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[2019] ZAWCHC 12
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Interfocus SA Investments 172 (Pty) Ltd and Another v Storbeck and Another (1577/19) [2019] ZAWCHC 12 (15 February 2019)
SAFLII
Note:
Certain
personal/private details of parties or witnesses have been
redacted from this document in compliance with the law
and
SAFLII
Policy
Republic
of South Africa
IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
Before:
The Honourable
Mr Acting Justice De Waal
Hearing: 8 February 2019
Judgment:
15 February 2019
Case
No:
1577/19
INTERFOCUS
SA INVESTMENTS 172 (PTY)
LTD
First
Applicant
J
S
Second
Applicant
vs
P
S
First
Respondent
THE
TRUSTEES FOR THE TIME BEING
OF
THE JC & P
TRUST
Second
Respondent
JUDGMENT
1.
This
urgent application is related to the divorce proceedings pending
between Second Applicant (“
Mr S
”)
and the First Respondent (“
Ms S
”)
in this Division under Case Number 18088/2018. The Ss married
more than 20 years ago. They have one grown-up
child.
2.
On
2 October 2018 Ms S caused summons to be issued for a
decree of divorce; maintenance and a division of the parties’
joint estate. They now live separately. Fairly shortly
after the commencement of the divorce proceedings, Ms S
launched
an urgent application under the same case number for the immediate
division of the joint estate into equal shares in terms
of
s 20
of the
Matrimonial Property Act 88 of 1984
. By agreement
between the parties that application was referred to the semi-urgent
roll for hearing on 29 May 2019.
3.
In
the present urgent application, Mr S and the First Applicant,
i.e. the company Interfocus SA Investments 172 (Pty) Ltd (“
the
company
”),
seek an order directing Ms S to deliver a Mercedes Benz GLC 250d
to Rola Motors Mercedes Benz, Somerset West.
I shall deal with
the basis for this application below.
4.
The
further relevant background is that the company is the registered
owner of certain commercial property situated in Gauteng (“
Helikon
Park
”)
and its business is the renting out of space to various third party
tenants, including a supermarket chain store.
Mr & Ms S
are the only directors of the company. The shareholders are
Mr S (50%) and the Second Respondent,
i.e. the Trustees for the
Time being of the JC & P Trust (50%) (“
the
Trust
”).
5.
Mr & Ms S
have for many years lived from the profits of the company’s
business activities. The company
pays Hermanus Property
Administration, a sole proprietorship in Mr S’s name,
income for the management of the rentals.
This income was
presumably used by Mr S to support him and his family. In
addition the company pays certain expenses
of Mr & Ms S
directly. They receive these payments as fringe benefits.
One of the fringe benefits
is payment for the vehicles that the Ss
drive.
6.
In
this regard the company concluded a Finance Agreement (outside the
National Credit Act 34 of 2005
) with Mercedes Benz Financial Services
South Africa (Pty) Ltd (“
MBFS
”)
for the lease of a Mercedes Benz GLC 250d (“
the
Mercedes
”).
This agreement, to which I shall refer as “
the
lease
”,
was concluded on 5 February 2016. The Mercedes was to
be used by Ms S. The lease was for a period
of 36 months
with a monthly instalment of R15 377.47.
7.
The
company also committed to finance the purchase of a Jeep Wrangler
(“
the
Jeep
”)
at a monthly cost of R14 619.83 for the use of Mr S.
8.
In
the founding affidavit, deposed to by Mr S, he contends that the
company was no longer able to continue to incur the increased
level
of expenditure since the separation between himself and Ms S.
He claimed that, after the separation, expenditure
increased from
between R75 000.00 and R80 000.00 per month to nearly
R130 000.00 per month. He further claimed
that the higher
drawings have been financed from a mortgage loan secured against the
Helikon Park property. Due to the downward
turn in the
commercial rental market and the separation, Mr S claimed that
at the current rate of withdrawal the money available
from the loan
would be extinguished by the end of the 2019 calendar year.
9.
Against
this background, Mr S proposed to Ms S that the expenses of
the company in respect of motor vehicles be reduced.
In the
first place, he proposed that, once the lease with MBFS regarding the
Mercedes comes to an end on 5 February 2019,
that this
vehicle be returned. He further proposed that the Jeep be
sold. The total saving in respect of the two vehicles
would be
about R30 000.00 per month.
10.
As
to alternatives for the Mercedes and the Jeep, Mr S initially
proposed that he would use a Nissan Bakkie (2005 model) and
that he
would be prepared to sponsor a vehicle for Ms S to the value of
R250 000.00. However, in a subsequent draft
order handed
to me by Mr Benade, who appeared for Ms S, it was proposed
that Ms S makes use of the Jeep for a period
of five months or
until such time as the Court hands down Judgment in Ms S’s
application in terms of
s 20
of the
Matrimonial Property Act.
11.
As
to the grounds for urgency, Mr S contended in the founding
affidavit that when the lease comes to an end on 5 February 2019,
the company had two options. It could elect to return the
vehicle to MBFS or it could purchase the vehicle outright for the
lump sum amount of R538 913.80. It was contended that the
matter is urgent because the company was unable to pay the
lump sum
to MBFS and Ms S was refusing to return the vehicle. This
meant that the company would default and become vulnerable
to legal
actions aimed at repossessing the vehicle or claiming the lump sum.
It was further contended that such legal proceedings
would affect the
credit rating of the company which was, in turn, essential to ensure
that financing could be obtained for the
purpose of settling the
division of the estate and the payment of Ms S’s half
share to her.
12.
Ms S
raises a number of defences to the urgent application. Her
defences, in summary, are the following:
12.1.
That
the company has not duly authorised the institution of the
proceedings and that Mr S in his capacity as director does
not
have
locus
standi
in respect of the relief sought.
12.2.
That
the company authorised her to extend the lease with MBFS and that she
had in fact done so. Further, that even if she
was not allowed
to extend the lease that, on a proper interpretation thereof, the
lease automatically renewed on 5 February 2019
on the same
terms unless MBFS decided otherwise.
12.3.
That
the matter was not urgent
inter
alia
because the company was not in financial trouble as claimed by Mr S.
13.
I
shall deal with each of these defences below.
Authorisation /
locus standi
14.
Two
questions arise. The first is whether the institution of the
proceedings were properly authorised by the company and the
second is
whether Mr S in his capacity as director of the company had
locus
standi
to institute the proceedings.
15.
On
the first issue, Mr De Villiers, who appeared for Ms S
together with Ms Wade, had a simple argument. They
referred to the Judgment of Watermeyer J in
Mall
(Cape) (Pty) Ltd vs Marino Ko-operasie Beperk
1957 (2) SA 347
(C) at 351H, where the learned Judge stated that when
a company commences proceedings some evidence should be placed before
the
Court to show that it has duly resolved to institute those
proceedings. In the present instance, it was argued that no
evidence
had been produced to that effect. It was further
contended that no such resolution can exist because Mr & Ms S
are the only two directors of the company and the latter obviously
did not agree to the institution of proceedings against herself.
Against this, it was argued for Mr S that he had always been the
chief executive officer of the company and responsible for
the
day-to-day management. As such, it was claimed that he was duly
authorised by the board of directors to do whatever is
necessary to
advance the best interest of the company. Reference was made to
s 66(1)
of the
Companies Act 71 of 2008
which vests the powers
of the company in the board of directors.
16.
In
my view, given the circumstances of the matter, insufficient evidence
was placed before the Court to show that Mr S was
authorised to
institute proceedings on behalf of the company or that the company
resolved in some other way to do so. It
follows from
s 66(1)
of the
Companies Act that
, unless otherwise provided in the Act or
the company’s memorandum or a resolution, the board of
directors retains all the
powers of the company, which would include
the power to institute legal proceedings. In the present
instance it is inconceivable
that the board could have authorised the
institution of proceedings, given the dispute between the Ss, and
given that they are
the only two directors of the company. I
accordingly conclude that the Applicants did not demonstrate that the
proceedings
were properly authorised by the company.
17.
Turning
to the standing of Mr S to bring the application, it was
contended that he was vested with such a right in terms of
s 163
of the
Companies Act. That
section allows a director of a
company to approach a Court
inter
alia
when the powers of a director or a person related to the company are
being exercised in a manner that is oppressive or unfairly
prejudicial to or that unfairly disregards the interest of the
applicant. It was contended that Ms S’s failure
to
return the vehicle was unfairly prejudicial to Mr S as she was
not acting in the best interest of the company and that
her conduct
was to be regarded as unfairly prejudicial to Mr S.
18.
The
short answer to this contention is that Mr S did not rely on
s 163
of the
Companies Act in
his founding affidavit or, for
that matter, in his replying affidavit. The question of whether
s 163
may be invoked in the present circumstances depends on
facts that neither of the parties dealt with in their papers.
It is
in any event not clear what “
power
”
Ms S exercised which was oppressive or unfairly prejudicial to
Mr S himself. She simply did nothing.
Also, as
explained above, Mr S’s case was that
the
company was prejudiced
and not him.
19.
For
this reason I find that Mr S did not demonstrate that he has
locus
standi
in his capacity as director in respect of the relief sought.
His reliance on
s 163
was not properly pleaded. He also
does not have standing under the common law. Whilst he has a
financial interest in
the relief sought, I fail to see how he has, as
a director, standing to approach the Court in his own right in
respect of a contractual
agreement between the company and a third
party (MBFS).
Extension of the
lease
20.
Even
if I am wrong in respect of the authorisation / standing issues, I do
not believe that the Applicants have established a clear
right to the
relief they seek. The Applicants must meet this requirement as
they seek a final order directing Ms S to
immediately deliver
the Mercedes Benz to Rola Motors.
21.
Ms S’s
defence on this aspect was twofold.
22.
Firstly,
it was contended on her behalf that she was authorised by a
resolution of the company dated February 2016 to bind
the
company to MBFS to “
any
agreements relating to the purchase, rental, leasing or financing of
any goods in any manner whatsoever and to settle all and
any
documentation or terms to give effect to such transactions
”.
This resolution further provided that Ms S’s authority
shall “
continue
to be operative until such time as it is revoked by written notice
”
sent by the company to MBFS. The resolution, however, appears
inconsistent with the minutes of a meeting of the directors
of the
company held on 31 January 2016 where it was resolved that
the company will “
purchase
”
a GLC 250d Mercedes from Rola Motors and that
Mr or Ms S
is authorised to do whatever may be necessary to give effect to the
resolution. Apart from the inconsistency between the
resolution
and the minutes, no clear evidence was presented that Ms S had
in fact exercised her power to extend the lease
and that MBFS agreed
to same.
23.
In
my view it is not necessary to decide the first issue as the second
argument of Ms S, which is that the lease automatically
renewed
after the expiry of the first three years appears to me to be
unanswerable. In this regard, Ms S relied on clause 26
of the lease, which provides as follows (my underlining):
“
26.
Expiry
if you have chosen the Agility / Contract Purchase Agreement
26.1 We guarantee that
the vehicle will have the value specified in the payment Schedule
hereto at the expiry of this Agreement,
provided that you have
complied with all of your obligations in terms of this Agreement.
26.2 Upon expiry of
the Agreement you will at your own cost return the vehicle to us in
the same good condition in which the vehicle
was received, fair wear
and tear only accepted, at an address specified by us, together with
all documents and service records
relating to the vehicle.
26.3 Any modifications
should be removed at your own cost and to our satisfaction.
26.4 Subject to the
provisions of clause 26.2 you will be entitled to purchase the
vehicle at the value referred to in 26.1
above by payment of such
amount, either:
26.4.1 immediately in
one lump sum payment; or
26.4.2 enter into a
new Agreement in the amount set out in the Schedule hereto and on the
terms and conditions as we may determine
in our absolute and sole
discretion.
26.5 In the event that
you have failed to comply with any terms or obligations set out in
this Agreement, we will value the vehicle
and will be entitled to
claim from you payment of any amount required to restore the vehicle
into the condition referred to in
clause 26.2 above. Any
amount will be payable upon demand and the certificate referred to in
clause 18.3 will constitute
prima facie proof of such amount
being owed by you to us.
26.6 Expiry if you
have chosen an Agreement with a Balloon Payment or Guaranteed Future
Value
26.6.1
Should you
fail to return the vehicle on the date of expiry of this agreement as
provided for in clause 26.2 or fail to make
the payment as
referred to in clause 26.4, then the Balloon Payment or
Guaranteed Future Value due will be refinanced by us
in our sole
discretion, subject to you having complied with all your obligation
in terms of the agreement and on the following
basis
:
26.6.2
We will
recalculate the balance due by extension of the period of the
agreement with a period that will allow you to maintain monthly
instalments similar as to what you have paid during the agreement.
We will send you written confirmation of the period of
payment
.
26.6.3 Your interest
rate will remain the same as during the agreement and on the same
terms and conditions as set out in clause 4
of this agreement.
26.6.4
All other
terms and conditions of this agreement will revive and will continue
to be applicable and apply in each and every respect
until you have
settled the vehicle in full by paying the aforesaid amount.
Ownership of the vehicle will remain with us until
you have fulfilled
your obligation in terms hereof by paying the full balance
outstanding
.
26.6.5 Upon fulfilment
of all the terms and conditions and having made full payment of the
recalculated amount as per clause 26.6.2,
ownership of the
vehicle will be given to you upon providing you with the registration
papers of the vehicle forming the subject
matter herein.”
24.
In
my view, clause 26.6.1 is only open to the interpretation
contended for by Ms S, which is that if the vehicle is not
returned on the expiry date and the lump sum payment is not made,
then the vehicle will be automatically refinanced if the lessee
complied with all his obligations in terms of the lease. MBFS
may however in its discretion decide otherwise. It has
however
not been contended by Mr S that MBFS on some or other basis
decided to deactivate the automatic renewal clause.
25.
The
basis on which the automatic renewal takes place is also set out in
clause 26. In this regard, clause 26.6.2
provides
that the monthly instalments will be similar as was paid during the
lease that expired. In terms of clause 26.6.4
all other
terms and conditions will revive and continue to be applicable and
apply in each and every respect until the vehicle
has been paid in
full.
26.
The
consequence of the above is that on 5 February 2014, when
the initial lease expired, there was no obligation on the
company to
return the vehicle or to pay the lump sum amount of R538 913.80
to MBFS. The obligation of the company will
remain the same as
before the expiry date and it seems that it will only be liable to
pay MBFS the monthly amount of R15 488.06.
As things
stand, the company has not yet failed to pay that amount and it is
thus not vulnerable in respect of any legal action
from MBFS.
In the circumstances, neither the company nor Mr S has any clear
right to demand that Ms S returns the
vehicle to MBFS.
They cannot make that demand until the lease is somehow terminated,
which presently has not been done.
27.
For
these reasons, I find that the Applicants have failed to establish a
clear right to the relief they seek.
Urgency
28.
If
the Mercedes did not have to be returned on 5 February 2019
and the lump sum did not become due on that day, then the
matter is
self-evidently not urgent. Whilst there was some evidence on
the papers that suggest that the company is taking
financial strain
due to the downturn in the demand for rental properties as well as
the increased expenditure after the separation
of the Ss, it cannot
be contended, nor was it, that the company is unable to continue to
make payments of the monthly instalments
for the Mercedes at least
until the application brought by Ms S for the division of the
joint estate is heard on 29 May 2019.
The
determination of that application, as I understand it, will render
the present proceedings moot. The assets and liabilities
of the
Ss, including the liabilities in respect of the vehicles, will then
be divided between them leaving only the maintenance
claim for Ms S
to be determined in the divorce proceedings.
29.
On
a proper interpretation of the lease the prudent course would have
been to await the outcome of the application to divide the
joint
estate instead of approaching the Court on an urgent basis to compel
Ms S to return the Mercedes to Rola Motors.
This is
another reason why the application could not succeed in the “
fast
lane
”
of the Third Division of this Court.
30.
In
the circumstances, the application is dismissed with costs, such
costs to be paid by the Second Respondent (Mr S).
I can
only make an order against him because of my finding that the company
did not properly authorise the institution of the proceedings.
I do not recall Mr De Villiers asking for the cost of two
counsel to be awarded and I also do not believe that it would be
justified in the circumstances of the case to make such an order.
______________
H J DE WAAL AJ
Acting Judge
of the High Court
Cape Town
15 February 2019
APPEARANCES
Applicants’
counsel: T Benade
Applicants’
attorneys: Voster & Steyn Attorneys, Hermanus
First
Respondents’ counsel: A De Villiers & L Wade
First
Respondents’ attorneys: Van Dyk Saayman Attorneys,
Hermanus