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[2021] ZAWCHC 174
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Intongo Property Investment (Pty) Ltd and Another v Groenewald and Others (15845/2020) [2021] ZAWCHC 174; 2022 (2) SA 543 (WCC) (2 September 2021)
R
E P O R T A B L E
IN THE HIGH
COURT OF SOUTH AFRICA
(WESTERN CAPE
DIVISION, CAPE TOWN)
Case
No.:
15845/2020
Before
the Honourable Ms Justice Meer
Hearing:
12 August 2021
Judgment
Delivered: 02 September 2021
In
the matter between:
INTONGO
PROPERTY INVESTMENT (PTY) LTD
First
Applicant
RASMUS
SVENSSON
Second
Applicant
and
MARK
SHANE
GROENEWALD
First
Respondent
UVT
COMPANY (PTY)
LTD
Second
Respondent
THE
REGISTRAR OF DEEDS, CAPE TOWN
Third
Respondent
THE
STANDARD BANK OF SOUTH AFRICA LTD
Fourth
Respondent
COMPANIES
AND INTELLECTUEAL PROPERTY
Fifth
Respondent
COMMISSION
JUDGMENT
MEER
J
Introduction
[1]
The Applicants seek to set aside the sale of Erf No 2369 Hout Bay,
known as 35 Fisherman’s
Bend Road, Llandudno (“the
property”), from the First Respondent to the Second Respondent,
on the basis that the sale
of the property was unlawful and
fraudulent and is accordingly a transaction tainted by fraud. In
addition they seek
inter alia
the following orders: that the
First Respondent repay to the Second Respondent any amounts paid to
him; that the Third Respondent
cancel the deed of transfer and cause
the property to be re-registered in the name of the First Applicant
and that the Fifth Respondent
be directed to remove the name of the
First Respondent in its records as the director of the First
Applicant, and replace it with
that of the Second Applicant.
The
Parties
[2]
The First Applicant is a company with its registered address in
Gauteng. The Second Applicant
is a businessman residing in Sweden.
He describes himself as a “businessman, director and
nominee shareholder of the
First Applicant” as well as “the
duly authorised representative of the First Applicant”. His
authorisation,
he avers, appears from a resolution of the First
Applicant’s alleged sole shareholder, Kaj Thomas Moller
(“Moller”),
who also resides in Sweden. The First
Respondent is a businessman who is domiciled in Gauteng. The Second
Respondent is a company
with its registered address in Gauteng. The
First and Second Respondents oppose the application.
[3]
The Third Respondent is the Registrar of Deeds, Western Cape. The
Fourth Respondent, Standard
Bank, is cited as an interested party
that has a bond registered in its favour with the Third Respondent
over the property. The
Fifth Respondent is the Companies and
Intellectual Property Commission (“CIPC”). As appears
from paragraph [1] above
limited relief is sought against the Third
and Fifth Respondents and no relief is sought against the Fourth
Respondent. These Respondents
have not participated in this
application.
Application
for Postponement
[4]
At the commencement of the hearing, Ms
Tshabalala for the First Respondent applied for a postponement
on the
basis of an amendment to the notice of motion brought by the
Applicants. The amendment sought a declaration to the effect
that the
First Respondent had fraudulently appointed himself as director. Ms
Tshabalala submitted that her client needed an opportunity
to respond
to the declaration sought. The postponement application, which
was opposed by the Applicants and the Second Respondent,
was
dismissed with costs for the reason that the First Respondent had
already been given an opportunity to respond to the issues
raised in
the amendment, in his answering affidavit. The First Respondent’s
fraudulent conduct had been foreshadowed in the
existing notice of
motion and founding affidavit, and the First Respondent had elected
to file an answering affidavit comprising
of bare denials. In
seeking a postponement he sought a further opportunity to respond,
which he was not entitled to. I note,
for the purpose of a
consideration of costs, that the hearing of the postponement
application took no more than approximately twenty
minutes to half an
hour, if that.
Relevant
Background Facts and Pleadings
[5]
The property in question was acquired in July 1989 by Amethyst
Investment CC. In March 2003
the latter was converted into the First
Applicant (‘Intongo”), which accordingly became the owner
of the property.
The shares in Intongo were issued to one
Jurgen Ludwig (“Ludwig”), who became the registered
shareholder.
He also became a director of Intongo together with one
James Kotze (“Kotze”). Ludwig’s directorship and
the registration
and subsequent cancellation of the shares in his
name are recorded in the relevant CIPC documents.
[1]
[6]
On 24 April 2003 Ludwig and the aforementioned Moller concluded a
nominee agreement
[2]
which
recorded that Moller was the beneficial owner of the Intongo
shares and that Ludwig was his nominee. In 2013 the nominee
arrangement between Ludwig and Moller ended. Thereafter, on 15
September 2020, Moller is alleged by the Applicants to have nominated
the Second Applicant as his nominee for his Intongo shares by way of
a shareholder nomination agreement.
[3]
[7]
The First Respondent, whom, for convenience, I shall hereafter
refer to as Groenewald
, had been in occupation of the property since
1 January 2014. In lieu of rental he paid Intongo’s bond on
the property
and all rates. There had been discussions since
2013 for Groenewald to purchase the property.
[8]
In May 2015 a sale of shares agreement was concluded between Intongo,
represented by Moller,
and Groenewald in terms whereof Moller sold
the Intongo shares to Groenewald for the South African Rand
equivalent of USD850 000.
The relevant terms of the sale of shares
agreement were:
8.1
Moller’s shares and loan account
in Intongo were sold to Groenewald.
“
with
effect in all respects” from 31 July 2015, which was defined as
the effective date. The completion date was defined as
the fifth
business day following 31 July 2015.
8.2
The purchase price was the ZAR
equivalent of USD 850 000, converted at the rate of exchange
on
the date of payment.
8.3
A deposit of 10% of the purchase price
was payable by the First Respondent upon receipt, by one
De Bruin,
Moller’s agent, of the shares’ certificate in Intongo,
and an irrevocable power of attorney authorising De
Bruin to transfer
the shares to Groenewald. The power of attorney was to
authorise the transfer of the shares, upon payment
of the purchase
price, and De Bruin was to remain in possession of the share
certificate pending the payment of the purchase price.
This was
specified at clause 4.
8.4
The balance of the purchase price was payable by
Groenewald by 31 July 2015
by way of either a single payment or
instalments at the discretion of Groenewald and to such accounts as
were agreed with Moller.
8.5
To secure the purchase price, Groenewald was to pay 90%
of the purchase price
into his attorney’s trust account within
30 days of the payment of the deposit.
8.6
Intongo was not to dispose of the property between the signature date
and 31 July 2015.
8.7
Ownership of and risk in and benefits attaching to the shares would
pass to Groenewald on
the completion date provided that all amounts
due to Moller in terms of the agreement had been paid.
8.8
On the completion date De Bruin would give Groenewald a number of
documents which would
enable him to take possession of the shares and
loan account of Intongo.”
[9]
Groenewald paid USD 377 000, which constituted approximately 45%
of the total purchase
price.
[10]
In October 2015, as appears from the relevant CIPC documents,
[4]
Ludwig’s share certificate was cancelled
[5]
and Groenewald became the shareholder and director of Intongo. The
Applicants allege that this occurred fraudulently. In
this
regard the Second Applicant states in the founding affidavit that
Groenewald made use of unsigned documents sent to
him by James
Kotze Attorneys to have himself appointed as the director of Intongo.
Kotze, according to the Second Applicant, had
sent the documents to a
secretarial services company without the necessary approval and
resolution from the Second Applicant because
Groenewald had advised
that he gave an undertaking to make a full payment for the shares. It
is only in his replying affidavit
that the contention is advanced by
the Second Applicant that Groenewald falsified documents to have
himself appointed as shareholder
and director.
[11]
In 2017 the property was offered to the Second Respondent for sale.
The Second Respondent submits
that from its point of view,
Groenewald was a director of Intongo and Intongo owned the property.
[12]
On 31 July 2017 the Second Respondent paid a deposit of R400 000
for the property into the bond
account held with Standard Bank, to
prevent the bank from foreclosing on the property. The Second
Respondent states that
Moller and the Second Applicant were aware of
this payment and although it was not in the name of Groenewald, they
assumed it was
a payment by him.
[13]
On 18 July 2017, shortly before the aforementioned payment of
R400 000 by the Second Respondent,
Kotze, the Applicants’
attorney, wrote to De Bruin, Moller’s s agent in the share sale
agreement, and provided him
with the closing documents for the
transfer of the shares, which, according to Kotze, were unused and
were prepared at a time when
he understood that payment in full was
expected from the Groenewald.
[14]
The Second Respondent notes that the first record in the founding
affidavit of any demand on Groenewald
for the purchase consideration
in respect of the share sale agreement is 4 August 2017. This, the
Second Respondent notes, is the
same day on which Groenewald signed
the property sale agreement with the Second Respondent. At the end of
2017 Groenewald paid
a further USD66 000 in respect of the share
sale agreement. In January 2018, the property was transferred into
the Second
Respondent’s name.
[15]
After the further payment by Groenewald at the end of 2017, Moller
explored a settlement of the outstanding
purchase price owed on the
share sale agreement with Groenewald. The Second Respondent states
that Moller knew that Groenewald
was a director of Intongo,
unlawfully in Moller’s view, but he did nothing about this
until August 2018 when he threatened
to remove Groenewald as a
director but did not in fact do so.
[16]
In October 2018, Moller learnt of the sale of the property. The
Second Respondent points out
that Groenewald, at that stage, was
promising to pay in terms of the share sale agreement and Moller
continued to negotiate with
Groenewald to obtain payment up to June
2019. He did not during this period try to set aside the sale he had
learned of in October
2018. This is not disputed.
[17]
The present application was brought in October 2020, some two years
after Moller learnt of the sale
of the property and some three years
after Moller became aware that Groenewald had been registered as the
director of Intongo.
The Second Respondent emphasises that it has
thus owned the property for more than three years and Moller was
aware of its ownership
for at least two years, since at least October
2018. Moller, according to the Second Respondent, was not interested
in setting
aside the property sale agreement. His interest was only
to enforce the share sale agreement between himself and Groenewald.
It
is only when these attempts failed that he directed his attention
towards reclaiming the property in the name of Intongo and by
allegedly appointing the Second Applicant as his nominee to do so.
Locus
Standi
[18]
The Second Respondent challenges the
locus standi
of both
Applicants to institute this application. Firstly, with regard
to the standing of the First Applicant, Mr Babamia
for the Second
Respondent submitted that it is clear that the First Applicant,
Intongo, did not authorise the institution of these
proceedings.
Groenewald is currently the only director of Intongo, and
in his capacity as such it was only he who would
have been authorised
to bring these proceedings in the name of Intongo. The Second
Applicant, he pointed out, is not a director
of Intongo and he
describes himself as a nominee shareholder of Intongo. This,
submitted Mr Babamia, is significant because it
is only Intongo that
has a claim to a return of the immovable property. The shareholder of
Intongo, nominee or beneficial, has
no such claim.
[19]
Secondly, apropos the standing of the Second
Applicant, Mr Babamia submitted that Moller could not
have
competently appointed the Second Applicant as a nominee shareholder
of Intongo or as its director, as he, Moller, was not
a registered
shareholder. Ludwig is the only registered shareholder
disclosed on the pleadings. Moller was never a registered
shareholder
and never became one after Ludwig’s share certificate was
cancelled, because from then on, the shareholder was
Groenewald. A
company, he submitted, referencing the definition of shareholder in
section 1 of the Companies Act 71 of 2008 (“the
Companies
Act&rdquo
;), and the requirement for a shareholder to be entered in
the securities register, only concerns itself with the registered
owner
of its shares. Ms Tshabalala for the First Respondent aligned
herself with the submissions by Mr Babamia on
locus standi
.
[20]
Mr Khoza for the Applicants countered that as it
is not disputed that the First Applicant was the owner
of the
property and Moller the owner of the shares in Intongo, both
Applicants have sufficient interest in the relief at
stake and
therefore have the requisite
locus standi
. He furthermore
submitted that Groenewald’s standing to represent the company
as the director was impugned because
he had fraudulently
appointed himself as director.
Discussion
[21]
Central to the issues of standing raised by the
parties are the questions as to precisely who in law can
institute
proceedings on behalf of a company, and the purview and position of a
shareholder in relation to a company and its assets.
I consider the
standing of each Applicant in this context.
The
Standing of the First Applicant: Who can by law represent the First
Applicant?
[22]
Section 66
of the
Companies Act prescribes
:
“
the business
and affairs of a company must be managed by or under the direction of
its board, which has the authority
to exercise all of the powers
and perform any of the functions of the company, except to the extent
that this Act or the company’s
Memorandum of Incorporation
provides otherwise.”
Section
1
of the
Companies Act defines
“board” as
“
the
board of directors of a company”
and
“director” as:
“
a
member of the board of a company, as contemplated in
section 66
,
or an alternate director of a company and includes any person
occupying the position of a director or alternate director, by
whatever name designated.”
[23]
The definitions of “director” and
“board” read with
section 66
of the
Companies Act
thus
instruct that a director who is also a member of the board of a
company, is responsible for the management and direction of the
company’s business and affairs and for the decision to
institute legal proceedings in the name of the company. It follows
that where a company has but one director it is only that director
who can institute proceedings or authorise the institution of
proceedings by an agent.
[24]
It is clear from the company documents annexed to
the answering affidavit that Groenewald is reflected as
the only
active director. Neither Moller nor the Second Applicant are recorded
as directors. Groenewald has not authorised these
proceedings nor has
he authorised the institution thereof by the Second Applicant or any
other person. As Moller is not recorded
as a director, his
resolution authorising the Second Applicant to institute proceedings
does not suffice to clothe Intongo
with the requisite standing.
[25]
The unsubstantiated allegations of fraud in the
founding affidavit shored up by mainly hearsay allegations
of
fraudulent signatures in the replying affidavit do not assist the
Applicants in their counter argument which seeks to impugn
Groenewald’s position as director. This is so because, apart
from the fact that a party cannot make out a case in reply,
the
alleged fraudulent representation to the Second Respondent in the
contract of sale on which the Applicants rely, did not cause
the
Second Respondent to act to its detriment, which is an essential
element of fraud.
[6]
See
Basil
Read (Pty) Ltd v Nedbank Limited and Another
2012 (6) SA 514
(GSJ) at paragraphs 24 – 26;
Standard
Bank v Coetsee
1981
(1) SA 1131
(A) at 1145;
Geary
and Son (Pty) Ltd v Gove
1964 (1) SA 434
(A) at 441C – D; Harms
Amlers
Precedent of Pleadings
(6 ed) at page 193; and Becks
Theory
and Principles of Pleadings in Civil Actions
(6
ed) at paragraph 13.44.
[26]
The Second Respondent did not, as the alleged
victim of the fraud, seek to set aside the sale. This is a
limitation
to the principle that fraud unravels everything, as recognised by the
Constitutional Court in
ABSA Bank Limited v Moore and Another
2017 (1) SA 255
(CC) at 39, where Cameron J said:
“
The
maxim is not a flame thrower, withering all within reach. Fraud
unravels all directly within its compass, but only between victim
and
perpetrator, at the instance of the victim. Whether fraud unravels a
contract depends on its victim, not the fraudster or third
parties.”
[27]
In view of all of the above, the First Applicant, Intongo, was
not entitled to institute these proceedings and is non-suited.
Its alleged interest in these proceedings, referred to by Mr
Khoza, does not detract from this and certainly cannot clothe
it with
standing.
Locus
Standi
of
the Second Applicant
[28]
The Second Applicant bases his standing as a
nominee shareholder and director, on the appointment by Moller
of him
in those capacities. “Shareholder” is defined in
section 1
of the
Companies Act:
“‘
shareholder
’,
subject to
section 57(1)
, means the holder of a share issued by a
company and who is entered as such in the certificated or
uncertificated securities register,
as the case may be”.
I
note that
section 57
deals with anomalous situations
[7]
and is not relevant for present purposes.
[29]
There is no evidence that Moller was a shareholder
as defined in the
Companies Act. What
does appear from the pleadings
is that Ludwig was Intongo’s registered shareholder from April
2003 and though the nominee
agreement between Moller and Ludwig may
have been terminated in 2013, there is no evidence that Ludwig
transferred the shares in
Intongo back to Moller or his nominee as
required by their nominee agreement. Moroever, upon the
cancellation of Ludwig’s
share certificate on 8 October 2015,
there is no record of Moller becoming a registered shareholder.
Instead, it is accepted that
the shares went to Groenewald.
[30]
In
Oakland Nominees (Pty) Ltd v Gelria Mining
and Investment Company (Pty) Ltd
1976 (1) SA 441
(A) at 453A –
B it was said –
“
Ownership
of shares does not depend on registration. On the other hand, the
company recognises only its registered shareholders”.
As
Moller was not a registered shareholder, he could not competently
have appointed the Second Applicant as a nominee shareholder
of
Intongo, or as its director. Accordingly, for this reason, the Second
Applicant too lacks the requisite
locus standi
.
[31]
Moller and the Second Applicant would in any event not have had the
requisite standing even had they been shareholders
as defined in the
Act, for, as has been acknowledged in
Itzikowitz
v ABSA Bank Ltd
2016 (4) SA 432
(SCA) at paragraphs 9 – 11, a company’s
property belongs to the company and not its shareholders and only the
company
may sue in respect of loss to property owned by it. No action
lies at the suit of a shareholder. In this regard the Court
stated:
“
[9]…. The notion
of a company as a distinct legal personality is no mere technicality
– a company is an entity separate
and distinct from its members
and property vested in a company is not and cannot be regarded as
vested in all or any of its members.
Generally, it is of cardinal
importance to keep distinct the property rights of a company and
those of its shareholders even where
the latter is a single entity.
The company’s property belongs to the company and not its
shareholders. A shareholder’s
general right of participation in
the assets of the company is deferred until winding-up, and then only
subject to the claims of
creditors…….
[11] More recently, in
Johnson
v Gore Wood & Co (a firm)
[2000] UKHL 65
;
[2001]
1 All ER 481
(HL), Lord Bingham of Cornhill observed:
‘
(1)
Where a company suffers loss caused by a breach of duty owed to it,
only the company may sue in respect of that loss. No action
lies at
the suit of the shareholder suing in that capacity and no other to
make good a diminution in the value of the shareholder’s
shareholding where that merely reflects the loss suffered by the
company. A claim will not lie by a shareholder to make good a
loss
which would be made good if the company’s assets were
replenished through action against the party responsible for the
loss, even if the company, acting through its constitutional organs,
has declined or failed to made good that loss
.’”
[32]
Accordingly, even had they been shareholders, Moller and the
Second Applicant would not have had the requisite
locus
standi
to set aside the sale of the property. As shareholders, they
would not have owned the property of Intongo but the shares
therein.
I note in passing that a shareholder who takes umbrage at the
manner in which a company is conducting itself or
its affairs has
remedies in terms of sections 161,
[8]
162,
[9]
163
[10]
and 165
[11]
of the
Companies
Act.
[33]
The Second Respondent took issue with Moller’s
failure to file a confirmatory affidavit authorising
the Second
Applicant to act for him. Even had such an affidavit been filed, it
would not have cured the defects pertaining to the
standing of the
Second Applicant alluded to above.
[34]
In the light of the aforegoing, I find that the Applicants have not
shown the requisite
locus standi
and for this reason alone the
application cannot succeed.
[35]
It would seem to me that the Applicants have in any event
not established the elements
of fraud
apropos
the
property sale transaction. Apart from the unsubstantiated
allegations of fraud, the representation made by Groenewald
to the
Second Respondent, which is relied upon for the fraud, has not
resulted in the Second Respondent acting to their detriment
or
wanting to set aside the sale. No representation concerning the sale
of the property was made to any other person.
[36]
It is to be noted that the only representations that were made to
Moller pertained to the sale of shares
agreement which, as appears
from the factual background, was breached. The Applicants’
remedy in those circumstances would
have been for damages arising
from the breach of the sale of shares agreement. It is unfortunate
that they resorted instead to
this application.
[37]
In view of all of the above, I grant the following order:
1.
The application is
dismissed with costs such to include the costs of two counsel for
the
Second Respondent and counsel for the First Respondent.
2.
The First Respondent shall
bear the costs occasioned by the postponement application.
Y
S MEER
Judge
of the High Court
APPEARANCES
Counsel
for Applicants
:
ADV
ADRIAN MONTZINGER
Instructed
by
:
MRT
Law Inc
Counsel
for Respondents
:
ADV
JAWAID BABAMIA SC
ADV
KEVIN ILES
Instructed
by
:
Webber
Wentzel
[1]
Annexure UVT1
to the Second Respondent’s answering affidavit.
[2]
Annexure F6
to the Founding affidavit.
[3]
Annexure F3 to the Founding
Affidavit.
[4]
Annexure UVT1
supra
.
[5]
See the
discussion in para [29] below.
[6]
The
elements of fraud being, (a)
a
representation, (b) which is, to the knowledge of the representor,
false, (c) which the representor intended the representee
to act
upon, (d) which induced the representee so to act, and (e) that the
representee suffered damage as a result. See
Basil
Read
at 1145.
[7]
For example where a profit
company has one shareholder, where a profit company has one
director, where a shareholder is a director
of a company, and where
a company holds shares in another company.
[8]
Application to protect rights of
security holders.
[9]
Application
to declare director delinquent or under probation.
[10]
Relief from
oppressive or prejudicial conduct or from abuse of separate juristic
personality of company.
[11]
Derivative
Actions.