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[2021] ZAGPJHC 369
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Bryan v Marcelle Props 118 CC and Others (24926/2018) [2021] ZAGPJHC 369 (13 May 2021)
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REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
CASE
NO: 24926/2018
REPORTABLE:
/NO
OF
INTEREST TO OTHER JUDGES: /NO
REVISED:
/NO
DATE:
13/5/2021
In
the matter between:
SANDRA
BRYAN
Applicant
and
MARCELLE
PROPS 118
CC
First Respondent
WILLIAM
JACK CAMPBELL MITCHELL
Second Respondent
BRAVO
ZULU PROPERTIES (PTY) LTD
Third Respondent
JUDGMENT
Delivered:
By transmission to the parties via email and uploading onto Case
Lines the Judgment is deemed to be delivered. The date for hand-down
is deemed to be 13 May 2021
SENYATSI
J:
[1]
This is an application to order
that the second respondent cease to be a member of the
first
respondent and that the applicant acquires 75% of interest owned by
him be determined in terms of the unsolicited value determined
by an
independent valuer, one Mr Errol Ansara (“Ansara”) and
confirmed by the second respondent on 23 February 2018.
[2]
The application is opposed and
the respondents brought a counter-application in terms of
which they
seek the court to order that the second respondent acquires 25% of
the interest of the applicant in the main application
in the first
respondent. For convenience sake, the parties will be referred to as
in the main application.
[3]
The main application which brought in terms of
ss49 and 36 of the Close Corporation Act of 1984 ("the Act).
Section 49 (1)
of the Act provides as follows:
“
49
Unfairly prejudicial conduct
(1)
Any member of a
close corporation who alleges that any particular act or omission of
the corporation or of one or other members
is unfairly prejudicial,
unjust or inequitable to him, or some members including him, or that
that the affairs of the corporation
are being conducted in a manner
unfairly prejudicial, unjust or inequitable to him, or to some
members including him, may make
an application to a court for an
order under this section.”
(2) If on any such
application it appears to a Court that the particular act or omission
is unfairly prejudicial, unjust or equitable
as contemplated in
subsection (1), or that the corporation's affairs- are being
conducted as so contemplated and if the Court considers
it just and
equitable, the Court may with a view to settling the dispute make
such order as it thinks fit, whether for regulating
the future
conduct of the affairs of the corporation or for the purchase of the
interest of any member of the corporation by other
members thereof or
by the corporation.
(3) When an order
under this section makes any alteration or addition to the relevant
founding statement or association agreement,
the alteration or
addition or replacement shall have the effect as if it were duly made
by agreement of the members.
(4) A copy of an order
made under this section which:
(a) alters or adds to
a founding statement shall within 28 days of the making thereof be
lodged by the corporation with the Registrar
for registration; or
(b) alters or adds to
or replaces any association agreement, shall be kept by the
corporation at its registered office where any
member of the
corporation may inspect it.”
[4]
Section 36 of the Act provides as follows:
“
36
Cessation of membership by order of the Court.
(1)
On application by any member of a
corporation, a Court may on any of the following grounds order that
any member of the corporation:
-
(a)
Subject to the provisions of the
association agreement (if any), that the member is permanently
incapable, because of unsound mind
or any other reason, of performing
his or her part in the carrying on of the business of the
corporation;
(b)
that the member has been guilty of
such conduct as taking into account the nature of the corporation’s
business, is likely
to have a prejudicial effect on the carrying on
the business;
(c)
that the member so conducts himself
or herself in matters relating to the corporation’s business
that it is not reasonably
practicable for the other member or members
to carry on the business of the corporation with him or her; or
(d)
that circumstances have arisen which
render it just and equitable that such member should cease to be a
member of the corporation:
Provided that such
application to a court on any ground mentioned in paragraph (a) or
(d) may also be made by a member in respect
of whom the order shall
apply
(2)
A Court granting an order in
terms of subsection (1) may make such further order as it deems fit
in regard to
(a)
the acquisition of the member’s
interest concerned by the corporation or by the members other than
the member concerned; or
(b)
the amounts (if any) to the paid in
respect of the member’s interest concerned or the claims
against the corporation of the
member, the manner and times of such
payments and the persons to whom they shall be made; or
(c)
any other matter regarding the
cessation of membership which the Court deems fit.
[5]
As already stated, the respondents by way of a counter application
seek relief against
the applicant as follows:-
(a) the first respondent
Marcelle Props, be allowed to sell to Bravo Zulu Properties, the
third respondent the immovable property
known as Portion 9 of the
F[....] Lake L[....] No [....], Registration Division FS Province of
KwaZulu Natal (“the property”)
together with movables
thereon for an amount of R2.3 million in accordance with the terms of
the notice of meeting and offer to
purchase, attached to the
applicant’s founding affidavit marked “FA11” and
“FA12” respectively
(b) the applicant be
ordered to pay the costs of the counter-application including costs
of two counsel.
[6]
In the alternative, the respondents seek that in terms of section
36(1) (2)(a) ; (b)
and (c) of the Act and on the further terms set
out in the notice of the counter application, the applicant ceases to
be a member
of the first respondent and that she transfers her 25%
member’s interest in the first respondent into the name of the
second
respondent for which 25% members interest the second
respondent is to pay the amount of R575 000.00. The counter
application
is opposed in the third alternative, the respondents seek
that the first respondent be placed under final winding and that the
costs of the counter application, including the costs of two counsel,
be costs in the winding up.
[7]
The first respondent consists of two members, namely the applicant
with 25% interest
and the second respondent with 75% interest. The
latter acquired his interest having purchased the initial 25% from
Trever Townsend
(“Townsend”) and 25% from Annabelle
Conyngham (“Conyngham”) who were also part of the
original four-member
team in the first respondent.
[8]
The first respondent does not trade and is purely a property holding
entity, being
the owner of an immovable property, as described in [6]
above, which is used as a holiday home. Neither the applicant nor the
second
respondent live at the property.
[9]
It is apparent from the papers that the second respondent wishes to
dispose of the
property of the first respondent against the wishes of
the applicant. It is also apparent from the papers that the second
respondent
wishes to dispose of the property and acquire the
applicant's interest at a value that has been determined by the
second respondent.
[10]
The property was acquired by the first respondent on 19 July 2005. A
cottage was erected on the
property and it was designed by the
applicant’s husband, Llew Bryans. The latter acquired the right
to 25% of the member’s
interest in the first respondent and the
interest was registered in the name of the applicant. The second
respondent acquired the
additional 50% from Conyngham and Townsend in
2007 to become a 75% member in the first respondent.
[11]
The third respondent Bravo Zulu Properties has, as its sole director
the second respondent. It
was incorporated in 1999 by the second
respondent for the purpose of acquiring other portions of the F[....]
Lake L[....]. Over
the years, it has acquired and owns nine portions
of the F[....] Lake L[....], namely, Portion 18, 26, 31, 32, 33, 34,
14, 15,
and 21 which are significantly larger in comparison to the
property which is the subject of this litigation.
[12]
The sole shareholder the third respondent is a trust known as the M.
A Mitchell Trust Nr2 which
has four trustees. The second respondent
is one of the trustees, as it can be established from the papers,
other trustees are the
unnamed two children of the second respondent
and the independent trustee.
[1]
[13]
It is also apparent from the papers that, although the second
respondent denies it, it was himself
who caused the third respondent
to be incorporated and he is its sole director. It is evident from
the papers that the second respondent
was instrumental as the sole
director of the third respondent, for the acquisition of other
portions of the F[....] L[....] by
it.
[14]
The second respondent argues that he is associated with the third
respondent. In my respectful
view, the second respondent is the main
reason the third respondent exists and he is directly related to it.
The third respondent
registered address and its chosen
domicilium
in terms of the offer to purchase is the residential address of the
second respondent.
[2]
The offer
to purchase, which was presented to the first respondent speaks of
the appointed conveyancing attorneys who are the second
respondents'
attorneys.
[3]
It follows, in my
view, that the third respondent is the alter ego of the second
respondent.
[15]
In June 2017, the second respondent caused the property of the first
respondent to be valued
by a professional valuer, who valued the
property at R1.2 million.
[4]
Following this valuation, the second respondent offered through a
notice of a meeting during February 2018 to be bought out by
the
applicant. The applicant accepted to buy 75% member’s interest
in the first respondent from the second respondent. The
second
respondent, however changed his mind and intimated during May 2018
that he would be willing to be bought out as the value
of the
property of the first respondent was R2.3 million. He contended that
he had received an offer for that amount from the third
respondent.
This was rejected by the applicant on the basis that the new value
had not been determined by an independent valuer.
[16]
In seeking to have the applicant’s membership to be terminated
in the first respondent,
one of the main contentions by the second
respondent is that the conduct of the applicant in late payment of
her contributions
to the first respondent’s costs justifies
that she should exit the first respondent. This may well be the case,
however,
is not disputed that the applicant meets her monthly
contribution to the first respondents. I am not persuaded that it is
appropriate
for her to exit the first respondent as the arrear dated
back to November 2013 and December 2013.
[5]
There is no evidence that the applicant continues to fail to meet her
financial obligations towards the expenses of the first respondent.
On the contrary, the evidence before this court points out that the
financial obligations are being met by the applicant.
[17]
There are two contentious offers in this litigation. The first is the
unsolicited one in terms of which
the second respondent caused the
property to be evaluated in 2017. In terms of the value determined by
Ansara, the sum of R1.2
million for both immovable and movable was
determine. The second is the offer from the third respondent to
acquire the property
at the sum of R2.3 million for immovable and
movable assets.
[18]
The deadlock between the applicant and the second respondent has been
about who should exit the
first respondent. The relationship between
the two members- in the first respondent has not been ideal. It
worsened when the current
litigation ensued.
[19]
Although the first respondent contends that the applicant was
initially prepared to sell her
membership interest in the first
respondent, this was disputed by the applicant who contended that she
did not wish for the property
to be sold by the first respondent. She
wishes to remain a member of the first respondents and continue to
use the property for
holiday purposes. She contends that if the
property were to be sold, she would incur significant costs of
purchase or hire of an
alternative holiday home at a greater cost to
her in the long term.
[20]
The applicant furthermore contends that she has an affinity for the
property and states
that she loves the cottage
which was designed by her architect husband as well as the unspoilt
surrounds. According to her, it
is not about the money, but the sheer
beauty, peace, and uniqueness of the place. In support of her
contention, she attached a
photograph to her founding affidavit.
[21]
The applicant submits that she wishes to purchase the second
respondent’s 75% interest
for R937 000, which is 75% of
R1 250 000 which is the amount of value determined by an
independent value Ansara
and referred to in the notice of a meeting
of members of the first respondent to be held on 2 March 2018. She
states that she is
in a position to make payment of the sum of R937
500 in cash and willing to adjust the value of the property by an
upward of R40 000.
[22]
On the 28 February 2018, the second respondent states in an email as
follows:
"
6 So before we
go to the route which ends in the meeting on Friday to liquidate the
CC, which obviously financially hurts all members
it would be
opportune to consider the alternative route of Marcelle Props being
owned by one member. As you know, I have extensive
property holdings
in the area and could build a house elsewhere. The price you mention
in your email is given as the ‘ lowest
price’ we could
consider selling at. What would be your price for buying us out?
[23]
From that email, it is quite evident that the second respondent was
prepared as of 23 February
2018 to exit the first respondent by
selling his member's interest in the first respondent as, in his own
words, he had extensive
property holdings in the area and could build
a house elsewhere. This admission, in my view, is an important
consideration on whether
or not it is just and equitable for the
second respondent to exit the first respondent by selling his
member’s interest to
the applicant.
[24]
I find it difficult to understand that the basis for changing the
second respondent’s position
as per the letter of the second
respondent’s attorneys dated 7 May 2018.
[6]
In that letter, the second respondent stated that he was no longer
prepared to sell his member's interest. He also stated that
he had
procured through the third respondent, an offer to purchase the
property for R2.3 million. This contention by the second
respondent
is without merit. The offer which suggests double the market value as
opposed to the offer made in terms of the Ansara
valuation is without
merit. No evidence has been presented that the valuation was
independently done. Furthermore, as the third
respondent is directly
related to the second respondent it is doubtful that the offer was
made on an arm’s length basis.
The second respondent, as
already stated, is the third respondent’s sole director. I am
of the view that the value is contrived
and designed to frustrate the
efforts of the applicant to purchase the 75% member’s interest
in the first respondent.
[25]
Our courts have made pronouncement on the meaning of a market value
of the property being sold.
In
Camps
Bay RatePayers of Residents Association v Harrison
[7]
the Constitutional Court had an opportunity to consider the market
value. The Court held as follows:
“
[38] at 59 that
“Traditionally, market value is said to be the price that an
informed buyer will pay an informed seller both
of them having regard
to all the potential risks-both realised and unrealised- pertaining
to the subject property”
Applying
the principle as set out by the Constitutional Court, I am of the
view that the offer made by the third respondent to acquire
the
property of the first respondent is not at arms.
[26]
Although it appears that there is a dispute between the offers made
to acquire the property,
that is R 1 250 000 as opposed to R2 300 000
this dispute is not genuine. The so-called dispute is contrived by
the conduct of
the second respondent through the third respondent to
make the offer genuine in circumstances not justified, fair and
reasonable
to the applicant.
[27]
The respondents have argued that the value of the property has
changed since the valuation by
Ansara. I have not seen evidence
before this court on to what extent has such change in the value
taken place. There has been an
independent valuation done on the
property. It follows therefore that such contention must fail.
[28]
In
Gatenby
v Gatenby
and
Others
[8]
the court had an opportunity to interpret and apply
s
49 of the Act and held as follows:
"The object of s
49 is to come to the relief of the victim of oppressive conduct. The
section gives the Court the power to
make orders 'with a view to
settling the dispute' between the members of a close corporation if
it is just and equitable to do
so. To this end, the Court is given
wide discretion. It may make such order as it thinks fit, with the
framework of either regulating
the future conduct of the affairs of
the corporation or the purchase of the interest of any member of the
corporation by other
members thereof or by the corporation.”
[29]
In
De
Franca v Exhaust Pro CC
(De Franca Intervening)
[9]
the
court held as follows:
"
Section 49 deals
with the situation where conduct (an act or an omission) of the close
corporation or of one or more of its members
where the manner in
which the affairs of the close corporation are being conducted, is
unfairly prejudicial, unjust or inequitable
to a member of the close
corporation. When this occurs such member may make an application to
the court for an order, that will
have an effect of 'settling the
dispute’(s 252 of Act 61 of 1973 provides for an order having
the effect of bringing to an
end the matters complained of). As to
what the applicant must establish, see Gatenby’s case (supra at
124 B-G). The Court
has a wide discretion with regard to the order
that it decides to make to bring about the required result (cf
Gatenby’s cape
supra at 122F-123J). Such order can, however,
only be made if the Court considered it just and equitable to do so.
Section 36 of the Act
also deals with an application to Court by a member of the close
corporation, but such member is not required
to establish the nature
of the conduct referred to above when discussing S 49 of the Act
namely conduct affecting him. It is the
carrying of the business of
the close corporation that must be effected either by the existence
of circumstances envisaged by ss
(1) (a) or by conduct as described
in ss (1) (b) and (1) (c) Subsection (1) (d) however gives wide and
virtually unlimited scope
for the application of s 36 of the Act, the
only limitation being the just and equitable requirement. The order
that a Court can
make in terms of s 36 (1) of the Act is
circumscribed, namely an order that a member shall cease to be a
member of the close corporation
once a court decides that an order
for such cessation of membership should be made, it has a discretion
to make further orders
as referred to in s 36 (2) of the Act. While a
Court could, applying the provisions of s 49 of the Act, make an
order compelling
one member to purchase the interest of another,
which would have the effect of such members membership in the close
corporation
ceasing, that which would have to be established before
this is done is quite different to what would have to be established
under
s 36 of the Act.”
[30]
A member of a close corporation who seeks relief in terms of ss 36
and 49 bears the onus of establishing
that the court should exercise
its discretion in favour of ordering the disposal of a respondent’s
interest in the close
corporation and as to the terms and conditions
of that disposal and any other ancillary relief that may be
claimed.
[10]
[31]
In
Feri v Gxothwe
and Another
it was held as follows:
“
[26] On the
facts of this matter either s36 or s49 could be applied. That said,
it seems to me that s49 is the must opposite section
to apply. While
the focus of s 36 is on the effect of a member’s capability or
conduct on the business of the close corporation,
the focus of s49 is
on the effect of conduct of either the close corporation or a member
or members on another member. The applicant’s
complaint in this
matter is ultimately, that the first respondent’s conduct-his
acts and omissions-the unfairly prejudicial,
unjust, or inequitable
to her. I shall, accordingly, deal with the matter in terms of s 49,
although I am of the view that the
same result would follow from the
application of s 36, and that the cases dealing with s 36 are, by and
large, applicable to s
49 as well."
That
said, it seems to me that s 49 is the most opposite section to apply.
While the focus of s 36 is on the effect of a member’s
capability or conduct on the business of the close corporation, the
focus of s49 is on the effect of the conduct of either the
close
corporation or a member or members on another member. The applicant’s
complaint in this matter is ultimately, that
the first respondent’s
conduct is- his acts or omission- are unfairly prejudicial, unjust
and inequitable to her, I shall,
accordingly deal with the matter in
terms of s 49, although I am of the view that the same result would
follow from the application
of s 36, and that the cases dealing with
s36 are by and large applicable to s 49 as well.”
[32]
In
Kanakia
v Ritshelf 1004 CC t/a Passage to India
[11]
it was held as follows:
“
It is clear
that s 36 and s 49 provide members of a close corporation with almost
this same protection where the one member acts
in a prejudicial
manner to other members or to the business of the close corporation.
However, the powers of the court under s
49 are wider than those
which are given to the Court under s 36. The Court under s 49 can
make any order, other than the one envisaged
in s 36(2), including an
order regulating the official conduct of the affairs of the
corporation (see s49 (2)).”
[33]
In
De
Sousa v Technology Corporate Management (Pty) Ltd
[12]
the Court held as
follows:
[34]
Section 252 (of the Companies Act) (my own
emphasis) provides a member, [3] or part of the company, with the
means of obtaining
relief from unfairly prejudicial, unjust, and
inequitable acts or omissions if the company or conduct of its
affairs. The emphasis
is upon the unfairness of the conduct
complained of. A member seeking relief must show that the conduct is
unfairly prejudicial,
unjust, or inequitable to that member or to
some part of the members. The conduct must not only be prejudicial
but unfairly so
[4]. Fairness is thus the criterion by which a court
must decide whether it has jurisdiction to grant relief.
[35]
The test of unfairness must, I think, be an
objective one. Our Courts have generally followed what is referred to
as the reasonable
bystander test’. This was articulated by
Nourse J in RA Noble of Sons (clothing) Limited
[1983] BCLC 273
AT
290291 as:
“
The test of
unfairness must I think, be objective not a subjective one. In other
words, it is not necessary for the petitioner to
show that the
persons who have had de facto control of the company have acted as
they did in conscious knowledge that this was
unfair to the
petitioner or that they were acting in bad faith, the test is whether
a reasonable bystander observing the consequences
of their conduct,
would regard it as having unfairly prejudiced the petitioner’s
interests.’
[36]
Fairness is an elastic concept. What is unfair will depend upon the
context in which it is being
used. In
Re: a Company
(No 00709
of 1992) [1999] 1 UULR 1092 (HL)
[1999] UKHL 24
;
[1999] 2 ALL ER 961
at 966-967e,
Lord Hoffman put that:
'Although fairness is a
notion which can be applied to all kinds of activities, its content
will depend on the context in which
it is being used. Conduct which
is perfectly fair between competing businessmen will not be fair
between members of the family.
In some sports it may require at best,
observance of the rules, in others (it’s not cricket) it may be
unfair in some circumstances
to take advantage of them. All is said
to be fair in love and war. So the context and background are very
important.
In
the case of s 459, the background has the following two features:
First,
a company is an association of persons for an economic purpose,
usually entered into with legal advice and some degree of
formality.
The terms of the association are contained in the articles of
associations and sometimes in collateral agreements between
the
shareholders. Thus the manner in which the affairs of the company may
be conducted is closely regulated by rules to which the
shareholders
have agreed. Secondly, the company has developed simply from the law
of partnership, which was treated by equity,
like the Roman
societas
,
as a contract of good faith. The traditional role of equity, as a
separate jurisdiction, was to restrain the exercise of strict
legal
rights in certain relationships in which it was considered that this
will be contrary to good faith. These principles have,
with
appropriate modification, been carried over into company law.
The
first of these two features leads to the conclusion that a member of
a company will not ordinarily be entitled to complain of
unfairness
unless there has been some breach of terms on which he agreed that
the affairs of the company should be conducted. But
the second leads
to the conclusion that they will be cases in which equitable
considerations make it unfair for those conducting
the affairs of the
company to rely upon their strict legal powers. Thus unfairness may
consist in a breach of the rules in a manner
which equity would
regard as contrary to good faith.’
[37]
What is evident from the above-quoted passage in O’neill’s
is that the notion of
unfairness transcends the strict legal rights
of the shareholders; they may be cases where it would be unfair for
the majority
to exercise or take advantage of their rights or powers
under the articles of association or agreements between them.
[38]
In
Grancy
Property (Pty) Ltd v Manala
[13]
it was held as follows
"[27] In
concluding on this particular aspect of the case it bears mention
that in determining whether the conduct complained
of is oppressive,
unfairly prejudicial or unfairly disregards the interest of Grancy,
it is not the motive for the conduct complained
of that the court
must look at but the conduct itself and the effect which it has on
the other members of a company (see e.g. Livanos
v Swartzberg and
Others
1962 (4) SA 395
(W) at 399).”
[39]
The court jurisdiction to make an order doesn’t arise until the
statutory criteria have
been satisfied. The plaintiff (or applicants)
bears the onus of satisfying the court that the particular act or
omission has been
committed, or that the affairs of the company are
being conducted in a manner he alleges; and that such act or omission
is inequitable
to him or to some part of the members of the company
[40]
The following has been recognised as unfairly prejudicial conduct
entitling a shareholder to relief;
where there is an unfair abuse of
power and an impairment in the probity with which the company’s
affairs are being conducted;
where the majority voting power has been
abused or unfairly used to the prejudice of the shareholders; and
where the majority shareholders
use their greater voting power in a
manner which doesn’t enable the majority to enjoy a fair
participation in their affairs
of the company.
[14]
(
Bader
and Another v Weston and Another
1967 (1) SA 134
(C) at 139 F-G;
Aspek
Pipe Co (Pty) Ltd and Another v Mauer-Berger and Another
1965 (1) SA 517
(C) at 525;
Louw
and Others v Nel
2011 (2) SA 172
(SCA) ([2010] ZASCA161) para 23, see Blackman
et
al
,
Commentary on the Companies Act vol 2 at 9-44).
[41]
Where there is an unfair abuse of power and an impairment in the
probity with which the company's
affairs are being conducted; where
the majority voting power has been abused or unfairly used to the
prejudice of the shareholders;
and where the majority shareholders
use their greater voting power in a manner which doesn't enable the
majority to enjoy a fair
participation in their affairs of the
company, these examples are some of the key features that have been
recognised in our law
as unfairly prejudicial conduct entitling a
shareholder to relief. Consequently, our law has always afforded
minority protection
against abuse of voting power of majority
shareholders. This is also a key feature in s 49 and S 36 of the
Act.
[15]
[42]
Lack of harmony or confidence may also justify the granting of the
remedy of winding up. Lack
of confidence or harmony rested upon lack
probity or on unfair dealing or conduct will justify removing or
forcing the member to
exist the company or close corporation.
[16]
It is necessary to establish such lack of probity or unfair dealing
or violation of the conditions of fair play. Although it is
a
well-known fact and undeniable that the majority shareholders have to
manage the affairs of the company and to determine its
policy with
lack of probity and unfair dealings in the affairs of the company and
that their will is likely to prevail, the minority
shareholders,
however, are entitled to complain if the majority voting power is
being abused or unfairly used to their (minorities)
prejudice as
shareholders. I hold the view that the circumstances of this case
warrant interference by this court.
[43]
It is, in principle, correct that the second respondent may be
entitled to invoke the provisions
of s 46 (b) of the Act which
provides as follows:
“
s 46 Valuable
rules regarding internal relations: -
The following rules in
respect of internal relations in a close corporation shall apply in
so far as this Act or an association
agreement in respect of the
corporation doesn’t provide otherwise;
(a)
every member shall be entitled to participate in carrying on
the business of the corporation;
(b)
subject to the provision of s 47, members shall have equal
rights in regards to the management of the business of the
corporation
and in regards to the power to represent the corporation
in the carrying on of its business. Provided that the consent in
writing
of a member holding a member’s interest of at least 75
%, or of members holding together at least that percentage of the
member’s interest in the corporation shall be required for:
(i)
a change in the principal business carried on by the
corporation;
(ii)
a disposal of the whole or substantially the whole,
undertaking of the corporation;
(iii)
a disposal of all, or the greater portion of the assets of the
corporation; and
(iv)
any acquisition or disposal of immovable property by the
corporation;
(c)
differences between members as to matters connected with a
corporation’s business shall be decided by majority vote at a
meeting
of members of the corporation;
(d)
at any meeting of members of a corporation each member shall
have the number of votes that corresponds with the percentage of his
or her interest in the corporation;
(e)
a corporation shall indemnify every member in respect of
expenditure incurred or to be incurred by him or her-
(i)
the ordinary and proper conduct of the business of the
corporation; and
(ii)
in regard to anything done or to be done for the preservation
of the business or property of the corporation; and
(f)
payments by a corporation to its members by reason only of
their membership in terms of section 51 (1) shall be of such amongst
and be effected at such times as the members may from time to time
agree upon, and such payments shall be made to members in proportion
to their respective interests in the corporation.”
I
am of the view that this section is not applicable to the applicant
based on the facts and the circumstances of this application.
[44]
The conduct of the second respondent, as a 75% interest member in the
first respondent falls
foul of the acts envisaged in s 49. He has,
without any solicitation from the applicant, caused the value of the
property of the
first respondent to be determined by an independent
valuer. Having received such valuation which amounted to R1 250 000,
made an unsolicited offer to be brought out by the applicant in
February 2018. Having received the acceptance of the offer to be
bought, he waited and did about turn and in May 2018 intimated that
there was a third party willing to pay R2 300 000
for the
property. The third party happened to be the third respondent
directly related to him.
[45]
I have already determined that the second offer by the third
respondent was not based on the
market value and was contrived to
frustrate the applicant. Consequently, there are no just and
equitable grounds by the second
respondent to frustrate the offer
made by the applicant to acquire 75% member’s interest from the
second respondent.
[46]
The conduct of the second respondent is therefore unfair, unjust and
inequitable. The applicant
be permitted to acquire the 75% member's
interest in the first respondent. The second respondent has numerous
portions of the L[....]
F[....] next to the property of the first
respondent through the third respondent and will not, by exiting the
first respondent
suffer any injustice and inequity.
[47]
It follows in my respectful view that the applicant has discharged a
burden of proof that the
conduct complained of by the second
respondent is unfair, unjust and inequitable to her and therefore
prejudicial to her interest
in the first respondent.
[48]
For the reason stated above, I am of the view that the second
respondent has failed to discharge
the burden of proof that it would
be in the best interest of all members that the property of the first
respondent be sold at R
2.3 Million. I say so because firstly, the
valuation has not been supported by an independent valuer. Secondly
and most importantly
the third respondent, who has made the offer is
not an independent third party and has not proved that the offer is
made at an
arm’s length. The counter-application must therefore
fail.
[49]
The first respondent is not a trading entity. As a consequence, no
benefit would be derived by
any creditor to wind it up. As a
consequence, the alternative relief sort by the respondents must also
fail.
ORDER
[50]
It is ordered that:
(a) The second respondent
ceases to be a member of the first respondent;
(b) The second respondent
and failing the second respondent the sheriff of the Gauteng Local
Division, Johannesburg is hereby authorised
to sign all necessary
documents and take all necessary steps to effect transfer into the
name of the applicant, the second respondent’s
75% members
interest in the first respondent against payment by the applicant of
R1 027 500.00 to be paid within 10 days
of the date of this
order;
(c) The second and third
respondent are ordered to pay the cost of this application.
SENYATSI
ML
Judge
of the High Court of South Africa
Gauteng
Local Division, Johannesburg
REPRESENTATION
Date
of hearing: 06 October 2020
Date
of Judgment: 13 May 2021
Applicant’s
Counsel: Adv L Hollander
Instructed
by: Jason Michael Smith Inc Attorneys
Respondent’s
Counsel: Adv PT Rood SC with Adv M T A Costa
Instructed
by: Kern and Partners
[1]
See Answering Affidavit in the main application/Founding Affidavit
in the counter-application, para 105, 154, 164, and 175. Replying
Affidavit in the counter application para 27 p 335 and para 116 p.35
[2]
See
Founding Affidavit in the time main application annexure “FA10"p59
(Clause 4.1) and Founding Affidavit in the main
application annexure
"FA12"p66 (Annexure A to the offer.)
[3]
See Founding affidavit in the main application para 41.4.4 p.18
referring to the letter dated20/6/2018
[4]
See Founding Affidavit in the main application or founding affidavit
in the counter-application para 162 p174
[5]
See Answering Affidavit in the main application, Founding Affidavit
in the counter-application, annexure “WM3"p182,
Also See
Answering Affidavit in the main application founding affidavit in
counter-application annexure "WM8" WM16"
pp 188-196.
[6]
See Founding Affidavit in the main application annexure “FA10”
pp 52-55 and annexure “FA11" pp 56, 57
notice of meeting
members to be held on 12 July 2018
[7]
2011 (4) SA 42 (CC)
[8]
1996 (3) SA 118 (E)at 112 D-F
[9]
1997(3) SA 878(SE) at 893 C-J
[10]
See
Feni v Gxothiwe and Another
2014 (1) SA 594
(ECG) at para [27] at
601; Smith and Another v Mew
2010 (6) SA 537
(SCA) para [25] at 543;
Geaney… v Portion 117 Kalkheuwel Properties CC and Others
1998 (1) SA 622
(T) at 631 G-632A, Kanabia v Ritzshelf 1004 CC
200
(3)(2) SA 39
(D) at
[11]
supra
[12]
2017 (5) SA 577
[13]
2015 (3) SA 313 (SCA)
[14]
Bader
and Another v Weston and Another
1967 (1) SA 134
(C) at 139 F-G;
Aspek
Pipe Co (Pty) Ltd and Another v Mauer-Berger and Another
1965 (1) SA 517
(C) at 525;
Louw
and Others v Nel
2011 (2) SA 172
(SCA) ([2010] ZASCA161) para 23, see Blackman
et
al
,
Commentary on the Companies Act vol 2 at 9-44
[15]
See Elder v Elder Watson Ltd
1952 SC 49
at 55 and 60; Aspek Pipe
(supra) at 528 D-H; Donaldson Investments (Pty) Ltd and Others v
Anglo-Transvaal Colliers Ltd SA Mutual
Life Insurance Society and
Another v Intervening
1979 (3) SA 713
(W); Re: Elgindata Ltd
[1991]
BCLC 959
at 984 and 1004).
[16]
See Aspek Pipe (supra) at 528 E-J.