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[2010] ZAGPJHC 148
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Ravinsky and Another v Gossel and Another (20152/2010) [2010] ZAGPJHC 148 (22 September 2010)
NOT REPORTABLE
IN THE SOUTH GAUTENG HIGH COURT OF
SOUTH AFRICA
JOHANNESBURG
CASE NO
:
20152/2010
DATE
:
22/09/2010
In the matter between:
SHARLENE
RAVINSKY
................................................................
First
Applicant
LEON SELWYN
JANKELOWITZ
............................................
Second
Applicant
And
ROBERT DAVID
GOSSEL
…..................................................
First
Respondent
GOSSEL’S RECORD CLUB (PTY)
LTD
............................
Second
Respondent
______________________________________________________________
JUDGMENT
______________________________________________________________
C. J. CLAASSEN
J
:
This is an
application for the liquidation of the second respondent, a company
by the name of Gossel’s Record Club (Pty)
Ltd trading as GRC
Properties. The basis upon which the application was brought is that
an alleged deadlock has occurred between
the shareholders and
directors. The first and second applicants each hold 25 percent of
the shares and the first respondent 50
percent. The second applicant
has given a full power of attorney to the first applicant to act on
his behalf while he is out
of the country.
The case will have to be determined
on the basis that the applicants own 50 percent and the first
respondent 50 percent of the
shares. There are only two directors on
the Board of Directors being the first applicant and the first
respondent. The memorandum
of Articles of Association in paragraph
81(a) actually requires three directors for purposes of establishing
a quorum. The fact
that a third director has not been appointed
undermines the managing and running of the business.
There is, however, a saving clause in
clause 81(b) which states that the current directors may act
notwithstanding any vacancy
in their number. Clause 80 of the
Articles of Association specifically states that in the case of
equality of votes the chairman
shall not have a second or casting
vote.
What the applicants have been
complaining about is the attitude of the first respondent towards
the running of the company. It
is true that the company was
initiated by the first respondent. Thereafter he obtained a
co-shareholder and a co-director, Mr
Jankelowitz who subsequently
died. The current two applicants are the heirs of the deceased Mr
Jankelowitz.
Several issues have arisen between
the parties the most recent one being the allocation of dividends
from the company’s
three financial resources. It is common
cause on the papers that the first respondent took it upon himself
to declare the dividend.
The applicants were not happy with that
dividend and the matter could not be resolved because of the
equality of votes both at
shareholder and director levels.
It is not necessary for me to
traverse all the various disputes. Suffice to say that the first
respondent has suggested that the
impasse can be resolved by
appointing a third director, alternatively that the first and second
applicants sell their shares
on the open market. In my view, that is
an acknowledgement on the part of the first respondent that
animosity reigns supreme
and that there has in fact been a loss of
trust in him by the first and second applicants.
I was referred to
the legal principles involved when a situation like this occurs in
small private companies such as the second
respondent. In the case
of
Moosa
NO v Mavjee Bhawan (Pty) Ltd and Another
1967 (3) SA 131
(TPD) Trollip J, as he then was, had to deal with a
similar situation. At page 137 he referred to various overseas
publications
including a particular article written by a lecturer at
the University of Queensland reported in
1964 Modern Law Review 282.
It has now been established that
there are two principles of importance when deciding whether or not
a deadlock has occurred entitling
a company to be liquidated as a
result thereof. The second principle is the one applicable to the
present case and in this regard
Trollip J stated at page 137 as
follows:
“
The
principle enunciated by Lord Shaw in
Loch’s
case at p. 788 is that it may be just and equitable for a company to
be wound where there is
‘
justifiable lack
of confidence in the conduct and management of the company’s
affairs…grounded on conduct of the directors,
not in regard to
their private life or affairs, but in regard to the company’s
business’;
that lack of confidence
is not justifiable if it springs merely from
‘
dissatisfaction at
being outvoted on the business affairs or on what is called the
domestic policy of the company’,
but it
is justifiable if in addition there is a lack of probity in the
directors’ conduct of those affairs. The other principle
derived from the
Yenidje
Tobacco Co
case, usually called the ‘deadlock’ principle, 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. Usually that relationship is such
that it requires the members to act reasonably
and honestly towards
one another and with friendly co-operation in running the company’s
affairs. 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, in
the same way as, if they
were partners, they could claim dissolution
of the partnership.
That
is my understanding of the general principles in the
Yenidje
Tobacco
case, as explained in the article in the Modern Law Review. In the
particular facts of that case it was constant quarrelling, disputes,
with resulting animosity between the two members which irretrievably
destroyed the personal relationship of confidence and co-operation
that their arrangement contemplated would prevail between them in
conducting the company’s affairs, thereby warranting the
winding-up of the company.”
1
The learned judge then quotes a
further portion from the Modern Law Review article in the following
terms:
“
According to these
decisions, proof that relations between the parties have deteriorated
to a point where all hope of future co-operation
between them is
precluded is sufficient to justify winding-up, and the mere fact that
one side may possess the preponderating or
casting vote by which a
deadlock can be ended will not prevent the making of an order in such
circumstances, since, as is pointed
out in one of the decisions, it
may never have been intended that the casting vote should be used to
enable one party to obtain
sole control of the company which he can
exercise regardless of the wishes of the other.”
It is common cause
on the papers that the first respondent regards himself as the
manager or managing director of the second respondent.
He stated as
much himself in his longwinded answering affidavit. His attitude
towards the company is also that he regards it
as his pension. It is
common cause that the company is well run and that it is producing
profits and that it is a viable company.
However, that does not
preclude a liquidation order of the company where its members are
quarrelling and having disputes resulting
in animosity between them.
The mere fact that the first respondent suggests the appointment of
the third director alternatively
that the applicants sell their
shares, is, to my mind, indicative of the existence of such
animosity and a unilateral attempt
by the first respondent to
resolve such animosity. Now that, in itself, in my view, based on
the authorities, is sufficient for
a liquidation order to be issued.
The remaining question is whether a
final or provisional liquidation should be ordered. In my view, it
is wise in these circumstances
to order a provisional liquidation to
enable both sides to reflect upon their position and decide whether
or not they would want
to intervene to save the company from
liquidation or adopt any other scheme of arrangement.
I am of the view that the common
cause facts in this matter are such that a liquidation order is
inevitable and that there is
very little hope of future
co-operation. Hence the respondent’s suggestion that a third
director be appointed alternatively
those shares is to be sold in
order to avoid any future deadlock. In these circumstances I am of
the view that the applicants
have made out a case for the
liquidation of the second respondent. I therefore make the following
order:
A provisional liquidation order of
the second respondent is issued returnable on 2 November 2010.
The costs of this application are to
be costs in the liquidation of the second respondent.
____________________________
1
These principles were approved and applied by
Ponnan JA in
Apco
Africa (Pty) Ltd and Another v Apco Worldwide Incorporated
[2008] ZASCA 64
;
2008 (5) SA 615
(SCA) at para
[16]
.