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[2010] ZAWCHC 619
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Jansen v De Villeneuve NO and Others and Others, In re De Villeneuve and Others v Jansen and Others (13753/2010) [2010] ZAWCHC 619 (10 December 2010)
IN THE HIGH COURT OF
SOUTH AFRICA
(WESTERN CAPE HIGH
COURT, CAPE TOWN)
Case No: 13753/2010
In the matter between:
CEDRIC WINSTON JANSEN
…..............................................................................
Applicant
and
SONJA
LYNNE PLANTE FEVURE
DE
VILLENEUVE N.O.
…............................................................................
First
Respondent
ANDREW MARALACK N.O.
….............................................................
Second
Respondent
PETER CAROLUS N.O.
…........................................................................
Third
Respondent
CHRISTOPHER PETER VAN
ZYL N.O.
….............................................
Fourth
Respondent
[Cited in their
capacities as Joint Liquidators of
Eraco Boat Builders CC
(In Liquidation)]
THE MASTER OF THE HIGH
COURT
…...................................................
Fifth
Respondent
CLAREMART
AUCTION GROUP
….........................................................
Sixth
Respondent
In re:
SONJA
LYNNE PLANTE FEVURE
DE
VILLENEUVE N.O.
…................................................................................
First
Applicant
ANDREW MARALACK N.O.
….................................................................
Second
Applicant
PETER CAROLUS N.O.
….............................................................................
Third
Applicant
CHRISTOPHER PETER VAN
ZYL N.O.
….................................................
Fourth
Applicant
and
CEDRIC WINSTON JANSEN
….................................................................
First
Respondent
(Joint Liquidators of
Eraco Boat Builders CC (In Liquidation)
THE
MASTER OF THE HIGH COURT
….....................................
Second
Respondent
CLAREMART
AUCTION GROUP
…...............................................
Third
Respondent
JUDGMENT
DELIVERED ON 10 DECEMBER 2010
ALLIE, J
[1] The applicant in the
interim interdict is referred to as the applicant in this judgment
and the respondents in the interim
interdict will be referred to as
the respondent.
[2]
Applicant obtained on, 22 June 2010 on an ex parte basis, as a
matter of urgency a
rule
nisi
interdicting
and restraining respondents, as joint liquidators of Eraco Boat
Builders CC, (Eraco) from selling certain movables
by public auction
pending the final determination of proceedings that applicant should
institute within 21 days of the order.
[3] On 20 August 2010
respondents brought an application for the reconsideration and
setting aside of the order in terms of Rule
6(12)(c) of the Uniform
Rules of this court. The application was postponed to 13 October
2010 and the interim interdict was extended
to that date. The matter
came before me thereafter.
[4]
It is common cause that applicant in the
rule
nisi,
did
not institute proceedings within the requisite 21 days or any time
thereafter.
[5] Rule 6(12)(c) reads
as follows:
"A person
against whom an order was granted in his absence in an urgent
application may by notice set down the matter for
reconsideration of
the order."
[6]
In the case of
ISDN
Solutions (Pty) Ltd v CSDN Solutions CC & Others
1996 (4) SA 484
(W) at 486H - 487C
the
court dealt with the underlying reason for the rule as follows:
"The Rule has
been widely formulated. It permits an aggrieved person against whom
an order was granted in an urgent application
to have that order
reconsidered, provided only that it was granted in his absence. The
underlying pivot to which the exercise
of the power is coupled is
the absence of the aggrieved party at the time of the grant of the
order.
Given this, the
dominant purpose of the Rule seems relatively plain. It affords to
an aggrieved party a mechanism designed to
redress imbalances in,
and injustices and oppression flowing from, an order granted as a
matter of urgency in his absence. In
circumstances of urgency where
an affected party is not present, factors which might conceivably
impact on the content and form
of an order may not be known to
either the applicant for urgent relief or the Judge required to
determine it. The order in question
may be either interim or final
in its operation. Reconsideration may involve a deletion of the
order, either in whole or in part,
or the engraftment of additions
thereto.
The framers of the
Rule have not sought to delineate the factors which might
legitimately be taken into reckoning in determining
whether any
particular order falls to be reconsidered. What is plain is that a
wide discretion is intended. Factors relating
to the reasons for the
absence, the nature of the order granted and the period duhng which
it has remained operative will invahably
fall to be considered in
determining whether a discretion should be exercised in favour of
the aggrieved party. So, too, will
questions relating to whether an
imbalance, oppression or injustice has resulted and, if so, the
nature and extent thereof, and
whether redress is open to attainment
by virtue of the existence of other or alternative remedies. The
convenience of the protagonists
must inevitably enter the equation.
These factors are by no means exhaustive. Each case will turn on its
facts and the peculiarities
inherent therein."
[7]
In view of the fact that the applicant brought the interim interdict
on an ex
parte
basis
and as a matter of urgency, this court is entitled to entertain the
respondents' application for the reconsideration and
setting aside
of the interim order granted on 22 June 2010.
[8] At the time when
Deon Erasmus was the sole member of Eraco CC, the close corporation
was awarded the tender by the South African
Police Services (SAPS)
to manufacture, supply and deliver four speed patrol vessels.
[9] As a potential
investor in Eraco, applicant obtained a loan for it from the
Industrial Development Corporation (IDC). The
loan was however
granted to Planet Waves 498 (Pty) Ltd during August 2008.
[10] On 30 November
2007, Erasmus purported to sell the assets of Eraco, including its
movables to Planet Waves 498 (Pry) Ltd.
Mr Erasmus is also a
director of Planet Waves.
[11] Eraco was finally
wound up during February 2010. Applicant alleged that the partly
constructed vessels for SAPS are the movable
assets that Eraco sold
to Planet Waves.
[12] Respondents alleged
that to the extent that applicant relies on an agreement of sale
between Eraco and Planet Waves, Planet
Waves ought to have been an
applicant or it ought to have been joined as a party.
[13] It is common cause
that the money that Planet Waves obtained from its loan with IDC was
used by Eraco in the conduct of its
business. Applicant alleged that
of the intention of the directors of Planet Waves was that it would
take over the business of
Eraco. The auditors of Eraco reflect in
their note on the financial statement that the IDC was in the
process of reflecting Eraco
as the entity to whom the funds are
lent.
[14] The agreement of
sale between Eraco and Planet Waves contains the following
conditions precedent in paragraph 3:
"3.1 The whole
of this agreement is subject to the fulfilment of following
conditions precedent:
3.1.1. the PURCHASER,
should it so require, having completed to its satisfaction, a due
diligence investigation into the affairs
of the Corporation and the
business and having delivered a whtten notice to the SELLER after
completion of such due diligence
investigation confirming its
intention to abide by this agreement;
3.1.2. the conclusion
of a 3 (three) years written service agreement between the PURCHASER
and the executive and such other members
of the SELLER'S management
as the PURCHASER may require;
3.1.3. the SELLER
entehng into comprehensive written restraint of trade agreement in
favour of the PURCHASER and its subsidiaries;
3.1.4. the conclusion
of a written agreement of lease between the SELLER and the PURCHASER
in respect of the premises, where the
factory is situated, on terms
and conditions acceptable to the PURCHASER.
3.2. The parties
shall use all reasonable endeavours to procure the fulfilment of the
conditions.
3.3. Unless the
conditions are either fulfilled or (where appropriate) waived, by no
later than close of business on January 31,
2008, or such later date
as may be agreed in writing between the parties, the provisions of
this agreement shall be of no further
force and effect after such
date. No party shall have any claim against the other as a result of
the failure of the conditions
precedent.
3.4 All the
conditions are inserted for the benefit of the PURCHASER who is
entitled to waive fulfilment of any of those conditions
by written
notice to the SELLER."
[15] Applicant failed to
allege that the purchaser i.e. Planet Waves waived the fulfilment of
the conditions precedent nor was
a written notice by the purchaser
annexed to the papers. The owner of the immovable property from
which the boat manufacturing
business was conducted before and after
November 2007 is Eraco Property Holdings (EPH) (Pty) Ltd which is
owned by Mr Erasmus.
Applicant alleged that it was envisaged that
Planet Waves would acquire the shareholding in EPH for a nominal
amount. Applicant's
allegations fall short of stating that Planet
Waves in fact did acquire the shares in EPH. It is undisputed that
Planet Waves
did not enter into an agreement of lease with EPH even
though applicant alleged that Planet Waves conducted the boat
manufacturing
business from EPH's premises.
[16] Applicant submitted
that the failure to comply with or waive the conditions precedent
was only brought to his attention in
respondent's affidavit in this
matter. The correspondence of the jointly appointed attorneys dated
18 August 2009 annexed to
the replying affidavit make it clear that
respondents considered the agreement of sale to be of no force and
effect because the
conditions precedent were not met and the seller
is stated on the agreement as being Deon Erasmus in his personal
capacity as
opposed to Eraco Boat Builders CC. Applicant alleged
that the error occurred due to a mistake common to the parties.
[17] Respondents allege
that Planet Waves is a dormant company that is in the process of
being deregistered.
[18] Eraco's annual
financial statements for the year ended 28 February 2009 reflect
that it operated the boat manufacturing business
for that financial
year and for the previous financial year i.e. March 2007 until
February 2008.
[19]
Respondents point out that applicant failed to disclose the
following facts to the court dealing with urgent interim interdict
brought on an ex
parte
basis:
20.1. That on 25 May
2010, respondents' attorney sent him a letter stating that the
purported sale agreement could not be implemented
because Mr Erasmus
was the seller and not Eraco and because the conditions precedent
had not been fulfilled.
20.2. Applicant failed
to attach a copy of the purported agreement of sale of the assets of
Eraco.
20.3. Applicant failed
to disclose that an application was heard in court for auction of
the vessels in terms of Section 386(5)
of the Companies Act on 4
March 2010.
20.4. The agreement
between Eraco and SAPS provided that Eraco could not assign its
obligations to perform under the contract
without the written
consent of SAPS.
20.5. That on 18 August
2009 an attorney jointly appointed by Mr Erasmus and applicant sent
applicant a letter in which she explained
why she believed that the
agreement of sale was invalid.
[20] The shareholders of
Planet Waves on 15 August 2007 were Deon Erasmus, C Gouws, Aquarella
Investments 512, Mr K J Minton and
applicant. Erasmus is also a
director of Planet Waves. It is significant to note that none of the
other shareholders have filed
affidavits in support of applicant's
case.
[21] In reply,
respondents allege that applicant who held himself out as being an
attorney drafted the purported agreement of
sale of Eraco's assets
to Planet Waves and the shareholders agreement between Planet Waves,
The Eraco Boat Builders Worker's
Trust and the applicant. Applicant
was employed by Eraco in March 2008. During April and May 2008,
Ormans Auditors pointed out
that the sale agreement had lapsed due
to non-fulfilment of the suspensive conditions. It was then agreed
that the sale agreement
be revived. By February 2009, applicant had
not effected transfer of the business and assets of Eraco to Planet
Waves. Ormans
then resigned as auditors. On 31 July 2009, Erasmus
and applicant agreed that Erasmus would submit to an attorney of his
choice
the letter written by applicant in which he opposed the
issuing of shares to James Fischer, a prospective investor and the
appointment
of Fischer as a CEO of Eraco. The attorney was to be
paid by Erasmus and applicant.
[22] Applicant was later
dismissed from his employment with Eraco after a disciplinary
hearing for his failure to attend to the
restructuring of Eraco,
failure to reflect Minton as a shareholder in Planet Waves, failure
to supply Orman accountants the with
requisite information, failure
to supply the new accountant with information, failure to provide
sub-contractors, suppliers and
clients with appropriate contracts,
failure to render monthly management accounts to the IDC and his
failure to implement suppliers'
guarantees which resulted in
unnecessary delays.
Validity of the
Agreement of Sale
[23] The real dispute of
fact, namely the ownership of the assets that were to be sold by
public auction hinges on the interpretation
of the purported
agreement of sale between Eraco and Planet Waves. As this is a
question of law, the court can determine it on
the papers before it.
[24] The first issue
that requires determination is whether the parties to the contract
were indeed Eraco and Planet Waves as
alleged by applicant.
[25] The copy of the
agreement of sale annexed to respondents' papers is an unsigned
copy. As neither side have taken the point
that it was not signed, I
will accept that the original was signed. On the first page the
seller is described as follows:
"Deon Erasmus
Identity Number:
4805285150080 Acting in his personal capacity"
9
[26]
Thereafter the purchaser is correctly described as Planet Waves 498
(Pty) Ltd. The signature line contains the following
description for
the seller:
"Deon
Erasmus SELLER."
In
the preamble the following is stated:
"A. The SELLER
owns 100% of the equity in Eraco Boat Builders CC, registration no.
1996/11917/23 and in addition has certain
claims in the said Eraco
Boat Builders CC.
B.
The PURCHASER is desirous of
taking
over the business of the said Eraco Boat Builders CC
as
a going concern subject to certain conditions precedent...
"
(my emphasis).
[27] It is clear that
what the purchaser intended to purchase and the seller intended to
sell was the business of Eraco. The question
then arises whether
Deon Erasmus could sign the agreement in his personal capacity.
Clearly he cannot. He ought to be described
as acting as a duly
authorised representative of the close corporation. I have searched
the agreement in vain and found no description
of Deon Erasmus
acting in that capacity.
[28] The conditions
precedent have clearly not been fulfilled nor are there any
allegations to the effect that the purchaser waived
the conditions
precedent expressly in writing as required by the agreement. The
purported ratification of the agreement does
not assist applicant as
Planet Waves was already incorporated by then.
[29] The agreement of
sale was not entered into with the owner of the boat building
business, Eraco Boat builders CC and can accordingly
not be binding
on that entity.
[30] At best for Planet
Waves, it may have a claim against Eraco for the monies advanced to
Eraco from the loan with the IDC.
That claim had to be lodged with
the liquidators and is not the subject of deliberation in this
matter.
[31] Clause 13 of the
agreement of sale is a warranty by Erasmus that he has title to all
the assets, he will discharge all liabilities
listed, he has
complied with all the statutory requirements relating to the
business and the business is not bound by any employment
or service
agreement to provide any employee with more than one month's notice
of termination.
[32]
Applicant relied on Clause 13 to allege that Erasmus had represented
that he had title to the assets. In this allegation,
applicant
misconceives the legal position which is that the assets of the
close corporation are owned by that close corporation
and the
preamble to the agreement says as much. Clause 13 cannot bind the
close corporation.
The
Derivative Action
[33]
The
Foss
v Harbottle
general
rule laid down is that where a company has been prejudiced, it must
seek the legal remedy. It is stated as follows in
Wallersteiner
v Moir (No. 2); Moir v Wallersteiner & Others (No. 2)
[1975] ALL
ER 849
(CA) at857d:
"It
is a fundamental principle of our law that a company is a legal
person, with its own corporate identity, separate and
distinct from
the directors or shareholders, and with its own property rights and
interests to which it alone is entitled. If
it is defrauded by a
wrongdoer, the company itself is the one person to sue for the
damage. Such is the rule in
Foss
v Harbottle. "
[34]
The exception to the rule in
Foss
v Harbottle
[1843] EngR 478
;
(1843) 2 Hare 161
(67 ER 189)
at 492
(Hare)
is as follows:
"If
a case should arise of injury to a corporation by some of its
members, for which no adequate remedy remained, except
that of a
suit by individual corporators in their private characters, and
asking in such character, the protection of these rights
to which in
their corporate character they were entitled, I cannot but think
that the pnnciple so forcibly laid down by Lord
Cottenham in
Wallworth
v Holt
...
and other cases would apply..."
[35]
Section 266(1) of the Companies Act 61 of 1973 provides for the
derivative action in certain circumstances. The section reads
as
follows:
"Where a company
has suffered damages or loss or has been deprived of any benefit as
a result of any wrong, breach of trust
or breach of faith committed
by any director or officer of that company or by any past director
or officer while was a director
or officer of that company and the
company has not instituted proceedings for the recovery of such
damages, loss or benefit,
any member of the company may initiate
proceedings on behalf of the company against such director or
officer or past director
or officer in the manner prescribed by this
section notwithstanding that the company has in any way ratified or
condoned any
such wrong, breach of trust or breach of faith or any
act or omission relating thereto."
[36] On the allegations
before me, apart from an unsupported allegation based on hearsay
evidence that Mr Erasmus intends buying
the movable assets of Eraco
at the public auction, there is no evidence that the directors of
Eraco or the liquidators are trying
to appropriate to themselves an
advantage that belongs to Planet Waves.
[37]
Applicant has in any event not even overcome the hurdle of showing
that the assets belong to Planet Waves for a derivative
action
presupposes that the subject matter of the dispute involves a
dissipation of corporate property, money or advantage.
Applicant's
Locus Standi
[38]
For the reasons set out above, applicant has accordingly not
established that he has the
locus
standi
to
bring the interdictory relief sought and obtained on 22 June 2010.
Prima Facie Case
[39]
To succeed, applicant has to show that he possesses a
prima
facie
right.
Once he failed to establish
locus
standi
he
also failed to establish a
prima
facie
case
although open to some doubt. There is no need for the court to
inquire into issues such as the balance of convenience.
Common Mistake
[40] The applicant held
himself out to be a lawyer with accounting and business experience,
to such an extent that he was entrusted
with drafting the purported
agreement of sale and the shareholder's agreement. He cannot be
heard to say now that the incorrect
description of the seller in the
sale agreement was a common mistake because applicant in the
preamble and in the definition
of the name of the business stated
that the business belonged to Eraco.
[41] Once the auditors
of Eraco alerted applicant to some alleged errors in the sale
agreement during April or May 2008, the respondent's
predecessor in
title had voiced its objection to the errors in the sale agreement.
Applicant cannot claim that Erasmus had misrepresented
the true
position regarding the identity of the owner of the business as this
identity is clearly set out in the sale agreement.
Pendente Lite
Nature of Relief
[42]
Applicant has failed to avail himself of the opportunity to
institute the action within 21 days of the order granted on 22
June
2010 and in so doing has disregarded the condition upon which the
court granted the interim interdictory relief. As the
relief was
granted
pendente
lite
it
should ordinarily lapse on the applicant's failure to institute the
contemplated action (see:
National
Council of Societies for the Prevention of Cruelty to Animals v
Openshaw
[2008] ZASCA 78
;
2008 (5) SA 339
(SCA) at paragraphs 17: Juta & Co Ltd v
Legal & Financial Publishing Co (Pty) Ltd 1969 (4) SA443 (C) at
445 C –
F].
[43] In this matter the
costs should follow the cause.
It
is ordered that
:
1.
The
order granted by this Court on 22 June 2010 is hereby
reconsidered
and set aside.
2.
Applicant
shall pay the costs including the costs of two counsel.
ALLIE, J