ‘the architect’ (sic) of
Scott’s demise and abused him,
as he could not tolerate him.
There is however little if any evidence of this in the voluminous
correspondence between the shareholders
and directors and, if
anything, it appears that on more than one occasion Bresler in fact
attempted to stand up for Scott. He repeatedly
cautioned them from
riding roughshod over Scott’s right to be paid out the fair
value of his shareholding.
106. As far as Scott is
concerned the respondents’ complaints were more muted. They
appear to have become frustrated by what
they perceived to be a
lackadaisical and slapdash approach to his responsibilities and
duties as deal leader. It appears as if
he let a number of deals
fester away instead of closing them expeditiously, thereby exposing
the companies to potential loss, and
there clearly was some
dissatisfaction in regard to the standard and quality of service he
was rendering to clients.
107. But that said, all
in all, although the respondents claimed to be the ones who were the
victims of oppressive and unfair conduct
on the part of Scott and
Bresler, within the meaning afforded to those terms as set out in the
cases I have referred to above,
in my view this was not established
at all and any shortcomings in regard to their failures, and the
negative behaviour they were
accused of, was ascribable either to
their managerial or personal deficiencies or to their frustrations
at, and reactions to, what
was being done to them by the respondents.
108. It is evident that
(motivated no doubt by their frustrations with the applicants) Pople,
Bahlman, Pudney and Grantham effectively
decided to take matters into
their own hands and set about taking control of the two entities in
order that they could get rid
of both Bresler and Scott, who they
considered were no longer a fit for what they had in mind as far as
the direction and future
of the businesses were concerned. Initially
it appears they only envisaged getting rid of Scott, but as the
relationship with Bresler
also progressively worsened they decided
that he too had to go.
109.
The difficulty which they had was that Bresler and Scott together
held a combined 60% majority shareholding in Xigo and a 40%

shareholding in Quickberry. Fortunately, the shareholders agreements
provided
[40]
that if either of
them was to leave the employ of the companies (except to take up a
position as non-executive directors), they
would thereby trigger the
sale of their equity, with effect from the day preceding the date of
their ‘departure’. However,
divestment of the
shareholding was not immediate and the shareholders agreement also
provided for a lengthy and cumbersome process
in terms of which the
shares would be deemed to have been offered for sale at fair value
(as determined by two independent auditors),
which offer would lie
open for acceptance by any of the other shareholders for a period of
12 months. If at the expiry of such
a period the offer had not been
accepted the departing shareholder would then be at liberty to offer
his shareholding to a third
party. The respondents astutely realized
that in a situation where either Scott or Bresler was forced to leave
they would have
the upper hand, as far as their respective bargaining
positions were concerned, as they could drag out the process of
acquiring
their shares for a full year before electing to accept or
reject their deemed offers, and amongst themselves they spoke about
using
this period of time to put pressure on the applicants to sell
their shareholdings for a reduced value.
110. The plan which they
adopted to give effect to their aims was to build up a case of sorts
against Scott (presumably because
he had been a source of irritation
for longer and was an easier and softer target), which they could use
as grounds to fire him
by way of a disciplinary hearing, thereby
triggering the sale of his shareholding, part of which they envisaged
could be taken
up by BCMS and the remainder of which Pople was
interested in acquiring. Although they claimed they wanted to pay
Scott fair value
for his shareholding this is belied by a number of
statements they made in which they clearly said they wanted to pay as
little
as possible for his shareholding, and the  strategy they
adopted of deliberately putting him under financial pressure, by
calling for him to contribute towards a shareholder loan for Xigo,
whilst at the same time withholding the declaration of a dividend
in
Quickberry. The idea clearly was that faced with a disciplinary
hearing and a subsequent dismissal, whilst at the same time
being
placed under financial pressure, he would be motivated to offer his
shares to them at a heavily discounted price.
111. The next step was to
‘performance manage’ Bresler out of Xigo, by making his
working conditions intolerable. To
this end, they proposed closing
down the Cape Town office where he was based, thereby compelling him
to commute to and from their
principal place of business in
Johannesburg whilst at the same time taking away his control of the
purse strings, by removing his
financial functions from him, even
though he was still the financial director. They thought that this
combination of inconvenience
and humiliation would do the trick, and
forced to work under such circumstances it would not be long before
he too decided to leave.
Bresler was excluded from all
decision-making in relation to the closure of the Cape Town office,
including the costings pertaining
thereto (which once again one would
have expected he would have been involved with as financial
director), and was simply informed
of it when it was a
fait
accomplit
.
112. Scott was
marginalized and excluded from participating in the affairs of the
companies from early in 2016, when it was decided
by Bahlman, Pople,
Pudney and Grantham (with Bresler initially acquiescing) that
management of both entities would effectively
no longer be carried
out by their boards, but by fiat of a single executive committee
which was established for this purpose. In
my view, in doing so those
involved acted contrary not only to the memorandums and the
shareholders agreements of both companies,
but also contrary to
well-established principles of company law and provisions of the
Companies Act, notably s 72 thereof, which
although it allows for a
committee to be set up to perform certain functions as may be
delegated to it by the board, does not allow
for complete executive
control by the board to be subverted and rule by committee to be put
in place, instead.
113. In banding together
as a group of shareholders and directors who were likeminded in their
objectives, the lines became blurred.
In this regard for example
Pople, who was the Chair of the Xigo board, assumed executive
authority on Exco, as did Grantham who
was the MD of Quickberry but
not a director of Xigo. Nonetheless, both of them made executive
decisions in respect of a number
of matters involving both companies.
At the end, not only Scott but Bresler too was excluded from active
participation in Exco
and the decisions it took.
114. Not only were both
applicants excluded from their right to participate in the affairs
and the running of both companies, but
despite clear attempts on
their part to try and start an active process of engagement in
relation to a valuation of the equity
in both entities and their
share thereof they were stonewalled by the respondents. Bresler in
particular was very active in trying
to get the respondents to put
forward an acceptable offer for his shareholding, but nothing was
forthcoming (notwithstanding his
indication to Pudney already in
November 2016 as to what he was looking at in terms of a figure),
because the respondents clearly
thought they would play the long game
with a view no doubt to also getting him to sell at a discount.
115.
It is well established law that excluding a shareholder from
participation in the affairs of a company of which he is a member
[41]
whilst at the same time
preventing him from extricating his shareholding for fair value, or
not engaging him with a view to a reasonable
offer for his
shareholding,
[42]
is
oppressive and unfairly prejudicial conduct.
116.
I am mindful that the disciplinary process to which Scott was
subjected was directed, supposedly, at his alleged failure to
perform
satisfactorily as an employee and in this regard the circumstances
giving rise to his dismissal would ordinarily not be
relevant as to
whether or not he was oppressed or prejudiced unfairly as a
shareholder, or director.
[43]
However, it has been pointed out in a number of Canadian cases that
where the  interests of an employee are closely intertwined
with
his interests as a shareholder and his dismissal is part of a
‘larger’ pattern of conduct designed to exclude
him from
participation in the company, it is clearly permissible and indeed
necessary to have regard thereto.
[44]
117.
Given that the strategy which was adopted by the respondents included
bringing Scott before a disciplinary hearing and then
firing him as
part of a broader pattern of conduct designed to force him out of the
company, not only as an employee but also as
a shareholder, the
circumstances pertaining to the hearing are clearly relevant to a
consideration of whether or not they formed
part of the oppressive
conduct which was directed at him. In
Barnard
[45]
this court held
[46]
that
procedural unfairness and irregularities in relation to the convening
of a shareholders’  meeting in order to remove
the
applicant as a director, as well as in relation to a disciplinary
hearing which was subsequently convened and which led to
his
dismissal, could be considered in substantiation of his allegation
that the affairs of the company were being conducted in
a manner
which was unfairly prejudicial, unjust or inequitable to him.
118. As I pointed out
above, Scott’s hearing itself was substantially flawed and
materially defective, on a number of grounds.
Not only was the
‘evidence’ insufficient to sustain a finding on the
charges, but the presiding officer also misdirected
himself in
numerous respects, not least in regard to how he handled the question
of onus and his evaluation of the ‘evidence’.
Even
Scott’s prior suspension was patently defective in that he was
never given any opportunity, contrary to the fundamental
tenets of
the
audi alteram partem
principle, to provide reasons for why
he should not be suspended, before he was informed thereof. Bresler’s
intended suspension
would also have fallen foul of this principle,
had he not interdicted it from being put into operation. I may add
that even were
sufficient, reliable evidence to have been properly
put before the hearing, it is doubtful whether or not it could
reasonably have
led to a sanction of dismissal. In this regard it is
a well-established principle of labour law that where an employee is
guilty
of not performing according to the level or requirements of a
particular job, not because of any misconduct on his part but rather

because of an inadequacy, the ‘sanction’ which is to be
imposed is to be a corrective and graduated one, designed to
help him
raise himself to the level or standard required. Dismissal would
ordinarily only be permissible once, and if, he had thereafter
failed
to rehabilitate himself and his subsequent performance had again not
come up to scratch.
119. In the result, and
for the reasons I have referred to, in my view it is clear that both
Bresler and Scott have made out a case
for the relief which they
sought. They were both the victims of the abuse of the power and
control which the respondents wielded
over the two entities.
The appropriate
remedies
i)
The functus officio
point
:
120. Although I accept,
on the strength of the decision in
Louw,
that the liquidation
of Xigo does not
per se
necessarily constitute a bar to an
order that Scott or Bresler’s shareholdings should be bought
out by their co-shareholders,
the difficulty which presents itself is
that an order in these terms is being sought by Bresler by way of a
claim for alternative
relief, pursuant to an amendment to the notice
of motion in the Xigo application which was effected in July 2017,
after the grant
of the principal relief which was sought.
121. In my view this is
both conceptually and legally unsound. In the first place, it seems
to me, as a matter of logic, that if
an applicant brings an
application in which he or she asks only for certain (principal)
relief, in this case a winding up order,
without any alternative
claim being attached thereto, and then succeeds in getting it, that
is the end of the matter and they have
nothing left against which
they can later put in an alternative claim. One can surely only ask
for alternative relief if there
is still some principal relief or
claim outstanding, if that has gone because it has been awarded or
settled, on what basis can
one later seek to put in an alternative
thereto?
122.
In the second place, to allow such an alternative at this stage would
violate the
functus
officio
doctrine, which it has been said, is one of the essential mechanisms
by which the law seeks to give expression to the principle
of
finality.
[47]
123.
It is well established in our law
[48]
that once a court has duly pronounced a judgment or order which is
final in effect, it has no authority to alter, supplement or
correct
it, save in respect of accessory or consequential matters that flow
from it ie such as orders for costs or interest, or
the correction of
typographical,
[49]
arithmetical or other errors, or orders by way of clarification
necessary to give proper effect to its ‘true’ intention.

The reason for this is that upon making its pronouncement the court
has exhausted its powers: its jurisdiction having been fully
and
finally exercised, its authority over the subject-matter has
ceased.
[50]
In my view once
this court granted a final winding up order for Xigo at the instance
of Bresler on 15 June 2017 it was
functus
as far as his application was concerned and it cannot now entertain
the application for alternative relief which has been brought
by him
in relation to Xigo. As far as the remaining applications by him and
Scott are concerned there is no such impediment.
ii)
The terms of a
buy-out order
:
124.
Fortunately, this is not a matter where the court needs to decide
between competing claims for orders that shareholders should
buy one
another out, as second and third respondents withdrew their
counter-applications in this regard. The parties are in fact
agreed
that if there is to be an order directing a buy-out, it should be one
directing second and third respondents to acquire
the applicants’
shareholdings. That brings me to the question of what the appropriate
terms of any order which might issue
for the purchase of shares
should be. In matters such as these the remedy proposed should, as
far as is practically possible, effect
an expeditious,
straightforward and inexpensive termination of the relationship
between the parties, in a manner which will avoid
the potential for
further disputes
[51]
and it
must be fair to both sides,
[52]
and the court is required to consider not only the interests of
‘warring’ shareholders, but also those of any
shareholders
who may have stood apart from the fray, as well as the
best interests of the companies concerned.
[53]
125.
Inasmuch as s 163(2) provides that the court may make any interim or
final order it considers ‘fit’ it has been
held that
these are words of wide import which reflect that a court has a wide
and unfettered discretion
[54]
to make such order as it considers to be fair and equitable in the
case before it, in order to ‘put right and cure’
the
unfair prejudice which the oppressed shareholder may have suffered.
126.
What has to be determined by the court is what would constitute a
fair price
[55]
for the
applicants’ shareholdings, which must of necessity depend on
the circumstances before me, as set out above. It has
been held, as a
general principle, that a fair price should represent the value the
shareholdings would have had ‘if there
had been no unfair
treatment’.
[56]
In
arriving at such a determination, it is not necessary that I conduct
a valuation exercise of the kind which would ordinarily
be performed
by an accountant or auditor, in accordance with the accepted
methodology which such professionals commonly make use
of. In this
regard Grant Thornton explained in their report that there are 3
recognized methods of valuing equity in a corporate
entity viz an
income-based valuation (which quantifies the capitalized net present
value of the future income stream ie cash flow
which would accrue to
the entity, which is then discounted at a rate appropriate for the
risks associated with such income stream),
a market-based valuation
(which seeks to determine the fair market value of the entity
concerned in terms of certain earnings or
revenue multiples), and a
net asset valuation (which uses the current value of a company’s
tangible net assets as the key
determinant of fair market value). As
I indicated previously, Grant Thornton were of the view that the
income-based ie discounted
cash flow valuation method was the
appropriate one to adopt in the case of the two entities in this
matter.
127. The parties have
agreed that if I were minded to make a buy-out order it can be left
to an independent, registered and practising
chartered accountant to
make such a valuation, in accordance with such accepted valuation
methodology as is set out in the Grant
Thornton report, and in
accordance with a directive which I issued in this regard they have
favoured me with proposed draft orders
which set out terms of
reference for the exercise which must be carried out by such valuer.
In most material respects the parties
were
ad idem
as to what
those terms of reference should be.
128. What has not been
agreed upon between the parties, and has not been set in the Grant
Thornton report is the relevant date at
which fair value should be
pegged by the appointed valuer. Grant Thornton point out that the
determination of the date in valuation
matters is usually driven by
the reason for which the valuation is to be performed.
129.
In a number of English and Australian cases the date which has been
set for the valuation of shares which are to be acquired,
in terms of
an order of the kind in issue in this matter, has ranged from the
date when the application was launched
[57]
to the date the order was made,
[58]
or a subsequent date pursuant to such an order,
[59]
the date of the last available balance sheet
[60]
or even the date when the unfair conduct occurred ,
[61]
or a convenient date immediately before it.
[62]
From a review of the case law it appears that the most commonly
stipulated valuation dates are when the application for relief
was
launched or when an order was made.
130. As was pointed out
in the introduction, the respondents contend that it would not be
fair to order them to acquire the applicants’
shareholdings for
a price or value which is determined as at 30 November 2016, which is
the date suggested by the applicants (being
the last available date
according to Scott, at the time when he was dismissed, when a balance
sheet or set of financial statements
are available), as this would
result in them having to pay millions of rands for shares in
companies which, as a result of Xigo
having been consigned to the
‘abattoirs of the insolvency court’ by Bresler, are now
practically worthless. In essence
the respondents submit that
inasmuch as Bresler chose to go for winding up applications in
respect of both entities, he was the
cause of the destruction in
their value and the author of his own misfortune and he should
consequently not be allowed to profit
at the respondents’
expense. The applicants on the other hand contend that it would be
manifestly unfair not to order the
respondents to buy them out at
that date, as this would do nothing more than to give effect to the
general rule that they should
be bought out at a value which their
shares would have had in the ordinary course, but for the oppressive
conduct to which they
were subjected. Scott, in particular points out
that he was unfairly dismissed on 20 December 2016, and he was not
directly involved
in the internecine warfare which Bresler and the
respondents engaged in, and launched his own, separate applications
for buy-out
orders in terms of s 163 on 9 February the following
year, and only sought winding up orders in the alternative, and not
as the
principal relief.
131.
The respondents further contend that what the applicants are in
effect seeking to do is to obtain what amounts to compensatory
orders
in lieu of damages via the back door, under the guise of orders in
terms of s 163, and this is not permissible. They point
out that such
orders are provided for in terms of s 163(2)(j) of the Act. In
Scottish
Lord Denning opined
[63]
that
an order in terms of the then equivalent section in English law
directing an oppressor to acquire the shares of an ‘injured’

shareholder for a fair price was in effect an order for ‘money
compensation’ for the injury which had been done to
the
oppressed shareholder. This view was endorsed in a number of
subsequent English and Australian decisions.
[64]
That the nature of the remedy is recognized to be a compensatory one
is further borne out by the fact that contrary to what would
be
ordinarily be the case in an ordinary commercial exchange of shares,
it is generally accepted that when valuing minority shareholdings

pursuant to an order in terms of s 163 no discount is to be applied
for the fact that these may be minority shareholdings.
[65]
The reason for this is because if a discount were to be applied it
would allow the oppressors to acquire the shareholding of the

oppressed at a price which would reflect the effect of their
oppressive conduct, thereby perversely providing them with an
incentive
to oppress.
[66]
132. Despite various
requests during 2016 that the respondents should engage Bresler and
Scott in an attempt to resolve their disputes
by non-litigious means,
they were rebuffed on a number of occasions. It is worth reiterating
that, although it was agreed pursuant
to the meeting which was held
between Bresler and Pudney on 8 November that the other shareholders
would revert with an offer for
the possible acquisition of the
applicants’ interests in the 2 companies, or at least
Bresler’s, no such offer was
ever forthcoming. On 18 November
Bresler’s attorneys formally and sensibly requested, on behalf
of both him and Scott, that
an attempt be made to reach agreement on
a commercially sensible and amicable parting of the ways in a manner
which would not be
destructive of the underlying value of the
companies and the individual shareholdings. The respondents rejected
this proposal on
29 November with the proverbial measure of contempt
as they were of the view that no purpose would be served in having
any discussions
in this regard and according to them there was no
urgency. In my view the respondents’ refusal to engage the
applicants in
what was clearly a sensible proposal, at a time when on
their own version the relationships between the shareholders and
directors
was severely dysfunctional and the businesses were
suffering as a result thereof, was wholly irresponsible and the
respondents
are largely to blame for what followed.
133. Having previously
warned that if they did not engage him he would have little option
but to wind up the companies, Bresler
was almost obliged to make good
on his threats. My sense of it is that he thought that an application
for winding up would jolt
the respondents into action and force them
to the negotiating table. I do not believe that he seriously
envisaged that he would
have to actually take an order in this
regard, as he must have realized that by doing so he would, in a
manner of speaking, kill
the geese which were laying the golden eggs.
It might, with the benefit of foresight, have been more sensible if,
instead of launching
winding up proceedings Bresler had brought
applications in terms of s 163 instead, with winding up orders being
sought in the alternative.
But the question is whether or not he can
be blamed for adopting the course of action which he did, and only
seeking s 163 orders
much later.
134.
I accept that, as a general principle, in matters such as these an
order for the winding up of a company should be sought as
a last
resort because of the consequences attendant thereto, which result in
the company no longer being able to continue in active
business and
effectively coming to an end. Although it was held in
Louw
[67]
that the liquidation of a company is not necessarily a bar to a
subsequent application for an order in terms of s 163 directing
a
share buy-out, in that matter the applicant had sought such an order
from the outset, by way of an alternative to an order for
winding up,
and by the time the matter was heard the company had already been put
under at the instance of a creditor, and therefore
the
functus
officio
principle was not applicable. This is not the case in this matter,
where an application in terms of s 163 was not sought in Xigo,
as an
alternative, until after the principal relief had been granted.
135. In my view,
disaffected shareholders should be encouraged to first make
application for relief in terms of s 163, if it is
appropriate,
before they resort to applications for winding up, rather than after.
Not only will this allow for a possible settlement
between opposing
shareholders in a manner which will allow for the company to continue
in business, but it will also not destroy
the underlying value of the
equity in the company. It will encourage applicants to reflect very
carefully on the effect a possible
winding up order will have on the
value of their own shareholdings, before they rush to court for such
an order. If s 163 orders
are granted too readily in post wind-up
situations, it will allow impetuous litigants to avoid this
responsibility, and then seek
to gain an unfair advantage over their
co-shareholders by asking for an order that they be bought out at
pre-liquidation values
at their expense, thereby saving themselves
from the calamity they brought   upon everyone.
136. As it turned out,
the respondents must have realized that they needed to engage Bresler
on a possible buy-out, or else he would
go ahead, because on 10
February they themselves launched counter-applications for relief in
terms of s 163. Bresler responded
to these counter applications by
advising in his replying/opposing affidavits of 28 February that he
was not averse to his shares
being bought out, provided this was done
in an orderly manner. To this end he presented the report of Grant
Thornton.
137. Shortly thereafter,
on 9 March, Scott launched his own s 163 applications in which he
proposed making use of the selfsame methodology
proposed in the
report by Grant Thornton. Shortly after 24 March all of the
applications were postponed for hearing on 6 June.
138. Inasmuch as the
respondents did not file opposing papers in Scott’s
applications I think Bresler is correct when he says
that at that
stage of the proceedings all the parties must have been of the view
that in preference to winding up the companies
his and Scott’s
shareholdings should be acquired by the remaining shareholders, and
all that really remained in dispute was
a determination of how the
shares should be valued and acquired. One would have thought that in
the light of these circumstances
the respondents would have reached
out to the applicants and would have attempted to resolve the matters
before they went any further.
However, this was not to be and between
6 and 19 April they instead withdrew their counter-applications, not
only in Xigo but also
in Quickberry. As far as the record goes there
is no concrete indication that any real attempt was made in the
period between 24
March and 19 April to put forward any hard offers
and one must assume that even then the respondents were not of the
view that
there was any urgency in the matter. And as a result, on
the papers it appears that Bresler was still of a mind to proceed
with
the applications for orders winding up both companies, and was
also determined to have things his way. Thereafter it appears Xigo

was wound up by agreement on 3 May 2017. Bresler did not however
press for the winding up of Quickberry.
139.
In the answering affidavit which the respondents filed on 5 June
2017
[68]
it was averred that
subsequent to the filing of Bresler’s replying affidavit in
Quickberry on 28 February, the businesses
in Xigo and Quickberry
started to ‘unravel’ and the viability of a buy-out was
becoming ‘slim’. According
to Grantham, Bahlman and Pople
no longer held the view that a buy-out in Xigo was ‘preferable
at that stage’.
140. Somewhat curiously,
notwithstanding this statement, as far as Scott’s applications
were concerned Grantham said that
although a notice of intention to
oppose was filed they subsequently decided that it was appropriate
that they should acquire Scott’s
shares in Quickberry and
attempts were made to communicate with his attorneys in order to
structure an appropriate mechanism for
this, by 6 June 2017 when the
matter was to be heard. However, Grantham said that in April 2017,
having discussed the matter with
their legal representatives they
concluded that there was no longer any purpose in continuing with
their opposition to Bresler’s
application for the winding up of
Xigo, which had by then suffered substantial prejudice as a result of
the winding up application
and certain conduct on the part of
Bresler. He said that as Bresler had not elected to seek relief in
terms of s 163 in relation
to Quickberry, and since his proposed
terms in relation to the valuation of his shareholding in Quickberry
were not acceptable
to them, the respondents,  decided to
withdraw their counter application against him in Quickberry. They
alleged that Bresler
made himself guilty of inappropriate behaviour
in respect of Quickberry in that he made potential clients aware of
the winding
up application and as a result they were reluctant to
sign up any new deals. It was alleged that he had also started
intimating
to staff that they would not be paid their salaries for
March and the atmosphere in the offices became toxic. The respondents
claim
that Bresler reduced staff working hours by half as well as the
salaries and Quickberry had to be relocated to avoid employees
becoming increasingly demoralised. Despite this a number of staff
members resigned. They also claimed that Bresler and Bahlman had

started new businesses in direct competition with Quickberry. They
averred that Bresler’s real motive in seeking the winding
up of
the 2 entities was to eradicate competition in respect of his own
businesses. As a result of these facts and circumstances
the
respondents were of the view that the liquidation of Quickberry might
well be an appropriate remedy, as they doubted whether
it would
survive for longer than another 2-3 months. However, notwithstanding
these assertions Quickberry was never placed into
liquidation at the
instance of any of the parties, or any creditors, and as at date
hereof it is still in existence. This must
of necessity place a large
question mark behind the respondents’
bona fides
. My
sense of it is that the respondents were as bloody-minded about not
arriving at a compromise with Bresler and Scott, as they
accuse them
of being. In the case of Scott in particular, I can see no reason why
the counter-applications needed to be withdrawn.
There was no defence
raised to his allegations of oppressive conduct, and from the outset
he had indicated that he sought a buy-out
order in terms of s163. Why
did the respondents not engage him in this regard, immediately after
he filed his application, or at
the very latest, by the time they
filed their own counter-application thereto, in February?
141. In my view Scott had
nothing to do with the applications for winding up which Bresler
launched and it would be grossly unfair
to seek to blame him for any
depreciation in value which occurred after the launch of such
applications, or to seek to peg the
valuation of his shares to a date
connected with the events in this regard. He was subjected to
egregiously oppressive and unfairly
prejudicial conduct, to which the
respondents have never even pretended to have a defence.  Their
failure to file any answering
papers in regard to either of his
applications speaks volumes.
142. I have taken account
of Scott’s explanations for why he has suggested that the date
for the valuation of his shares should
be set as the end of November
2016. I can see no reason why financial statements will not be able
to be drawn for the end of December
2016, being the month in which he
was ‘dismissed’. Traditionally the end of many entities’
financial year is
February, which will usually provide a more
accurate and up to date picture of the companies’ financial
state and the value
of their equity, for a valuer and (had all things
been equal) from the papers before me it does not appear as if Scott
or the respondents
would have been prejudiced or advantaged were the
date when he launched his applications, to be set as the date for the
determination
of the value of his shareholdings, instead of the end
of November 2016, if that were considered appropriate. However,
having duly
considered the circumstances set out above, which gave
rise to the deterioration in the parties’ relationship and the
oppressive
conduct to which Scott was subjected in the course
thereof, and the applications which followed thereafter, in my view
as far as
Scott is concerned the fair and appropriate date at which
his shareholdings should be valued, should not be the date when he
launched
his applications ie 10 March 2017 but should accordingly be
31 December 2016.
143. As far as Bresler is
concerned, in my view given that he initially chose to go by way of
winding up applications instead of
an application for a buy-out in
terms of s 163 it would already, for this reason, not be appropriate
to put him in the same camp
as Scott as far as the date for a
valuation of his shareholding is concerned. In addition, in my view
there was a failure also
on his part, and not only on the part of the
respondents, to engage meaningfully. The differences which there were
between him
and the respondents were not insurmountable and had they
wanted to resolve the matter it would, with a bit of effort, have
been
easy enough to do. In this regard I point to the fact that the
parties were able to arrive at a largely agreed draft order
containing
their proposed terms of reference for a valuation.
Initially the respondents were to blame for the impasse, but he too
must bear
a share of the responsibility for the events which
followed. Even if one accepts that he acted impulsively by launching
applications
for the winding up of both companies because of the
pressure he was under at the time and simply because he wished to use
these
as a forceful negotiating tool, he had time to reflect and to
put in an alternative claim when the respondents launched their
counter-application
on 10 February, or by the time when he filed his
replying/answering affidavits at the end of February, in which he
essentially
agreed that an order in terms of s 163 should issue for a
buy-out of his shares, albeit on different terms to those they
proposed.
He chose not to do so even after he realized that there
were differences between the valuation methods proposed by the
respondents
and his own, and even after Scott had launched his own
such applications to which the respondents had effectively conceded,
and
even after the respondents then unexpectedly withdrew their
counter-applications in April. I do not believe that the respondents

succeeded in proving that by failing to make application for an
alternative order before his notice of amendment was filed on 14
July
2017, he had waived his rights to do so. He could always have later
issued a separate application for such relief and I do
not believe
that his conduct is necessarily inconsistent with such an intention.
Waiver of rights is not something that is
easily presumed,
unless there is very clear evidence to this effect. In my view
Bresler simply did not see the need to make such
an application,
until after he had obtained a final order of liquidation in Xigo, and
he had despite this still not managed to
arm wrestle the respondents
into making him an offer.
144. On the other hand,
the respondents should not, in my view, be allowed to get away with
their abject refusal to do the right
thing, given the way in which
they had treated him. Whilst it is so that ‘technically’
Bresler only formally put them
on notice in July 2017 that he was
seeking to claim for an order in terms of s 163, I agree with his
contention that in the light
of the stance which he adopted in his
replying/answering affidavits of 28 February it must have been clear
to the respondents that,
as in the case of Scott, he too was still
suggesting that there be a buy-out, and by the end of March the
respondents were clearly
of a similar view, because they had filed
their own counter-applications for such relief in terms of s 163 on
10 February. One
would have thought that in such circumstances sense
would have prevailed, and they would have pressed for a settlement
with both
him and Scott, in this regard. Instead, they decided to
withdraw their counter-applications. By doing so, they knowingly
decided
to subject themselves and the companies to a liquidation
order, and to the risk that the value of the underlying shareholdings
would be negatively affected. In my view, in the light of these
circumstances, and having regard similarly for the deterioration
in
the parties’ relationship and the oppressive conduct to which
Bresler was subjected the fair and appropriate date for
the valuation
of his shareholding in Quickberry should accordingly be 31 March
2017.
145. They are two
remaining aspects which need to be dealt with. Firstly, insofar as
the costs of the winding up of Xigo are concerned
Bresler contended
that these should be borne by second and third respondents given that
they had opposed the application. The respondents
on the other hand
contend that, inasmuch as their opposition was directed at trying to
save a solvent and viable commercial entity
from being placed into
liquidation, they were justified in opposing the matter. Having
considered the circumstances I am of the
view that the order which is
ordinarily granted in such matters ie that the costs should be costs
in the winding up is the appropriate
order that should be made.
Lastly, I note that although the costs of the urgent application for
an order interdicting the respondents
from implementing certain
resolutions in terms of which they were to suspend and discipline
Bresler were reserved for determination
together with the
applications which are before me, however, neither of the parties
have addressed me in this regard. I accordingly
propose making an
order which will give them an opportunity, in the event that they are
unable to resolve the matter, to make further
written submissions in
this regard.
The Orders
146. In the result I make
the following orders:
146.1
In the application
under case number 817/17:
(a) The application for
relief in terms of
s163
(2)(e) of the
Companies Act no.71 of 2008
, is
dismissed with costs, such costs to include the costs of two counsel
where so employed.
(b)The costs of the
application for the winding up of the first respondent shall be costs
in the winding up.
146.2
In the
application under case number 818/17
(a) Second and third
respondents are directed to purchase, in proportion to their
shareholding, the shares of the applicant in the
first respondent in
accordance with the terms set out in annexure ‘A’ hereto.
(b) The date at which the
valuer shall determine the purchase price and value of the
applicant’s shares in the first respondent
shall be 31 March
2017.
(c) Second and third
respondents shall be liable for the costs of the application jointly
and severally, such costs to include the
costs of two counsel where
so employed.
146.3
In the
application under case number 4602/17
(a) Second and third
respondents are directed to purchase, in proportion to their
shareholding, the shares of the applicant in the
first respondent in
accordance with the terms set out in annexure ‘A’ hereto.
(b) The date at which the
valuer shall determine the purchase price and value of the
applicant’s shares in the first respondent
shall be 31 December
2016.
(c) Second and third
respondents shall be liable for the costs of the application jointly
and severally, such costs to include the
costs of two counsel where
so employed.
146.4
In the
application under case number 4603/17
(a) Second and third
respondents are directed to purchase, in proportion to their
shareholding, the shares of the applicant in the
first respondent in
accordance with the terms set out in annexure ‘A’ hereto.
(b) The date at which the
valuer shall determine the purchase price and value of the
applicant’s shares in the first respondent
shall be 31 December
2016.
(c) Second and third
respondents shall be liable for the costs of the application jointly
and severally, such costs to include the
costs of two counsel where
so employed.
146.5
In the
application under case number 4046/17
In the event that the
parties are unable to arrive at an agreement in respect of the costs
of the application, they shall be entitled
to make written
submissions in regard thereto within 15 days from date of this order.
SHER
J
Attendances
:
For
the applicant in the matters under case nos. 817/17 and 818/17:
Mr
A Smalberger SC
Instructed
by:
Cliffe Dekker Hofmeyr, Cape Town
For
the applicant in the matters under case nos. 4602/17 and 4603/17:
Mr
A Subel SC
Instructed
by:
Fluxmans Attorneys, Rosebank
For
the respondents:
Mr C Eloff SC
Instructed
by:
Fairbridges Wertheim Becker, Cape Town
ANNEXURE ‘A’
1. The 2
nd
and
3
rd
respondents (“the respondents”) are
directed to purchase, in proportion to their shareholding, the shares
of the applicant
in the 1
st
respondent and to take
transfer thereof against payment to the applicant of a purchase price
(“the purchase price”)
in an amount to be determined in
the manner set out below.
2. The purchase price for
the applicant’s shares is to be determined by a registered and
practising chartered accountant in
South Africa of not less than 15
years standing (“the valuer”) whose identity is to be
agreed upon in writing between
the applicant on the one hand and the
respondents on the other, within 10 days of the grant of this order
and, failing such agreement,
an accountant of such standing to be
nominated by the Chairperson for the time being of the Public
Accountants and Auditors Board.
3. The valuer is to
determine the purchase price and value of the applicant’s
shares in the 1
st
respondent at the applicable date which
is set out in the order which is prefixed hereto, and in the
following manner:
3.1 in accordance with
the valuation methodology set out in “ACB 86” annexed to
the replying affidavit in case number
817/2017;
3.2 no allowance is to be
made for the fact that the applicant holds a minority shareholding
and there should be no discount for
that fact;
3.3 the valuer is
required to meet with and to receive representations from each of the
parties and their financial representatives
in carrying out his/her
functions;
3.4 in valuing the
applicant’s shares in the 1
st
respondent the valuer
shall have the further power to make such adjustments as the valuer
may consider fair to arrive at what,
in the valuer’s
professional expert opinion, would constitute a “fair price”
for the applicant’s shares
to be acquired by the respondents as
set out in paragraph 1 above;
3.5 the applicant and the
respondents shall co-operate fully with the valuer for the purposes
of the valuer carrying out such valuation
and determination and shall
provide all and any documents in their possession or under their
control as may be called for, or required
by, the valuer and shall
subject themselves to any interview that the valuer may require and
answer any questions posed to them,
whether orally and/or in writing,
by such valuer;
3.6 the valuer shall act
as an expert in making such determination and not as an arbitrator
and the valuer’s valuation and
determination shall be final and
binding absent manifest error;
3.7 the valuer is granted
the power to instruct his own legal representatives for the purposes
of approaching this court for any
direction or power necessary to
carry out his/her functions in terms of this order;
3.8 within one week of
any party making written submissions to the valuer, any party/parties
may deliver any comments to those submissions;
3.9 the valuer will make
a preliminary valuation in accordance with the principles set out
above within 6 weeks of his appointment
(or such longer period as
this court may on application direct) and will circulate such
preliminary valuation to the applicant
and the respondents
immediately upon it being finalised;
3.10 the applicant and
the respondents will make any such written submissions as they may
wish to make in respect of the preliminary
valuation, in writing,
within one week of receipt of the preliminary valuation;
3.11 the valuer, after
considering any written submissions received, will make a final
valuation and determination of the purchase
price within 2 weeks of
publishing his preliminary valuation;
3.12 the costs of the
valuation shall be borne by the respondents jointly and severally.
4. The respondents are to
make payment of the purchase price, in proportion to their respective
shareholdings in the 1
st
respondent, within 30 days of the
date referred to in paragraph 3.11.
[1]
Under case nos. 817/17 and 818/17.
[2]
As will be apparent from what is set out below the respondents
allege that Bresler was to blame for this state of affairs.
[3]
No. 71 of 2008.
[4]
Who were to
be chosen
by agreement
between the parties, or failing such agreement as appointed by the
SA Institute of Chartered Accountants.
[5]
Between 28
February and 1 March 2017.
[6]
A
nnexure
‘ACB 86’ to his answering affidavit in the
counter-application.
[7]
Under case nos. 4603/17 and 4602/17.
[8]
Louw v Nel
2011 (2) SA 172
(SCA) at para [31].
[9]
S 163(1)(a).
[10]
Ss 163(1)(b)
and (c).
[11]
Under case no. 4046/17.
[12]
Per Desai J.
[13]
U
nder
case no 817/17.
[14]
Ss 163(1)(b)
and (c.).
[15]
Grancy Property Ltd v
Manala & Ors
2015 (3)
SA 313
(SCA) at para [23].
[16]
Act 51 of 1973.
[17]
Which in turn was modelled on s 210 of the English Companies Act
1948.
[18]
Aspek Pipe Co (Pty) Ltd &
Ano v Mauerberger & Ors
1968 (1) SA 517 (C).
[19]
Id
at
525J-526E.
[20]
Marshall
v Marshall (Pty) Ltd and Or
s
1954 (3) SA 571
(N) at p580, which as Tebbut AJ explained (at
526C-E) in its ordinary grammatical meaning refers to conduct which
is “severely
oppressive or despotically harsh or cruel”.
[21]
Scottish
Co-operative Society v Meyer
(1958) 3 All ER 66
(HL) at p71.
[22]
Id
at
p 86.
[23]
Elder v
Elder and Watson Ltd
1952 SC 49
at p60.
[24]
Aspek
n 18 at pa 527 H-J.
[25]
Which, although set out in the heading of the section, was not
referred to in the body thereof.
[26]
S 252 (3).
[27]
Irvin &
Johnson Ltd v Oelofse Fisheries; Oelofse Fisheries v Irvin &
Johnson Ltd
1954
(1) SA 231 (E).
[28]
Note 21 at p89.
[29]
P
er
Denning J.
[30]
Note 8 at para [20].
[31]
Similar provisions in Canada have gone further by making the remedy
available not only to members and directors but also to officers
of
a company or ‘security holders’, creditors and even in
some instances members of the public (cf s 215 of the Saskatchewan

Non-Corporations Act RSS 1978, s 450 of the Quebec Business
Corporations Act, s 243(2) of the Yukon Business Corporations Act

RSY 1986, s 227 of the Business Corporations Act of British Columbia
SBC 2002 and ss 238 and 241 of the Canada Business Corporations
Act
RSC 1985). In Australia the remedy is available to shareholders and
directors (s 232 of the Corporations Act 2001 (Cth) whilst
in the UK
it may apparently still be confined to shareholders (
vide
s 994 of the Companies Act 2006).
[32]
Note 18 at p 527D-F.
[33]
Similarly,
i
n
Grancy
n 15 at para [26] the SCA confirmed that s 163 should be construed
in a manner which will advance the remedy it offers, rather
than to
limit it.
[34]
Sammel & Ors v
President Brand Gold Mining Co Ltd
1969 (3) SA 629
(A) at 678G-H;
Louw
n 8 at para [22].
[35]
Louw
n
8 at para [24].
[36]
Aspek
n
18 at 527B-C.
[37]
Visser Sitrus (Pty) Ltd v
Goede Hoop Sitrus (Pty) Ltd & Ors
2014
(5) SA 179
(WCC) at para [64].
[38]
Id.
[39]
Id
at
529D-E. Conduct may thus be considered to be oppressive even though
it is ascribable ‘simply to the controlling shareholder’s

overwhelming desire for power and control and not with a view to his
own advantage in a pecuniary sense’
R
v Harmer Ltd
(1958)
3 All ER 689
at p704.
[40]
In clause 8.6.
[41]
Barnard v Carl Greaves
Brokers (Pty) Ltd & O
rs
[2007] ZAWCHC 2
;
2008 (3) SA 663
(C.) at para
[45]
;
O’Neill
& Ano v Phillips & Ors
[1999] 2 All ER 961.
[42]
De Sousa v Technology
Corporate Management (Pty) Ltd & Ors
[2017] 3 All SA 47 (GJ).
[43]
Meskin
Henochsberg on the
Companies Act
Vol 1 (Issue
14) at 574(9) referring to
Naneff
v Con-Crete Holding Ltd [
1993]
OJ No 1756 at 71 (QL) (Gen Div).
[44]
Leon &
Armstrong
The
Relevance of the Oppression Remedy as a Control on Corporate
Governance in Canada
27
Advoc.Q. 402
(2003) at p429-433;
Naneff
n43.
[45]
Note 41 at
para [45].
[46]
Per Binns-Ward J.
[47]
Retail Motor Industry v
Minister of Water
2014 (3)
SA 251
(SCA) at para [23] quoting from Pretorius ‘The Origins
of the Functus Officio Doctrine’
(2005) 122
SALJ
832.
In
Firestone
South Africa (Pt) Ltd v Genticuro A.G
1977
(4) SA 298
(AD) at 309A Trollip JA held that public policy requires
that the principle of finality in litigation should generally be
preserved
rather than eroded.
[48]
Firestone
n
45 at 306F-G;
West Rand
Estates Ltd v New Zealand Insurance Co Ltd
1926
AD 173
at pp176, 187.
[49]
Sometimes
referred to as a ‘clerical’ error.
[50]
Firestone
n
45 at 426G.
[51]
Bayly v Knowles
2010 (4) SA 548 (SCA).
[52]
Louw
n
8.
[53]
Bayly
n 51 at para [25].
[54]
Id
at
para [27];
Bader
v Weston
1967(1) SA 134 (C.) at 147;
Louw
n
8 at para [21]; Meskin n 43 at 574(10).
[55]
Scottish
n 21 at p89.
[56]
De Sousa
n 42 at para [36];
Scottish
n 21 at p89. A similar approach has been adopted in Australia vide
Sanford  v Sanford
Courier Service Pty Ltd
(1986) 10 ACLC 549.
[57]
Scottish
n
21
; Re London School of
Electronics Ltd
(1985) 1
BCC 99394
; Re a Company
(No. 002612 of 1984)
(1986)
2 BCC 99453
;
Re Bread Ltd;
The Queensland Co-operative Milling Association v Hutchinson
[1977] Qd R 44
;
Re Dalkeith
Investments Pty Ltd
(1984)
9 ACLR 247
;
Sanford
n 56;
Reid v Bagot Well
Pastoral Company Pty Ltd
(1992) 9 ACSR 129
;
Joint v
Stephens
(2008) 26 ACLC 1.
[58]
Re a
Company (No 005134 of 1986) ex parte Harries; Richards v Lundy
[2000] 1 BCLC 376
;
Re
Regional Airports Ltd
[1999] 2 BCLC 959
;
Roberts
v Walter Developments Pty Ltd
(1997) 15 ACLC 882
;
Mopeke
Pty Ltd v Airport Fine Foods Pty Ltd
(2007) 61 ACSR 254.
[59]
Re a Company
(1983) 1 BCC 98.
This was a matter where the applicant had
unreasonably rejected previous fair offers which had been made.
[60]
United Rural Enterprises
Pty Ltd v Lopmand Pty Ltd
(2003) 47 ACSR 514.
[61]
Re O.C Transport Services
Ltd
(1984)1 BCC 99.
[62]
Dynasty
Pty Ltd v Coombs
(1995) 13 ACLC 1290.
[63]
Note 21 at p 89.
[64]
Re a Company No 002612 of
1984
(1986) 2 BCLC 99
at
p495;
Rankine v Rankine
(1995) 124 FLR 340
;
Smith
Martis Cork & Rajan Pty Ltd & Ors v Benjamin Corporation Pty
Ltd
(2004) 207 ALR 136
at
pars [71]-[72]
Vadori v AAV
Plumbing
[2010] NSWSC.
[65]
O’Neill
n 41 at p11;
De Sousa
n 42 at para [36];
McMillan
NO v Pott
2011 (1) SA 511
(WCC) at 541A-E.
[66]
Sirianos ‘Problems of Share Valuation under Section 260 of the
Corporations Law’ (1995) 13
Company
and Securities Law Journal
88, as cited by Brockett ‘The Valuation of Minority
Shareholdings in an Oppression Context-A Contemporary Review’

(2012) 24.2 Bond Law Review at p 122.
[67]
Note 8.
[68]
in response
in response to the supplementary affidavit filed by Bresler on 30
May.