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[2011] ZAGPJHC 146
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Muller v Lilly Valley (Pty) Ltd (2011/22041) [2011] ZAGPJHC 146; [2012] 1 All SA 187 (GSJ) (24 October 2011)
REPORTABLE
IN THE SOUTH GAUTENG HIGH COURT OF
SOUTH AFRICA
(JOHANNESBURG)
CASE NO: 2011/22041
DATE: 24 October 2011
In the matter between:
HEINRICH
MULLER
........................................................................................................
Applicant
And
LILLY VALLEY (PTY)
LTD
..........................................................................................
Respondent
JUDGMENT
WEINER J:
The Applicant, as a shareholder of
the Respondent seeks the winding-up of the Respondent on the basis
that it is just and equitable
for the Respondent to be wound up as
contemplated by
Section 81(1)(d)(iii)
of the
Companies Act 71 of
2008
(
“the new Act”
).
The application was, launched under section 344(h) of the Companies
Act 61 of 1973 (
“the
old Act”).
As the
legal basis is the same as under section 81(1)(d)(iii) of the new
Act, I do not believe that such misnomer is fatal to
the
application.
The provisions of Section
81(1)(d)(iii) of the new Act mirror the
“just
and equitable”
ground provided for in terms of section 344(h) of the old Act. On
this basis, it is submitted that the same legal principles
which
held sway in relation to such section of the old Act are applicable
to the present inquiry under the new Act.
THE
FACTS
The
Respondent conducts the business of a flower farm. It also owns
certain properties. The Applicant is a Horticulturist and
a 33%
shareholder in the Respondent. The Applicant’s co-shareholders
in the Respondent are Liesbeth van den Berg (
“Liesbeth”
)
(28 percent ) and the Carin van den Berg Trust (
“the
Trust”
)
(39%).Liesbeth and Carin are co-trustees and Carin is a beneficiary
of the Trust. Liesbeth has been a director of the Respondent
since
1994. The Applicant was previously a director of the Respondent
having been appointed as such during June 2007. He reigned
in
November 2010. Carin became involved in the business at the end of
June 2010 and was appointed a director of the Respondent
on 1
September 2010.
Prior
to Carin becoming involved in the flower farming business of the
Respondent, Liesbeth and the Applicant conducted the business
together, attending to virtually all aspects of the day-to-day
administration and conduct of the Respondent’s business
and
its financial affairs.
In 2007, it was agreed that the
Applicant would be allocated 33 percent of the shareholding in the
Respondent. It was intended
by both the Applicant and Liesbeth that
a further 17 percent shareholding in the Respondent would be
acquired by the Applicant
in due course.
Since prior to 2007, the Applicant
has resided on the farm and he continues to do so.
From or about June 2007 to November
2010, the Applicant and Liesbeth took equal drawings from the
Respondent and were both signatories
on the bank account of the
Respondent. All the Applicant’s living expenses were drawn
from the Respondent as were Liesbeth’s.
According to the
Applicant, he ran the flower business whilst Liesbeth took a
“back
seat”
although the
Applicant always discussed the more important aspects of the conduct
of the business with Liesbeth. The Applicant
contends that the
relationship was essentially one of partnership.
“
THE
BREAKDOWN”
According to the Applicant:
During June 2010, Liesbeth indicated
that she was no longer prepared to allow the Applicant to acquire
the additional 17 percent.
The Applicant felt that she had reneged
on an agreement that their holdings would be equal and in
accordance with a partnership.
Liesbeth informed him that her
vision of the company was that it was a
“family
business”
.
The Respondent owns shares in
Multiflora Ltd and part of the income of the Respondent is derived
from dividends which accrue
to the shareholders from time to time.
A dividend of R900 000.00 was paid to the Respondent in May 2010.
During June 2010,
whilst the Applicant was away on holiday,
Liesbeth drew R600 000.00 out of the Respondent’s bank
account. This withdrawal
was not in accordance with the usual
business practice and was not authorized by a resolution of the
Board of Directors.
The involvement of Carin in the
conduct of the Respondent’s business from June 2010
precipitated Liesbeth’s new
vision of the way forward for the
Respondent (i.e. the change from a vision where the business of the
Respondent would be conducted
equally for the benefit of the
Applicant and Liesbeth (in her personal capacity and as
representative of the Trust) to one
where Liesbeth intended to make
it a family concern. Liesbeth and Carin became secretive and
authoritarian in the manner in
which they dealt with him and the
business. They started making decisions about important matters
without consulting him (including
drawing large sums of money out
of the Respondent without authority). Applicant stated that he
became a director in name only.
He became concerned that he had all
the obligations and liabilities of a director but in practice none
of the rights. Accordingly,
he resigned his position as director in
November 2010.
Liesbeth demanded that the Applicant
relinquish his motor vehicle which is owned by the Respondent
(which he did under threat
that its value would be debited to his
loan account).Liesbeth also demanded that he vacate the dwelling
which he occupies at
the farm. He has refused to do this. Liesbeth
and Carin have taken it upon themselves to debit the Applicant’s
loan
account with the amount of R8 000.00 per month, without his
agreement, purportedly as rental.
According to the Respondent:
The Applicant based its case for
winding up on 5 factual grounds:
He is essentially a partner with
the other shareholders of the Respondent where a relationship of
confidence and trust prevailed;
this partnership was carried out
in a corporate entity, where he was a director of the Respondent
and, by way of agreement,
entitled to 33% of the shares of the
Respondent; and by way of expectation, entitled to a further 17%
of the shares in the
Respondent.
He was forced to resign as a
director of the Respondent as a result of financial irregularities
and being encumbered by all
the duties of directorship, while
enjoying none of the rights.
The business is being conducted
recklessly and to his prejudice as a shareholder.
The benefits of his employment with
the Respondent, including housing, vehicle and access rights, have
been unlawfully withdrawn
without reason.
His rights as shareholder have and
are being ignored.
The Respondent contends that the
Applicant ignores the fact that the relationship between the
parties operated on two levels:
The flower growing business, where
the Applicant was a loyal, skilled and trustworthy employee whose
level of responsibility
increased over time. He was the manager
from 2001, entitled to a house, vehicle, access and other
incidents of employment.
It had been contemplated to conduct this
business in a separate corporate entity that was registered but
never implemented,
and in which the Applicant would hold a 50%
interest. Instead, the parties shared equally in the financial
benefits afforded
by the conduct of the flower growing business
from June 2001.The Applicant earned approximately R1mil per year;
The flower growing business is to
be distinguished from the pre-existing property or assets of the
Respondent. This consisted
of 8 properties and a block of
Multiflora shares that had been acquired well before the
Applicant’s involvement in
the Respondent and with which his
activities were not directly concerned.
In 2007, the Applicant was rewarded
for his services and dedication by becoming entitled to purchase a
33 percent shareholding
from the Trust valued at one third of the
2001 value, whilst taking into account the appreciation in the
Respondent’s
assets created by the successful conduct of the
flower growing business by the Applicant;
In June 2007 he was appointed a
director;
In 2008 the shares were transferred;
The possibility of a further
transfer of 17 of percent the Respondent’s shares, at a
price, was explored but not finalised;
this would in any event be
contingent upon the Applicant remaining with the Respondent. The
initial 33 percent shares have
not been paid for yet.
The flower growing business level of
the arrangement is a close employment relationship with a profit
sharing arrangement predicated
upon a continued involvement in the
business as manager and employee.
In contrast, the shareholding in
the pre-existing assets of the Respondent is a strictly commercial
one. Its interest is the
capital growth generated by the underlying
assets.
There was no financial irregularity
in the R600k drawing:
The Respondent’s auditors
advised the shareholders how they had treated the payment of the
Multiflora dividend;
The Applicant, in essence accepted
the distribution plan but he wanted 50 percent of the payment and
immediate delivery of
a further 17 percent of the shares; this
created conflict which Liesbeth tried to appease by offering to
make up the difference
personally;
When the deposit was made into
Liesbeth’s account it was made in full view as the Applicant
had access to the Respondent’s
bank accounts;
The transfer in and out of monies
occurred routinely as can be expected in a business of this kind;
there was no reason to
have left cash in the bank when it could be
utilised by a shareholder (and recorded in the books of the
Respondent).
The Applicant’s insistence on
formalities is contrived and duplicitous as no such formalities
were used in the past.
Other than the Multiflora dividend,
despite referring to other financial irregularities none have been
shown;
there is an independent auditor;
He failed to disclose to the court
that he actually resigned as an employee in June 2010, effective 15
December 2010. He had
distanced himself from the business from
October 2010. There was no reason for the Applicant to have
resigned as an employee.
He went of his own accord (and without
citing any of the reasons he now does). He was also sincerely
requested to return on
more than one occasion.
With the voluntary resignation from
employment went the Applicant’s entitlement to housing,
vehicles, access and other
employment perks.
The business is not being recklessly
conducted, but is flourishing and well managed. This is not
disputed in reply.
The Applicant’s rights as
shareholder have not been ignored.
The
Applicant’s
case for the breakdown in the relationship of trust rests, inter
alia, on his allegations of financial irregularities.
The main issue
here is the treatment of the Multiflora dividend. Liesbeth states
that she drew against her credit loan account
and that of the trust
an amount of R600’000.00 being their share of the multiflora
dividend. When the Applicant returned
from holiday on or about the
14
th
of June 2010 he telephoned her and advised her that he had noted
this withdrawal. He accused her of doing precisely as she pleased.
She explained to the Applicant that she had utilised the money to
reduce her bond. She further stated that she and the trust
were
majority shareholders and that they were entitled to withdraw their
share of the multiflora dividend. This had nothing to
do with the
flower farming business of the Respondent of whom the Applicant was
the managing director. The Applicant was informed
that he is
perfectly at liberty to withdraw his R300’000.00 share of the
multiflora dividend against his credit loan account
but he chose not
to.
On the 15
th
of June 2010, the day after the phone call, Respondent confronted
Applicant and told her that he was giving six months notice
of
termination of employment. Liesbeth stated that she was distressed
at this because she valued the Applicant’s expertise.
She then
phoned Carin who was in Holland and advised her to return as the
Applicant had terminated his employment and she needed
Carin to
become involved in the business. Carin returned on the 20
th
of June 2010. Thereafter, Carin and Liesbeth approached an attorney,
one Jordaan, requesting a shareholders agreement. It was
prepared on
the basis that the Applicant owned a 33 per cent of the shareholding
in the Respondent.
At that stage Applicant stated that
he might have been hasty in giving notice and was prepared to
attempt reconciliation. However
when presented with the shareholders
agreement, Applicant stated that although he did not insist on the
17 per cent shareholding
he wanted 50 per cent voting rights.
Liesbeth stated that she was not agreeable to this as she foresaw
deadlocks and the agreement
was never signed. From the 15
th
of June 2010, the Applicant’s involvement in the flower farm
reduced.
These allegations are not materially
disputed in the reply.
In the replying
affidavit, the Applicant raises the premise of seeking relief from
oppression under section 163 of the new Act.
At the hearing, the Respondent
contended that the Applicant, in essence, had abandoned the relief
for winding-up and there was
no effort, until 21 September 2011,
after the commencement of the hearing, to comply with the service
formalities of a winding
up under the new Act. However, the
Applicants counsel confirmed that the Applicant still sought a
winding-up.
It
is common cause that, at this stage, relief under section 163 of the
new Act cannot succeed because the relevant parties (the
shareholders and directors) have not been joined.
As
will be discussed below, the court’s discretion, in terms of
section 347(2) of the old Act, is based upon whether or
not other
remedies are available to the Applicant. Section 163 will be
considered in the light of that contention.
LEGAL
PRINCIPLES
The
“just
and equitable”
basis
for winding-up a company
“postulates
not facts but only a broad conclusion of law, justice and equity as
a ground for winding-up”
.
The
“justice
and equity”
is that between the competing interests of all concerned
1
.
The
Applicant relies upon this principle on the basis that the breakdown
in the relationship between the shareholders of the Respondent
provides
“grounds analogous to those for the dissolution of
partnership”
2
.
The argument is that where (as in this case) there is, in substance,
a partnership in the form of a private company, circumstances
which
would justify the dissolution of a partnership would also justify
the winding-up of the company under the just and equitable
provision.
3
In
this regard, the words
“just
and equitable”
have
been
elegantly
described by Lord Wilberforce in
Ebrahimi
v Westbourne Galleries Ltd
4
as
follows:-
“…
the
words “just and equitable” are a recognition of the fact
that a limited company is more than a mere judicial entity,
with a
personality in law of its own: that there is room in company law for
recognition of the fact that behind it, or amongst
it, there are
individuals, with rights, expectations and obligations inter se which
are not necessarily submerged in the company
structure. ….
The “just and equitable” provision does not …
entitle one party to disregard the obligation
he assumes by entering
a company, nor the court to dispense him from it. It does, as equity
always does, enable the court to subject
the exercise of legal rights
to equitable considerations; considerations, that is, of a personal
character arising between one
individual and another, which may make
it unjust, or inequitable, to insist on legal rights, or to exercise
them in a particular
way. It would be impossible, and wholly
undesirable, to define the circumstances in which these
considerations may arise. Certainly
the fact that a company is a
small one or a private company, is not enough. There are very many
of these where the association
is a purely commercial one, of which
it can safely be said that the basis of association is adequately and
exhaustively laid down
in the articles. The superimposition of
equitable considerations requires something more, which typically may
include one, or
probably more, of the following elements: (i) an
association formed or continued on the basis of a personal
relationship, involving
mutual confidence - this element will often
be found where a pre-existing partnership has been converted into a
limited company;
(ii) an agreement, or understanding, that all, or
some (for there may be “sleeping” members), of the
shareholders shall
participate in the conduct of the business; (iii)
restriction on the transfer of the members’ interest in the
company - so
that if confidence is lost, or one member is removed
from management, he cannot take out his stake and go elsewhere. It is
these,
and analogous, factors which may bring into play the just and
equitable clause, and they do so directly, through the force of the
words themselves. To refer, as so many of the cases do, to
“quasi-partnerships” or “in substance partnerships”
may be convenient but may also be confusing. It may be convenient
because it is the law of partnership which has developed the
conceptions of probity, good faith and mutual confidence, and the
remedies where these are absent, which become relevant once such
factors as I have mentioned are found to exist: the words “just
and equitable” sum these up in the law of partnership
itself.
And in many, but not necessarily all, cases there has been a
pre-existing partnership the obligations of which it is reasonable
to
suppose continue to underlie the new company structure. But the
expressions may be confusing if they obscure, or deny, the
fact that
the parties (possibly former partners) are now co-members in a
company, who have accepted, in law, new obligations.
A company,
however small, however domestic, is a company not a partnership or
even a quasi-partnership and it is through the just
and equitable
clause that obligations, common to partnership relations, may come
in.”
Based
upon this principle, the Applicant submitted that the relationship
of trust and integrity between the shareholders is integral
to the
success of the business of the Respondent as well as to the
continuation of that relationship
5
.
In
this regard, the Applicant’s counsel relied upon the second
principle referred to in the
Yenidge
Tobacco Company
case
which was referred to by Ponnan JA in the APCO case supra
6
.
Ponnan JA in dealing with this type of scenario when examining the
dissolution of partnership ground stated as follows:
“
The
second, usually called the deadlock principle, is derived from the
Yenidje Tobacco Company case. It is founded on the analogy
of
partnership and is strictly confined to those small domestic
companies in which, because of some arrangement, express, tacit
or
implied, there exists between the members in regard to the company’s
affairs a particular personal relationship of confidence
and trust
similar to that existing between partners in regard to the
partnership business. If by conduct which is either wrongful
or not
as contemplated by the arrangement, one or more of the members
destroys that relationship, the other member or members are
entitled
to claim that it is just and equitable that the company should be
wound up. (See also Moosa NO v Mavjee Bhawan (Pty)
Ltd and Another
1967 (3) SA 131
(T) at 137; Emphy and Another v Pacer Properties
(Pty) Ltd
1979 (3) SA 363
(D) at 336 H - 367 B.)”
The
Respondent submitted that the Applicant’s reliance on the
partnership principle was misplaced. Respondents counsel referred
to
the APCO case
7
in which it was stated that there are certain features of a private
company which may justify “the superimposition of equitable
considerations”. In this regard, Ponnan JA referred to the
considerations laid down in the judgment of Lord Wilberforce.
8
Respondent
contended that the Applicant had failed to meet the requirements
necessary for “the superimposition of equitable
considerations” on what is otherwise known in company law as
simply a matter of shareholder’s voting powers.
Counsel
for Respondent referred to the “
two
distinct principles that guide a Court in exercising its discretion
to a wind up a domestic company which is in the nature
of a
partnership
”
cited in APCO’s case
9
-
The
first, relating to “
a
justifiable lack of confidence in the conduct and management of the
company’s affairs
”
does not apply since the Respondent is, on the Applicant’s
own version prosperous and successful. It is also not
disputed that
it can be adequately run by the management without him. This is not
a case where the company’s affairs
have come to a standstill
because of a dispute between shareholders.
The
second relates to the existence of “
some
arrangement, express, tacit or implied (that creates) a particular
personal relationship of confidence and trust similar
to that
existing between partners in regard to a partnership business. If
by conduct which is either wrongful or not as contemplated
by the
arrangement, one or more of the members destroys that relationship,
the other member or members are entitled to claim
that it is just
and equitable that the company should be wound up.
”
This is the principle upon which Applicant relies.
In
the present case, Respondent contends that there is no particular
personal relationship in the Applicant’s interest in
the
residual assets of the Respondent. This is to be contrasted with the
flower growing business relationship. It is the conflation
between
these separate relationships that is the source of the Applicant’s
misdirection in this matter. There may be a
personal disagreement in
relation to the flower growing business. That does not mean that the
relationship in the Respondent
has been destroyed.
It seems that the Applicant has two
hurdles to overcome in seeking to bring his case within the
Yenidje
Tobacco
principle:
Firstly whether the breakdown is as
a result of the other shareholders’ conduct or his conduct;
and
Secondly, even if the other
shareholders acted contrary to his wishes, is this not simply a
matter of the majority binding the
minority.
In
relation to a): It is a matter of dispute on the papers which party
caused the “breakdown”. This is relevant to
whether the
Applicant can claim the relief he seeks. i.e. whether he comes to
the court “clean hands”
10
.
Other than the way in which the Multiflora dividend was dealt with,
the Applicant was unable to point to facts which show wrongful
conduct by the other shareholders which has destroyed or
significantly impaired the relationship. The Applicant claims that
by reneging on the agreement to give him the extra 17%, the other
shareholders have displayed conduct which has destroyed the
relationship. The Respondent claims that firstly, this was not an
agreement but an intention to restructure in the future and
that, in
any event, this happened when the Applicant had already decided to
terminate his employment. It could never have been
intended that he
would get the 17% shareholding whilst no longer being employed by
the Respondent. It is not clear on the papers
whether the alleged
reneging of the agreement was before the Applicant’s
resignation or after. Both appear to have occurred
in June 2010.
This was also about the time the issue around the Multiflora
dividend occurred. It was before Carin became involved
in the
business and was appointed a director. In applying the principles
laid down in
Plascon
Evans (Pty) Ltd v Van Riebeeck Paints (Pty) Ltd
,
11
the Court must accept the Respondent’s version in relation to
this dispute.
In
relation to b): When evaluating the conduct of shareholders within
the company, the guiding principle is that:
“
by becoming a shareholder in
a company a person undertakes by his contract to be bound by the
decisions of the prescribed majority
of the shareholders, if those
decisions on the affairs of the company are arrived at in accordance
with the law, even where they
adversely affect his own rights as a
shareholder”
12
Lord Wilberforce in the
Ebrahimi
case referred to above
dealt with the concept of a “
quasi-partnership
”
as follows:
“…
.
the expressions may be confusing if they obscure, or deny, the fact
that the parties (possibly former partners) are now co-members
in a
company, who have accepted, in law, new obligations. A company,
however small, however domestic, is a company not a partnership,
or
even a quasi-partnership and it is through the just and equitable
clause that obligations, common to partnership relations,
may come
in.”
The
lack of confidence in the other partners/shareholders must, of
course, be justifiable.
13
Both
Sections 344(h) and 347(2) of the old Act give the court a
discretion in regard to a winding up. A useful point to start
with
this discussion is the judgment of Stegmann J in
Tjospomie
Boerdery (Pty) Ltd V Drakensberg Botteliers (Pty) Ltd And Another
14
.
He was dealing with a similar argument on section 344(h) read with
Sec347(2) (Both of which remain in force under the New Act):
“
There
can be no doubt that when the jurisdictional fact envisaged by
s
344
(h)
has been found to be present (ie the relevant conclusion of law has
been drawn), the section invests the Court with a power
to grant or
withhold a winding-up order. …..The apparent effect of the
provision is therefore to confer upon the Court 'a
very wide
discretionary power': cf
Moosa
NO v Mavjee Bhawan (Pty) Ltd and Another
1967 (3) SA 131
(T) at 136H
per
Trollip
J (as he then was).
……
.
the Legislature appears to have contemplated that although it might
be shown that the relevant circumstances rendered it just
and
equitable that the company should be wound up, there may nevertheless
at the same time be other circumstances which would justify
a refusal
by the Court to issue a winding-up order. I find myself unable to
visualise any circumstances that would justify a refusal
to issue a
winding-up order that would not at the same time be relevant to the
question whether it was just and equitable that
the company should be
wound up. I am therefore inclined to think that although
s
344
(h)
has undoubtedly set up a form apparently involving two steps, the
practical reality is that both steps are covered by one
and the same
enquiry. In practice any circumstances that would justify a refusal
to exercise the discretionary power established
by
s
344
(h)
would also demonstrate that it was not just and equitable that the
company should be wound up. …… In practice
no room is
left for the exercise of the discretion formally conferred on the
Court and apparently to be exercised as an independent
second step.
The Legislature has, however, found another use for the otherwise
superfluous formal provision for the exercise of
a discretion. In
1952, by the introduction of
s
111
bis
and an amendment to
s
117(2)
of the Companies Act 1926 (the substance of which provisions has been
re-enacted in
s
252
and
s
347(2)
of the Companies Act 1973) the Legislature made further provision for
the manner in which the otherwise purely formal discretion
under
s
344
(h)
was to be exercised in particular circumstances. If conduct that was
oppressive to some members rendered it just and equitable
that the
company should be wound up, the apparent discretion to issue or
refuse a winding-up order under
s
344
(h)
would no longer have to be exercised accordingly, for the Court was
given the further choice of exercising powers under
s
111
bis
of the 1926 Act (now
s
252
of the 1973 Act) to deal with the situation in a different way.
Similarly, if it appeared to be just and equitable that a
company
should be wound up,
s
117(2)
of the 1926 Act (now
s
347(2)
of the 1973 Act) empowered the Court to exercise its apparent
discretion to issue or refuse a winding-up order under
s
344
(h)
in a particular way (ie by refusing such an order) if the applicants
for a winding-up order were members of the company and
if the Court
was of opinion (or was satisfied) that the applicants were
unreasonably refusing to pursue some other remedy that
was available
to them.
Taking into
consideration the facts and allegations contained in the founding
affidavit and admitted by the
Respondent,
as well as the authorities referred to above in relation to the
application of the “partnership principle”,
as well as
the wide discretion granted to the Court, the Applicant has, in my
view, failed to establish:-
That the
misconduct complained of is that of the other shareholders as
opposed to his;
That he resigned
as an employee and director from the Respondent on justifiable
grounds;
That the
conduct upon which he relies was such that it destroyed the
relationship between the parties and created a “justifiable
lack of confidence” in the conduct and management of the
Respondent’s affairs (insofar as he relies on the
partnership principle);
That, even
though he was
a minority shareholder (and not an equal shareholder) he did not
undertook to be bound by the decisions of the prescribed
majority
of the shareholders;
That his
position (if the Respondent was not wound up) outweighed the
prejudice to the other shareholders as well as the fifty
permanent
staff members and their families who enjoy cost free accommodation
on the premises and the fifty temporary employees,
whose
livelihood would be affected;
That It would be
“just and equitable” that the Respondent be wound up.
Section 347(2) of
the old Act grants the court a further discretion to issue or refuse
a winding up order under section 344(h),
if the court is of the
opinion or is satisfied that the Applicants were unreasonably
refusing to pursue some other remedy that
was available to them.
Accordingly, e
ven
if the Applicant had established that it was “just and
equitable” to wind up the Respondent based upon the
partnership principle under Section 81(1)(d)(iii), before a court
will grant a winding-up of a solvent company, it must be satisfied
that all alternative means have been investigated and failed.
ALTERNATIVE REMEDIES
At
the hearing, the Applicant submitted that Liesbeth and Carin had
unreasonably refused to accept a reasonable offer to buy the
Applicant’s shares.
In
response, Liesbeth and Carin stated that the Applicant should have
resorted to the provisions of the Articles of Association
which
relate to the transfer of shares. Applicant contends that this
approach fails to take account of the fact that the Applicant,
in
writing, offered his shares for sale to Liesbeth (in her capacity as
shareholder and trustee of the Trust) as early as 1 November
2010.
He argues that accordingly, the share transfer provisions in the
Articles have no viable application in practice and resort
to them
affords the Applicant no relief. They are raised by Liesbeth
vexatiously and obstructively in a bid to further prejudice
the
Applicant’s rights. It was submitted by the Respondent that
the Applicant had other remedies, more particularly, by
utilizing
the procedure in the articles. The Applicant had not followed the
procedure and Liesbeth and Carin had never stated
that they were not
open to buying the shares. They rejected the Applicant’s
figure of R2 million. Such figure was not arrived
at in terms of the
procedure in the Articles. The auditor was never called upon by the
Applicant to do a valuation after the
parties failed to agree on a
price.
In
addition, several options were presented to the Applicant in
correspondence. Such options included the invitation to submit
any
further proposals that he wished to discuss if he did accept the
options presented by Liesbeth. The Applicant did not take
up this
invitation. Nor did the Applicant, in accordance with the Articles
seek to find a third party purchaser and submit such
offer to
Liesbeth. Counsel for Applicant stated that such a scenario was
improbable within a family business scenario. That may
be so, but
Applicant cannot, claim that without having explored the option.
The
Applicant
could also, for example, have sought specific performance in regard
to the 50 per cent shareholding which he claimed
was due to him.
Thereafter his rights as an equal shareholder could have been
exercised.
The
Applicant submitted that in terms of Section 347(2), it is for the
Respondent to place before the court the other remedies
available.
The Respondent submitted that the Applicant should have acted in
terms of the Articles. Such alternative remedy was
not adequately
pursued by the Applicant.
The
Applicant
raised in the replying affidavit, the alternative remedy provided by
Section 163 of the New Act. Its precursor was Section
252 of the old
Act. Sec 252(3) provides that:
‘if
on any such application it appears to the court that the particular
act or omission is unfairly prejudicial, unjust
or inequitable or
that the company’s affairs are being conducted as aforesaid
and if the court considers it just and equitable,
the court may with
a view to bringing an end the matters complained make such order as
it thinks fit, whether for regulating
the future conduct of the
company’s affairs or for the purchase of the shares of any
members of the company by other members
thereof or by the company
and…
’
Section 163(2) of
the New Act provides that
‘the
court may make any interim or final order it considers fit including
–
..........
(e) an order
directing an issue or exchange of shares’;
There are various
other powers which a court
has
under section163 (2), but the specific power under section 252 (3)
to order the
‘purchase
of the shares of any members of the company by other members thereof
or by the company’
is not contained within section 163. It is not necessary in the
present matter to consider the reasons for the change in wording.
It
might be that in terms of section 163(2)(e), the court can order an
exchange of shares for cash on a value determined in terms
of the
articles. The Applicant himself believed that there might be a case
to be made out in terms of section 163 as he referred
to this remedy
in his replying affidavit. Accordingly, he believed that an
alternative remedy to winding up may be available.
In the result, taking into account
all relevant considerations and prejudice to the parties, the
Applicant has failed to establish
that is it “just and
equitable” to wind-up the Respondent. In terms of section
347(2), I am satisfied that there
is some other remedy available to
the Applicant.
The application is accordingly
dismissed with costs.
DATED
AT JOHANNESBURG THIS 24th DAY OF OCTOBER 2011
___________________
Weiner
J
Date
of hearing: 22 September 2011
Date
of judgment: 24 October 2011
Counsel
for the applicant: D Fisher SC
Attorneys
for the applicant: Blakes Mphanga Inc.
Counsel
for the respondent: D Vetten
Attorneys
for the respondent: Martini-Patlansky
1
Moosa NO v Marjee Bhamwan (Pty) Ltd
1979 (3) SA 131
D at 136.
2
Hennochsberg [Issue 31], Volume 1, page 702; APCO Africa (Pty) Ltd
and Another v APCO Worldwide Inc.
[2008] ZASCA 64
;
2008 (5) SA 615
SCA; Moosa’s
case (supra) at 136 H.
3
In re Yenidje Tobacco Company Ltd
[1916] (2) Ch 426
(CA) at 430;
Marshall v Marshall (Pty) Ltd and Others
1954 (3) SA 571
(N);
Lawrence v Lawrich Motors (Pty) Ltd
1948 (2) SA 1029
(W).
4
[1973] AC 360
(HL) at 379 B.
5
APCO Africa case (supra) at page 628, paragraph 29.
6
APCO Africa case (supra) at 625
7
Supra at 624 – 625.
8
Supra
9
Supra
at [19].
10
Apco supra
11
1984(3) 623 A @634-635; Marshall v Marshall (Pty)Ltd 1954(3) SA 571
N @579
12
Per Trollip JA in Samuel v President Brand Gold Mining Company
Limited
1969 (3) SA 629
(AD) at 678.
13
Apco supra @625A
14
1989(4)
31 T.