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[2020] ZAGPJHC 28
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Nyathi and Others v Mogase and Others (24225/19) [2020] ZAGPJHC 28 (13 February 2020)
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IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG LOCAL DIVISION, JOHANNESBURG
CASE
NO: 24225/19
In
the matter between:
NYATHI,
PONTSO RETHABISENG
First
applicant
DUNAMIS
EMPORIUM SERVICES (PTY) LTD
Second
applicant
NYATHI, NOEL
JANAVARI
Third
applicant
and
MOGASE,
TUMELO EZEKIEL
First
respondent
KUYALUNGA
TRAFFIC SOLUTIONS (PTY) LTD
Second
respondent
FIRST
NATIONAL BANK
Third
respondent
JUDGMENT
CORAM:
ENGELBRECHT AJ
1.
When business is struggling and business
partners fall out, the intervention of a court is sometimes the only
solution – even
more so when there is a dispute about unpaid
dues to creditors and only one of the business partners is in control
of the bank
account.
2.
Dunamis Emporium Services (Pty) Ltd
(Dunamis) holds 50% of the shares in the second respondent (KTS),
with the first applicant (Ms
Nyathi) and the third applicant (Mr
Nyathi) holding a 50% interest each in Dunamis. Mr Nyathi is,
or was, depending on who
is to be believed, the Chief Operating
Officer (COO) of KTS. In the period between 8 March 2018 and 27
August 2018 he was
also a director of KTS. Ms Nyathi is also a
former director of KTS (until 27 February 2018).
3.
Once upon a time, the Nyathis and the first
respondent (Mr Mogase) had been friends. For reasons not
important to the determination
of this application, the relationship
between the
dramatis personae
appears to have deteriorated to such a degree that by 6 March 2019 Mr
Mogase indicated to the Nyathis that ‘
I
feel that I have reached the end of our collective business
experience’
and indicating a
proposal for his exit from Dunamis. By 11 March 2019, he
appears to have had a change of heart regarding
his exit. He
purported to dismiss Mr Nyathi from his position as COO if Dunamis on
the basis that Dunamis could not afford
his salary – even
though Mr Nyathi was not earning a salary and despite the fact that
he was appointed as a shareholder representative.
Mr Mogase
also argued by this date that an addendum to the shareholders’
agreement was void. By the next day, Mr Nyathi
was asked to
collect his personal possessions from the offices of KTS. All
of this happened against the backdrop of -
3.1.
the
parties anticipating payment of an arbitration award of just over R3
million following an arbitration involving KTS and Tswaing
Municipality;
3.2.
the
parties knowing that KTS owed a debt to SARS of about R1,8 million,
in addition to other outstanding liabilities.
4.
By 1 April 2019, the Nyathis proposed a
roundtable discussion on the future of KTS and sought clarity
inter
alia
on the use of KTS bank accounts
for Mr Mogase in his personal capacity. An undertaking was
sought from Mr Mogase that he refrain
from using the KTS funds for
personal purposes and that he refrain from engagement with creditors
without the involvement of the
applicants. Towards the end of
April Mr Mogase, in a telephone conversation with Mr Nyathi’s
attorney, agreed to a
meeting in May and said that he would not
transact on the KTS account until resolution of the disputes between
the parties.
He also undertook that the funds due to be paid
from any creditor – in particular Tswaing Municipality –
would be used
or allocated according to a schedule of payments to be
agreed at the roundtable meeting to be held. Already at this
stage,
the applicants harboured a fear that Mr Mogase would
misappropriate funds once they were paid into the KTS bank account.
Efforts were made to require dual approval of transactions on the
relevant accounts, but Mr Mogase failed to sign the requisite
mandate.
5.
On 6 May 2019, the arbitration award in
favour of KTS was made an order of court, but by this time nothing
had come of the offer
of Mr Mogase to participate in a round table
meeting in that week. It was only by 20 May 2019 that Mr
Mogase’s attorney
indicated that a round table meeting would be
held on 23 May 2019. Mr Mogase’s attorney undertook that
Mr Mogase would
not operate the KTS bank account until finalization
of this meeting.
6.
The meeting was held, but the parties were
unable to agree on the terms of how to bring their business
relationship to an end.
Be that as it may, according to the
applicants, Mr Mogase (1)confirmed that he would give a written
guarantee that he would
not transact on the KTS bank account until
resolution of the disputes between the parties; and (2) offered that
the arbitration
award could be paid into his attorney’s trust
account. Mr Mogase denies this agreement, although that
agreement was
recorded in a letter from Mr Mogase’s attorney.
Mr Mogase now says his attorney held no instruction to send this
letter.
7.
On 5 July 2019, just short of R3 million
due under the arbitration reward was paid into one of the KTS
accounts – an account
different from the one mentioned in the
arbitration award, on the apparent instruction of Mr Mogase. He
confirms that banking
details were provided to KTS’ attorneys
on a KTS letterhead. On the very same day that the monies
were paid into
the account, Mr Mogase made payments totaling about
R900 000 from that account. Thereafter, on 8 July 2019, Mr
Mogase
blocked Ms Nyathi’s access to the KTS accounts.
8.
This application was then launched on 10
July 2019. It started out as an urgent
ex
parte
application in which the
applicants sought an interim order prohibiting the first respondent
(Mr Mogase) from in any way dealing
with or transacting on or
withdrawing from certain bank accounts in the name of KTS and held
with the third respondent (FNB).
In terms of the notice of
motion, the relief was sought to operate pending resolution of the
dispute between the shareholders in
KTS or pending the outcome of an
arbitration to resolve the disputes. A rule
nisi
was issued on 10 July 2019. The rule was extended twice, and
became opposed, ultimately for the matter to be argued before
me on 6
February 2020. By this time it had became apparent that no
roundtable discussion would be held to resolve the matter.
9.
Mr Chavalala raised a point
in
limine
on the standing of Mr and Ms
Nyathi, on the basis that they are neither shareholders nor directors
of KTS, but he accepted that
Dunamis enjoyed standing. On that
basis alone, I was compelled to hear the merits of the application.
Moreover, I not
persuaded by the submission that Mr and Ms Nyathi do
not enjoy standing in this application: they have asserted that they
were
directors of KTS at a time when KTS incurred certain debts with
the South African Revenue Service (SARS), and that SARS may turn
to
them for payment of the outstanding amount. The rights and
interests of the Nyathis have clearly been affected by the
election
of Mr Mogase to make payments to certain creditors, but to delay the
payment of monies to SARS. Moreover, given Mr Mogase’s
challenge to the addendum to the shareholders’ agreement, the
Nyathis were entitled to assert their interests in their own
right.
I also cannot leave out of account that Ms Nyathi has stood surety
for the overdraft facilities of KTS – further
dissipation of
the funds in the account may expose Ms Nyathi to further liability.
10.
Mr Chavalala did not press a point on the
non-joinder of SARS that had been raised in the papers, correctly
so. Any indirect
financial interest that SARS might have in the
outcome of the application is not such that it necessitated the
joinder of SARS.
11.
This brings me to the merits of the
application. In accordance with the trite requirements for an
interim interdict as set
out in
Olympic
Passenger Service (Pty) v Ramlagan
1957
(2) SA 382
(D), in order for them to succeed, the applicants must
show:
11.1.
a
prima facie
right
(though open to some doubt);
11.2.
an
injury committed or a reasonable apprehension of irreparable harm;
11.3.
that
the balance of convenience favours the applicants; and
11.4.
the
absence of similar protection offered by any other ordinary remedy.
12.
These requirements seem simple enough, but
the grant of interim relief is an extraordinary remedy, as was
recognized in
Erikson Motors (Welkom))
Ltd
v
Protea Motors Warrenton
1973 (3) SA 685
(A) at 691D-E, and this court enjoys a wide discretion in accordance
with the principles set out in
Knox
D’Arcy Ltd and Others v Jamieson & Others
[1996] ZASCA 58
;
1996 (4) SA 348
(A) at 361I.
13.
Upon a weighing of the averments in the
respective affidavits, and guided by the principles as enunciated in
Plascon-Evans Paints Ltd v Van Riebeeck
Paints (Pty) Ltd
[1984] ZASCA 51
;
1984 (3) SA 623
(A) at
643H – 635C, I have come to the conclusion that Mr Mogase has
acted in a manner indicative of a particular state of
mind. He
has taken a number of steps indicating that he wished to take full
control of the funds of KTS and that he will
unilaterally exercise
his discretion on which creditors to pay and which not, despite the
manifest interest of the applicants in
the appropriate disbursement
of the monies. Mr Mogase has all but ensured that Dunamis and
its shareholders are excluded
from any oversight role in respect of
KTS. In his answering affidavit, Mr Mogase stated expressly
that he disagrees with
demands made by the applicants (including that
he should not make payment of personal accounts from the KTS accounts
and not perform
transactions on the KTS accounts). He says, in
terms, that the applicants ‘
do not
have a right to dictate to [KTS] which of its creditors it must pay
and which must not be paid’
.
Yet, for himself, he assumes the right – not to dictate, but to
decide unilaterally, and seemingly without coming
to an agreement
with his business partners.
14.
Unfortunately, the elections made by Mr
Mogase on which creditors he would make payment to, and particularly
the election not to
make payment to SARS immediately upon receipt of
the funds, is supportive of the applicants’ claims that they
fear misappropriation
that may carry consequences for the
applicants. In argument before me, Mr Chavalala sought to
convince me not to grant the
order sought because a SARS debt incurs
significant interest and penalties. In his submission, if the
order is not granted,
the payment to SARS can be made to avoid
further penalties. That was also Mr Mogase’s submission
in his answering papers.
Yet, Mr Mogase had elected not to make
payment to SARS on 5 July 2019 when he rushed to make payments to
others who were allegedly
creditors of KTS. And he did not make
payment to SARS in the days that followed between then and the grant
of the rule
nisi
on 10 July 2019. The submission that Mr Mogase intended to make
payment, but was prevented from doing so in light of the
application
rings hollow in the circumstances. It is also unconvincing in
light of the fact that Mr Mogase took three days
to confirm the list
of payments allegedly made to his attorney for – so he says –
onward transmission to the applicants.
Why, if Mr Mogase was
midway-through making a list of payments, was he sending the report
at that stage? The email certainly did
not suggest that payment to
SARS was imminent.
15.
It does not help Mr Mogase’s cause
that he asserts an inability to show proof of payment to the
creditors who had allegedly
been paid by relying on the consequences
of the interdict. Importantly, he not only failed to provide
proof of payment, but
also failed to provide proof of any kind that
those amounts were indeed due to the creditors listed. Of
concern is his allegation
in the answer that R600 000 was paid
to ‘
Intellect’
,
which is understood to be a reference to Inteleg (Pty) Ltd (Inteleg),
the holder of the remaining 50% of the shares in KTS with
Dunamis.
Mr Mogase is the sole shareholder in and sole director of Inteleg.
But even if the reference is not to Inteleg,
the reality is that the
payments were made despite an undertaking that payments would
not
be made and that Mr Mogase would
not
transact on the accounts once the monies came in. The
applicants had every reason to be concerned when Mr Mogase acted in
contravention of that undertaking, which had been recorded in a
letter from his attorney. He now disavows that undertaking
as a
defence. Moreover, the different versions of payments made as
set out in the email to the attorney, a letter from the
attorney and
as described in the answer, creates a cause for concern about the
veracity of the allegations on payments said to
have been made.
16.
The balance of convenience favours the
grant of an order. The facts advanced by Mr Mogase are not
sufficient to persuade me
that it would be better to release the hold
on the accounts, in order for him to make further decisions on
payments. Manifestly
SARS has to be paid, but there may also be
other creditors still remaining. This court is not in a
position to consider who
ought to be paid and who not, and it seems
inappropriate to leave that determination to the discretion of Mr
Mogase, given the
elections he made when the monies were first paid
into the account. And if the money is gone, the applicants are
unlikely
to have any recourse against Mr Mogase. A referral to
arbitration does not appear to me to be an appropriate course of
action
in the circumstances of the case, especially in light of the
submission that Dunamis intends to make application for the winding
up of KTS. Mr Chavalala submitted that the business is doing
better, but I have no facts on the papers in this regard.
And,
even if I accept these facts from the Bar, it suggests that KTS has
not been hampered in its ability to conduct business as
a consequence
of the interdict that has been granted. It cannot prejudice KTS
if its funds are preserved in order for a determination
on their
proper disbursement to be made.
17.
At the hearing, Ms Lipschitz, who appeared
for the applicants, proposed that I grant an order interdicting and
restraining the Mr
Mogase from dealing with or transacting on or
withdrawing funds from the back accounts registered and operated
under the name of
KTS and held with the third respondent (FNB).
It was proposed that the order operate pending the finalization of a
winding
up application for the dissolution of KTS to be launched by
Dunamis within 14 days of the grant of this order, failing which the
interim order would lapse. Furthermore, it was proposed that,
should the winding up application be granted, the interdict
ought to
continue to operate until a liquidator is appointed, but if it were
to be dismissed the interim order would cease to operate.
18.
Mr Chavalala, who appeared for Mr Mogase
and KTS, suggested that the better alternative would be for me to
release the freeze on
the bank accounts and to direct Mr Mogase to
make payment to SARS of the funds remaining in the bank account.
19.
I am not convinced that I enjoy the
jurisdiction to make the order proposed by Mr Chavalala. I am
anxious that I should not
make an order that could or would affect
any winding up process that may follow these proceedings. As
mentioned above, Mr
Chavalala told me from the Bar that the fortunes
of the business have improved, but I cannot place any reliance on
that submission,
which is not based on the papers before me.
More importantly, if the fortunes of KTS have indeed improved, the
applicants
will not succeed in an application for the winding up of
KTS and, should I follow the proposal of Ms Lipschitz, that will mean
that my order will cease to operate. It seems to me to be far
more desirable to allow for the interim order, which provides
safeguards to all parties until a court in a winding up application
is able to make a full assessment of the facts.
20.
On the issue of costs, I agree with the
submission of Ms Lipschitz that Mr Mogase ought to bear the costs of
the application.
He is the director of KTS whose conduct has
led to the need for the application. He is also the party that
failed to give
undertakings to put the minds of the applicants at
ease, and who made the election to make payment to a number of
alleged creditors
that did not include SARS, but did appear to
include another legal entity in which he holds an interest. I
see no need to
burden KTS with a costs order when clearly the
responsible party here is Mr Mogase.
21.
In the circumstances, I make the following
order:
21.1.
The
first respondent is interdicted and restrained from in any way
dealing with or transacting on or withdrawing funds from the
bank
accounts with account numbers […]01 and […]61 that are
registered and operated under the name of the second
respondent, and
held with the third respondent (the Interdict);
21.2.
The
Interdict shall operate pending the finalization of a winding up
application for the dissolution of the second respondent, which
shall
be launched by the second applicant within 14 days from the grant of
this order, failing which the Interdict shall lapse.
21.3.
Should
the winding up application be granted, the Interdict will continue to
operator until a liquidator is appointed;
21.4.
Should
the winding up application be dismissed, the Interdict will cease to
operate.
21.5.
The
costs of this application, including all reserved costs, shall be
paid by the first respondent.
_____________________
ENGELBRECHT AJ
Acting Judge of the High Court of South Africa
Appearances:
Adv: Lipshilt for Applicant
Adv: Chavalala for Respondents
Held on: 06 February 2020
Delivered on: 13 February 2020