THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Reportable
Case no: 613/2017

In the matter between:
TECHNOLOGY CORPORATE MANAGEMENT
(PTY) LTD FIRST APPLICANT
ANDREA CORNELLI SECOND APPLICANT
ANTONIO JOSE GARRIDO DA SILVA THIRD APPLICANT
IQBAL HASSIM NO FOURTH APPLICANT
BARRY KALMIN NO FIFTH APPLICANT
and
LUIS MANUEL RITO VAZ DE SOUSA FIRST RESPONDENT
JOSE MANUEL GARCIA DIEZ SECOND RESPONDENT
SHARON ANN OBEREM INTERVENING APPLICANT

Neutral citation: Technology Corporate Management (Pty ) Ltd and
Others v De Sousa and Another (Case No 613/2017)
[2024] ZASCA 29 (26 March 2024)
Coram: WALLIS, MBHA, VAN DER MERWE, PLASKET and
DLODLO AJJA
Heard: 30 and 31 October 2023
Delivered: 26 March 2024

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Summary: Companies Act 61 of 1973 – s 252 – claim that manner in
which the business of the company has been conducted was unfairly
prejudicial, inequitable or unjust to plaintiffs – requirements for proof of
unfair prejudice – whether compa ny a small domestic company of the
nature of a partnership – growth of company and introduction of a new
major shareholder – effect of shareholders agreement on management of
company – whether previous relationship between original shareholders
continuing to exist – whether expectations based on previous relationship
continuing to exist
Dismissal of major shareholder as employee – whether unfair exclusion
from company – effect of binding award by CCMA that dismissal neither
procedurally nor substantively u nfair – rule in Hollington v Hewthorn to
be confined to decisions in criminal cases – test for admissibility of
CCMA award whether relevant – prima facie proof that dismissal not
unfair – onus on plaintiff to demonstrate that notwithstanding award
dismissal unfairly prejudicial to him.
Shareholder no longer employed in company – locked in because unable
to dispose of shares as provided in shareholders’ agreement – whether
unfair prejudice if no offer made to acquire their shares – no obligation to
make such an offer unless exclusion or other prior conduct caused unfair
prejudice – no right of unilateral exit from the company at the cost of the
company or the remaining shareholders – where no obligation to
negotiate to acquire shares failure to do so not unfair.
Loss of trust and confidence by minority shareholders in management by
majority – unfair prejudice if occasioned by lack of probity on part of the
majority – necessary to show conduct that is dishonest or falls short of the
standard of fair dealing required of majority in managing the affairs of the
company – unfair prejudice not established by evidence that if managed
differently company would have been more profitable.

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Shareholder dispute – majority shareholders securing that the company’s
funds are e xpended in defending the action – in principle improper if
company has no material interest in the outcome of the litigation – where
substantive relief is sought against company it is not a nominal defendant
– does not mean that company’s resources should be used to defend the
interests of the majority shareholders – company should only engage on
matters having a direct impact on its own interests – remedy for improper
use of company’s resources to fund litigation on behalf of shareholders an
interdict and order that majority refund amounts disbursed in their
interests – does not entitle minority shareholders to compel the company
to expend its funds in payment of the minority’s costs.
Fair offer – considerations.
Buy-out – before ordering company to purcha se minority’s shares court
must consider impact on the company – form of order.
Fair trial – what constitutes – effect of a one -sided approach to issues -
interruptions during cross-examination and restricting the time to be spent
on cross-examination – need for civility in exchanges between judge and
counsel.

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ORDER

On appeal from: Gauteng Division of the High Court, Johannesburg
(Boruchowitz J, as court of first instance) reported sub nom : De Sousa
and Another v Technology Corporate Management (Pt y) Ltd and Others
2017 (5) SA 577 (GJ).
It is ordered that:
1 The application by the intervening applicant for conditional leave
to intervene is dismissed and the intervening applicant is ordered to
pay the costs of opposition by the first and second respond ents in
the main application, such costs to include the costs of one counsel.
2 The application for leave to appeal is upheld with costs, such costs
to include the costs of the application for leave to appeal before the
high court and the costs of two counsel.
3 The appeal is upheld with costs, including the costs of two counsel
and the judgment of the High Court is altered to read as follows:
(a) The plaintiffs’ claim is dismissed with costs, such costs to
include those consequent upon the employment of two counsel.
(b) The costs of the adjournment on 2 October 2012 including the
costs consequent upon the employment of two counsel are to be
costs in the cause in the action.
(c) The plaintiffs are ordered jointly and severally, the one paying
the other to be absolved , to pay the costs of the application to
amend the particulars of claim dated 9 December 2013 and the
costs of the application in terms of Rule 35(3) dated
4 December 2015, such costs to include those consequent upon
the employment of two counsel.

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(d) Each party is to bear his or its costs of the application in terms
of s 163 of the Companies Act 71 of 2008 and in respect of the
recusal application by the first applicant.


JUDGMENT


Wallis AJA ( Mbha, Van der Merwe, Plasket and Dlodlo AJJA
concurring)
[1] The central issue in this application for leave to appeal is whether
the high court’s order, under s 252 of the Companies Act 61 of 1973 (the
Act), that the First Applicant, Technology Corporate Management (Pty)
Ltd (TCM), purchase the shares in TCM owned by the First Respondent,
Mr Luis de Sousa, and the Second Respondent, Mr Jose Diez, should be
upheld or set aside. The applicants other than TCM are the remaining
shareholders of TCM, namely Mr Andrea Cornelli, Mr Antonio (Tony) da
Silva and the Iqbal Hassim Family T rust (the Trust) represented by its
trustees, the fourth and fifth applicants. The Trust was the vehicle through
which Mr Iqbal Hassim acquired shares in TCM.

[2] This judgment is regrettably lengthy , as was the trial before
Boruchowitz J. To simplify readin g I will refer to Mr de Sousa and Mr
Diez jointly as the plaintiffs and to them individually as Luis and Jose , as
was done at the trial . The present applicants will be referred to
collectively as the defendants in relation to the proceedings in the high
court and as the appellants in relation to the proceedings in this court .
Individually, Messrs Cornelli, da Silva and Hassim will be referred to as
Andrea, Tony and Iqbal. Three other individuals who feature in the

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narrative, Mr Wayne Impey, the Chief Financ ial Officer (CFO) of TCM
and Messrs Frank and Fabio Cornelli, who were responsible for the
operations of what is referred to as the Supplies Division of TCM, will be
referred to as Wayne, Frank and Fabio. No disrespect is intended by the
use of their given names without conventional honorifics. Conventional
usage is adopted in relation to other individuals.

[3] In view of the range of issues that arise in this appeal and must be
dealt with in the judgment it is convenient to preface it with an index. The
issues are dealt with as follows:
Section Paragraphs
(a) Introduction 4 – 15
(b) Litigation history 16 – 27
(c) Preliminary issues (leave to appeal, joinder and
application for leave to intervene in the appeal). 28 – 40
(d) The pleaded case 41 – 50
(e) The evidence 51 – 74
(f) Section 252 75 – 114
(g) Luis’s claim of legitimate expectations and exclusion 115 – 152
(h) Luis’s dismissal 153 – 174
(i) Absence of genuine negotiations and a fair offer 175 – 188
(j) Loss of trust occasioned by a lack of probity 189 – 234
(k) Favourable treatment of Iqbal 235 – 241
(l) TCM’s payment of litigation costs 242 – 247
(m) Jose’s claim 248 – 250
(n) Conclusion on unfair prejudice 251 – 253
(o) The high court’s order 254 – 259
(p) Fair trial issues 260 – 270

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(q) Costs 271 – 277
(r) Order 278

Introduction
[4] In the early 1980s, while they were training as customer engineers
on the installation and repair of IBM computers, two young men, Luis
and Andre a became good friends. They were good at their work, with
Luis becoming a technical specialist and Andrea, who had a more
commercial bent and was good with customers , becoming an operations
specialist. In 1987, after IBM withdr ew from South Africa, leaving their
employer, ISM, as the sole agent for IBM products in South Africa,
Andrea and Luis decided to set up in opposition to ISM providing
computer repair services to IBM users. An accountant they approached
for advice said that they should establish a com pany through which to
operate the business. They did so and in due course that company became
TCM. Although the initial plan had been for their line manager at ISM to
join them, he withdrew at a late stage and TCM was incorporated with
each of them owning 50% of the issued shares and each contributing their
different skills to the venture.

[5] TCM was successful and expanded rapidly. Within a month or two
of its establishment, Jose, also an IBM trained technician, was employed
to work with Luis, and about two years later Tony, also formerly of IBM,
was employed to work in sales with Andrea. Both Jose and Tony were
promised shares in TCM , although the extent of the stakes they would
receive was indeterminate and the promise was only given effect in 2004.
Within a few years of its founding TCM had, through the acquisition of
stakes in existing local businesses, established branches in Durban , Cape
Town, East London (later moved to Port Elizabeth, as it was then known,

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now Gqeberha ) and Bloemfontein . Under pressur e from customers to
extend the range of its services it also acquired 50% shareholdings in two
existing companies providing software and network services. An increase
in the number of employees accompanied the expansion and in 1990 a n
informal Board of Directors was constituted comprising Andrea as chair,
Luis and representatives of the related companies as the remaining
members. In truth this was merely a committee created to co -ordinate
activities of the various companies involved in some way with TCM.1

[6] One of the ‘directors’ was Andrea’s brother, Frank. He did not
work for TCM, but had his own company, Sternco (Pty) Ltd, which
imported heavy duty machinery for large industrial corporations such as
Iscor and was sharing TCM’s premises on an unexplained b asis. He was
Sternco’s representative on this board of directors . He became involved
in TCM’s business because TCM needed to obtain items of IBM
equipment and IBM spares from overseas . IBM disinvested from this
country, along with other large multi -national corporations, as part of a
campaign to place pressure on the apartheid regime. It appointed ISM as
its sole South African representative . TCM could not source the
equipment and spares it needed from either ISM, with which it was in
competition, or directly from IBM. Apparently, Jose was able to identify
and contact potential overseas suppliers, but TCM had no expertise in the
process of collecting these items, arranging for their carriage by air or sea
to South Africa, arranging insurance, freight and cus toms clearance and
making payment through the international banking system. It turned to
Sternco to undertake this work as an adjunct to the latter’s existing
business. After Sternco was liquidated in about 1995 , Frank and another

1 This is reflected in the fact that the minutes of the first meeting of the committee record that service
on the committee was voluntary.

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brother, Fabio, continued to attend to the importation of equipment and
spares for TCM, as well as continuing Sternco’s other business. This was
done through the Supplies Division. It will be necessary to revert to the
basis upon which this operated later in this judgment. For the present it
suffices to introduce Frank and Fabio and the origin of their involvement
with TCM.

[7] TCM’s business was successful and it expanded the scope of its
operations. In addition to the branches it established service centres in 37
places in South Af rica to enable it to respond rapidly to customer
requests. This was important as major clients included a bank and a
healthcare business whose activities extended beyond the major cities.
According to its Annual Financial Statements (AFS), TCM earned annual
revenues of R165 million in the 2002 financial year. In the following year
that increased to R227 million. Andrea and Luis were the sole directors
and their directors’ emoluments for those years , apart from any other
benefits they may have enjoyed by wa y of salary, bonuses , allowances
and the like, amounted to around R2 .6 million, which they shared
equally. Their roles within the company were reasonably well -defined.
Andrea was effectively the chief executive and Luis headed up the
technical side and the accounting. Jose was in charge of logistics and
supplies and Tony’s role was in sales and marketing. These four were the
key figures , although the staff complement had increased to several
hundred.

[8] In 2003, TCM lost a tender for a substantial contract wi th Standard
Bank because it lacked an acceptable BEE profile. Andrea believed that,
unless this was remedied , the future of the business was threatened and
set about looking for a suitable person to introduce to the company to

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enhance its BEE profile to a suitable level. He identified Iqbal as being
able to fill that role. Iqbal had a lengthy career with IBM and was at the
time working for IBM in a senior position in Dubai. On 15 March 2004,
heads of agreement were signed between Andrea, Luis, Tony, Jose, Iqbal
and TCM, as well as the software and networks associated companies and
the two outside shareholders, each of whom held a 50% share in those
companies. The heads of agreement provided for the then existing
shareholders of TCM, being Andrea and Luis (40% each) and Tony and
Jose (10% each) to sell a total of 25.1% of the issued share capital in
TCM to Iqbal. This would dilute Andrea and Luis’s stakes to 30% each
and those of Tony and Jose to 7.45% each. In addition Iqbal was to
acquire a 12.6% stake in th e network and software companies at the
expense of the two outside shareholders. Iqbal took up his position in
TCM on 1 April 2004 , after the signature of the heads of agreement , but
before the conclusion of the formal sale and shareholders agreements that
it contemplated. The sale of shares agreements w as only concluded on
29 June 2005. Attached to the sale of shares agreement was the following
organogram showing the corporate structure after implementing the
transaction.

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[9] The advent of Iqbal marked a d istinct change in the internal
dynamics of TCM and the commencement of the deterioration in the
relationship between Luis and Andrea. In his founding affidavit in earlier
application proceedings seeking similar relief in terms of s 252 of the Act
(‘the s 252 application’) , Luis said that from approxi mately 2007 the
relationship between the members of TCM began to deteriorate . In
evidence he tied this to certain events in November 2007. However, there
were undoubtedly earlier signs of problems and particular ly of a rift
between Luis and Andrea. The earliest occurred in relation to two
addenda to the sale of shares agreement in September 2005. Both dealt
with the computation of the price. On 19 September 2005 , Wayne, who

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had previously been TCM’s auditor and had been appointed as CFO and a
director in 2004, brought them to Luis for signature . The two were
related, because the o ne dealt with the computation of the purchase price
in terms of the formula in the agreement and the other explained that the
price had been computed on the basis of the division known as the TCM
Supplies Division reflecting a nil value . Luis signed the first without
demur. The second one he refused to sign, although Jose signed both. The
treatment of the Supplies Division was one of the g rounds upon which
Luis and Jose claimed that they had suffered unfair prejudice . As
foreshadowed in paragraph 6 it will be dealt with later.

[10] Another sign of problems was that, in the emails that were the
principal means of communication among the executiv es, Luis
increasingly questioned or challenged Andrea and the exchanges became
personal and aggressive suggesting a breakdown in the relationship
between the two men . An early exchange in January 2006 captures the
tone of these communications. It started w ith Andrea receiving an email
from IBM advising that there had been excellent feedback from the IBM
compliance team regarding their performance on fourteen of TCM’s most
profitable deals, resulting in a perfect IBM audit. The following morning
he circulated the email to Luis, Iqbal and Tony with the suggestion that a
staff member, Justine Impey, and her spouse, be awarded a company-paid
overseas trip in appreciation of her contribution to th e audit and asking
for their approval or disapproval. Fourteen minu tes after sending the
email he received the terse response from Luis ‘Disagree.’ Not
surprisingly he re plied, asking: ‘Please provide brief motivation on why
you disagree?’ The response was:2
‘I have been over this before and I don’t think that I have to do it again.

2 This and other emails are reproduced in this judgment as sent.

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I guess this is a sort of democracy and majority wins. In a game there are always
winners and losers. Fortunately for you have hand picked the other players and
therefore we will never be p laying on a level field. You sold it to me and I bought it.
I’ll just have to live with it.’

[11] The original email distributing good news raised a simple issue that
one would have thought could be resolved by way of a five minute
conversation between individuals who had known one another and
worked together amic ably for years. Given the rather unpleasant tone of
Luis’s response, it is no surprise that Andrea’s reply was equally sarcastic
and reflected some frustration with Luis. It read:
‘I respect your views and decisions.
Its my (democratic) view that you are l acking in understanding of who/what
contributes real value at TCM.
You references to I “sold you” I ‘hand picked” I created “unlevel playing field” is
incorrect, disrespectful and indicative of your continual (democratic) lack of
confidence and trust in my intentions and methods.
I’ve tried and will continue to better your understanding and confidence, all within
reason and respect. I urge you be as respectful, co -operative and if possible less (pre)
judgmental.”
The email ended with an invitation to discus s the issue or any other issue
‘in restoring your confidence and satisfaction in myself and/or TCM’.
The contrast between the tone of this exchange and an earlier exchange of
emails between the two men in 2002 was stark. Clearly something was
going wrong well before the events of November 2007.

[12] The most cursory reading of the documents, the evidence and the
record of the proceedings referred to below in the Commission for
Conciliation, Mediation and Arbitration (the CCMA), reveals that there
was growing tension between Luis and Andrea . In November 2007
matters came to a head and Luis’s disgruntlement turned into action . He

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consulted attorneys and in May 2008, at their suggestion, approached Mr
John Geel, an accountant with KPMG, to undertake a valuation o f his
shares. In his affidavit in the s 252 application he said that he did this
because his and Jose’s position s were becoming untenable and that it
would be in the best interests of all if they extricated themselves from the
relationship. The terms of en gagement of Mr Geel said that his task was
‘to assist Luis with an indicative value of the TCM Group to assist with
possible future negotiations with prospective shareholders and/or
investors’. As there was no question of any such negotiations occurring,
the only purpose of the valuation was to be used in Luis’s efforts to
extricate himself from the company by having the company , or the other
shareholders, buy his shares. By then he and Jose, although the latter
seems to have played a fairly passive role , had resolved to exit the
company and were setting about achieving that aim .3 The relationship
between h im and Jose on the one hand and Andrea on the other, and
Luis’s relationship with Iqbal, deteriorated. The record suggests that
Andrea and the other direc tors were aware that Luis was engaged in
consultations with legal and commercial advisers with a view to leaving
the company.

[13] On 19 February 2009 a meeting was convened with Andrea at the
instance of Luis and his advisers, Mr Geel and Mr Buchler, his attorney.
Mr Geel testified that the purpose of the meeting was to put a proposal
that would have involved the purchase of Luis’s and Jose’s shares in
TCM. Initially it appeared that the parties would make progress because,
Luis and Jose wished to sell and Andrea made it clear that he was
desirous of seeing them exit the company. He said he would be more than

3 His evidence during the CCMA hearing was that it was only in August that he seriously started

considering exiting the business , but this seems unlikely . In his founding affidavit in the s 252
application he said that when he approached KPMG it was with a view to the on-sale of his shares.

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happy to assist in a process over the next three months to make that
happen ‘in good faith’ . He put forward three criteria as indications of
what he regar ded as good faith. They were that Luis and Jose would
reduce their involvement in the day-to-day operations of the company ,
take a reduction in salary and relinquish their executive directorships .
There was then a caucus between the plaintiffs and their ad visers.
According to Mr Geel , on their return the response was that the
conditions were unacceptable to Luis and Jose and:4
‘… at that point the meeting became acrimonious and I say acrimonious, was hostile,
swearing, bad language in the meeting and Andrea said that was it, he got up, he
stormed out, he left the meeting, gone.
The meeting then adjourned.

[14] The following day, Luis was suspended from his employment and
presented with three disciplinary charges. An independent chair was
appointed to deal with the disciplinary enquiry, which culminated in Luis
being dismissed from his employ with TCM with effect from 31 March
2009. Luis appealed unsuccessfully to an independent appeal tribunal
and, after that failed, he approached the CCMA. On 30 October 2010,
after an eleven day hearing, the CCMA held that his dismissal was both
substantively and procedurally fair and dismissed his claim based on
unfair dismissal. He did not review that decision before the Labour Court.
Instead he decided, in conjunction with hi s legal advisers , to concentrate
his efforts on the s 252 application. That application had been launched
on 28 September 2009 in parallel to the CCMA proceedings. 5 In it h e
sought an order that either TCM, or Andrea, Tony and the Trust, purchase
his and Jose’s shares in TCM for a price of R160 million or an amount to

4 It was put to Mr Geel that the initial reaction was that this was a fair proposal , but that the problem

arose when Mr Buchler said that if Andrea didn’t get on with it quickly Luis would return to work.
While Mr Geel did not dispute this I prefer not to make a factual finding on whether that occurred.
5 Case number 09/41464.

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be determined. Jose was still employed when those proceedings
commenced and was never dismissed, but resigned from his employment
with TCM on 2 April 2013.

[15] The present action was instituted on 14 December 2010 before the
s 252 application could be heard. It sought substantially the same relief
on substantially the same grounds .6 After a trial lasting for 80 days that
gave rise to the record of 17 438 pages now before us , Boruchowitz J
upheld the plaintiffs’ claims and ordered TCM to purchase their shares at
a value to be determined after consideration of a valuation of the shares
by a referee. The judgment runs to 156 pages and 362 paragraphs. An
application by the five applicants for leave to appeal was dismissed on
24 May 2017 and Andrea, Tony and the Trust were ordered to pay the
costs on an attorney and client scale , including the costs of two counsel.
On 7 September 2017 this court (Navsa ADP and Swain JA) referred
their application for le ave to appeal for oral argument in terms of
s 17(2)(d) of the Superior Courts Act 10 of 2013, subject to the usual
order that a full record be filed and that the parties be prepared , if called
upon to do so , to argue the merits of the appeal. Given the siz e of the
record and the scope of the appeal this Bench was specially constituted to
hear the appeal before the commencement of the fourth term. We are
indebted to counsel for their helpful submissions and their co-operation in
enabling the appeal to be fully argued in the time available.





6 The action was launched before the Companies Act 71 of 2008 came into force on 1 May 2011 and
was preserved by the provisions of Item 10(1) of Schedule 5 to the 2008 Act.

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The litigation history
[16] I echo the words of Ponnan JA in Louw v Nel 7 that this is a case
that is by no means easy for an appellate court to deal with satisfactorily.
That is not only because of the voluminous record and the confused
presentation of the case and the defence , but also because time did not
stand still while the litigation wended its way through the courts. The
high court’s judgment contai ned an explanation of the history of the
litigation. This contained ver y serious findings of bad faith against
Andrea and stinging criticism of the conduct of the case by leading
counsel for the defendants. These underpinned the making of punitive
orders for costs against the defendants and necessitate a traverse of that
history. Summons was issued on 14 December 2010. It was amended in
2012 to include reference to events after the issue of the summons. The
trial was set down for hearing on 2 October 2012, but was adjourned
because it could not be completed in the allocated ti me. The defendants,
other than TCM , were ordered to pay those costs on the attorney and
client scale, including the costs of two counsel and qualifying fees for an
expert witness Professor W ainer. That order was made despite the fact
that the defendants had wanted to proceed with the trial on the available
dates, but objected to Professor Wainer giving evidence , because no
expert notice had been delivered in respect of his evidence, nor had he
attended any meeting of experts as required by the Gauteng Pract ice
Manual. The order is challenged in this appeal.

[17] On 9 December 2013 , shortly before the trial was due to
recommence, having been set down for four weeks from 27 January
2014, the plaintiffs served a notice of intention to amend the particulars
of claim to introduce additional financial material up to 2013 and the

7 Louw and others v Nel [2010] ZASCA 161; 2011 (2) SA 172 (SCA) para 1.

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facts surrounding Jose’s resignation in 2013 , together with an allegation
amounting to a claim that he was constructively dismissed. Th e
application to amend was opposed and the n withdrawn on 1 6 January
2014, without a tender for costs. Leading counsel for the plaintiffs told
the judge that they did not intend to adduce evidence outside the scope of
the pleaded issues and that the evidence foreshadowed in the notice
would be led ‘for corroborati ve and evidential’ reasons. The nature of
these was not explained. He said in regard to the 2013 financial material
that ‘we’re not complaining about 2013, we’re not extending the period
of complaint’.

[18] In reality the evidence raised entirely new substanti ve issues that
were not pleaded . O ver the objections of the defendants’ counsel , Jose
dealt with his treatment leading up to his resignation in 2013 . The judge
understood him to be claiming constructive dismissal and the heads of
argument in this court contended that he was constructively dismissed .
Professor Wainer dealt at length with the proper accounting treatment of
maintenance spare part s. This was not referred to in the pleaded claim
and only arose as a result of the revised expert report by Mr Geel
produced in anticipation of the amendments to incorporate the 2013
material. In his earlier reports there was no reference to maintenance
spare parts as a separate item. The defendants other than TCM were
ordered to pay the costs of the plaintiffs’ application to amend on the
attorney and client scale, including the costs of two counsel , even though
the application was witdrawn. That order is also challenged in this appeal.

[19] When the trial commenced in January 2014 the respondents ’
leading counsel delivered his opening address during the first two days
and the applicants then applied for a separation of issues in terms of Rule

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33(4). That consumed six days of hearing followed by a week’s
adjournment during which the judge prepared a written judgment. 8 The
hearing of evidence commenced on 14 February 2014 with Mr Geel. A
consolidated summary of his evidence had been delivered incorporating
material up to 2013. Defendants’ counsel objected to the plaintiffs
leading evidence in regard to events falling outside the times specified in
the pleadings, being the matters raised in the withdrawn notice of
amendment and derived from the consolidate d report of Mr Geel . The
objection was overruled and Mr Geel gave evidence for four days . The
trial was then adjourned at the defendants’ request and cost.

[20] On 3 December 2014 , during the adjournment , the defendants
made an offer to purchase the plaintiffs’ shares for a price of R46 995 000
in the case of Luis and R7 097 000 in respect of Jose, supported by a
valuation from TCM’s auditors, Grant Thornton. The offer was open for
acceptance by either or both of Luis and Jose until 17 December 2014 .
On 5 December 2014 the plaintiffs’ attorneys wrote to the defendants’
attorney saying that the offer would be regarded as part of a gen uine
attempt at trying to resolve the matter, but that the deadline could not be
met. The response was to extend it to 19 January 2015. The record
contains no other response from the plaintiffs until a letter dated 12
February 2015 , noting that the offer h ad lapsed , but indicating a
willingness to engage in settlement negotiations. The defendants’
attorneys asked for a meeting, but nothing came of that.

[21] The hearing resumed on 5 May 2015 . Notwithstanding that at the
end of the previous hearing counsel had s aid that he had no further

8 De Sousa and Another v Technology Corporate Management (Pty) Ltd 2016 (6) SA 528 (GJ) (De
Sousa (1)).

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questions for Mr Geel, further evidence in chief was led from him dealing
with facts about the performance of the company in 2014 . These were
derived from a fresh summary of Mr Geel’s evidence and a summary of
Professor Wainer’s evidence. Leading counsel for the defendants noted
an objection to this evidence being led but , given the previous ruling on
the introduction of the 2013 evidence , merely so as to have it on record
and without any expectation that the objection would be up held.9 Mr
Geel’s evidence in chief continued for a further day and a half. Thereafter
his cross -examination commenced. It endured for eighteen days, with a
good deal of time being lost due to interlocutory matters and discussions
between counsel and the ju dge, primarily over the direction and duration
of the cross -examination. Eventually on 1 June 2015, the judge directed
that by midday the following day Mr Geel was to be ‘out of the witness
box’. When midday came the following day there was a further debat e
about the duration of the cross -examination, but ultimately it concluded
on 2 June 2015, subject to the reservation of a single issue.

[22] Luis’s evidence was led on four days thereafter. On 9 June 2015
the judge informed the parties that he had discussed the course of the case
with the Judge President in the light of its length and the fact that he was
due to retire from active service as a judge at the end of July 2016. An
arrangement had been made for it to be set down for the whole of the first
term of 2016. The Judge President had directed that:
‘Whether or not the matter is finali sed at the end of the first term of 2016 the parties
shall not be permitted to set down or enrol the matter for further hearing in this court.
Judgment shall be delivered on t he basis of the evidence which at that stage has been
adduced. … The parties are directed to take all necessary steps in order to finalise the
matter by not later than the last day of the first term of 2016.’

matter by not later than the last day of the first term of 2016.’

9 Inexplicably, but typically for this trial, it took 14 pages of the record to note a simple objection.

21
After this direction had been given Luis’s evidence continued for a
further three days a nd the proceedings were then adjourned on 11 June
2015 to 25 January 2016.

[23] The trial resumed on that date , but th e following five days were
taken up with matters arising from an application by Luis under s 163 of
the 2008 Act, aimed at compelling TCM to pay his costs of the litigation.
TCM (but not the other defendants) opposed the s 163 application and, in
the opposing affidavit , sought Boruchowitz J’s recusal from hearing th at
application, but not the trial . The g rounds advanced were that in making
the two earlier costs orders against the defendants other than TCM , he
had expressed the view that TCM was an innocent and purely nominal
party in the s 252 litigation and described the other four defendants as
‘wrongdoers’.10

[24] In December 2015 TCM had declared a dividend , but withheld
Luis’s share because his by then divorced wife, Mrs Sharon de Sousa
(now Mrs Oberem, the intervening applicant) , claimed that one half of it
be paid to her because a division of the joint e state formed part of the
divorce order. TCM issued an interpleader summons and paid the money
into its attorney’s trust account. This prompted Luis to add a further claim
to his s 163 claim. This was to be paid the full amount of the dividend
declared in December. When the trial resumed, a week was spent dealing
with these matters including t wo days on the recusal application. On the
morning that the parties were going to argue the s 163 application , an
agreement was reached between Luis and Mrs Oberem, who had now
applied to intervene in the trial , that the dividend could be paid and each

10 The view is echoed in his judgment and will be the subject of consideration at a later stage of this
judgment.

22
would receive a portion of it . This resulted in the s 163 application not
proceeding and t he costs of the recusal application and the s 163
application were reserved. At t he end of the trial t he defendants , other
than TCM , were ordered to pay the costs of both applications on the
attorney and client scale, including the costs of two counsel. That order is
also challenged in this appeal, in part on the grounds that only TCM was
a party to those applications and not the other defendants . Andrea
deposed to an affidavit confirming certain facts and specifically recorded
that he otherwise abided the decision of the court on the merits. The other
defendants did not oppose the application.

[25] When the matter resumed on 3 February 2016, Luis’s cross-
examination started. It continued for nine days until 11 February 2016 ,
when the judge made an order that:
‘Your cross-examination will cease tomorrow afternoon at 4 o’clock. You’re afforde d
another day to cross-examine Luis.’
The cross-examination ended the following day, although not without a
protest being registered over its foreshortening. Luis was re-examined the
following day and Jose then gave evidence. His evidence in chief took
about a day and he was then cross -examined for about two days in all.
When that was finished , plaintiffs’ co unsel applied for , and after
argument was granted, leave to recall Luis on certain stock sheets referred
to in the cross-examination of Jose. That took the balance of that day and
some of the following day.

[26] On 22 February 2016 Mr Geel’s cross -examination was resumed.
He was re -examined on 24 February and then further cross -examined on
25 February 2016. Once he had completed his evidence Professor Wainer
gave evidence and was cross -examined over three days before the

23
plaintiffs’ evidence was concluded on 1 March 2016. The following day
the defendants’ case was closed without calling any witnesses.
Subsequently the parties addressed oral argument over fiv e days and the
judgment was delivered on 31 March 2017. Effectively the judge upheld
every allegation made by the plaintiffs. His primary finding was that this
was a small domestic company of the nature of a partnership and that the
plaintiffs had been exc luded from participation in its management in a
manner that was unfairly prejudicial to them. In addition he held that
there had been a failure to negotiate in good faith to enable the plaintiffs
to exit the company and this failure on its own constituted further unfairly
prejudicial conduct. He dealt with each of the other allegations in the
particulars of claim and upheld all of them. His view was that the se
showed a lack of probity by Andrea in the conduct of the affairs of TCM
that underlay the breakdow n in relations between him and Luis and
constituted a further ground of unfairly prejudicial conduct.

[27] In order to determine the appeals against certain costs orders a s
well as the fair trial issue it will be necessary to look in greater detail at
some of the reasons for the protracted nature of the proceedings . An
enormous amount of time was taken up by debates over interlocutory
issues and procedural matters . At the outset, s ix days were devoted to
arguing the application to separate the issue s and the rest of the second
week was spent in the preparation of a written judgment. Five days were
spent over the s 163 application, the recusal and the related disputes.
Time was repeatedly wasted over lengthy debates between the judge and
counsel for the defendant s, such as one that occurred on 23 February
2016. Mr Geel was about to be recalled to deal with one outstanding issue
from his cross -examination and virtually a whole day was spent in
debating whether he could deal in re-examination with some work he had

24
done since his previous period in the witness box. The debate stretche d
over 118 pages of the record and took two-thirds of the day, while the re-
examination took 143 pages and the further cross -examination it
engendered 109 pages. That was a particularly flagrant example, but there
were many others in the record. Th roughout the trial the evidence was
interspersed with regular exchanges between counsel and counsel, and the
judge and counsel . These started with interruptions that became
arguments and then wandered all over the terrain of the case without any
apparent purpose. Time was taken up with repeated judicial warnings that
the proceedings were becoming unduly protracted . T he protests these
engendered from leading counsel for the defendants – not counsel who
appeared before us – further protracted the trial. None of this served to
facilitate the smooth running of the case.

Preliminary issues
[28] The first issue is whether leave to appeal should be granted . If
granted, the applicants raised two points in limine that it contended were
dipositive of the appeal. The first was that the high court’s order did not
include an order in terms of s 252(3) of the Act for the reduction of the
share capital of the company in consequence of the order that the
company buy the respondents’ shares. That was not a point in limine, but
a possible flaw in the order granted by the high court and c ould only be
properly considered at the end of the appeal. The second was that Mrs
Oberem, should have been joined in the action after she divorced Luis on
26 October 2015. She had applied for leave to intervene in the trial , but
her application had been dismissed and leave to appeal refused. Her
further application to this court for leave to appeal was dealt with
simultaneously with the a pplication for leave to appeal in th e present
case. Orders referring each of them for oral argument were granted in

25
similar terms on the same day, 7 September 2017. When Mrs Oberem’s
application was heard a consent order was made in circumstances dealt
with below . Nevertheless, o n 20 October 2023 , an application was
delivered on her behalf for leave to intervene in th is appeal if leave to
appeal were to be granted. The second point in limine and the application
to intervene in this appeal are intertwined and it is convenient to deal with
them together.

Leave to appeal
[29] This case raise d a number of points in regard to the proper
approach to s 252 of the Act . While that section has now been repealed
by the Companies Act 71 of 2008 (the 2008 Act), decisions on the earlier
provision will be of assistance in relation to cases arising under s 163(1)
of the new Act ,11 which substantially re -enacts it .12 In addition the
applicants have reasonable prospects of success if granted leave to appeal
on the merits. Together those factors mean that l eave to appeal must be
granted.

[30] One further matter must be mentioned. T he applicants raise d a
contention that they were denied a fair trial. Mr Green SC, who appeared
before us on behalf of the applicants, but was not involved in the trial,
raised the relevant points in appropriately moderate language by
reference to passages in the record. For his part , Mr Subel SC , who
appeared for the respondents at the trial and before us, said that ‘It was a
thoroughly unpleasant trial.’ The r ecord reveals some disconcerting

11 Grancy Property Ltd v Manala and Others [2013] ZASCA 57; 2015 (3) SA 313 (S CA) paras 22-32;
Visser Sitrus (Pty) Ltd v Goede Hoop Sitrus (Pty) Ltd and Others 2014 (5) SA 179 (WCC) paras 54-56.
In the latter case at para 54 Rogers J doubted whether the new section provided a much wider scope for
judicial intervention than its predecessor.
12 Freedom Stationery (Pty) Ltd and others v Hassam and Others [2018] ZASCA 170; 2019 (4) SA 459

(SCA) para 26; Parry v Dunn-Blatch and others [2024] ZASCA 19, para 20.

26
exchanges between counsel and between leading counsel for the
defendants and the judge . An application was made for the judge’s
recusal in relation to an interlocutory application . The judgment is in
parts couched in immode rate language when expressing displeasure with
the manner in which the applicants’ defence to the claim was conducted.
In refusing leave to appeal the judge recognised the serious nature of the
allegations made in relation to his conduct during the trial , but
characterised them as ‘nothing less than an abusive, derogatory, ad
hominem attack on a presiding judge’. Regrettably, this conveyed that the
judge was overly sensitive to the allegations and regarded them as a
personal affront.13

[31] It is unfortunate tha t in the interests of justice the judge did not
grant leave to appeal, so that an appeal court could express a view on the
matters he described in these terms. He cited the following paragraph
from the judgment of the Constitutional Court in Bernert v ABSA Bank:14
‘Apart from this the applicant has made serious allegations against judges of the
Supreme Court of Appeal. These allegations concern the proper administration of
justice. They strike at the very core of the judicial function, namely, to administer
justice to all, impartially and without fear, favour or prejudice. Compliance with this
requirement is fundamental to the judicial process and the proper administration of
justice. This is so because it engenders public confidence in the judicial process, and
public confidence in the judicial process is necessary for the preservation and
maintenance of the rule of law. Bias in the judiciary undermines that confidence.’

[32] That is an important statement of principle, but the judge should
have followed the g uidance given in the following paragraph , which he
did not quote, in regard to th e desirability of such allegations being

13 Moch v Nedtravel (Pty) Ltd t/a American Express Travel Service 1996 (3) SA 1 (A) at 14G-J.
14 Bernert v Absa Bank Limited 2011 (3) SA 92 (CC) para 21.

27
considered by a court that co uld investigate whether there was any
substance in them. That paragraph reads:15
‘These are important constitutional issues that go beyond the interests of the parties to
the dispute, for an independent and impartial judiciary is crucial to our constitutional
democracy. It is, therefore, in the public interest that these issues be resolved. As
these allegations are made against the Supreme Court of Appeal, there is no court that
can investigate these issues other than this court. This court, as the ultimate guardian
of the Constitution, has the duty to express the applicable law, in to enhance certainty
among judicial officers, litigants and legal representatives, and, thereby, to contribute
to public confidence in the administration of justice.’
In Bernert the Constitutional Court granted leave to appeal for those
reasons without referring to the prospects o f success, because the nature
of the issues raised meant that it was in the interests of justice to do so.
For the same reason leave to appeal should have been granted in this case
in that this court could consider the complaint and address it to the extent
necessary. Accordingly, leave to appeal will be granted.

Joinder and the application to intervene
[33] The circumstances in which Mrs Oberem applied to intervene in
this appeal were set out earlier. The application was dealt with at the
outset of the hear ing and dismissed on the basis that reasons and
appropriate costs orders would be given in this judgment. These are the
reasons and they also dispose of the second point in limine.

[34] For reasons that do not concern us it was thought preferable for
Mrs Oberem’s application for leave to appeal to be heard before the
application in the present case. It came before this court on 27 May 2019.
Mrs Oberem and Luis , together with Jose and TCM, arrived at a

15 Ibid, para 22

28
settlement that was embodied in a consent order. The relevant provisions
of that order read as follows:
‘1 A Liquidator is appointed for the determination of the liabilities and assets of
the former joint estate, of the Applicant [Mrs de Sousa] and the 1 st Respondent [Luis].
In so far as is necessary the appointed liquidator is authorised to discharge all
liabilities, liquidate and distribute all of the assets of the joint estate including the 30%
shareholding in the 3 rd Respondent currently registered in the name of the 3 rd
Respondent …
2 …
3 Subject to and once a ll the liabilities of the joint estate have been discharged,
the extent of which shall be determined by the liquidator, the Applicant shall be
entitled to be registered as a member of the 3 rd Respondent as to 15% of its issued
share capital, or such portio n thereof as may remain thereafter after the discharge of
the liabilities as aforesaid.
4 The 1st Respondent shall remain registered as to 30% of the share capital of
the 3 rd Respondent, until such time as the rights of the Applicant and the 1 st
Respondent in relation to such shares are finalised.
5 – 10 …
11 Nothing in this order shall affect the costs involved in the trial action under
case 50723/2010 or in the appeal pending before the SCA. It is specifically recorded
that the Applicant [Mrs Oberem] makes no admission as to any liability of the joint
estate and of herself with regard to any costs relating to the trial action and/or any
further proceedings relating thereto.’

[35] Mrs Oberem explained in her affidavit in support of the present
application for l eave to intervene that she had been advised that should
leave to appeal be granted this court’s order established her direct legal
interest in the present appeal. She believed that there was a conflict
between that order and the high court’s order in the trial and that in view
of the order in her appeal ‘it is no longer possible for this Honourable

of the order in her appeal ‘it is no longer possible for this Honourable
Court to uphold the judgment of Mr Justice Boruchowitz in respect of the

29
main matte r to the extent of my 15%, or to reverse or vary that order
insofar as it may pertain to my 15%’.

[36] It was by no means clear what was sought to be achieved by the
intervention if leave to appeal were to be granted to the Applicants and
the appeal proceeded on its merits. If leave w ere refused, the high court’s
order would remain in p lace unamended and would encompass what
Mrs Oberem referred to as ‘my 15%’. If leave w as granted, either the
appeal would succeed, in which event the high court ’s order would be set
aside, or it would fail, in which event it would remain in place
unamended. Either way the aim of protecting her 15% would not be
achieved, at least not by way of some adaptation or amendment of the
high court’s order.

[37] A more fundamental difficulty lay with the submission that the
effect of the earlier order was to give Mrs Obe rem a direct legal interest
in the subject matter of the suit. In SA Riding for the Disabled
Association16 the Constitutional Court said:
‘It is now settled that an applicant for intervention must meet the direct and
substantial interest test in order to succeed. What constitutes a direct and substantial
interest is the legal interest in the subject -matter of the case which could be
prejudicially affected by the order of the court. This means that the applicant must
show that it has a right adversely affected or likely to be affected by the sought.’

[38] Did the earlier order give Mrs Oberem a direct and substantial
interest in the subject matter of th is case? She clearly had no interest in
whether the treatment of her former husband had been unfairly
prejudicial, unjust or inequitable to him in his capacity as a 30%

16 SA Riding for the Disabled Association v Regional Land Claims Commissioner and Others 2017 (5)
SA 1(CC) para 9.

30
shareholder of TCM, or whether the company’s affairs were being
conducted in a manner that was unfairly prejudicial, unjust or inequitable
to him or some part of the members of the company. Her clai m was
dependent upon half of the shares registered in her husband’s name being
hers (‘my 15%). She contended that this 15% shareholding ‘no longer
forms part of the order’ of the high court and ‘this needs to be recognised
at the commencement of the hearing of the appeal’.

[39] Unfortunately that was the same misconception that had
underpinned her application to intervene at the trial ,17 save that it was
now thought to have been fortified by the consent order. Once the divorce
order was granted Mrs Oberem acquired a right to a division of the joint
estate, because it was property jointly owned by Luis and herself. In the
ordinary run of cases this is done by agreement between the parties but, if
they cannot agree, the court will either order a division , or appo int a
liquidator to effect a division ,18 or possibly both. The liquidator
proceeds under the actio communi dividendo .19 All that is required is an
equality of division in the end result, not a division of every asset,
although where an asset is easily divisi ble the liquidator will ordinarily
allocate it in equal shares to the former spouses. It is always open to them
to agree that any particular asset be divided between them in this way
once the liquidation process arrives at the stage where assets can be
distributed. That is what occurred as a result of the settlement and the
consent order granted by this court. The parties accepted that, once the
liquidator’s work was done , the 30% shareholding, or some part of it,

17 This judgment does not appear to have been reported, but see De Sousa v Technology Corporate
Management (Pty) Ltd and Others; De Sousa v De Sousa and Another [2018] ZAGPHC 445 paras 37 -
45 (De Sousa (2)).

45 (De Sousa (2)).
18 Gillingham v Gillingham 1904 TS 609 and Revill v Revill 1969 (1) SA 325 (C).
19 Robson v Theron 1978 (1) SA 841 (A) at 854G -855H; Morar NO v Akoo [2011] ZASCA 130; 2011
(6) SA 311 (SCA) para 12.

31
would still exist and could be divided equally between Luis and
Mrs Oberem. To that end the consent order made provision for the
company and the other shareholders to consent to this arrangement. It
made no mention of the present proceedings or what would occur in
respect of these shares if the hig h court’s order or the appeal against it
was upheld. The parties knew that would be decided in this application .
Prior to the liquidation of the joint estate, the order did not entitle
Mrs Oberem to advance claims in respect of any portion of the 30%
shareholding registered in Luis’s name. Nor did it give her a direct and
substantial interest in the outcome of these proceedings. The 30%
shareholding was to remain registered in Luis’s name until the position in
relation to those shares was finalised. Until t hat occurred her interest in
the shares themselves was no more than a spes. It is inconceivable that ,
without any express reference to it , the consent order altered the high
court’s order in this case in the material respect suggested by
Mrs Oberem.

[40] In t he result the application to intervene was misconceived and
Mrs Oberem lacked any direct and substantial interest in the litigation
entitling her to be joined in the appeal if the application for leave were to
be granted. As to costs, only the respondents sought an order for costs. In
our view they were entitled to their costs, but only on the basis of one
counsel and not on the basis of the costs being awarded on an attorney
and client scale. That forms part of the order set out above.

The pleaded case
[41] In pleading the case , even though their situations were markedly
different, no distinction was drawn between the position and complaints

32
of Luis and those of Jose, save for a single paragraph dealing with the
latter being sent to Namibia . Their cases overlap at some points but
diverge at others. It is best therefore to separate the two.

Luis’s case
[42] The particulars of claim adopted a scattergun approach without
clearly identifying the course of conduct of the company’s affairs of
which complaint was made. Allegations were pleaded in the broadest
possible terms with little particularity, such as the complaints about Luis
being ‘criticised, belittled, humiliated and persecuted’ , and descended to
the trivial with an allegation that Andrea ‘unfairly and unjustly reduced
the office and parking space available to’ Luis with a view to showing
‘public contempt’ for him and ‘denigrating his status as a founder
member’ of the company. The friendship relationship on which the
business had been established had plainly broken down, accompanied by
a good deal of bitterness. The broad allegation was that Luis was entitled
to the same standing and status in TCM as Andrea and the latter had set
about a campaign to deprive him of that status and drive him out of the
company.

[43] The extent to which the pleadings threw everything but the kitchen
sink at Andrea is reflected in the reliance placed upon two events that, as
a result of Luis’s opposition, did not occur . The first was a proposed
amendment to the sale of shares agreement to reduce the price payable by
Iqbal for the Trust’s shares. The second was a proposed loan to Iqbal to
assist him to pay for the shares . Luis suggested that this might involve a
contravention of s 38 of the Act. He refused to agree to the amendment
and, irrespective of its lawfulness, the idea of a loan was dropped. T he
two paragraphs of the particulars of claim dealing with these matters

33
commenced with the meaningless statements that Andrea ‘purported to
compel the plaintiffs to conclude an amending agreement’ and ‘purported
to procure that’ a contravention of s 38 would occur. Not only were they
meaningless, but it is incomprehensible on what basis events that did not
occur because of Luis’s opposition could constitute conduct by Andrea of
the affairs of TCM in a manner that was unfairly prejudicial to Luis.

[44] Of more substance were allegations falling broadly into four
categories. The most substantial related to Luis’s personal situation and
encompassed his dismissal as an employee, his resulting exclusio n from
executive involvement in the day-to-day running of the business and the
determination of bonuses and benefits in a manner that was said to be
prejudicial to him and benefi tted other executives and employees in
return for their support of Andrea. It was alleged that Andrea had an
ulterior motive of ‘humiliating, denigrating, and punishing’ the plaintiffs
for not acceding to his demands. The second category related to allegedly
favourable treatment of Iqbal directed at assisting him to pay for his
shares by concluding retention agreements, making payments under those
agreements and paying him enhanced bonuses and other benefits. The
third category involved the accounting treatment of the Supplies Division,
the alleged undervaluation of inventory and criticisms of the failure to
control the operating expenses of the business , thereby diminishing the
benefits flowing to shareholders and the value of the business. The fourth
and last category related to the alleged failure in 2008 and 2009 to
negotiate in good faith with Luis in order to enable him to dispose of his
shares at fair value . Linked to that was a failure to furnish information
and documents that would have enabled him to arrive at a fair value for
his and Jose’s shares.

34
[45] I have endeavoured to place these disparate items in an appropriate
order, although there was no discernible common thread binding them
together. On that basis Luis’s case was the following:
(a) he had a legitimate expectation to daily involvement and
engagement in the operation s of the first defendant as a director and
shareholder;
(b) more particularly he had a legitimate expectation to recognition
and remuneration as (i) a founder member of TCM; (ii) a quasi -partner in
the affairs of the business, which was a domestic company akin to a
partnership; (iii) a participant in and contributor to the business of TCM
of equal standing to Andrea; and to (iv) the due respect and regard of his
fellow directors, shareholders and employees;
(c) since approximately 2007 these benefits had been denied to him;
(d) between 2007 and 2009 as a result of his unwillingness to agree to
certain changes in the sale agreement under which Iqbal had acquired the
shareholding in the company he placed in the Trust , he had been abused
and treated in a demean ing manner; had his resignation as a director
demanded; and had his bonuses reduced both in order to humiliate him
and to use the funds to assist the Trust to pay for the shares and buy the
personal loyalty of other recipients of bonuses;
(e) Andrea procured the conclusion of retention agreements with Iqbal
that were a sham and benefited Iqbal and the Trust at the expense of the
other shareholders;
(f) the disciplinary charges brought against him were spurious and in
procuring them Andrea was driven by the ulterior motive of excluding
him from the business;
(g) the disciplinary hearing was conducted in a manner that was unfair
to him;

35
(h) during 2008 and 2009 Andrea refused to engage in bona fide
discussions or negotiations aimed at permitting Luis to dispos e of his
shares either to the other shareholders or to a third party at a fair value
and refused to permit him the proper access to documents and
information to which he was entitled as a shareholder and director ,
thereby preventing him from arriving at a fair assessment of the value of
his shares and complying with the provisions of the shareholders’
agreement in regard to the disposal of his shares;
(i) in three respects, Andrea engaged in conduct in regard to the
finances of TCM that operated to the detr iment of other shareholders,
namely that he:
(1) caused the business of the Supplies Division of TCM to be
transferred at no value to another company, TCM Printing Solutions (Pty)
Ltd, owned by the Trust as to 25.1% and his brothers Frank and Fabio as
to the balance in equal shares of 37.45% each; alternatively procured that
the business of the Supplies Division was conducted and accounted for as
if it were an entity separate from TCM , with all income and profits
accruing for the benefit of the Trust and Frank and Fabio; and
(2) during the period 2008 and 2009 Andrea procured an under -
valuation of the inventory of TCM of approximately R11.2 million for the
purpose of reducing the value of the Luis’s shares; and
(3) from 2007 Andrea has conducted the business of TCM in a
manner such that the operating profit ha d been drastically reduced; the
operating expenses ha d almost doubled and , although the gross profit of
the business climbed from R153 878 415 in 2008 to R228 746 081 in
2012, a failure to control the ex penses of the business, result ed in the
benefits available for distribution as dividends not accru ing as they
should and the growth and well-being of TCM not being properly ensured
and protected;

36
(j) Andrea had authorised and procured that the funds of TCM be used
to conduct the defence of the application proceedings referred to earlier in
para 9 of this judgment;
(k) In the result the relationship of trust and respect between Luis and
Jose on the one hand and their co -shareholders on the other had broken
down so that it was impossible for them to co -operate meaningfully as
shareholders, directors and employees and jointly to conduct the business
of TCM and best advance its objectives.

Jose’s case
[46] Jose’s claims in regard to unfair prejudice could not be the same as
those of Luis. TCM was established by Andrea and Luis. Jose and Tony
had joined it as junior employees with an offer of an indeterminate
number of shares. They had carried on as employees without that offer
being fulfilled until shortly before it became necessary to sell shares to
Iqbal as part of the BEE deal. At times Luis described them as directors ,
although they were not formally appointed as such until 2004 . However,
they appear from an early stage to have worked with Andrea and Luis as
part of an informal executive committee for the business. They discussed
major decisions, but the final decisions were taken by Andrea and Luis.
On that basis it was alleged that Jose had a legitimate expectation of daily
involvement in the operations of TCM an d recognition of his status as a
shareholder and director of the company. He did not claim to have been a
’quasi-partner’ as Luis did, nor did he claim to have the other
expectations described above in para 45 (b) above.

[47] The allegations in the particulars of claim that were specific to Jose
were that:

37
‘During the period of approximately September 2008 to the present time, the second
defendant has:
16.1 marginalised, sterilised, humiliated and denigrated the status of the second
plaintiff;
16.2 rusticated him to the first defendant’s Namibian office without discussion and
without his consent;
16.3 threatened to dismiss the second plaintiff should he not resign as a director of
the first defendant;
16.4 deprived the second plaintiff of his erstwhile duties a nd status without proper
cause;
16.5 generally conducted himself towards the second plaintiff with the ulterior
motive of forcing the second plaintiff to leave the employ of the first defendant and to
give up his directorship thereof and/or his shareholding therein.’
It is unclear whether ‘the present time’ referred to in the preamble was
2010 when the summons was issued, or 2012 when the particulars of
claim were amended, but on the facts alleged it does not appear to matter.
In paragraph 17 it was alleged that the second defendant had conducted
himself and the business of TCM in a manner calculated to deny and
frustrate the plaintiffs’ legitimate expectation of their daily involvement
and engagement in the operations of TCM and the recognition of their
status as shareholders and directors.

[48] There was an overlap with Luis’s allegations in regard to the
endeavour to reduce the price payable by Iqbal. Jose also objected to the
retention payments to Iqbal and he adopted the allegations summarised in
paragraphs 45 (i) to ( k) arising from Mr Geel’s analysis of the financial
position of the company . Like Luis he alleged that there were no bona
fide negotiations over their possible departure from the company and the
disposal of their shares. Nor was any reasonable o ffer made to purchase
the shares.

38
The relief sought
[49] An order under s 252 is directed at remedying the unfair prejudice
that has been suffered. The unfair prejudice on which the plaintiffs relied
was the following.
(a) Their primary case was that by virtu e of the nature of TCM’s
business they both had a legitimate expectation to daily involvement and
engagement in the business , as well as recognition of their status as
shareholders and directors. In Luis’s case he claimed to be entitled in
addition to recognition as an equal participant and contributor to Andrea.
Both claimed to have been denied these rights from 2007 to 2010, when
the summons was issued. They said that their prejudice was compounded
by their being locked -in, causing an inability to dispose of their shares
and realise their value. They sought a ‘buyout’ order that either TCM, or
alternatively Andrea, Tony and the Trust, should purchase their shares
and take transfer of them against payment of the sum of R160 million, or
such other amount as the court might determine. They tendered against
payment in full to resign as directors and sign all documents necessary to
transfer the shares to whoever purchased them.
(b) The second ary case was that , even if they had no such legitimate
expectations, Luis’s dismissal and the treatment Jose received before his
resignation on 27 March 2013 , were prejudicial to their position as
shareholders and resulted in their exclusion from the daily involvement
and engagement in the business and the recognition as shar eholders and
directors that they would otherwise have enjoyed. Like their primary
case, the prejudice was compounded by their being locked-in.
(c) The third source of unfair prejudice was simply that they were locked
in and , in and of itself , this constituted unfair prejudice to them as
shareholders.

39
(d) Their final ground of unfair prejudice was that they had lost faith and
confidence in the management of the business by Andrea and the other
directors as a result of the latter conducting the affairs of the business in a
manner lacking in probity, so that it was no longer possible for Luis and
Jose to co -operate meaningfully with them in the conduct of the
company’s business. They did not allege dishonesty or a general lack of
probity in conducting the affairs of the company, but a lack of probity in
relation to conduct directly affecting them. They attributed this to an
intention to force them out of the company and compel them to sell their
shares at less than their true worth. This unfair prejudice was closely
linked to their being locked-in.

[50] Luis and Jose alleged in para 21 of the particulars of claim that the
fair value of their shares was R160 million, alternatively an amount to be
determined by the court. Mr Geel had determined that figure. Prior to the
commencement of the hearing in 2014, the parties agreed that the issues
to be decided would be as set out in the particulars of claim ‘save for
paragraph 21 thereof, read together with paragraph 15 of the plea (“the
remaining issues ”) which relates to t he quantum of the claim’. The
precise effect of that separation of issues, like much else in the case, gave
rise to an argument before us arising from the fact that the judgment ed
TCM, rather than the other shareholders, to purchase the shares on the
basis of a valuation to be done. That will be dealt with later in the
judgment.

40
The evidence
Luis and Andrea
[51] It is a persistent judicial complaint that cases brought by minority
shareholders claiming to have been unfairly prejudiced by the manner in
which the affairs of the company have been conducted , come to resemble
matrimonial suits and disputes over the dissolutions of partnership . The
parties take the opportunity to unearth every grievance and canvas every
disagreement, however minor , that might conc eivably have led to the
breakdown in their relationship. They pore over every actual or perceived
fault or slight and blame one another for every thing that went wrong .20
They frequently attribute to the other party improper motives directed at
causing them harm. That occurred in the present case. Luis said that
Andrea engaged in ‘a concerted and orchestrated plot to remove me from
the business’. He accused Andrea and Iqbal of acting in concert in an
attempt ‘to completely alienate me from the business’. According to him
Andrea was acting mala fide and was motivated by ulterior motive and
malice. Why he would have done this to an old friend and business
partner was never explained. In his mind the incident that triggered the
breakdown in the relationship occurred in November 2007 when Andrea
asked for and received, over his strenuous opposition , an increase in his
remuneration that meant that for the first time he earned more than Luis.
He viewed this as a fundamental breach of an informal agreement they
had co ncluded in about 1987 that they would always be on the same
footing as far as remuneration and status was concerned.


20 Hoffmann J in Re a Company (No 004377 of 1986) [1987] BCLC 94 at 101 drew the analogy with
matrimonial proceedings and remarked that: ‘Voluminous affidavit eviden ce is served which tracks the
breakdown of a business relationship commenced in hope and expectation of profitable collaboration.

Each party blames the other but often it is impossible, even after lengthy cross -examination, to say
more than the petitioner says in this case, namely that there was a clear conflict in personalities and
management style.’

41
[52] The rupture in regard to Andrea’s remuneration was followed two
weeks later by Andrea attempting to persuade his fellow shareholders to
reduce the price payable by Iqbal for the shares. Luis refused to accept
that this was a genuine attempt to assist someone who had brought
considerable benefits to the business, but needed assistance in meeting his
obligations to pay the purchase price of t he shares he had purchased.
Instead he treated it as symptomatic of Andrea trying to secure the
support of the other directors and senior executives to exclude him from
the business. The final straw , after which the relationship between the
two men came to resemble a form of internecine guerrilla warfare, was a
dispute at the end of November and the beginning of December over
Andrea’s attempt to sever the relationship between TCM and its Supplies
Division by creating a new company in which the only sharehol ders
would be his brothers Frank and Fabio with Iqbal as a BEE shareholder.
This appears to have confirmed Luis’s belief that Andrea was actively
working to bring about a situation where he was isolated as a director and
would be excluded from the company . His resentment over what he
perceived to be a humiliating downgrade in status was obvious and the
source of many of the problems between the two of them.

[53] Luis attributed e very disagreement between himself and Andrea
from 2007 to a conspiracy to remove hi m from the company arising from
ulterior motives and malice on the part of Andrea. Everyone who agreed
with Andrea over the issues giving rise to disputes was tarred with the
same brush of being part of a conspiracy, or having had their co-operation
bought with generous bonuses and the like. Hard evidence of such
conspiracies and ulterior motives was lacking. The company was thriving
and growing to the benefit of all . Between 2004 and 2008 its value
increased fourfold according to Luis ’ evidence before the CCMA.

42
Between 2008 and 2012, the date of the amended particulars of claim, its
sales increased from R318 million to nearly R775 million. Its gross profit
increased from R96 million to nearly R229 million. Its headcount grew
from 396 to 534. Between June 2008 and July 2012 it paid out dividends
of R81 million to its five shareholders , at a stage when dividends were
not subject to income tax in the hands of the recipient. Insofar as relevant,
that trend continued in the years after 2012. It is obvious that the business
was thriving under Andrea’s leadership , notwithstanding Luis’s
resistance. Prior to 2005 the company had not declared dividends. The
new policy was adopted in the light of clause 4.3 of the sale of shares
agreement, which provided that all divid ends received by Iqbal would be
used to discharge the purchase price of the shares. Luis was a major
beneficiary of the new policy of paying substantial dividends.

[54] Beyond their increasingly divergent perspectives on their roles and
relative positions in t he company , no obvious reason emerged for the
deterioration of the relationship between the two former friends . Every
indication was that before 2004 and the introduction of Iqbal as a BEE
shareholder the business was run very informally with Andrea in the CEO
role taking responsibility for overall management and building up the
company together with sales and marketing , and Luis in charge of the
technical side of the business, logistics , procurement, inventory, some
accounting record-keeping and administration. There was no evidence of
there being any need to resolve issues, as each man took responsibility for
his own area of work . Any problems were minor and resolved through
informal meetings. After 2004, and especially after the conclusion of the
shareholders agreement in 2005, Andrea took his role as CEO very
seriously. He saw the loss of the Standard Bank contract and the need to
address BEE issues as a wake -up call that the company needed to change

43
and he set about addressing this. He identified Iqbal as the person who
could address the BEE issue and make a contribution to the company and
he appears to have conducted the negotiations with him with little input
from anyone else. Luis did not ask for Iqbal’s CV or interview him.

[55] Luis repeatedly suggeste d that Andrea had persuaded him to go
along with the BEE transaction and the shareholders agreement on the
basis that nothing would change. This is difficult to believe and is
contradicted by the existence and terms of the shareholders agreement .
The very act of drawing up a shareholders agreement proclaimed that
things would change and what had been an informal way of doing
business would become more formal. Email exchanges and Luis’s
evidence conveyed that he thought that Andrea had become over -
infatuated with his role as CEO, wanted his own way in everything and
resented any attempt to stand in his path. In other words he had grown too
big for his boots. The shift in perceptions was well illustrated by the
emails exchanged between them in November 2007 over Andrea’s
suggestion that there be an adjustment to his own remuneration package.

[56] The exchange started with an email from Andrea to the directors
saying that he had long thought that his package as CEO and Chairman
was not consistent with his role and t he performance of the company and
suggesting an adjustment. Luis responded that afternoon saying that he
could not approve of the recommendation and that he would send a note
to the shareholders only. Th e note was in an email sent at the same time
in which he said that directors’ increases, especially an increase for the
CEO, should be approved only by the shareholders, He said that TCM’s

44
net profits after tax were lower than the previous year although turnover
was up by 20% and gross profit by 22%. He added:
‘4 On paper I believe that My Shareholding is worth less today than it was a year ago.
Again I speak from what I can recall.
5 As a CEO he has not achieved the number one goal. That is to create fair value in
the Shares held by Shareholders.’
Luis added that one cannot compare the package of the CEO of a private
company, especially if the CEO is a major shareholder, with that of a
public company , as the risks were different. However, he said he
respected Andrea’s ability as a businessman and his ability to maximise
profits and most aspects of his vision for the group. Accordingly he said
he would accept an increase of 5% to bring his total increase for the year
up to approximately 18%.

[57] The tone of the email , the criticism directed at him and the
grudging offer of an insignificant increase , angered Andrea. He
responded as follows:
‘Hi Luis,
I find your views mostly irrelevant and emotional. Your personal (non appreciative)
views are very evident and consistent with your general conduct and behaviour.
For the record this is not an “increase” its an “adjustment” long overdue (many years
ago), often recommended by other shareholder/directors, yet always opposed by you,
maybe thinking and acting as a joint CEO? I remind you, you are not a Joint CEO or a
50/50 p artner in a small business (as once was, a long time ago) . Accepting,
acknowledging this may resolve the continual non -productive baggage you keep
raising.
I need not (further) justify the and my CEO role, responsibility, value, performance or
shareholder returns over the last 20 year … most evident in the last 3 years.’
Andrea went on to say that the directors represented the shareholders and
were accordingly able to contribute and vote on the matter he had ra ised.
He claimed that the amount of the adjustm ent was not material to him as

45
he was not seeking wealth through his salary, presumably in contrast to
seeking wealth from his shareholding. He said he was willing to embrace
any CEO better suited to the job than he and suggested that Luis
nominate one. The issue carried on over the next couple of days with the
exchanges becoming increasingly sarcastic on both sides. It included
further criticism by Luis of the company’s performance and Andrea’s
response that he had addressed these issues ‘enough”.

[58] The one point of substance that emerged from these exchanges was
that Luis was hoping for the company to list on the JSE t o enable the
shareholders to realise the true potential of their shares . Andrea
recognised that Luis was looking for an ‘exit strategy/plan’ and asked that
there should be no more JSE meetings. He suggested that Luis should see
whether he could get an offer for the company without its key people and
told him that he was ‘a fine one judging the CEO performance’. An
article about earnings for CEO ’s and executive directors was attached ,
and he added sarcastically:
Now ask yourself how come “you” earn the same as the CEO … maybe its because
you have the same size office?’
In the final email in this exchange he referred to Luis’s ‘ghost
consultant’, which showed an awareness that Luis was seeking advice
outside the company.

[59] Luis described the other members of the board of directors ( Tony,
Iqbal, Wayne and Ms Bhula) as lackeys of Andrea (‘his coterie’), whose
support and votes at board meetings and on round robin resolutions had
been bought by the grant of bonuses and other financial benefits . An
example of his ascribing impropriety to Andrea and others , and his
reluctance to take anything at face value , appears from his approach to

46
the incident descri bed in paragraph 10 above. He annexed the emails
referred to there to his founding affidavit in the s 252 application .
Consistent with his general practice of always attributing ulterior –
usually dishonest – motives to people, he said in his affidavit:
‘Obviously, Cornelli’s intention to reward Justine in this way was part of his usual
strategy, namely, to reward people, and members of their family, thus to ensure their
compliance and loyalty. Certainly this proposal could not be explained on any other
basis.’
Andrea’s answering affidavit explained the nature of the IBM audit and
its potential downside for TCM and refuted the suggestion that he was
trying to curry favour with Wayne by favourable treatment of his sister -
in-law. Luis made no endeavour in repl y to deal with the importance of
the audit or to explain why he thought that the work was part of
Ms Impey’s ordinary duties, but redoubled his attack on Andrea by
adding that he was close friends of Ms Impey and her husband and:
‘…was even then in the hab it of distributing largesse to reinforce his support base in
the company.’
It is unclear how this suppose d favouritism was compatible with the fact
that in the following year Ms Impey’s bonus was reduced substantially ,
unlike those of other senior employee s, and only resumed an upward
trajectory the following year.

[60] As had been the case when he gave evidence before the CCMA,
Luis reluctantly accepted u nder cross-examination at the trial , that he
could point to no fact to justify the accusations he made agai nst the
directors, other than that the individuals whom he targeted in this fashion
supported proposals emanating from Andrea. He accused his colleagues
of blatant dishonesty in regard to an internal survey undertaken in 2008
concerning support services for customer sales and services and persisted
in the accusation until the trial. There was no foundation for this

47
accusation. On this and every other point he was unwilling to concede
that he might have been at fault in any way , or a contributor to the
deterioration in his relationship with Andrea and his fellow directors.

[61] In regard to his dismissal Luis said:
‘The whole conflict, orchestrated by [Andrea] culminating in my dismissal on charges
which were patently trumped -up, had nothing to do with my condu ct as an employee
but were designed to punish and persecute me as a shareholder, and, ultimately, to
compel me to dispose of my shares at a value far below the true value of my shares.’
This was the pattern throughout the case. Luis was obsessed by the idea
that Andrea was conspiring with the other directors to get rid of him and
seeking to harm him financially by compelling him to dispose of his
shares at less than their true value. He saw a conspiracy in almost
everything that was done in the company. When cross -examined about
the provisions of the shareholders agreement all he could say was that the
apparent and obvious meaning of its provisions ‘was not what he was
told’. The record contains many examples of Luis’s unwavering belief
that Andrea had for n o identifiable reason misled him as to the effect of
the shareholders agreement and engaged in a process of manipulating
events so as to isolate and exclude him , with a view to compelling him to
dispose of his shares at far less than their true worth. It w as never
apparent why Andrea would have set about such a course.

[62] The defendants’ plea did not give a reason for the obvious
breakdown in shareholder relations , or make any specific allegations
against either Luis or Jose’s conduct. It is plain from the documents in the
record and the cross-examination directed to Luis at both the CCMA and
the trial , that Andrea and the other directors regarded him as being
obstructive and uncooperative in the workplace and having failed to adapt

48
to the needs of a busine ss that had grown beyond all recognition . The
issues emerged from the details of the charges in his disciplinary enquiry.
The first was a technical one of disobeying an instruction from Andrea
and there is no need to go into it. The second was that he had caused an
irretrievable breakdown in trust and in the working relationship with his
fellow employees, directors and shareholders, arising from accusations of
dishonesty made against the CEO and fellow executives a s well as
insinuations of corporate governa nce irregularities and potentially
criminal breaches of the Companies Act. He had demanded major
amendments to the shareholders agreement , such as that he be joint CEO
with Andrea, in order to change the manner in which the company was
being run and secure greater authority and status for himself .21 The
charge said that this had caused a breakdown in relationships , which he
had refused to try and repair. This was causing disharmony and tension in
the company and he had become incompatible with his fellow dir ectors.
The last charge complained of his work performance and his failure to
assist his colleagues and heed the advice and instructions of the CEO.
The long and the short of this was that his fellow directors laid
responsibility for the breakdown in relationships squarely at Luis’s door.

[63] The documents included in the record do not cover the entire
period after Iqbal joined the company or even the entire period after the
conclusion of the shareholders agreement. But the conclusion is
irresistible that the problems that gave rise to this litigation followed upon
the changes that came about when Iqbal joined the company and flared up
over three issues in November 2007 . Within six months of the latter date
Luis was looking for a way to leave the company he had co-founded

21 He said that it was to reflect the agreed position between him and Andrea that they were of equal

status and were always joint CEO’s. Not even Jose supported that view of matters.

49
twenty-one years earlier. In 2008 he started openly to question the
accuracy of the audited financial statements, but Mr Geel’s description in
his report of the circumstances in which he was employed suggest that the
problems had been brewing f or a while. The commercial driving force
behind Iqbal joining TCM as a shareholder, director and employee was
the loss of the contract with Standard Bank and Andrea’s decision that the
BEE issue needed to be addressed urgently. While Luis said that he
supported the proposal that Iqbal become involved and regarded him as
having been an immense success, it is not clear that he truly welcomed it.
When issues arose over whether Iqbal would be able to adhere to the
payment provisions in the agreement, he was not co-operative in
addressing the problem. He said that he thought that Iqbal’s arrival would
not affect him or his relationship with Andrea , but plainly no -one else
shared that view, not even Jose . His unwillingness to accept this was a
theme to which he re peatedly returned and it lies at the heart of his
exclusion case.

[64] There is nothing in the record to suggest that Andrea tried to
address this problem in a sympathetic manner, although some emails said
that he had on many occasions tried to discuss the problems with Luis
and get him to understand that his fears were misplaced . Several of his
emails to Luis said that particular issues had repeatedly been explained to
him and there was no point in further discussion. Andrea recognised that
the introducti on of Iqbal and the conclusion of the shareholders
agreement signalled a more formal structure to the company’s operations.
There were now three major shareholders and Wayne, its former auditor,
had been introduced as the CFO and a director. His own position as CEO
took on greater importance , while that of Luis declined in relative

50
importance, becoming a service provider to the sales function. Decisions
were now taken after consultations that included Iqbal and Wayne. That
Andrea appreciated this is clear, but either Luis did not, or if he did, was
deeply resentful of it. Under cross-examination he constantly harked back
to the past and the way things had been before the conclusion of the
shareholders agreement. His constant queries directed at proposals or
decisions advanced by Andrea appear to have been attempts to push back
against the changes and reassert his former standing in the company.
Those efforts became most apparent in the proposals he put forward in
May 2008 to be appointed joint CEO with Andrea. His own description
of these was that ‘this is going back okay to the way things used to run
before the BEE agreement came along’.

[65] The deterioration in the relationship between the two men is
apparent from the tone of their correspondence. There are num erous
examples in the record. Both were parties to uncivil exchanges. It is
pointless to speculate whether the relationship would have broken down
had it not been necessary for Iqbal to become a shareholder and be
involved in the business. It is equally po intless to speculate whether it
would have achieved the success it has without his involvement, or
whether, as Andrea feared, it would not have survived. The fact of the
matter is that Iqbal became involved with the agreement of both Luis and
Andrea and proved a great success. His joining the company flowed from
the conduct of TCM’s affairs , but the existing shareholders agreed to it
and it was not in any way unfair or prejudicial to their position as
shareholders. The schism that arose w as an indirect and unintended
consequence of his advent. The inevitable changes that it brought about
were welcomed and adopted by Andrea and resisted by Luis because of

51
their impact on his role and status. That resistance in turn generated
frustration and anger on the part of Andrea and the breakdown in the
relationship followed.

Jose
[66] Jose’s situation was significantly different from that of Luis. Jose
was not dismissed, nor were disciplinary charges brought against him.
His pleaded complaint was that he , like Luis, was sidelined and
humiliated as a result of a restructuring of his role and an allocation of
most of his previous responsibilities to Tony. On 31 March 2009 he wrote
to Andrea declining an offer of voluntary retrenchment made on 17
March 2009 and accepting the altered description of his responsibilities ,
in the following terms:
‘In these circumstances, I confirm that I will continue in my new Executive Director
role and enclose a signed acceptance of my Job Description to confirm the
aforementioned.’
Essentially this left him with no defined duties beyond ad hoc executive
projects assigned to him by Andrea. He said that he felt obliged to accept
the position even though it left him in a position where he was no longer
an executive with people reporting to him, bu t at the be ck and call of
Andrea.

[67] Shortly thereafter he was seconded on short notice to Namibia to
establish a branch office there. It was made apparent to him that, if he did
not accept this position, he was likely to be retrenched. The logistics of
the move were a problem and impractical for him because of the need to
get a visa in order to work in Namibia and because of his home and
family commitments. He thought he could have done the job equally well
from the Johannesburg office with occasional visits to Namibia, but at the

52
end of the day would apply for a work visa every six months that
permitted him to stay in the country. While the logistical and personal
problems occasioned by the move were considerable, he accepted the role
and over the next three years made a success of it.22 His evidence in chief
in this regard was as follows:
‘MR SLON: … [W]hat was your attitude to this response, to this suggestion?
JOSE: The suggestion was perfect. There’s no problem at all in my, from my side. I
actually welcomed it. I thought it was a good idea and me taking over and handling it
was perfect.
MR SLON: Yes.
JOSE: I knew the field. I knew the logistics. Basically I would know exactly how to
take it on and how to get it going.’
His further comments were that ‘I was quite happy doing that’ and:
‘MR SLON: And how – what was the – how did it go, personally? How did you feel
about doing the work and going up to Namibia and being involved in the company?
JOSE: I was excited about it.
MR SLON: Yes.
JOSE: I thought it was a good idea.’

[68] Jose also said that in accepting the position in Namibia he had
been faced with Hobson’s choice. Either he went to Namibia, or he would
have been retrenched and become a non -executive director with
significant consequences for him when h e was nearing the age of sixty.
However, his evidence that the reorganisation that deprived him of his
executive duties was an attempt by Andrea to force him to leave the
employ of TCM and give up his directorship was unconvincing in view of
the positive w ay in which he embraced it . His resignation on 2 April
2013, two and a half years after the commencement of this action and

22 In his evidence he said he was there for nearly three years until April 2013, but that was nearly four
years after he was instructed to take the position.

53
three and a half years after the commencement of the prior application for
s 252 relief, was triggered by a row with Andrea over a s tock count and
the disposal of out of date spares. Andrea criticised Jose for not
completing the task allotted to him, while Jose maintained that he had
exactly performed what he was told to do and the problem lay with Tony
not making it clear which stock he wanted scrapped. It seems probable
that Jose was perceived by Andrea and generally within the company as
an ally of Luis’s, but he was not driven out and remained an employee
until his resignation.

General
[69] The picture that emerges is one that can easi ly occur when a small
company grows beyond its original roots and becomes a large
organisation requiring clearer structures and lines of authority with less
scope for the relaxed manner of doing things that characterised its early
days. Andrea and the majo rity of directors saw the company as having
changed from a small domestic company into a major business that
needed to be run differently from the way it had been run in the past .
Wayne’s appointment to a role that had not previously existed, but one
that exists in every major company, was indicative of th at. Taking
cognizance of BEE realities and bringing in Iqbal with his great
experience in the industry, likewise showed that the company had moved
to a new level. Luis did not readily accept these changes and his attitude
towards Iqbal was at best ambivalent and possibly hostile. 23 He was
particularly sensitive to its impact on his status within the company . He
was unwilling to accept Andrea’s authority as CEO , but hankered after
the days when, as he perceived it, they had run everything jointly. In his

23 He described him as a ‘latecomer’ who was ‘adding a Black face to the bus iness’. He said that he
was ‘not unique in South Africa. There would have been other people that could fulfil that role.’

However, when invited to identify someone he was unable to do so.

54
evidence he attributed everything that had happened to a conspiracy or a
plan to humiliate or persecute him. The result was that he hurled
accusations of dishonesty and improper motives at everyone who
supported Andrea . Everyone else was always wrong and he was right.
This extended to the people who presided over the various disciplinary
proceedings and even the judge who dismissed the s 252 application.
There could be no doubting his sense of grievance. It needed to be , but
was not, taken into account when considering the extent to which it
coloured his evidence and its reliability.

[70] I share the view expressed in Kremer24 that in cases of this type ‘it
is usually a waste of time to investigate who caused the br eakdown’ and
the present case well -illustrates that point. Whether it would have been
any easier if counsel for the app ellants had not closed their case without
calling any witnesses , is impossible to say. One suspects that it would
have further muddied the waters.

[71] In my view a careful reading of the transcript of the trial and the
documentary evidence reveals nothing more than that Andrea’s and
Luis’s paths diverged as the company grew and succeeded beyond even
their wildest dreams. They had carried on for 17 years with Andrea as the
CEO and Luis running the information technology side of the operations
and the accounts. For a number of years they had enjoyed the same
benefits and major decisions were taken jointly, but there is no evidence
of what was re garded as a major decision until the time came to address
the BEE problem in 2003 and 2004. Luis’s evidence at the CCMA was
that Andrea was always responsible for the ‘managing part’ of the

24 In Re a Company (No 006834 of 1988) ex parte Kremer [1989] BCLC 365 (Ch D) at 366.

55
company, but that they regarded themselves as equal and joint runners of
the company. 25 Andrea always consulted him when he thought it
appropriate and vice versa.

[72] Luis said that he was happy with the decision to introduce Iqbal
and thought they would simply carry on as before with five people
instead of four. That is difficult to accept from a successful businessman,
but if correct it was remarkably naïve of him. Iqbal did not share the same
background as Luis and Andrea in building the business from scratch.
That background was likewise shared by Jose and Tony. He had n o
baggage arising from long -standing personal relationships. He was
entering into a business transaction with successful businessmen. He
came from a lengthy career in a large multi -national, which would have
operated in a hierarchical way with a clear allo cation of roles and
responsibilities. He was to acquire a 25.1% stake in the business in terms
of formal agreements prepared by legal advisers. There was no reason for
him to think that the business would not be run in accordance with those
agreements. The shareholders agreement opened the way for
disagreements about the direction of the business to be resolved by
majority vote. The heads of agreement were followed by the execution of
a formal shareholders agreement . This replaced the prior more informal
way of doing things evidenced by the promises of equity to Jose and
Tony not having been carried out and them being regarded as directors
although not appointed as such. All of this signalled that there was to be a
significant change in the way in which TCM was run. Luis did not like
this and constantly looked back to the pre -2004 situation and tried to
assert that his position was no different from what it had been then.


25 He said it was 50.50.

56
[73] By contrast, it is plain that Andrea was less concerned with the past
than the future. He was very conscious of his leadership role and
responsibilities as CEO of a company with a turnover of hundreds of
millions of Rand, major clients, a national footprint and a large and
growing workforce. The ongoing growth in the company did not suggest
that the business was being mismanaged. He was certainly forceful in
making proposals and seeking to implement them. He ultimately lost his
temper over Luis’s attempt to act as if he were joint CEO. From the stage
when it became clear that Luis was planning to extricate himself from the
business, it was equally clear that Andrea would have been happy for him
to go. To make matters worse just as Luis did not trust him, he did not
trust Luis. That underpinned his suggestions that Luis and Jose should
resign a s executive directors, but remain non -executives at reduced
remuneration. But there is nothing to indicate that he was not genuinely
trying to do his best for the company and its shareholders, or was plotting
to use nefarious means to rid himself of the burden of dealing with Luis.

[74] Against that background, where Luis and Jose wanted to exit the
company and Andrea wanted them to leave, one would have thought that
it would have been possible to reach an accommodation that enabled that
to take place. However, the problem appears to have been that the parties
were far too far apart on the value of the shares held by Luis and Jose .
Andrea had indicated a figure of R37 million, but their Luis and Jose’s
view in the light of Mr Geel’s assessment was that a prope r figure was
between R130 and R160 million. That was a gap that in the prevailing
atmosphere of mutual distrust could not be bridged. All that this court can
do therefore is determine whether the high court was correct in its
findings in regard to the treatment alleged by Luis and Jose; whether that
treatment, to the extent it occurred , was unfairly prejudicial, unjust or

57
inequitable to them in their capacity as shareholders ; and, if so, whether
the appropriate remedy was an order that TCM purchase their shares. But
first in order to provide context to the factual enquiry it is necessary to
consider what s 252 requires of an applicant seeking relief under its
provisions.

Section 252
General
[75] The relationship between a company and its members , as well as
the members inter se is contractual and based primarily on the
memorandum of incorporation (formerly the memorandum and articles of
association). In Sammel v President Brand Gold Mining Co Ltd , Trollip
JA said:26
‘By becoming a shareholder in a company a pers on undertakes by his contract to be
bound by the decisions of the prescribed majority of 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 sharehol der (cf. secs. 16 and 24). That
principle of the supremacy of the majority is essential to the proper functioning of
companies.’
The company in that case, was a public company listed on the
Johannesburg Stock Exchange with a large body of shareholders, whi lst
TCM is a private unlisted company, with only five shareholders, but the
principle holds good for all companies.27 On any disputed issue the views
of the majority will ordinarily prevail.

[76] This remains the ordinary rule, but legislation governing
companies in South Africa, following both the lead and in many respects

26 Sammel and Others v President Brand Gold Mining Co Ltd 1969 (3) SA 629 (A) at 678.
27 Ebrahimi v Westbourne Galleries Ltd [1972] 2 All ER 492 (HL) at 500. F or examples see Garden
Province Investments (Pty) Ltd and Others v Aleph (Pty) Ltd and Others 1979 (2) SA 525 (D) at 533H -
534G; Louw and others v Nel op cit, fn 7, para 22.

58
the language of similar English legislation, has long recognised that in
certain circumstances, even if the majority shareholders act strictly in
accordance with the contractual terms govern ing the shareholder
relationship, the y may have exercised their powers in a way that was
oppressive or unfairly prejudicial to minority shareholders. To that end
the courts have been vested with statutory powers to override the
majority’s exercise of its c ontractual powers in order to remedy such
oppression or unfair prejudice. At the time the present disputes arose the
applicable provision was s 252 of the Act, which in relevant part read as
follows:
‘252. Member’s remedy in case of oppressive or unfairl y prejudicial conduct.—
(1) Any member of a company who complains that any particular act or omission of a
company is unfairly prejudicial, unjust or inequitable, or that the affairs of the
company are being conducted in a manner unfairly prejudicial, unju st or inequitable
to him or to some part of the members of the company, may, subject to the provisions
of subsection (2), make an application to the Court for an order under this section.
(2) …
(3) 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 to an end the matters complained of, make such
order as it thinks fit, whether for regulating the future conduct o f 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, in the case of a purchase by the company,
for the reduction accordingly of the company’s capital, or otherwise.’
This was the provision invoked by Luis and Jose. Speaking for this court
Ponnan JA said of it that:28
‘The combined effect of ss (1) and (3) is to empower the court to make such order as

‘The combined effect of ss (1) and (3) is to empower the court to make such order as
it thinks fit for the giving of relief, if it is satisfied that the affairs o f the company are

28 Louw v Nel, ibid, para 7.

59
being conducted in a manner that is unfairly prejudicial to the interests of a dissident
minority.’

[77] Although the heading refer red to ‘oppression’ that was a hangover
from its predecessor. 29 Section 252 referred to conduct that is ‘unfa irly
prejudicial, unjust or inequitable’ . While ‘unfairly prejudicial’, ‘unjust’
and ‘inequitable’ are notionally separate they may overlap. F or
convenience and to avoid unnecessary repetition, I will refer to all three
generally as ‘unfair prejudice’ or ‘ unfairly prejudicial’ as the sense
requires. The section could be invoked in two situations. The first was
where the complaint was that a particular act or omission of the company
was unfairly prejudicial to the member or group of members. The second
was where the affairs of the company were being conducted in a manner
unfairly prejudicial to that member or to some part of the members of the
company. The latter was the basis for the present claim. While there was
potentially an overlap between the two, the re was a clear difference in
principle, between cases where the complaint arose from the action s of
the company and those where it was the manner in which the affairs of
the company were being conducted that was alleged to be unfairly
prejudicial. The one focussed on the company’s actions, while the other
focussed on the manner in which the affairs of the company were being
conducted and the actions of those responsible for that conduct. 30 These
would usually be the directors and the majority shareholders.

[78] Unfairly prejudicial conduct by the company could arise from
matters such as changes in the articles of association to enable the

29 Section 163 of the 2008 Act refers to ‘oppressive or unfairly prejudicial conduct’ or conduct that
‘unfairly disregards the interests’ of a shareholder or director.
30 The distinction was drawn by David Richards J (as he then was) in Re Coroin Ltd (No 2) , [2013] 2
BCLC para 626.

60
majority shareholder to dispose of their shares; 31 amending the articles of
association to confer additional rights on a develop er;32 changes to the
voting rights attached to certain shares or the issue of additional shares in
such a way as to result in a shareholder’s voting rights being diluted 33 or
to enable the majority to acquire the minority’s shares; a merger with, or
takeover by, another business; the disposal of the company’s business or
a major asset of that business;34 or even the winding-up of the company.35
Any of those could be structured so as to prejudice the interests of
minority shareholders unfairly. Their common feat ure was that they were
actions by the company itself, albeit driven by the majority shareholders.

[79] A claim of the second type under s 252 require d proof of the
manner in which the affairs of the company were being conducted that
was unfairly prejudicial to the member, or part of the members , of the
company. The language of the section postulate d generally an ongoing
course of conduct, although it is unnecessary to decide whether it had to
be continuing when the proceedings were launched or when relief was
given.36 The cases held that a court should not construe the notion of
conducting the affairs of the company unduly narrow ly, because ‘the
affairs of a company can be conducted oppressively by the directors
doing nothing when they ought to do something – just as they can be
conducted oppressively when they do something injurious to its interests

31 Greenhalgh v Arderne Cinemas Ltd (No 2) [1950] 2 All ER 1120 (CA).
32 Off-Beat Holiday Club and Another v Sanbonani Holiday Spa Shareblock Ltd and others 2017 (5)
SA 9 (CC).
33 In re Sam Weller Ltd [1990] 1 Ch D 682 at 689G-H; Re Coroin Ltd op cit, fn 30. para 555.
34 Garden Province Investments (Pty) Ltd and Others v Aleph (Pty) Ltd and Others, op cit, fn 27.
35 Bader and Another v Weston and Another 1967 (1) SA 134 (C) at 146F-H.

35 Bader and Another v Weston and Another 1967 (1) SA 134 (C) at 146F-H.
36 See in this regard the discussion of the expression ‘are being conducted’ in the English and
Australian counterpart to s 252 in Campbell v BackOffice Investments Pty Ltd [2008] NSWCA 95 paras
126-132.

61
when they ought not to do it’. 37 Proof was required of an identifiable and
discernible course of conduct of the company’s affairs that was unfairly
prejudicial to the member or part of the members.38 It was permissible to
rely upon outwardly unrelated incidents, provided the y were linked in a
way that identified the course of conduct of which complaint was made.
In the absence of such a link between the events relied on and the conduct
of the company’s affairs the requisites for relief under s 252 would not be
satisfied. 39 Without such a link ‘the acts of the members themselves are
not acts of the company, nor are they part of the conduct of the affairs of
the company’.40

[80] The concept of the affairs of a company being conducted in an
unfairly prejudicial manner is concerned with the effect of the conduct,
not the motives of those responsible for it, although motive is not always
irrelevant because it may affect whether th e outcomes are unfair. 41 The
enquiry is whether objectively speaking the conduct complained of was
unfairly prejudicial to the shareholder or part of the shareholders. A
successful invocation of s 252 does not require proof of a lack of bona
fides on the pa rt of the directors or management of the company or an
intention to cause prejudice. The persons responsible for the conduct may
be motivated solely by what they regard as (and may well be) the best
interests of the company. Sight must not be lost of the importance of the

37 Per Lord Denning in Scottish Co -operative v Meyer and Another [1953] 3 All ER 66 (HL) at 88,
quoted in Livanos v Swartzberg and others 1962 (4) SA 395 (W) at 398 C-D. The latter case involved
the respondent prepari ng to set up a business in opposition to the company in anticipation of leaving
the existing company.
38 Aspek Pipe Co (Pty) Ltd and Another v Mauerberger and Another 1968 (1 (SA 517 (C) at 529B-D.

39 Graham v Every [2015] 1 BCLC 41 (CA) paras 37-38. The actions may be those of a shareholder but
they must involve matters that involve the affairs of the company. If they are merely issues between the
shareholders in their capacity as such they do not fall within the section. See also on the same point
Loveridge and others v Loveridge [2020] EWCA Civ 1104, para 55 and Primekings Holdings Ltd and
Others v King and Others [2021] EWCA Civ 1943, para 61.
40 Per Harman J in Re Unisoft Group Limited (No 3) [1994] 1 BCLC 609 at 610-611.
41 Donaldson Investments (Pty) Ltd and Others v Anglo -Transvaal Collieries Ltd and Others 1983 (3)
SA 96 (A) at 111F-H; Parry v Dunn-Blatch and others, op cit, fn 12, para 39.

62
word ‘unfairly’. The remedy is only available if the member is unfairly
prejudiced.42 The mere fact that a course of action by the company
operates to the prejudice of a member does not suffice to entitle them to a
remedy under s 252. The u nfairness and the p rejudice must affect the
shareholder as a shareholder. Unfair prejudice to the shareholder as an
employee does not fall within the section unless it has an impact on their
position or interests as a shareholder. Save in extremely unusual
circumstances the prejudice will be commercial prejudice. 43 While the
claimant does not have to come to court with ‘clean hands’, in the sense
that they must have been faultless in the breakdown of the relationship, if
their own conduct is the primary or major cause of the problems that have
arisen that is relevant to whether the conduct to which they have been
subjected was unfair.

[81] ‘Unfairly prejudicial ’ is an expression that is not susceptible of
close definition. In 1967 Corbett J drew attention 44 to th e paucity of
material on the meaning of the expression ‘unfair prejudice’ in the
predecessor to s 252 and the situation has only improved slightly since
then, notwithstanding that there are now many cases in the law reports
both here and overseas on the application of s 252 or similar provisions in
other jurisdictions. The reason is that each case depends on its own
peculiar facts, although over time some recognised categories of instances
of unfairly prejudicial conduct have been identified. The breadth of the
powers vested in the court is not an invitation for courts to intervene in

42 Garden Province Investments (Pty) Ltd v Aleph (Pty) Ltd , op cit, fn 27 at 531C-G. In this case it was
said that unfairness was used in the sense of unreasonable on the basis of the Afrikaans text.
43 Re Unisoft Group Limited No 3) op cit, fn 40, at 611 f-i

43 Re Unisoft Group Limited No 3) op cit, fn 40, at 611 f-i
44 Bader and Another v Weston and Another , op cit, fn 35, at 145C-D dealing with s 111 (bis) 2 of the
Companies Act 46 of 1926.

63
the affairs of a company at the instance of a disgruntled member. In a
passage cited by this court in Louw v Nel,45 Buckley LJ said:
‘The mere fact that a member of a company ha s lost confidence in the manner in
which the company's affairs are conducted does not lead to the conclusion that he is
oppressed; nor can resentment at being outvoted …'46
Dissatisfaction and disagreement with, or disapproval of, the conduct of
the business, does not of itself mean that the member has suffered unfair
prejudice. The fact that there are irreconcilable differences between
shareholders may in some circumstances justify an order for winding-up
the company, but it is not, without more, unfair pre judice.47 Something
more is required. The question is, how much more?

[82] There is a tension between the principle of majority rule in Sammel
v President Brand Gold Mining Co Ltd and the power given to courts by
s 252 to intervene in the company’s affairs on equitable grounds and in
doing so override, or at least provide a remedy for, conduct that is
entirely in accordance with the memorandum of association of the
company and any collateral agreements . In that situation the principle of
majority rule gives way , because the powers of the majority have been
exercised in a way that is unfairly prejudicial to the minority . The same
tension arose under the provisions of s 459 of the 1985 Companies Act in
the United Kingdom , which was the corresponding provision in th at
jurisdiction until its replacement by s 994 of the 2006 Companies Act.48 It
provided for a court to grant relief where the company’s affairs were
being or had been conducted in a manner which was unfairly prejudicial

45 Op cit, fn 6, para 24
46 Re Five Minute Car Wash Service Ltd [1966] 1 All ER 242 (CA) at 246-7.
47 Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [2001] NSWCA 97 para 89 citing Mcmillan v Toledo
Enterprises International Pty Ltd [1995] FCA 1664 para 58.

Enterprises International Pty Ltd [1995] FCA 1664 para 58.
48 Section 994 allows a shareholder to apply to court where ‘the affairs of the company are being, or
have been, conducted in a manner that is unfairly prejudicial to the interests of members generally of
some part of its members, in their capacity as such (including the petitioning member); or an actual or
proposed act or omission of the company is or would be prejudicial.’

64
to the interests of its members gener ally or some part of its members .
This was the subject of the leading speech of Lord Hoffmann in O’Neill v
Phillips.49 The following passage 50 provides helpful guidance on the
approach to resolving the tensions inherent in s 252:
‘… Parliament has chosen fai rness as the criterion by which the court must decide
whether it has jurisdiction to grant relief. It is clear from the legislative history … that
it chose this concept to free the court from technical considerations of legal right and
to confer a wide power to do what appeared just and equitable. But this does not mean
that the court can do whatever the individual judge happens to think fair. The concept
of fairness must be applied judicially and the content which it is given by the courts
must be based upon rational principles …
Although fairness is a notion which can be applied to all kinds of activities, its content
will depend upon the context in which it is being used. In the case of s 459, the
background has the following two features. First, a compan y 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
association and sometimes in collateral agreements between the shareh olders.51 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, company law has
developed seamlessly from the law of partnership, which was treated by equity, like
the Roman societas, as a contract of good faith. One of the traditional roles of equity,
as a separate jurisdiction, was to restrain the exercise of strict legal rights in certain
relationships in which it considered that this would be contrary to good fa ith. 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

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 bee n some
breach of the terms on which he agreed that the affairs of the company should be
conducted. But the second leads to the conclusion that there will be cases in which

49 Re a company (No 00709 of 1992) O’Neill and another v Phillips and others [1999] 2 All ER 961
(HL). The significance of the j udgment is noted by Robert Goddard ‘Taming the unfair prejudice
remedy: Sections 459 -461 of the Companies Act (1985) in the House of Lords’ (1999) 58 Cambridge
Law Journal 487.
50 Ibid, 966f to 967d.
51 Shareholders’ agreements are dealt with below in para 93.

65
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 or in using the rules in a manner which equity would regard as
contrary to good faith.’

[83] It has been suggested by one commentator that the approach of
Lord Hof fmann unduly narrowed the scope of the unfair prejudice
jurisdiction and that the approach of courts in Canada, Australia and New
Zealand is to be preferred. 52 I have considered the various cases from
those jurisdictions cited by the author and others cited by South African
writers,53 but refrain from citing and analysing them because I think the
criticism is based on a misconstruction of O’Neill v Phillips . There
appears to be little practical difference in the approach in different
jurisdictions. The author suggested that O’Neill v Phillips ‘effectively
limits “unfairness” in terms of the remedy to breaches of legally
enforceable agreements’, apparently basing this on the fac t that the trial
court had said, and Lord Hoffmann accepted, that negotiations to increase
Mr O’Neill’s stake in the company to 50% had stalled and Mr Phillips
had resumed the reins of management because the company ran into
difficulties. But the point of the decision was that the trial judge had
found that because Mr Phillips had made no promise or undertaking to
increase Mr O’Neill ’s shareholding or allow him to continue as the
manager of the business, Mr O’Neill could not have had any realistic

52 Matthew Berkahn ‘Unfair Prejudice: Who has it right, economically speaking?’ [2008] 1 JIALawTA
55 (The full title of the journal is Journal of the Australasian Law Teachers Association.) . The author
cites other academic writing in fn 43 at p 60 in sup port of his view. A more favourable view was
expressed by Jason W Neyers ‘Is there and Oppression Remedy Showstopper: O’Neill v Phillips ’
(2000) 33 Can Bus L J 447.

(2000) 33 Can Bus L J 447.
53 M S Blackman et al, Commentary on the Companies Act, (Juta, 2002, Loose -leaf in three vol umes).
has a wide selection of references to cases in the United Kingdom, Australia and Canada as well as
references to the South Africa cases.

66
expectation that either of those events would occur .54 Accordingly there
was no unfairness in not carrying out a promise that he had not made.
Lord Hoffmann recognised that ‘ there 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’ . That was inconsist ent
with saying that unfairness resided only in breaches of legally enforceable
agreements. Any doubt should be put to rest by the following passage
from his speech:55
‘In a quasi -partnership company, they will usually be found in the understandings
between the members at the time they entered into association. But there may be later
promises, by words or conduct, which it would be unfair to allow a member to ignore.
Nor is it necessary that such promises should be independently enforceable as a
matter of co ntract. A promise may be binding as a matter of justice and equity
although for one reason or another (for example, because in favour of a third party) it
would not be enforceable in law.’ (Emphasis added.)

[84] Identifying every circumstance in which equitable considerations
will make it unfair for the majority to rely on their strict legal powers is
an impossible task as Lord Wilberforce recognised when dealing with the
just and equitable ground for winding up a company in Ebrahimi v
Westbourne Galleries Ltd.56 He said:
‘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

54 At 971 Lord Hoffmann said: ‘… there is no basis, consistent with established principles of equity,
for a cour t to hold that Mr Phillips was behaving unfairly in withdrawing from the negotiation. This
would not be restraining the exercise of legal rights. It would be imposing upon Mr Phillips an

obligation to which he never agreed. Where, as here, parties enter in to negotiations with a view to a
transfer of shares on professional advice and subject to a condition that they are not to be bound until a
formal document has been executed, I do not think it is possible to say that an obligation has arisen in
fairness or equity at an earlier stage.’
55 Ibid 969.
56 Ebrahimi v Westbourne Galleries Ltd , op cit, fn 27. The case concerned a petition to wind -up a
company on the grounds that it would be just and equitable to do so. The passages quoted in the text
have previously been cited with approval by this court. See Apco Africa (Pty) Ltd v Apco Worldwide
Incorporated [2008] ZASCA 64; 2008 (5) SA 615 (SCA) para 17; Cook v Morrison and Another
[2019] ZASCA 8; 2019 (5) SA 51 (SCA) para 20. The principle has been applied on a nu mber of
occasions in the high court.

67
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. That structure is defined by the
Companies Act 1948 and by the articles of association by which shareholders agree to
be bound. In most companies and in most contexts, this definition is sufficient and
exhaustive, equally so whether the company is large or small. The ‘just and equitable’
provision does not, as the respondents suggest, entitle one party to disreg ard 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 charact er 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 p ersonal 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

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.’
His Lordship pointed out that it is confusing to refer to such companies as
‘quasi-partnerships’ or ‘in substance partnerships’ especially as one must
always be alert to the fact that:
‘[T]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

68
not a partnership or even a quasi -partnership and it is through the ju st and equitable
clause that obligations, common to partnership relations, may come in.’

[85] Two situations that commonly form the basis for claims by a
minority shareholder of unfair prejudice were identified . The first is
where there was an agreement or und erstanding that all or some of the
shareholders would participate in the conduct of the business , whether as
directors or employees or both, where the unfair prejudice lies in their
being prevented from doing so . These can conveniently be described as
exclusion cases. The second is where , in the absence of such an
agreement or understanding , the conduct of the majority shareholder ,
especially where it involves a lack of probity on their part, brings about a
loss of trust and mutual confidence , but the disaffected shareholder is
unable to address that by disposing of their interest in the company . The
result is that they are effectively locked in and unable to realise the value
of their investment.

[86] These two situations frequently overlap. Both are in play i n this
case. Luis says that he was excluded from the company, initially by being
sidelined in his role as a director and employee and subsequently as a
result of his dismissal. In addition he says that he is unable to realise the
value of his shareholding and is therefore locked in to the company. His
primary case was based on the cumulative effect of both . His secondary
case was that, even if he had not established his exclusion claim, his
‘locked in’ claim on its own sufficed to entitle him to relief. Jose’s case
on exclusion is less clear , although he complained that his role was
reduced and his responsibilities given to others, particularly Tony. He
was not excluded as a director and remained in employment until he

69
resigned on 2 April 2013, after the com mencement of this litigation. His
‘locked in’ claim appeared to be the same as that of Luis.

Exclusion cases
[87] Exclusion cases overwhelmingly arise in smaller companies 57
where the shareholders enter into the venture on the basis of an informal
or tacit understanding or arrangement that each will contribute something
by way of capital or labour and each w ill play a role in the running of the
company, usually as a director, but sometimes as an employee, whether
alone or in addition to being a director. This applies particularly to
companies constituted on the basis of family, friendship or
complementary business skills, where, albeit unspoken, the parties have
an understanding of the manner in which the business will be conducted
and their respective roles in it. Later, when differences and disputes arise
and cannot be resolved , unfair prejudice may be occasioned to the
minority shareholder if they are excluded by the majority shareholder
from the position that enabled them to play a role in the running of the
company. The aggrieved shareholder then complains that their exclusion
was inconsistent with the basis upon which they became a shareholder.
Exclusion can occur in various ways. The minority shareholder may be
sidelined in the ongoing decision-making process of running the business,
while remaining a director and employee. Alternatively, they may be
removed as a director under the provisions of the relevant legislation or

57 Rehana Cassim ‘A Critical Analysis on the Use of the Oppression Remedy by Directors Removed
from Office by the Board of Directors under the Companies Act 71 of 2008’ (2019) 40 Obiter 154 at
159-161. The court in Latimer Holdings Latimer Holdings Ltd v SEA Holdings New Zealand Ltd
[2004] NZCA 226; [2005] 2 NZLR 328, para 78, based on a survey in Australia, held that this was the

common situation giving rise to an exclusion claim. Re Phoneer Ltd [2002] 2 BCLC 241 raised the
converse situation of a breach of an undertaking to remain working in the business for five years given
to induce the other shareholder to make further loans to the company and agree to an adjustment of
shareholdings. The breach was held to give rise to unfair prejudice under s 459 of the Companies Act
(1985). Not all are small companies and t hey may involve substantial businesses. See, for example, Re
Coroin Ltd (No 2), op cit, fn 30.

70
dismissed from employment, or both. One way or another the effect is to
prevent them from continuing to fulfil the role initially anticipated and
accepted when they became a shareholder.

[88] Exclusion is usually the result of a breakdown in the relationship
between the shareholders. 58 The reasons for relational breakdown are
many and varied. S ometimes the business develops and the shareholders
disagree on its future direction. Sometimes the introduction of a new
shareholder alters the dynamics between the existing shareholders.
Disagreements may arise over the distribution or retention of profi ts,
remuneration of shareholders, the payment of bonuses or dividends. If the
business goes through a lean period the managing shareholders may be
accused of negligent or incompetent management. The examples can be
multiplied, but the end result can be that one or more of the shareholders
may feel that they have been excluded. In turn this may lead the
disgruntled shareholder to seek avenues to leave the company, while
realising the value of their interest in it.

[89] The remedy under s 252 is not restricted to cases where the
company was formed on the basis of a personal relationship or
understanding between the shareholders in regard to the manner in which
they will conduct themselves in exercis ing their rights as shareholders .
However, the cases, both here an d elsewhere, suggest that it is most
usually in that type of case that resort is had to s 252 or its equivalent .
These were for a time referred to in England as ‘legitimate expectation’

58 See M I Iqbal, ‘The effectiveness of shareholder dispute resoluti on by private companies under UK
companies legislation: an eval uation’ (November 2008), doctoral thesis submitted to Nottingham Trent
University by M I Iqbal available at https://irep.ntu.ac.uk/id/eprint/306/1/194154_Iqbal.pdf, Chapter 3
(hereafter M I Iqbal).

71
cases,59 but Lord Hoffmann, the initiator of the expression, said that this
borrowing from public law may be misleading. 60 Since the decision in
O’Neill v Phillips the concept of ‘legitimate expectations’ has been
abandoned in the UK (but not apparently elsewhere) in favour of
‘equitable considerations’, which is regarded as b eing more certain and a
bar to judicial findings based on individual concepts of fairness rather
than so me objective standard. 61 However, Luis pleaded his case on the
basis of a legitimate expectation , so in dealing with it I will continue to
use the expression, subject to the caveats in the following paragraph.

[90] I share Lord Hoffmann’s reservations about the use of the term
‘legitimate expectations’ . The criticism of the expression by the New
South Wales Court of Appeal seems justified. It expresses a conc lusion
regarding the character of the expectation, rather than adding anything to
that notion, and it can distract from the central question of whether there
has been unfairly prejudicial conduct .62 Like th e latter court, I do not
accept its replacement by ‘equitable considerations’ .63 Unlike England,
we do not have a separate system of equity , where equity is the means
whereby courts can avoid the consequences of strict legal rights in
accordance with principles developed over many years. Our law is
developed on the basis of equitable principles generally , especially those
embodied in the Constitution and the Bill of Rights , but unlike England it
does not afford the courts a power to avoid legal obligations on the basis
of equity. In the result equity in our law does not bear the same meaning

59 Visser Sitrus (Pty) Ltd v Goede Hoop Sitrus (Pty) Ltd and Others, op cit, fn 11, paras 62-63.
60 O’Neill v Phillips, op cit, fn 49, at 970 in section 6 of the opinion. This view wa s endorsed in Re
Coroin Ltd, op cit, fn 30 paras 635-636.
61 M I Iqbal, op cit, fn 58 at 186.

Coroin Ltd, op cit, fn 30 paras 635-636.
61 M I Iqbal, op cit, fn 58 at 186.
62 Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd , op cit, fn 47, para 62 (per Spigelman CJ) and paras 649 -
650 (per Fitzgerald JA). See also Tomanovic v Global Mortgage Equity Corporation Pty Ltd [2011]
NSWCA 104, paras 166-171.
63 Tomanovic v Global Mortgage Equity Corporation Pty Ltd, ibid, paras 177-179.

72
as it does in England.64 The legitimate expectations doctrine has a definite
role in our public law and importing it into the field of company law is
not necessarily apt . It is preferable, as Rogers J did in Visser Sitrus,65 to
speak of cases where the re is proof of a n informal arrangement or
understanding between the contesting shareholders as to the manner in
which they will exercise their rights as shareholders and the roles they
will play in the company’s business operat ions. This can be entirely
informal and is unlikely to rise to the level of a contract, but it is shared
by the majority and minority shareholders.

[91] The exclusion cases to which we were referred and that I have
encountered in my own research were almost invariably based on
allegations that an arrangement or understanding existed among the
shareholders that the minority shareholder would be entitled to participate
in the management of the business at an operational level . This created
expectations on the p art of the minority and imposed restraints upon the
majority’s exercise of their contractual rights. If such an a rrangement or
understanding was established, then excluding the minority shareholder
from that participation, whether by removing them from th e board of
directors, downgrading their role in the company in some other way , or
dismissing them from employment , could possibly constitute unfair
prejudice to them. The existence of such an arrangement or understanding
of th at nature is usually inferred from the nature of the relationship
between the shareholders, for example, their being close relatives or good
friends, and their conduct in managing the affairs of the company, for
example, the division of responsibilities, the manner of decision -making
or an equality of treatment. The scope of a ny arrangement or

64 A similar point is made about Canada in Neyers, op cit, fn 52
65 Visser Sitrus, op cit, fn 11, para 62.

73
understanding is limited only by statutory and regulatory constraints and
may arise in respect of many situations.

[92] Two further points need to be made before turning to discuss the
situation of a minority shareholder being locked in and unable to realise
their investment in the company. The first is that informal arrangements
or understandings of the type being discussed do not necessarily operate
in perpetuity. As the company develops and grows such arrangements or
understandings will frequently be adapted to changing circumstances or
abandoned altogether. The business may expand , or its nature may
change. If it is successful, other shareholders may be brought in. Funding
agreements may need to b e concluded on terms that preclude the
implementation of the original agreement or understanding. If the
company becomes sufficiently large and successful a listing on a public
stock exchange may be sought. The evidence shows that this was thought
of as a possibility in 2006 and Luis raised it in a proposal he put to the
board of directors in May 2008. Accordingly, when a claim of exclusion
is based on an a rrangement or understanding , the court must not only
examine whether at the inception of the company t here was such an
arrangement or understanding, but also whether it was still operative
when difficulties arose. If the parties by their actions have abandoned it
then the disaffected shareholder can no longer rely on it.

[93] The second point is that, apart fr om the memorandum of
incorporation of a company, shareholders have always been entitled to
further regulate their relationships by way of a shareholders agreement.
Such agreements were valid and binding under the Act 66 and are

66 Gihwala and Others v Grancy Property Ltd and Others [2016] ZASCA 35; 2017 (2) SA 337 (SCA)
para 54.

74
specifically provided for and rendered enforceable under s 15(7) of the
2008 Act. They typify the kind of collateral agreement referred to by
Lord Hoffmann. 67 Shareholders agreements are entered into where
investors wish to regulate their relationship inter se when the investment
is to be made through the medium of a company. They are a recognised
means of protecting the rights of minority shareholders and dealing with
the consequences of a breakdown in relationships between shareholders.68
Their advantage is that they specify the rights of the parties inter se; they
may be flexible; they can only be altered with the consent of all the
parties; they can restrict the power of the majority to ride roughshod over
the views of the minority by imposing minimum requirements to pass
certain resolutions; they can make provision for the participation of the
shareholders as directors or employees and provide for exit mechanisms
if for any reason any shareholders wish to exit the company.69

[94] Where the parties have, with the assistance of legal and pos sibly
commercial advisers, carefully negotiated the terms of a shareholders
agreement spelling out their rights and obligations in particular situations,
it is ordinarily not unfair to conduct the affairs of the company in
conformity with those instruments . The notion of fairness is not
indefinite, but is informed by the underlying values of reasonableness and
justice that play a creative, informative and controlling role in our law of
contract. The Constitutional Court in Beadica held that t hose values do
not empower courts to refuse to enforce contractual terms on the basis of
their subjective view of whether to do so would be unfair, unconscionable

67 See para 82, supra.
68 See M I Iqbal, op cit, fn 58, Chapter 4 The thesis is partly based on interviews with barristers in the
UK specialising in this area of compa ny law and they appear to be virtually unanimous that such

agreements are a protective device for minority shareholders. The use of such agreements is
widespread in other jurisdictions. See M I Iqbal, p 79, fn 35.
69 This is a very brief summary of matters discussed in greater detail by Dr Iqbal, ibid.

75
or unduly harsh. 70 Where the parties have expressly addressed and
provided for particular situations that may arise in the future , courts
should be wary of holding that the implementation of what was agreed is
unfairly prejudicial to a minority shareholder and , by overriding the
agreement, confer rights on the minority shareholder that they agreed not
to have. Su ch a finding would come perilously close to ignoring the
principle laid down in Beadica that courts do not have the power to refuse
to enforce contracts on the basis of the individual judge’s perceptions of
fairness. It would also override the long-accepted principle that the courts
do not exist to make contracts for the parties. It is one thing for the courts
to remedy unfair prejudice by overriding an otherwise lawful exercise of
rights by a majority shareholder. It is something entirely different for
them to confer rights on minority shareholders that are greater than , or
differ from, the rights for which they have bargained and impose burdens
on the majority that it did not undertake to bear.

Locked-in cases
[95] The possibility of the minority shareholde r being locked in and
unable to realise their investment may, as will be seen, aggravate the
unfairness of an exclusion that is itself unfairly prejudicial. But the
shareholder may find themselves locked in e ven where there is no
exclusion from participation in the affairs of the company , or where that
exclusion was not unfair. The minority may wish to exit the company
because they have lost trust and confidence in the majority and the
direction of the company . They may also wish to do so for reasons of
their own that impute no failing to the majority. In either event they may

70 Beadica 231 CC and Others v Trustees for the time being of the Oregon Trust and Others [2020]
ZACC 13; 2020 (5) SA 247 (CC) paras 79 and 80. In view of the fact that our law does not recognise a

system of e quity such as that in England it is preferable to refer to the foundational values of our
Constitution and the manner in which those principles are to be found in our law of contract than to the
‘established equitable rules’ to which Lord Hoffmann referred in O’Neill v Phillips.

76
find themself unable to realise their investment unless the arrangements
for this in terms of the articles of association , or any shareholders
agreement, facilitate an exit , or an exit arrangement can be negotiated
without undue difficulty . It is not enough merely to show that the
relationship between the parties has irretrievably broken down, 71 but
nonetheless claimants try to build upon such breakdown and their
inability to exit the co mpany to show that it has resulted in unfair
prejudice to them. When they do so it is always necessary to bear in mind
that:72
‘The provisions of the section were enacted to protect members from unfairly
prejudicial, unjust or inequitable conduct; not to en able a 'locked -in' minority
shareholder to require the company to buy him out at a price which he considers
adequately reflects the value of the underlying assets referable to his shareholding.’

[96] Whether the mere inability to exit the company because of th e
terms of the memorandum of incorporation or a shareholders agreement
is in and of itself unfairly prejudicial to the minority shareholder was
considered i n O’Neill v Phillips . The relationship between Mr O’Neill
and Mr Phillips had broken down so that tr ust and confidence between
the two had been lost. It was submitted that it was irrelevant whether this
was due to anything unfair done by Mr Phillips, because, even if he was
not at fault in causing the breakdown , it would be unfair to leave
Mr O’Neill loc ked into the company as a minority shareholder. This
would prevent him from realising his investment in the company because
of provisions in the articles of association that effectively governed and
limited his power to dispose of his shares. The contention was that either

71 Grace v Biagioli and Others [2005] EWCA Civ 1222 para 61, sub -para 6 ; Tomanovic v Global
Mortgage Equity Corporation Pty Ltd, op cit, fn 62, para 199.
72 Blackman, op cit, fn 53, p 9-37 (RS2).

77
Mr Phillips or the company should raise the capital to pay Mr O’Neill a
fair price for his shares. It was rejected in the following terms:73
‘Mr Hollington’s submission comes to saying that, in a “quasi -partnership” company,
one partner ought to be entitled at will to require the other partner or partners to buy
his shares at a fair value. All he need do is to declare that trust and confidence has
broken down. … [I]t is submitted that fairness requires that Mr Phillips or the
company ought to raise the necessary liquid capital to pay Mr O’Neill a fair price for
his shares.
I do not think that there is any support in the authorities for such a stark right of
unilateral withdrawal. There are cases, such as Re a company (No 006834 of
1988), ex p Kremer [1989] BCLC 365, in which it has been said that if a breakdown
in relations has caused the majority to remove a shareholder from participation in the
management, it is usually a waste of time to try to investigate who caused the
breakdown. Such breakdowns often occur (as in this case) without either side having
done anything seriously wrong or unfair. It is not fair to the excluded member, who
will usually have lost his employment, to keep his assets locked in the company. But
that does not mean th at a member who has not been dismissed or excluded can
demand that his shares be purchased simply because he feels that he has lost trust and
confidence in the others. I rather doubt whether even in partnership law a dissolution
would be granted on this gr ound in a case in which it was still possible under the
articles for the business of the partnership to be continued.’74

[97] I think this was correct . The mere fact that a minority shareholder
wishes to exit the company and claims to have lost trust in and respect for
the majority shareholders does not on its own mean that they have
suffered unfair prejudice within the ambit of s 252 (or its equivalent) . It
does not become unfair prejudice merely because the member seeking to

does not become unfair prejudice merely because the member seeking to
depart is ‘locked in’ by their inab ility to dispose of their shares. It will

73 O’Neill v Phillips, op cit, fn 49 at 972e-j. The principle was endorsed in Omar v Inhouse Venue
Technical Management (Pty) Ltd and Others 2015 (3) SA 146 (WCC) paras 5-6.
74 The model rules for private companies in the Companies Act 2006 do not contain a default rule
providing for a dissentie nt minority shareholder to exit the company despite that having been
recommended by the Law Commission. The reasons are discussed by M I Iqbal , op cit, fn 57, para
4.6.3.1, pp 103-105.

78
almost always be prejudicial for the withdrawing minority shareholder to
be unable to realise their investment. 75 However, p rejudice alone, and
even a loss of trust in the majority, is not necessarily unfair . After all the
minority shareholder agreed to become a shareholder on the basis that
they could not freely dispose of their shares in the company. One of the
risks of conducting a business with others in a small private company is
that leaving the business and di sposing of one’s interest in it may be
difficult or practically impossible . S mall private companies in South
Africa have always been required to have provisions in their articles of
association restricting the transfer ability of shares. This is still the c ase
under s 8(2)( b)(ii)(bb) of the 2008 Act. Often these take the form of
provisions requiring the departing member to find a purchaser for their
shares and, having done so, then to offer the shares to their fellow
members on the same terms. Similar provis ions are frequently
encountered in shareholders agreements. The difficulty is always to find
an outside purchaser for the shares. If no such purchaser can be found and
the remaining shareholders do not wish to acquire the shares of the
departing member the latter is ‘locked in’ to the company with no
involvement in its day -to-day operations and no means of realising the
value of their shareholding.

[98] Treating that as automatically unfair would rewrite the provisions
in the memorandum of incorporation, or a ny shareholders agreement
dealing with a member’s disposal of their shares , and replace them with
an obligation o n the remaining members to acquire them provided only
that the departing shareholder declared their loss of trust in the majority .
There is no reason why, in the absence of some form of misconduct by

75 Lucy v Lomas [2002] NSWSC 448, para 43; Tomanovic v Global Mortgage Equity Corporation Pty
Ltd, op cit fn 62, para 202.

79
the majority, a loss of faith in the m should advantage the minority
shareholder. Such an advantage would be at the cost of the majority, who
had not acted unfairly but would nonetheless have to raise the capital to
purchase the minority’s shares. Nor is there is any reason why the
disaffected minority, should be in a better situation than shareholders
seeking to leave for other reasons, such as relocation elsewhere in the
country, or emigration, or advancing years, who would not be entitled to
claim that the remaining shareholders acquire their shares . That would
amount to discrimination among the shareholders. The estate of a
disaffected shareholder would likewise be in a worse situation than the
disaffected shareholder was when still alive.

[99] If claiming that one had lost faith in the majority were the key to
unlocking a right to demand that the company or the majority acquire the
minority’s shar eholding, it would effectively confer a right to exit the
company at will at the expense of the remaining shareholders. A court
should not allow a claim of unfair prejudice to be used to rewrite the
terms on which the parties agreed to conduct the affairs of the company.76
As Lord Hoffmann said:
‘a member of a c ompany will not ordinarily be entitled to complain of unfairness
unless there has been some breach of the terms on which he agreed that the affairs of
the company should be conducted.’
The same reasoning applies with even greater force in the situation
postulated by Luis in his evidence , that where a shareholder and director
is also an employee and is dismissed from employment for serious
misconduct, the other shareholders must purchase their shares or, if they

76 While not adopting the decision in other respects Hammond J in Latimer Holdings op cit, fn, 57, para
95 said that on this point the House of Lords ‘must be right’ that there should not be a right to exi t at
will.

80
do not wish to do so, must retain the member in employment despite such
serious misconduct.

[100] The problem of minority shareholders finding themselves locked in
and unable to dispose of their shares has received legislative attention.
Under s 164 of the 2008 Act provision is made for a dissenting
shareholder in certain circumstances, hedged about with qualifications, to
give notice to the company requiring the company to acquire their shares
at fair value. However, the availability of that remedy is limited to
amendments to the memorandum of incorporation affecting rights
attaching to shares, the sale of the whole or greater part of the assets or
undertaking, an amalgamation or merger and proposals for a scheme of
arrangement. It does not give rise to a general unilateral right of
withdrawal at the insta nce of a minority or dissentient shareholder. And
there are sound business reasons why that should be so. To permit a
shareholder to withdraw and compel either the remaining shareholders, or
the company , to purchase their shares might imperil the future of the
company and prejudice its creditors. Its shareholders would be prejudiced
by being forced to dispose of assets or borrow money in order to pay the
price fixed for the shares of the departing shareholder. It might even lead
to the winding -up of the com pany or the sequestration of the other
shareholders. Allowing that to happen to a functioning and otherwise
solvent business is not in the public interest.

[101] The basic principle underlying provisions such as s 252 was well-
expressed by Young J, in Fexuto v Bosnjak Holdings,77 when he said:
‘Because it is easily overlooked, it is necessary to repeat that a plaintiff must actually
prove oppression before obtaining relief. Oppression is not normally established

77 Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (1998) 28 ACSR 688 SC (NSW) at 740.

81
merely by showing that the majority are in contro l of the company, that the applicant
is consistently outvoted nor because the majority have made some decisions which
were questionable from a business point of view or have later turned out to be
disastrous.…[C]are must be taken to ensure that the traditi onal role of directors and
shareholders to manage and control their own companies was not invaded without due
cause.’
Under s 252 in the absence of any unfair prejudice flowing from other
matters, the fact that a member finds themsel f locked in to their
shareholding and unable to realise th eir investment in the company does
not sustain a case that the affairs of the company are being conducted in a
manner that is unfairly prejudicial, unjust or inequitable to them.
Identifying the circumstances where that might in conjunction with other
factors have given rise to a claim for relief under s 252, or might give rise
to a claim under s 163 of the 2008 Act, is not a question that needs to be
addressed in this case.

Offers to purchase
[102] In O’Neill v Phillips, Lord Hoffmann held that, in exclusion case s
in particular, whether the majority offer to acquire the shares of the
excluded party may be highly relevant . The trial court and the House of
Lords held that Mr O’Neill failed to prove that he had been unfairly
treated. In the result Mr Phillips successfully defended the unfair
prejudice claim. However, Mr Phillips contended that, in any event, he
had made an offer to purchase Mr O’Neill’s shares at a fair valuation and
this was all the relief to which Mr O’Neill was entitled. Accordingly it
was submitted that the claim should fail. The point did not need to be
decided, but was discussed because of its practical importance.

82
[103] The relevant passage reads as follows:78
‘In the present case, Mr Phillips fought the peti tion to the end and your Lordships
have decided that he was justified in doing so. But I think that parties ought to be
encouraged, where at all possible, to avoid the expense of money and spirit inevitably
involved in such litigation by making an offer to purchase at an early stage. This was
a somewhat unusual case in that Mr Phillips, despite his revised views about Mr
O’Neill’s competence, was willing to go on working with him. This is a position
which the majority shareholder is entitled to take, even i f only because he may
consider it less unattractive than having to raise the capital to buy out the minority.
Usually, however, the majority shareholder will want to put an end to the association.
In such a case, it will almost always be unfair for the min ority shareholder to be
excluded without an offer to buy his shares or make some other fair arrangement. The
Law Commission … has recommended that in a private company limited by shares in
which substantially all the members are directors, there should be a statutory
presumption that the removal of a shareholder as a director, or from substantially all
his functions as a director, is unfairly prejudicial conduct. 79 This does not seem to me
very different in practice from the present law. But the unfairness d oes not lie in the
exclusion alone but in exclusion without a reasonable offer. If the respondent to a
petition has plainly made a reasonable offer, then the exclusion as such will not be
unfairly prejudicial and he will be entitled to have the petition st ruck out.’(Emphasis
added.)

[104] It must be borne in mind that O’Neill, the minority shareholder ,
had not been excluded in the sense in which that expression is used in
cases of this type . He did not have a ny expectation of receiving either
50% of the shares o r a salary based on 50 % of the profits. Accordingly,

50% of the shares o r a salary based on 50 % of the profits. Accordingly,
denying him those benefits did not unfairly prejudice him. The point Lord
Hoffmann was making was that it would almost always be unfair not to
make a fair offer to acquire the shares of an excluded shareholder, where

78 O’Neill v Phillips, op cit, fn 49, at 974-975.
79 No such presumption was enacted in the English Companies Act 2006 although there is a
presumption that the removal of the company’s auditor in certain circumstances will be presumed to be
unfairly prejudicial to some part of the company’s members. See s 994 (1A).

83
they were denied benefits which they expected to receive. Similarly the
dictum from Kremer80 quoted in para 46 of the high court’s judgment
must be understood in its proper context. That was a case where there was
no dispute between the parti es that one of them would have to purchase
the shares of the other in the light of a breakdown of confidence between
them. The unusual feature was that the minority shareholder sought an
order that they acquire the majority’s shares, while the majority, wh ich
had offered to buy the minority’s shares at a fair price, sought an order to
that effect. The remark that it would be unfair to require the minority
shareholder to maintain their investment in the company where they had
fallen out with the majority was made in that unusual context. Where the
minority shareholder’s claim to buy-out the majority had failed, to refuse
it any relief at all and thereby oblige it to maintain its investment in the
company, would indeed have been unfair. Kremer is not authority for the
proposition that whenever the minority has fallen out with the majority
they will be unfairly prejudiced unless the majority offers to purchase
their shares at a fair price.

[105] With respect, the high court in the present case misconstrued what
Lord Hoffmann said . In para 44 of the high court’s judgment,81 the
following appears:
‘A form of unfair prejudice which is of particular relevance in the instant case arises
where a minority shareholder who has a right or legitimate expectation to participate
in the management of the company is excluded from so doing by the majority without
a reasonable offer or arrangement being made to enable the excluded shareholder to
dispose of his shares. The prejudicial inequity or unfairness lies not in the legally
justifiable exclusion of the affected member from the company's management, but in
the effect of the exclusion on such member if a reasonable basis is not offered for a

80 Kremer, op cit, fn 24.
81 De Sousa and Another v Technology Corporate Management (Pty) Ltd and Others 2017 (5) SA 577
(GJ) para 44.

84
withdrawal of his or her capital .82 It was emphasised in O'Neill above … that 'it
will almost always be unfair for a minority shareholder to be excluded without an
offer to buy his shares or to make some other fair arrangement.' (Emphasis added.)
In saying that the high court relied on McMillan NO v Pott:83
‘[39] In my judgment the respondents' att itude in failing, within a reasonable time of
McMillan's exclusion from the management of the company, to afford the trust the
opportunity to remove its capital, constitutes an act or omission by the company that,
in the circumstances described, is unfairly prejudicial, unjust or inequitable to the trust
within the meaning of s 252(1) of the Companies Act.
[40] A basis to claim relief in terms of s 252 inured in the circumstances, even if it is
accepted that McMillan had been wholly or in part to blame for his removal from the
board and dismissal from employment. The prejudicial unfairness or inequity lies not
in the legally justifiable exclusion of the affected member from the company's
management, but in the effect of the exclusion on any such member … if a reasonable
basis is not offered in the circumstances for a withdrawal by the member of his or her
capital. The issue of fault should, in general, not negate the right of a so -called quasi-
partner member to relief under s 252, when such member has been e xcluded by the
other members from the direct participation in the management of the company,
contemplated when the member's investment in the company was made.’(Emphasis
added)’

[106] Both those statements indicate that in an exclusion case the
prejudice may flow solely from the failure to make a fair offer to acquire
the minority’s shares. In other words, even if the exclusion is not unfairly
prejudicial to the claimant, the failure of the majority thereafter to make a
fair offer to acquire the minority’s shar es is unfairly prejudicial. That is
particularly clear from the emphasised passage in McMillan NO v Pott,

particularly clear from the emphasised passage in McMillan NO v Pott,
where the judge said that even if McMillan had been entirely at fault and

82 This sentence was quoted in Armitage NO v Valencia Holdings 13 (Pty) Ltd and Others [2023]
ZASCA 157, para 22 in support of the proposition that the test for unfair prejudice is an objective one,
which is clearly correct. The judgment did not analyse the relevant portions of O’Neill v Phillips or
refer to Bayly and Others v Knowles 2010 (4) SA 548 (SCA), which is discussed in para 109. It cannot
be taken to have endorsed, even obiter, the judgment that is under appeal before us.
83 McMillan NO v Pott and Others 2011(1) SA 511 (WCC) paras 39 and 40.

85
this had led to his removal from the business that did not matter. The
unfairness or inequity would lie in no reasonable basis being offered for
the removal of his capital. The conduct leading to the exclusion would
not ‘negate the right to relief under s 252’. But , if his dismissal was
entirely his fault , the dismissal was not unfairly prejudicial to Mr
McMillan. In the absence of some other ground of unfair prejudice it did
not give rise to a claim for relief under s 252.

[107] Lord Hoffmann did not say that whenever a shareholder is
excluded, however justifiably, they will be unfair ly prejudiced if a
reasonable offer to purchase their shares is not forthcoming. That would
ignore the requirement that the shareholder must have suffered unfair
prejudice in order to be entitled to relief. Absent any unfairly prejudicial
conduct towards t he shareholder, they enjoy no right to relief, however
much the y may be prejudiced by their inability to remove their capit al.
Any other approach would mean that a shareholder dismissed for the
grossest form of misconduct, such as theft or taking a bribe o r sexual
harassment of subordinates, could claim to be unfairly prejudiced by the
absence of an offer to purchase their shares. An offer according to Lord
Hoffmann ‘is only material to the outcome of the trial if the court
considers that the petitioner is otherwise entitled to succeed’. 84 He also
did not say that, irrespective of the circumstances, a minority shareholder
who had been excluded would be unfairly prejudiced, unless a reasonable
offer ha d been made to acquire their shares. Instead he identified two
situations where a reasonable offer is relevant.


84 O’Neill v Phillips, op cit, fn 49 at 974e -f. He said that logically it can only go to the question of
costs.

86
[108] The first is where the matter proceeds to trial. In such a case a fair
offer not accepted w ill be relevant to costs if the disaffected shareholder
is successful in showing an entitlement to relief , but the relief obtained is
no better than that offered . The second situation, and the one that has
given rise to misunderstanding, arises from the statement:
‘But the unfairness does not lie in the exclusion alone but in exclusion without a
reasonable offer. If the respondent to a petition has plainly made a reasonable offer,
then the exclusion as such will not be unfairly prejudicial and he will be entitled to
have the petition struck out.’
Lord Hoffmann was dealing solely with exclusion cases , where the
exclusion itself was unfairly prejudicial to the excluded shareholder .85 In
that situation a reasonable offer made at the outset would cure any
unfairness flowing from the exclusion and the respondent c ould have the
petition struck out.86 He did not say that the absence of a reasonable offer
on its own, where the exclusion was not unfair, would be unfair. Had that
been what he meant, Mr Phillips would have lost and Mr O’Neill would
have won, because Mr Phillips had not made a reasonable offer to acquire
Mr O’Neill’s shares.87 He rejected the submission that it was unfair for
the minority to be ‘locked in’ and unable to dispose of its shares because,
if upheld, it would amount to conferring a right to unilateral withdrawal
and impose on either the company or the re maining shareholders an

85 Tomanovic v Global Mortgage Equity Corporation Pty Ltd op cit, fn 61, para 237.
86 The striking out procedure in the UK under CPR 3.4(2) provides that:
‘The court may strike out a statement of claim if it appears to the court:-
(a) that the statement of claim discloses no reasonable grounds for bringing or defending the
proceedings;
(b) that the statement of case is an abuse of the court’s process or is otherwise likely to obstruct

the just disposal of the proceedings;
(c) that there has been a failure to comply with a rule, practice direction or court .’
These were not the rules in forc e in 1999 when the judgment in O’Neill v Phillips was delivered and it
appears that the power to strike out a claim may be wider than our procedure by way of an exception in
South Africa. Neyers, op cit, fn 52 points out that it is unclear whether Lord Hof fmann meant that an
unfairly prejudicial exclusion ceased to be unfair if a fair offer was made, which suggests that if the
majority are prepared to make a fair offer , they can always get rid of the disaffected shareholder even
by unfair means, or that making the offer forestalls the buyout remedy where that is what is sought. If it
is the latter, it is unclear why that justifies the striking out of the claim.
87 It was unreasonable because it did not include an offer in respect of the costs incurred before the
offer was made.

87
obligation to buy the minority’s shares to which they had never
consented. The absence of a reasonable offer may aggravate the
unfairness of an exclusion, but an exclusion that is not in and of itself
unfair is not rendered unfair b y the absence of a reasonable offer to buy
the excluded shareholder’s shares.

[109] In Bayly v Knowles 88 this court applied O’Neill v Phillips in that
way. The high court had held that the offer made by Bayly ‘was far below
the true value of the shares’. In fact , the respondent, Knowles, had not
disputed an allegation that the offer was more than fair to him , or set out
any facts explaining his failure to accept it, save that he did not want to
sell his shares to Bayly, but wanted to acquire Bayly’s shares f or himself.
In the result the appeal was upheld and the buy -out order set aside.
Heher JA said:89
‘The failure to accept Bayly's offer has important consequences for Knowles. In
English law the making of a reasonable offer for the shares of an oppressed minority
is enough to counter reliance by the complainer on s 459 of the Companies Act (the
equivalent of s 252). Pursuit of the complaint in the face of such an offer is evidence
of abuse of the process sufficient to strike out such reliance in limine. The principle of
encouraging affected parties to use the procedures provided in the articles (or in a
shareholders' agreement) to avoid 'the expense of money and spirit' is laudable. In the
context of s 252 the failure of a minority shareholder to accept a reasonabl e offer for
his shares and leave the company in the hands of the majority is, at least, strong
evidence of a willingness to endure treatment which is prima facie inequitable despite
the choice of a viable alternative. If that is so it would not ordinarily behove him to
continue to complain about oppression.’

88 Bayly and Others v Knowles , op cit fn 82, paras 19 -24. In Re Fortuna Dev Corporation: Tempo

Group Ltd v Wynner Group Ltd and Another 2010 (2) CILR 85, the Court of Appeal of the Cayman
Islands upheld an order striking out a petition f or the winding-up of the company on just and equitable
grounds where there had been a reasonable offer at a price determined by an agreed procedure to
purchase the shares of the dissentient shareholder.
89 Bayly and Others v Knowles, ibid, para 24.

88
Heher JA rightly referred to the need to make a reasonable offer for the
shares of ‘an oppressed minority’. He did not say that the failure to make
an offer rendered the minority oppressed.

Loss of trust due to an absence of probity
[110] Although this did not appear in the forefront of the argument by
counsel for the plaintiffs, there are references in the judgment of the high
court to the affairs of the company being mismanaged and that there ha d
been a lack of probity in the conduct of its affairs.90 The judge said that it:
‘is unduly prejudicial to them as they remain passive shareholders in the company
which appears to be mismanaged by the majority with whom they have fallen out. It
cannot reasonably be expected of the plaintiffs who have lost their employment to
keep their assets locked in TCM.
The following is a glaring example of a lack of probity in which TCM’s affairs have
been conducted.’
He then referred to the various aspects in which Mr Geel had been critical
of the accounts of TCM.

[111] Fexuto v Bosnjak Holdings,91 illustrates that where there is a loss of
faith, trust and confidence in the majority shareholders occasioned by a
lack of probity on their part, that may constitute unfair prejudice and
justify the grant of an order that the shares of the disaffected minority be
acquired by the company or the majority. Th e plaintiff in Fexuto
complained that the majority appropriat ed for themselves two business
opportunities that they were under a fiducia ry obligation to develop
through the company. The court ordered an accounting to the company
for the benefits acquired by the majority, after which it said that the
disaffected minority shareholder would be entitled to a buy-out .

90 Judgment paras 332 and 333.
91 Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd, op cit, fn 47, at 740.

89

[112] A large part of the tria l was devoted to Mr Geel’s criticisms of the
accounting methods of TCM. The judge accepted his evidence and found
that the true value of TCM was not reflected in its AFS for 2008 to 2012;
that the financial results had been manipulated since 2008; that inv entory
had been deliberately understated ; and, that work -in-progress and
maintenance spares had not bee n properly accounted for. The court held
that this had probably been done deliberately in order to suppress share
values should TCM or the defendants be compelled to purchase the
plaintiffs’ shares. It was also critical of the manner in which the Supplies
Division had been treated. The judge clearly did not regard Andrea’s
conduct as reflecting the standard of fair dealing to be expected in the
treatment of a minority shareholder by the majority. Given those findings
it will be necessary to consider in due course whether a case of unfairly
prejudicial conduct was established on this further basis, notwithstanding
that it did not stand in the forefront of the argument presented to us.

Conclusion on s 252
[113] An applicant for relief under s 252 cannot simply make a number
of vague and generalised allegations of unfairness, but has to establish:92
‘1. The particular act or omission that has been committed, or th at the affairs of the
company have been conducted in the manner so alleged.
2. Such act or omission or conduct of the company’s affairs is unfairly prejudicial,
unjust or inequitable to the applicant or some part of the members of the company.
3. The nature of the relief that must be granted to bring to an end the matters of which
there is a complaint;93 and

92 Louw and Others v Nel, op cit, fn 7, para 23; Geffen and others v Martin and Others [2018] 1 All SA
21 (WCC) para 23.
93 The appropriate remedy is not limited to rev ersing the conduct of which complaint is made. It must

‘put right and cure for the future the unfair prejudice which the petitioner has suffered at the hands of
the other shareholder of the company’ per Oliver LJ in In re Bird Precision Bellows Ltd [1985] BCLC

90
4. It is just and equitable that the relief be so granted.’
Whether the affairs of the company were conducted in a manner unfairly
prejudicial to the minority requires an objective assessment of the overall
conduct. While it aids the analysis to consider the alleged conduct within
a framework of instances that have been held to constitute unfairly
prejudicial conduct in other cases, it is not an exercise in categorisation.
Determining whether the company’s affairs can be pigeonholed in one or
more categories recognised in other decisions is not necessarily decisive.
All the proven facts must be assessed within the legal framework of the
applicable corpora te structure. That consists of the memorandum of
incorporation and any collateral agreements between the shareholders
identifying their rights and obligations as members of the company. A
shareholders agreement is the archetype of such a collateral agreement. A
useful test is whether the exercise of the power or rights in question
involves the breach of an arrangement or understanding between the
parties, even if not contractually binding, and whether it would be unfair
to allow that situation to continue.

[114] It is not sufficient for a claimant to show that the relationship
between the parties has broken down. There is no right of unilateral
withdrawal for a shareholder when trust and confidence no longer exist.
The loss of trust or confidence in the majority must flow from the affairs
of the company being conducted in a manner that is unfairly prejudicial to
the minority. Unfair exclusion from the management of the company to
the detriment of the minority’s position as a shareholder is the quotidian
example of situations falling within the section. The unfair prejudice may
be overcome by an offer to purchase the minority’s shares at a fair price.

493; [1986] Ch 658. Cited with approval in Ming Siu Hung and others v J F Ming Inc and Another
[2021] UKPC 1 para 15.

91
Conversely, a failure to make such an offer where there is no prior unfair
exclusion and no other unfair prejudice, is not in and of itself unfair
prejudice. Unless the minority have suffered unfair prejudice there is no
obligation on the company or the majority shareholders to negotiate their
exit other than in terms of the memorandum of incorporation or any
applicable shareholders agreement and it is not unfair prejudice if they
refuse to do otherwise. The exercise by the company or the other
shareholders of the powers and rights conferred by the articles cannot
ordinarily be regarded as unfair, especially where those powers are used
to protect the company from conduct by the minority that is detrimental
to the well-being of the company.94

Luis’s claim of legitimate expectation and exclusion
Background
[115] Luis’s primary contention was that this is an exclusion case based
on his legitimate expectation as a director and shareholder to daily
involvement and engagement in the operations of TCM. He claimed to
have a legitimate expectation to recognition and remuneration as (i) a
founder member of TCM; (ii) a quasi -partner in t he affairs of the
business, which was a domestic company akin to a partnership; (iii) a
participant in and contributor to the business of TCM of equal standing to
Andrea; and to (iv) the due respect and regard of his fellow directors,
shareholders and empl oyees. H is complaint was that in breach of this
expectation and understanding, since approximately 2007 and especially
after his suspension and dismissal in 2009 , he had been excluded from
engaging in the operations of TCM. This was the first and primary source
of alleged unfair prejudice.

94 This summary owes much to the analysis in Grace v Biagioli and Others, op cit, fn 71, paras 61-63.

92

[116] It was common cause that TCM was founded by two men having
close ties of friendship and complementary skills that enabled them to
make a success of the business. There is no doubt that they went into
business together on the basis of mutual trust. From the outset the
business operated on a basis of joint decision -making and equality . The
advent of Jose and Tony did not change that. Their role was subordinate
to that of the two founders. Although Jose and Tony were referred to as
directors, it does not appear that they were formally appointed as such
until 2003 or 2004 . They are not reflected as directors in the AFS until
the year ended 29 February 2004. In any event it is clear that they could
be overruled by Andrea and Luis. For so long as those two continued on
the path of joint decision -making their grip on the company’s affairs was
absolute.

[117] Luis testified that at a very early stage, soon after Jose joined the
company, he and Andrea had a discussion in the garage one a fternoon
about the need for a formal salary structure so that they could be paid
instead of relying on their savings from their employment with ISM. He
said that they agreed that:
‘… so long as TCM existed we will be, we would have equal shares in the runn ing of
the company. Okay, we’ll draw, you know, the same salaries, have equal say in the
management even though we approached it from different angles. Okay, it would be
like a, you know, like running a home, like running a family. Okay, both parties have
something to say in it.’
This ‘garage agreement’ was consistent with TCM originally being the
type of small domestic company that typically features in exclusion cases,
where shareholders are also working employees and the parties anticipate
that it will continue on that basis.

93

[118] While that was undisputed, the key question was whether that close
relationship continued in place after 2004 and justified Luis’s continued
expectations of his role . TCM had become a company with a turnover
running into the hundre ds of millions of Rand, a national presence and a
staff complement of several hundred . Its ownership structure and
management had altered with the introduction as shareholders of Iqbal,
and to a lesser extent Tony and Jose. Initially that occurred in terms of
heads of agreement signed on 15 March 2004. It was formalised in the
sale of shares agreement and the shareholders’ agreement executed on
29 June 2005. Two obvious questions arose from this. Could the business
any longer be described as a ‘quasi -partnership’, or was the basis of the
relationship between the shareholders now to be found in the shareholders
agreement? Did Luis’s position as a co -founder of the business continue
to justify his being entitled to the same standing and authority in the
company as Andrea, who was now formally the Chairman of the
company and its CEO?

[119] Luis attempted to show that the advent of Iqbal and the conclusion
of the shareholders agreement left matters unchanged so far as his role in
the company was concerned. The running of the company would remain
in his and Andrea’s hands and would continue as before. But his evidence
suggested that things indeed change d. He said that when Iqbal joined the
business:
‘It was not what we had agreed on, on moving forward. It was not what t he
shareholders agreement was meant to be. None of those things. Everything started
turning upside down and Andrea, backed by Iqbal, started changing things in such a
way that he just wanted to push me out of the company. That’s what he wanted to do.’

94
He accepted under cross -examination that the garage agreement was not
carried over into the shareholders agreement. However, he clung to the
view of the relationship between himself and Andrea expressed in his
description of the disciplinary proceedings instit uted against him as a
dispute ‘between the founders of the company, the two top people in the
company’.

[120] The differences between Luis and Andrea flared up in November
2007 with Andrea’s suggestion that he receive a backdated adjustment to
his remunerati on package , resulting in him and Luis being differently
remunerated for the first time . The resultant exchanges between them
have been described earlier and illustrate the central importance of Luis’s
claim that he had a legitimate expectation of being ent itled to manage
TCM on a day-to-day basis as an equal partner with Andrea and that this
was left undisturbed by the sale of shares to Iqbal and the conclusion of
the shareholders agreement. The High Court’s finding was as follows:
‘[128] That De Sousa had a right, or at the very least a legitimate expectation, to
participate in the management of the business of TCM can admit of no doubt. TCM
may properly be described as a quasi -partnership company. Although technically and
legally governed by the strictures of company law, in fact and in reality, the
relationship amongst the shareholders was more akin to a partnership in which each
held 50% of the shares … Since its establishment TCM functioned and was
administered under the direct control of its two foundin g members who participated
equally in its management. De Sousa testified that a pact was made between him and
Cornelli that for as long as TCM existed they would be equal partners in the business,
would earn the same benefits and would have an equal say in its affairs. It was always
intended that all shareholders be employed by the company. I also accept that, despite
the introduction of Diez, [Da Silva ]95 and Hassim as minority shareholders, TCM

the introduction of Diez, [Da Silva ]95 and Hassim as minority shareholders, TCM
retained its identity as a domestic company in the nature of a partnership primarily
between De Sousa and Cornelli.’

95 The judgment inadvertently refers to De Sousa and not Da Silva.

95

[121] The learned judge did not exp lain the basis for the conclusions in
the last two sentences of this passage 96 and counsel’s heads of argument
simply asserted that even after Iqbal’s acquisition of his 25 .1%
shareholding:
‘… the company nonetheless retained its original identity of a domestic company in
the nature of a partnership, primarily between De Sousa and Cornelli …’
Neither the judgment nor the respondents’ heads of argument engaged in
any analysis of the provisions of the heads of agreement, the sale
agreement or the shareholders agreement , although they were central to
the defence to the claim. The plea alleged that the relationship between
the shareholders was governed by a written shareholders a greement.
Luis’s allegations of a legitimate expectation and the existence of a quasi-
partnership of equals between him and Andrea were denied. In a request
for particulars for trial the defendants asked whether it was admitted that
the shareholders agreement ‘is the document that governs the relationship
between the shareholders themselves’. The answer was that at the time of
its conclusion it was intended to govern the relationship between the
shareholders. Whether it in fact did so lay at the heart of th e defence to
Luis’s claim. Th e first issue to be addressed is whether the judge’s
findings in the final two sentences quoted in the previous paragraph were
correct. The initial relationship between Luis and Andrea will be
considered followed by the conclusion of the heads of agreement, the sale
agreement and the shareholders agreement. The judgment will then
consider the parties’ contentions and the high court’s conclusion as
quoted above and set out the findings on the exclusion issue.


96 He referred to it again in para 133, but only in the context of the provisions relating to the disposal of
shares by a shareholder.

96
The relationship between Luis and Andrea
[122] One cannot fault the learned judge’s conclusion that at its inception
in 1987 TCM was a classic example of a small domestic company
operating on a basis of trust and mutual respect between the founders,
Luis and Andrea. They held equa l stakes in the company, applied their
differing skills to promoting the growth of the company and reaped the
benefits of doing so as it grew and achieved success. Luis said with
justifiable pride that they started out in competition with IBM and by the
early part of the present century had become IBM’s agent in South
Africa. Clearly their relationship gave rise to a mutual understanding that
they would work together to manage the company and its affairs on a
basis of equality. However, with growth and the company’s expansion
came change. The central issue at the trial was whether those changes in
ownership and in the nature and extent of its operations brought an end to
the understanding that had lasted while building up the company and
replaced that understanding with formal agreements. As Young J put it in
Fexuto:97
‘…the legitimate expectation does not last forever. It will be lost, if it is no longer
practicable for the right to the expectation to continue.’
Young J’s view that the mere expansion of a com pany indicates that an
earlier arrangement or understanding fell away may not necessarily be
correct,98 but changes in the nature of the company and its business may
indicate that the earlier informal understanding of how the business
should be conducted has ceased to be feasible so that it falls away. A
significant factor in bringing that about may be the advent of new
shareholders who become involved in the business on a different basis.


97 Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd, op cit, fn 77, at 704, lines 44-45.
98 It was held on appeal not to be supported by the facts. Fexuto Pty Limited v Bosnjak Holdings Pty
Ltd, op cit, fn 47.

97
[123] The existence of an arrangement or understanding in c ases of this
type is usually inferred from the conduct of the parties. By and large
small domestic companies do not regulate the relationship among
shareholders as formally as larger businesses involving experienced
business people. Initial arrangements and understandin gs may be
displaced by events. Lord Templeman expressed it broadly in saying that
the arrangements or understanding would apply unless for some good
reason a change in management and control became necessary. 99 The
appellants’ case was that this is what hap pened when Iqbal joined the
company in 2004. He did so, with the support of Luis, Jose, Tony and
Andrea because it was imperative to address the BEE issue. In order to
assess the impact of his arrival on the management of the operations of
TCM it is necessary to look at the contracts under which that came about.

The heads of agreement
[124] The heads of agreement were executed on 15 March 2004. Either
prior to , or contemporaneously with , the conclusion of the heads of
agreement, effect was given to the long -outstanding undertaking to give
Jose and Tony equity in the company. The contract under which that was
done was omitted from the record . The heads of agreement provided for
the transactions described above in paragraph 8. Iqbal was to pay for the
shares he wa s purchasing over 36 months. The price was payable out of
dividends and bonuses, would bear interest and be secured by a pledge .
The number of shares sold to Iqbal was sufficient to give TCM the BEE
rating it wanted. In addition it ensured that no decision requiring a special
resolution could be passed without Iqbal’s agreement.100

99 Tay Bok Choon v Tahnasan Sdn Bvd [1987] UKPC 2
100 Counsel provided us with a list of twenty provisions of the Act that required a special r esolution
ranging from changing the type of company; changing its name; altering the Memorandum of

ranging from changing the type of company; changing its name; altering the Memorandum of
Association; increasing share capital; converting or cancelling shares; issuing shares; approving share

98

[125] Clause 8 of the heads of agreement provided that:
‘A detailed shareholders agreement and sale agreement shall be entered into between
all parties regulating their rights as share holders and setting out the terms of the sale
embodied herein.’
It went on to identify the matters that were to be regulated by the
shareholders agreement. Clause 9 provided that, if Iqbal were to leave the
company or resign as an employee, he would be obl iged to offer his
shares back to the original sellers at the same purchase price. He was,
however, to be entitled to dispose of a maximum of 70% of his shares to
BEE third parties on similar terms as deemed necessary by the majority
of the shareholders or in accordance with any BEE Charter applicable to
the industry or simply for empowerment purposes.101 Under clause 10 the
other shareholders were to have options in their favour to acquire Iqbal’s
shares on the same terms and conditions in the event of his re signation or
death.

[126] Clause 12 recorded that Iqbal was to be appointed an executive
director and that his functions and duties would be embodied in
employment agreements 102 and his package would be structured on
mutually acceptable terms. Andrea, Luis and T ony were to remain as
directors, but Jose was to resign.103 Under clause 13 detailed employment
agreements were to be entered into with Jose and Tony regarding their

option plans; making loans to directors or managers; or voluntarily winding-up the company. The 0.1%
portion of Iqbal’s shareholding afforded him powerful protection.
101 There is a corresponding provision in clause 11.1 of the shareholders agreement.
102 The heads of agreement say that these are attached but th e parties have omitted them from the
record.
103 This was effectively reversed under the shareholders agreement because Luis nominated him as a
director.

99
functions, duties and package in TCM. 104 Lastly in relation to TCM
clause 14 provided that:
‘The shareholders agreements must deal with the resignation of directors and
employees of Tony and Jose as well as Andrea and Luis and the death of the parti es.
The parties must meet to discuss all these aspects.’

[127] Thereafter the heads of agreement dealt with TCM Networks (Pty)
Ltd and TCM Software and Services (Pty) Ltd in which TCM held a 50%
share, with the other 50% being held respectively by Mr del Fabbro and
Ms Applewhite, who were both parties, together with those companies, to
the heads of agreement. In regard to TCM Networks, Mr del Fabbro was
to sell 12.6% of the shares to Iqbal on the same terms and conditions
mutatis mutandis as the TCM sale. A shareholders agreement was to be
entered into under which Mr del Fabbro, Andrea and Luis were to be
directors of TCM Networks. The arrangements in regard to TCM
Software were similar in that Ms Applewhite was to sell 12.6% of the
shares to Iqbal on the same terms and conditions mutatis mutandis as the
TCM sale. A separate shareholders’ agreement was to be ent ered into
under which Ms Applewhite, Iqbal, Andrea and Tony were to be directors
of TCM Software. Finally the heads of agreement provided that the
management company, TCM Management (Pty) Ltd, was to be
restructured and the directors would be Andrea, Luis, Ms Applewhite and
Iqbal.

[128] The heads of agreement constituted a detailed contract prepared by
TCM’s attorney. It provided a roadmap for the future structur e of the
shareholding of TCM and the management of its business operations. It
contemplated the concl usion of further detailed agreements that would

104 We do not know whether such agreements were concluded , but if they were they have been omitted
from the record.

100
deal with the shareholdings of the individuals; the identity of the directors
of the different companies; the need for employment agreements in
respect of Iqbal, Tony and Jose ; what was to happen if Iqbal left the
company or resigned as an employee; and the resignation as either
directors or employees of any of Andrea, Luis, Tony and Jose , as well as
the possibility of their deaths . On this basis Iqbal started working for
TCM at the beginning of the 2005 financial year in early March 2004.

The sale and shareholders agreements
[129] TCM adopted new articles of association by resolution dated 28
February 2005 and the se were registered om 5 July 2005. Articles 14 to
16 dealt with the circumstances in which a member could dispose of their
shares. They imposed an initial obligation to offer the shares to the other
existing members and made any transfer subject to the consent of the
board of directors. Under article 61 the business of the company was to
be managed by the directors. Article 67 provided that a director may hold
any office or place of profit under the company other than that of auditor
‘for such period and on such terms as to remuneration and otherwise as
the directors might determine’.

[130] The sale and shareholders agreements were signed on 29 June 2005
over a year after the heads of agreement. The sale agreement provided for
the sale of shares to Iqbal in accordance with the provisions of the heads
of agreement. The price was more clearly defined in para 3.1 as being ‘an
amount equal to the net asset value of the company as at the effective date
together with a price earnings multiple of 5.7 based on the after -tax
profits of the company as at the effective date and as reflected in the
effective date accounts multiplied by 25,1%’. The parties fixed the price

101
at R26 646 260.53 on the basis of this formula. Payment was to be
effected by way of a deposit of R500 000 and the balance was payable
within 36 months of the date of signature of the agreement. Contrary to
the heads of agreement the balance was to be free of interest. Clause 18
provided that if Iqbal died before full payment had been made the sellers
would not be entitled to compel his estate to pay the balance of the
purchase price, but should retain the percentage of shares already paid for
and sell and transfer the balance to the sellers at the price outstanding at
the time.

[131] The shareholders agreement was typical of such agreements. In
clause 3 it recorded the holdings of the five shareholders and in clause 3.6
provided that:
‘The shareholders wish to regulate their relationship as shareholders in the company
on the terms and conditions contained herein.’
That was consistent with the stated purpose in clause 8 of the heads of
agreement that the sharehold ers agreement should be entered into by all
parties ‘regulating their rights as shareholders’. It sought in clause 4 to
give priority to the agreement over the articles of association.

[132] Clause 5 dealt with directors. The relevant provisions read:
‘Notwithstanding anything to the contrary contained in the articles of association of
the company, the shareholders shall take all steps, do all things and vote in favour of
all resolutions necessary to procure that:
5.1.1 Andrea and Luis shall as long as they hold at least 30% (thirty per centum)
each of the company’s total issue share capital be entitled to appoint 2 (two) directors
to the board and to remove and replace such appointed directors;
5.1.2 The remaining shareholders being Tony, Jose and Iqbal shall as long as they
hold at least 15% (fifteen per centum) each of the company’s total issued share capital

102
be entitled to appoint one director each to the board and to remove and replace such
appointed directors;
5.1.3 no person (including any shareholder of th e company from time to time) shall
have any claim against any party hereto pursuant to his or her removal as director in
terms of this agreement and/or in terms of the Act, it being recorded that nothing in
this agreement is intended to entrench the appoin tment as director of any specific
individual(s);
5.1.4 resolutions of the board shall, save as otherwise provided herein, be passed by
a majority vote of the board on the basis that each director shall have one vote;
5.1.5 in the event of an equality of vo tes as regards any resolution proposed to be
passed by the board, the chairman of the board shall have a casting vote (it being
recorded that the present chairman of the board shall be Andrea) who shall however
be subject to re-election and re-appointment at the annual general meeting;
5.1.6 s quorum for meetings of the board shall be comprised of any three directors,
provided that both Luis and Andrea shall be present at all such meetings;
5.1.7 if there is no quorum at any meeting ( “the original meeting”) of the board, the
original meeting shall be adjourned to the same time and same day two weeks later
than the date originally set (“the adjourned meeting”) on the basis that written notice
of the date and time of such adjourned meeting shall forthwith afte r the adjournment
of the original meeting be given by the company to all the directors of the company.
Any director(s) present at an adjourned meeting shall constitute a quorum.’
The remaining provisions of clause 5 deal t with the right to appoint
alternate directors; the place where board meetings were to be held;
contact details of directors; remote participation in board meetings and
round robin resolutions.

[133] Clause 5 recognised Luis in two ways. First it entitled him to
appoint two directors for so lon g as he held at least 30% of the shares in

appoint two directors for so lon g as he held at least 30% of the shares in
TCM. Andrea was likewise entitled to appoint two directors to the board.
Second it provided that a meeting of directors would not initially be
quorate unless both he and Andrea were present. However, the impact of
those two provisions was diluted by clauses 5.1.3 and 5.1.7. The former

103
made it clear that nothing in the agreement entrenched either Luis or
Andrea, or anyone else for that matter, as a director. The necessary
implication was that, notwithstanding their agreed entitlement to appoint
directors, and the undoubted anticipation that they would be directors,
any of Luis, Andrea or Iqbal could be removed as members of the board
by following the statutory procedures laid down in the Act. 105 Clause
5.1.6 protected Andrea and Luis by rendering a board meeting at which
one of them was not present non -quorate. However, the scope of the
protection was limited because at an adjourned meeting the meeting
would be quorate if any director was present.

[134] Clause 5.1.5 provided for Andrea’s initial appointment as chair of
the board, with a casting vote in the case of a n equality of votes , but it
expressly provided that he could be removed at an annual general
meeting. Provision was made in clause 9.1 for the appointment of a
managing director to undertake the day -to-day management and
administration of the business. Although Andrea is sometimes referred to
in documents as the CEO , it is not clear that the board ever formally
appointed him to that role . However, it wa s plainly the manner in which
he functioned. Jose accepted that since 1990 Andrea had been the CEO
and that he had not held this position jointly with Luis, who was
responsible for the technical service and accounting side of the business.

[135] Although all of the share holders were employees of TCM at the
time of its conclusion, the shareholders agreement did not refer directly to
that employment. Following upon the provision in clause 14 of the heads
of agreement that it should deal with the resignation or death of the

105 The provisions of s 71(1) of the 2008 Act preclude the entrenchment of directors by way of
shareholders agreements, which reinforces the. provisions of clause 5.1.3.

104
shareholders, including both Luis and Andrea, clause 10 entitled
‘Deemed Offers’, provided that:
‘Should any of the shareholders:-
10.1.1 die or suffer any incapacity for any reason whatever (it being agreed that a
continuous period of 90 (ninety) days dur ing which such shareholder is unable to
perform his usual management functions in respect of the company shall represent
incapacity for the purpose of this 10.1.1;
10.1.2 be sequestrated whether provisionally or finally; or
10.1.3 surrender his estate whether provisionally or finally; or
10.1.4 leave the employ of the company for any reason whatsoever,
Then such party (“the offeror”) shall be deemed on the day immediately preceding the
occurrence of such event to have offered (“the offer”) all of the offero r’s shares (“the
sale shares”) and an equivalent percentage proportion of the offeror’s claim by way of
loan account (“the sale claims” against the company on the exact basis set out in
clause 13 as applies to each shareholder referred to therein.’
In the case of Luis, Andrea and Tony clause 13.14 provided for them to
offer to sell the ir shares to the remaining shareholders. The procedure in
clauses 13.15 to 13.17 was , broadly speaking , that they should find an
external third party purchaser, offer the shar es to the remaining
shareholders at the price and on the terms offered by the potential
purchaser and either sell the shares to the remaining shareholders at the
price offered by the third party, or sell them to the third party. The effect
of the provision s of clauses 13.16 and 13.17 appears to be that if the
remaining shareholders accept ed the offer in part that would not permit
the exiting shareholder to sell the balance to the third party. In order to
dispose of the balance of the shares they would have to repeat the
process.

[136] Other provisions of the shareholders agreement dealt with Iqbal’s
shares, the sale of shares by the other shareholders and the admission of

shares, the sale of shares by the other shareholders and the admission of
new shareholders. Clause 17 covered the dividend policy and clause 21

105
imposed restraints on the shareholders in relation to the disclosure of
confidential information and competition with TCM. These restraints
applied only during the shareholder’s employment with the company.
Finally, clause 27 provided that the agreement was the sole record o f the
parties’ agreement in relation to its subject matter, namely, the
relationship between the shareholders. It also provided that no party
would be bound by any representation, warranty, promise or the like not
recorded in the agreement. That was fatal to Luis’s complaint that he had
been misled.

Discussion
[137] A claim under s 252 based on the member’s exclusion from the
company requires the identification of the acts giving rise to the
exclusion. Most reported cases seem to arise from the member’s remova l
as a director, but in this case that did not occur. Whilst Andrea suggested
on several occasions that Luis should resign as a n executive director and
made that a condition for continuing with the discussions about acquiring
his and Jose’s shares on 18 February 2009, he was not removed from the
Board and continued to attend board meetings after the present litigation
commenced. Luis also remained a shareholder with the ordinary rights of
a shareholder to participate in the affairs of the company and receiv e
dividends. Based upon the way things had operated from the inception of
the business, h e claimed a legitimate expectation to daily involvement
and engagement in the operations of the business and to be recognised
and remunerated as a participant of equal standing to Andrea, who was
the chairman and effectively chief executive of TCM. Was this justified?

[138] In order to satisfy that expectation Luis needed to be an executive
director of TCM employed as such and remunerated on the same basis as

106
Andrea. He did not have that right under either the articles of association
or the shareholders agreement. The trial court held that there was such a
right because this was a quasi -partnership company, administered under
the direct control of Luis and Andrea, who partic ipated equally in its
management on the basis that it was always intended that all shareholders
would be employed by the company. The foundation for this was the
garage agreement that even Luis accepted was not carried over into the
shareholders agreement. Nonetheless, the judge held that even after the
introduction of Tony, Jose and the Trust as shareholders and the
conclusion of the shareholders agreement the company retained its
identity as a domestic company in the nature of a partnership between
Luis and Andrea.

[139] With respect to the trial judge I cannot accept either of those
conclusions. Whatever the precise position before the conclusion of the
heads of agreement and up to the conclusion of the sale and shareholders
agreements, once those agreements h ad been concluded the shareholders
had put their relationships inter se on a very different footing, namely one
regulated by the shareholders agreement . This was the main purpose of
the heads of agreement, which said:
‘A detailed shareholders agreement and sale agreement shall be entered into between
all parties regulating their rights as shareholders and setting out the terms of the sale
embodied herein.’
Clause 3 of the shareholders agreement confirmed that the parties’
purpose in concluding the agreement was to regulate their relationship as
shareholders on the terms and conditions set out in that agreement. Those
terms were spelled out explicitly in clause 5. It made no mention of any
special arrangement or understanding between Luis and Andrea. It
attached no qualifications to each shareholder’s power to exercise the

107
voting rights attaching to their shareholding and it dealt with the
possibility of their ceasing to be employed by the company . I am unable
to see how those detailed arrangements could be ov erlain by a guarantee
of employment and a n unspoken partnership between Luis and Andrea
requiring that each be afforded equal status and equal participation in the
control and management of the company’s business. That would be
destructive of the entire pu rpose of concluding the shareholders
agreement and would impermissibly contradict its terms.

[140] Dealing first with the finding that it was intended that all
shareholders would be employed by the company, it was correct that they
were all employees at the tim e the heads of agreement and the
shareholders agreement were concluded and it was assumed that they
would continue to be employed. But their employment was neither
indefinite nor guaranteed, because clause 10(1) of the shareholders
agreement contemplated t hat a shareholder could become incapacitated
from performing their executive functions or cease to be employed. Luis
agreed that this included dismissal from employment and his counsel did
not suggest otherwise. Accordingly the intention that all sharehold ers
would be employed was subject to a significant qualification that applied
to Luis as much as to the other shareholders , namely that they continued
to be able to discharge their functions as an executive director and that
there were no proper employment -related reasons for terminating their
employment.

[141] Continued employment was a pre -requisite to Luis’s ability to be
involved in the day-to-day running and management of the company. The
express recognition that any of the shareholders could be dismissed was
inconsistent with an arrangement or understanding that Andrea and Luis

108
would always be employed and engaged jointly in the management of the
business. Any shareholder could leave the company for other reasons and
compete with TCM . The deemed offer and the accompanying risk of
being locked in to a minority shareholding in the company w ere the only
protection offered by the shareholders agreement against any shareholder
seeking to leave for whatever reason or conducting themselves in a way
that would justify the termination of their employment.

[142] In regard to the second finding that the company retained its
identity as a domestic company of the nature of a partnership, under
cross-examination, both in the CCMA hearing and in his evidence in this
case, Luis reluctantly accept ed that the shareholders agreement had
brought about significant changes to the relationships between him and
Andrea. The agreement recorded that Andrea would be the chair and,
whether or not he was formally elected to that position, he w as de facto
the managing director or CEO. The day-to-day management and
administration of the company was accordingly to be undertaken by him.
The extent to which he consulted his fellow shareholders or directors over
any matter was within his discretion. There was no obligation on him to
do so. S ignificant decisions by shareholders about the company’s affairs
would require the agreement of at least two of the three major
shareholders. This meant that neither he nor Andrea had a right of veto
and either could be outvoted. That simple reality disposed of the claim by
Luis to continued joint control on a day-to day basis with Andrea.

[143] A further insurmountable stumbling block in the path of the high
court’s conclusion that this was a domestic company of the na ture of a
partnership between Luis and Andrea, was that there was no evidence that
Iqbal was informed of , much less accepted and agreed to , such an

109
arrangement or understanding between Luis and Andrea. Proving its
existence was precluded by clause 27 of th e shareholders agreement.
Disclosure of the existence of such an arrangement would have materially
affected Iqbal’s involvement in TCM. After negotiations lasting over a
year and the conclusion of the shareholders agreement it is impossible to
conceive tha t he would have agreed that contrary to its terms the
company would continue to be administered under the direct day-to-day
control of Luis and Andrea to his exclusion. Any thing he wanted to do
would depend on his being able to secure the agreement of both of the
original shareholders. In the context of a public company Vinelott J
said:106
‘Outside investors were entitled to assume that the whole of the constitution was
contained in the articles, read, of course, together with the Companies Acts. There is
in those circumstances no room for any legitimate expectation founded on some
agreement or arrangement made between the directors and kept up their sleeves and
not disclosed to those placing the shares with the public.’
Iqbal was an outside investor in TCM and was entitled to assume that the
whole of the arrangements between the shareholders was contained in the
shareholders agreement negotiated and executed for that purpose.
Accordingly, there could no longer be a ‘quasi -partnership’ arrangement
between Luis and Andrea, as contended for in this litigation.

[144] The sale of shares and introduction of Iqbal, together with the
conclusion of the shareholders agreement, fundamentally change d how
the company was to be run . Luis knew this as illustrated by his
subsequent attempt to vary the shareholders agreement. The proposal for
amendments to the sale of shares agreement that he put before the board
of directors in May 2008 included the following:

106 Re Blue Arrow plc [1987] BCLC 585.

110
‘Luis, his nominee or successor -in-title will get Joint CEO Status with all privileges,
salary and car allowance backdated to 1 st Nov 2007 as well as Immediate Log -on and
equal transaction access to Andrea on ALL TCM current & future accounts on
Internet Banking.’
This was a fairly transparent endeavour to restore the claimed position
prior to the advent of Iqbal and the conclusion of the shareholders
agreement.

[145] Accompanying that proposal was a proposal for numerous changes
to the shareholders agreement to limit the directors’ powers unless there
was agreement by shareholders holding 80% of the entire issued share
capital of the company. If adopted the effect would be to shift control of
the company on all major decisions and many smaller day-to-day matters
from the directors to the shareholders. Any decision on those matters
would require the support of all three principal shareholders. It would
have given Luis veto power in respect of those thirty-three matters107 and
enabled him to block any management decision with which he disagreed.
Under cross -examination he was evasive ab out this, but the conclusion
was indisputable. The proposals related inter alia to undertaking new
business activities; the repurchase or buy back by the company of its own
shares; transfer of any of its shares to any person other than the company
itself; incurring long -term debts or any other material borrowing; the
conclusion of any contract that ‘could negatively affect the rights of any
shareholder’; the passage of special resolutions; the approval of any
budget and an annual business plan; the establis hment or implementation
of or any changes in the company’s financial policy (including but not

107 In Fexuto, op cit, fn 47, para 56 it was said of such a power that: ‘The inability to make decisions by
reason of the existence of a veto is a very significant burden for any active commercial organisation to

bear. It could adversely affect all its commercial and financial relationships. It is not a burden which
should be inferred in the absence of any foundation in the formal documents or in oral communication
which creates such an impediment to the capacity of the group to grow and develop.’

111
limited to payments to shareholders) or accounting policies ‘which might
adversely affect one of the shareholders ’; the conclusion or
implementation of any trans action with any shareholder or officer or
director of the company or any relative of those individuals; the
appointment, dismissal or determination and or increase in the
remuneration and bonuses of directors or the managerial level of
employees; the adopt ion or amendment of employment benefits for
employee; the grant of share options or the creation of any employee
share scheme with the inclusion of a profit sharing arrangement; and the
conclusion of financial or suspensive sale contracts or other contract s
binding the company to on -going financial commitments over and above
those for which provision had been made in the current budget or
business plan of the company.

[146] Leaving aside the distinct possibility that these proposals were
directed at forcing the hand of his co -shareholders into purchasing his
shares, their obvious purpose of reversing the provisions of the
shareholders agreement evidenced a clear recognition that the old order
had changed in 2004. The former relationship and understanding in
relation to the running of the business of TCM ended in 2004 and 2005
and a new arrangement was put in place by the conclusion of those two
agreements.

[147] There are some similarities with the Australian case of Fexuto,108
which involved a family business that was b uilt from scratch into the
largest business of its type in Australia. After the father and patriarch
died, the eldest son contended for an understanding among the members
of the family , that they would all participate in the management of the

108 Op cit, fn 47.

112
business on the basis of a ‘consensus style management’, alternatively to
his entitlement to be an executive director engaged in the day -to-day
management of the business. In regard to the existence of this
understanding Spigelman CJ said that:109
‘It is of some signific ance in the present case that the Appellant was not able to point
to any document, nor give any evidence of any conversation, by which the
`understanding' for which it contended was created. There was no evidence of any
communication constituting any such understanding, or on the basis of which any
express understanding could be inferred. The case, in this respect, was entirely a
circumstantial one. The right to participate was to be established by a process of
inference.’
In that case the business was structured through a holding company, three
subsidiaries and three family trusts. This distributed the shares among the
three sons and their families equally with their mother holding a key
share until her death , with its distribution thereafter preserving the
equality of interest among the three sons. In rejecting the claim based on
an understanding or informal agreement Spigelman CJ said:
‘The structure was devised with considerable care and attention to detail.’110
Similarly the structure created in terms of t he shareholders agreement in
this case was devised with considerable care and attention to detail . Iqbal
had a 25.1% shareholding, the extra 0.1% coming at the expense of Tony
and Jose. That served both BEE purposes and meant that special
resolutions could not be passed without his support. The shareholders
agreement made detailed provision for the structure of the board of
directors of the company and similarly detailed provision for what was to
happen if one of the parties to the agreement ceased to be an employee of
the company. If, as Luis claimed, matters were to remain unaltered there
was no point in creating that carefully designed structure.

109 Ibid, para 32.
110 Ibid, para 39.

113

Conclusion on legitimate expectation
[148] The high court’s conclusion that Luis retained a legitimate
expectation to daily involvement in the company as a person of equal
standing to Andrea after Iqbal joined the company was not justified by
the evidence. The court erred in not analysing the agreements governing
Iqbal’s introduction to the company or giving any consideration or weight
to their provisions or what occurred once Iqbal started working at TCM .
It may not have brought immediate or obvious changes in Luis’s day-to-
day situation , because he remain ed an executive director and employee
for some five years after that. Whether he truly thought that he would
always have daily involvement in the company as a person of equal
standing to Andrea, or whether he merely believed that this was his
entitlement as a co -founder of the company , is immaterial. Whatever he
thought it was on a vague and ill -formed basis. But, for any expectation
he entertained to be reasonable or legitimate , he needed to be able to
point to an understanding or agreement involving all the shareholders. He
made no attempt to do so. In view of the changes that came about in 2004
and 2005 his continued reliance on the historic situation did not suffice.

[149] The evidence and particularly the documents placed before us
suggest that the affairs of TCM were conducted with a fair degree of
informality. In Fexuto,111 Spigelman CJ aptly described this kind of
situation in saying the following:
‘Management practices in a corporation develop for many reasons. They are subject
to the exigencies of what falls for determination and to the personalities involved. The
fact that a particular person exercises certain management rights, or has a de facto
authority to carry on or to prevent certain actions, is as consistent with an inference

111 Op cit, fn 46, paras 59 and 61.

114
that this is merely the result of an ad hoc procedure, as it is with an inference tha t it is
a manifestation of an underlying `understanding' to this effect.
…
One cannot infer the right to have a status quo continue merely from the fact that it is
the status quo. Something more is needed in order to establish a right or expectation
that i t would continue. That will usually take the form of an agreement or
understanding between parties or an expectation induced by the conduct of the
business.’

[150] Luis’s evidence and the documents did not reflect, much less
establish, the continued existence of such an agreement or understanding
after 2004. Accordingly, the high court’s finding that after 2004 and 2005
Luis had a legitimate expectation that he would continue to be involved in
the daily operations of the company and would be recognised and
remunerated as of equal standing with Andrea cannot stand. In my
judgment all Luis was entitled to was the position and standing afforded
to him under the articles of association and the shareholders agreement.
He had a legitimate expectation that he would be e ntitled to exercise the
rights ordinarily attaching to his ownership of a 30% shareholding, as
well as the further right , whilst he held that shareholding , to appoint two
directors and th rough them to exercise the powers and functions of a
director. For so long as he remained in employment with TCM , I accept
that such employment would be in a senior executive position. However,
given the provisions of clause 5.1.3 of the shareholders agreement
stipulating that his right to be a director was not entrenched , he did not
have a legitimate expectation that the company would appoint him as an
executive director. Nor did he have a right to expect that it would retain
him in employment if there were proper grounds for his dismissal. Those
conclusions serve to dispos e of his claim insofar as it was based on the
existence of the claimed legitimate expectation.

115

Luis’s dismissal
[151] That conclusion does not dispose entirely of Luis’s claim to have
been excluded from his role at the company. There remained a second
source of unfair prejudice alleged on the pleadings , but not developed as
such in either the heads of argument or the oral argument. It was that ,
even if he had no such legitimate expectation , he was employed as an
executive director and his unfair dismissal would not only deprive him of
that employment and role in the company, but also trigger the deemed
offer for his shares. This case on unfair prejudice was based on the
contention that he had been unfairly dismissed. This exclu ded him from
his role in the compan y, because his active engagement in managing the
operations of the company ceased after his suspension on 19 February
2009 and his dismissal with effect from 31 March 2009 . The evidence,
both oral and documentary, suggests that he and Andrea clashed over
most substantial and some petty issues. Andrea appears to have had a
policy of circulating e -mails to the other directors asking for their
agreement to policy decisions that he advocated. The record is replete
with responses by Luis questioning or opposing outright those
suggestions; demanding information and explanations ; querying whether
the decisions should be taken without a formal meeting ; and frequently
countering with his own contrary proposals. After his dismissal nothing
prevented him from continuin g with this and he did so. However his
suspension and subsequent dismissal deprived him of the ability to
participate in the day -to-day operations of TCM and perform his
managerial function. That was the basis for his second claim to have been
excluded. The right to dismiss any employee, including a director, was
not disputed, so this claim pertinently raised the fairness of his dismissal

116

[152] Luis alleged that the charges against him were spurious and the
conduct of his disciplinary hearing was unfair. He clai med that Andrea
was acting with an ulterior motive to rid the business of his daily
engagement and involvement in its affairs and to deprive the business of
his contribution. The response in the plea was that he had been lawfully
and fairly dismissed after a disciplinary procedure the fairness of which,
from both a substantive and a procedural perspective, had been upheld by
the CCMA and not challenged by him.

[153] Despite th e fact that Luis’s exclusion flowed from his dismissal ,
and its alleged unfairness was said to be unfairly prejudicial to him in his
capacity as a shareholder, the judgment did not address the fairness of his
dismissal. The reason emerged from paragraph 106 of the judgment
where the judge said:
‘The proceedings before the CCMA … are not mate rial to the outcome of the case. It
is common cause that De Sousa was dismissed from his employment after a
disciplinary hearing. Even if it were proven that there were grounds for De Sousa's
dismissal, he would still be entitled to claim the relief sought and to dispose of his
shares in TCM at a fair value.’
For the reasons already dealt with in paragraphs 103 to 10 7 of this
judgment that view was incorrect. Be ing subjected to unfair prejudice
was an essential pre-requisite, before any question of an offer to purchase
arose. The contrary view of the high court in this case and the conclusion
to the same effect in McMillan NO v Pott were wrong in law and must be
overruled.

117
[154] The judge further explained that in his view the findings of the
CCMA commissioner were irrelevant because of the rule in Hollington v
Hewthorn.112 In para 129 he added:
‘As a matter of law, it is irrelevant whether or not Cornelli or the board of directors of
TCM was justified in dismissing De Sousa from his employment. What matters is that
he has been excluded from management …’
In the result the judgment d id not deal with the allegations of unfair
dismissal, or whether the dismissal was unfairly prejudicial to Luis in his
capacity as a shareholder. In the course of the trial counsel for th e
plaintiffs had taken the same approach and their heads of argument in this
court did not address the issue of dismissal .113 That approach was
incorrect because Luis’s exclusion flowed directly from his dismissal and
the defendants contended that his exclus ion was not unfair because his
dismissal was fair. If he had no expectation of continued employment and
engagement in the day to day running of the business, but his dismissal
was grounded on an ulterior motive to rid the business of his
involvement, lacking fair reasons relating to his conduct or performance ,
that would be unfair. 114 It would impact directly, and to his prejudice , on
his rights as a shareholder because it would give rise to a deemed offer
under clause 10 of the shareholders agreement, with the prospect of being
locked-in. It was therefore essential to address the fairness of his
dismissal.

[155] Once the fairness of Luis’s dismissal was in issue , the effect of the
decisions on that issue by the various disciplinary bodies and particularly
the CCMA had to be considered. Luis pleaded that his dismissal was both
procedurally and substantive ly unfair. The internal disciplinary enquiry

112 Hollington v F Hewthorn & Co Ltd [1943] KB 587 (CA); [1943] 2 All ER 35 (CA).

112 Hollington v F Hewthorn & Co Ltd [1943] KB 587 (CA); [1943] 2 All ER 35 (CA).
113 Their practice note said that it was unnecessary to read the record of the evidence before the CCMA.
114 As alleged in para 13.5.4 of the Particulars of Claim.

118
held that his conduct justified his dismissal. The appeal confirmed that
decision. After an eleven day trial, where the onus of proving the fairness
of the dismissal rested on TCM 115 it was held to have discharged that
onus. The CCMA commissioner concluded that the dismissal was
procedurally and substantively fair. Did the entire issue have to be
revisited and decided afresh ? Was the judge correct in saying tha t the
finding of the CCMA commissioner was irrelevant?

The Labour Relations Act 66 of 1995 and s 252 of the Act
[156] The Labour Relations Act 66 of 1995 (the LRA) is one of the
statutes passed to give effect to the right to fair labour practices in s 23(1)
of the Constitution and the related labour rights in that section. Central to
these rights is every worker’s right not to be unfairly dismissed ,
embodied in s 185(1) of the LRA. Where disputes arise over either the
procedural of the substantive fairness of a dismissal, the LRA provides
for the dispute in most instances to be referred to the CCMA under
s 191(1)(a)(ii) of the LRA, unless it is claimed that the dismissal was one
that could be referred directly to the Labour C ourt under s 191(5)(b) of
the LRA.

[157] An arbitration award by a CCMA commissioner is capable of
being challenged on various grounds under s 145 of the LRA. If it is not
challenged then in terms of s 143(1) of the LRA it is final and binding
and may be enforced as if it were an order of the Labour Court in respect
of which a writ has been issued. It is unnecessary to explore the
intricacies of reviews of CCMA arbitration awards as Luis elected not to
challenge the commissioner’s award in the present case. It i s accordingly
final and binding on him . Under s 157(1) of the LRA the Labour Court’s

115 Section 192(2) of the LRA.

119
jurisdiction in relation to reviews of CCMA arbitration awards is
exclusive of the jurisdiction of any other court. In the result there was a
statutorily binding determina tion that Luis’s dismissal by TCM was not
unfair both procedurally and substantively.

[158] The particulars of claim allege d that the manner in which Luis’s
original disciplinary hearing was conducted was unfair to him. No
particulars were given, but it is apparent, from the decision of the chair of
the hearing, as well as the documents in the record and Luis’s evidence,
that his complaint was that he had sought to be legally represented at the
hearing and th is was refused. On the substantive issues Luis advanced
three complaints. The first was that the charges related to alleged conduct
which had occurred substantially earlier – some six months or more –
than the time the charges were levelled against him. The second attacked
the charges broadly by saying that they did not merit investigation,
scrutiny or dismissal , without giving specifics . That went to the
seriousness of the charges. Thirdly he alleged that the charges had been
brought with the ulterior motive of ridding the business of him,
terminating his daily engagement and involvement in TCM’s affairs and
preventing him from making his contribution to those affairs.

[159] These allegations raised issues of both procedural and substantive
unfairness in relation to his dismissal . They were made in support of the
claim that he had been subjected to unfair prejudice as a shareholder in
the conduct of the affairs of the company. Insofar as labour law was
concerned those questions had been asked and answered against Luis in
the only forum having jurisdiction to addres s them. That raised the
conundrum of whether it was open to him to raise them again in a
different context and for a different purpose. If he could , it created the

120
possibility of the high court reaching conclusions contrary to those of the
CCMA on the very same questions. Take for example the procedural
issue of legal representation at the initial disciplinary hearing. The chair
held that it was not appropriate to permit him to have legal representation.
If the high court took a different view , then the all egation that the
disciplinary hearing was unfair would be established. If the high court
held that the charges against him related to trivial matters and were
brought with an ulterior motive with a view to getting rid of him , his
dismissal was substantivel y unfair. If the high court accepted that the
charges were established , but that dismissal was an excessive sanction ,
the dismissal would likewise be substantively unfair. On each and every
issue it was notionally possible for the high court to arrive at t he opposite
answer to the CCMA in respect of issues that under our labour law fall
within the exclusive jurisdiction of the CCMA and potentially the Labour
Court and Labour Appeal Court. That would be a most unsatisfactory
situation.

[160] There is no reason in principle why an applicant for relief under
s 252 should not rely on the unfairness of their dismissal from
employment as constituting their exclusion from the company. Ordinarily
that will be in cases where there is a legitimate expectation of
employment as an adjunct to the shareholding. For example, an employee
whose principal source of income from their involvement in the company
comes from their salary or the ability to earn commission will probably
be able to demonstrate that they enjoy a legitimate expectation of
continued employment. However, it is conceivable that , even without
such an expectation, their dismissal may give rise to unfair prejudice in
their capacity as a shareholder, for example, where it triggers an
obligation to dispose of their s hares at an artificially low price . Where

121
unfair dismissal is relied on in support of a s 252 claim and the fairness of
the dismissal has been the subject of adjudication by the bodies
established for that purpose , what is the impact of th eir decisions upon
the s 252 enquiry? The high court’s approach was that it was irrelevant.
For the reasons that follow, I disagree.

The rule in Hollington v Hewthorn116
[161] The high court relied on this decision in saying that the decision of
the CCMA commissioner was irreleva nt. I do not think it was correct to
do so. The rule in Hollington v Hewthorn is described as follows in
LAWSA, the opening sentence being the relevant portion for present
purposes:117
‘Evidence that a party has been convicted of a criminal offence is not ev idence, not
even prima facie evidence, in a subsequent contested civil suit; it is the irrelevant
opinion of another court. In uncontested civil proceedings the fact of the conviction
constitutes prima facie proof. The finding of a court in civil proceedin gs is
inadmissible in subsequent criminal proceedings and a conviction is not evidence in
subsequent criminal proceedings against someone else.’
The judgment has always been controversial 118 and in its country of
origin and elsewhere has been abolished or varied by statute. It is part of
our law of evidence by virtue of the provisions of s 42 of the Civil
Proceedings and Evidence Act 25 of 1965, but it has only been invoked to
a limited extent . It does not apply in relation to disciplinary proceedings
against legal practitioners where a conviction is accepted as constituting
evidence of the commission of the crime unless rebutted by the legal

116 Hollington v F Hewthorn & Co Ltd , op cit, fn 115.
117 Lawsa, Vol 18 (3 ed, 2015) para 141 ; It was stated in this form in Lagoon Beach Hotel (Pty) Ltd v
Lehane NO and others [2015] ZASCA 210; 2016 (3) SA 143 (SCA) para 12.

Lehane NO and others [2015] ZASCA 210; 2016 (3) SA 143 (SCA) para 12.
118 C/f S v Khanyapa 1979 (1) SA 824 (A) at 840C -841A, where Rumpff CJ expressed relief that the
rule was inapplicable and referred to criticism of it. That judgment was overruled in Attorney-General
Northern Cape v Brühns 1985 (3) SA 688 (A) , but without addressing the qualms expressed in regard
to Hollington v Hewthorn.

122
practitioner.119 In a case involving piercing of the corporate veil it was
held that despite the rule the plaintiff could rely upon the existence of a
judgment debt against A in order to pursue claims against B and C to
recover that debt.120 In a forfeiture case, the Constitutional Court invoked
it to refuse to admit the record of a criminal trial where the accused was
acquitted, because such evidence was ‘superfluous’. 121 The controversy
over it is reflected in leading textbooks and academic writing although
not all comment is unfavourable.122

[162] Although the rule is expressed as precluding reliance on a
conviction in a criminal case to prove a fact in a civil case, there are some
judicial statements indicating that it may extend to preventing reliance on
a judgment in one civil case as evidence to prove facts in a subsequent
civil case involving different parties .123 However, in thos e cases, unlike
the present one, that was not a pertinent issue and the statements were at
most obiter dicta. Only in Graham v Park Mews Body Corporate ,124 was
the rule deliberately extended to include subsequent litigation between
the same parties. The court said the following:
‘I am of the view that such rule is applicable in the present matter, even though the
previous proceedings were not a criminal trial, but arbitration proceedings. There
seems to be a general rule that findings of another tribunal cann ot be used to prove a

119 Hassim (also known as Essack) v Incorporated Law Society of Natal 1977 (2) SA 757 (A).
120 Cape Pacific Ltd v Lubner Controlling Investments (Pty) Ltd and Others 1995 (4) SA 790 (A) at
806C-H.
121 Prophet v National Director of Public Prosecutions 2007 (6) SA 169 (CC) para 42
122 C W H Schmidt and H Rademeyer The Law of Evidence (Looseleaf, 2003, Lexis Nexus) para
21.1.3; Thulisile Brenda Njoko ‘The admissibility of criminal findi ngs in civil matters: Re -evaluating

the Hollington judgment’ 2021 De Jure Law Journal 160.
123 Cape Pacific Ltd v Lubner Controlling Investments (Pty) Ltd and Others , op cit, fn 123; Shepherd v
Mossel Bay Liquor Licensing Board 1954 (3) SA 852 (C) at 860H-861C; Birkett v Accident Fund and
Another 1964 (1) SA 561 (T) at 566H -567B; Msunduzi Municipality v Natal Joint Municipal
Pension/Provident Fund and others 2007 (1) SA 142 (N) para 11; Mulaudzi v Old Mutual Life
Assurance Company (South Africa) Ltd; National Director of Public Prosecutions and Another v
Mulaudzi [2017] ZASCA 88; 2017 (6) SA 90 (SCA) para 40 . Schmidt and Rademeyer, ibid, para
21.3.5 regard it as illogical not to extend the rule in this way.
124 Graham v Park Mews Body Corporate 2012 (1) SA 355 (WCC) paras 59-65.

123
fact in a subsequent tribunal. I also see no logical reason why the application of this
rule cannot be extended to the findings, orders and awards of other tribunals, so as to
exclude the opinion of triers of fact in these proceedings in civil or criminal matters.’
The judge sought support for this extension in the following passage from
Land Securities plc v Westminister City Council:125
‘In principle the judgment, verdict or award of another tribunal is not admissible
evidence to prove a fact in issue or a fact relevant to the issue in other proceedings
between different parties.’

[163] With respect th at overlooked the reference to ‘different parties’ in
Land Securities . Th at case concerned an attempt in a rent review
arbitration to introduc e an arbitrator’s award in a separate rent review
involving entirely different parties as evidence of comparable rentals . A
careful reading of the judgment shows that the reason for the exclusion of
the award was that it was not evidence of a valuation by a skilled valuator
– which would have been admissible as expert evidence and subject to
cross-examination – but the opinion of the arbitrator based on the
evidence placed before him. All that the arbitrator could say was that on
that evidence, the correctness of which could not be tested, he had formed
the opinion reflected in the award. In addition , admitting the evidence
would involve a collateral enquiry into the correctness of the arbitration
award, which was not the purpose of the rent review. Graham v Park
Mews Body Corporate dealt with an application for the appointment of an
administrator to the respondent body corporate. It had been preceded by
an arbitration between the applicant and the body corporate over certain
repairs and the resultant award h ad been made an order of court. The
applicant sought to make use of the findings by the arbitrator to support
the case that the administration of the body corporate should be taken out

the case that the administration of the body corporate should be taken out

125 Land Securities plc v Westminster City Council [1993] 4 All ER 124 at 127.

124
of the hands of the body corporate and vested in an administrator. That
was a wholly different situation from the one in the Land Securities case.

[164] Graham v Park Mews Body Corporate was considered in
Institute for Accountability in Southern Africa v The Public Protector .126
There a claim for declaratory relief was based upon adverse findings
made by the Constitutional Court and the Gauteng Division of the High
Court in regard to the then Public Protector’s conduct in the discharge of
her duties. It was submitted o n behalf of the Public Protector that these
findings were inadmissible in terms of the rule in Hollington v Hewthorn,
as being merely the opinions of various other courts in regard to her
conduct. The contention was rejected . The judge pointed out that the
findings in question were not made in criminal proceedings , but in
reviews of the Public Protector’s conduct , and they were all final andno
longer subject to appeal. He held that given the criticism addressed to the
rule it should be strictly confined to the circumstances to which it clearly
applied, namely the use of findings in a criminal case to prove facts in a
civil case. As regards the argument that the rule exclude d the findings
with which he was concerned, because they were irrelevant opinions, the
learned judge held that the findings by judges in review proce edings
cannot be equated to the opinions of ordinary individuals. One can well
understand the reluctance of a judge to hold that findings by our highest
court and the full court of the division in which he was sitting were
merely irrelevant opinions that could be disregarded.

[165] In my view that criticism of Graham v Park Mews Body Corporate
was well -founded. The rule in Hollington v Hewthorn should not be

126 Institute for Accountability in Southern Africa v The Public Protector and others 2020 (5) SA 179

(GP). The views expressed in this judgment have found suppor t in Maqubela and Another v The
Master and Others 2022 (6) SA 408 (GJ) paras 47-50.

125
extended beyond the circumstances to which it expressly applied. In other
instances where it is sought to use findings in a previous case to prove
facts in a subsequent case, the test for admissibility should be relevance
and the court must pay careful attention to the weight to be attached to the
evidence thus tendered. It should be excluded if, like the Land Securities
case, it diverts the case into a collateral enquiry.

Discussion
[166] Applying those principles to the present case, the rule in Hollington
v Hewthorn was inapplicable because the CCMA award w as not made in
criminal proceedings. It was a labour arbitration to decide whether Luis’s
dismissal was either procedurally or substantively unfair. The onus of
proof rested on TCM and the decision by the commissioner that it was
not unfair in either respect was final and binding on both TCM and Luis.
The s 252 proceedings involved the same parties and the allegation was
that Luis’s dismissal was both procedurally and substantively unfair. The
onus rested on Luis to prove that. While the s 252 action required him to
show that the dismissal was unfairly prejudi cial to him in his capacity as
a shareholder, and he was not seeking conventional labour law remedies
such as reinstatement or compensation , the issue of the unfairness of his
dismissal was the same in both proceedings and there was a legally
binding decision that it was not unfair . On any view the CCMA award
was not irrelevant to the s 252 issue that Luis had raised and did not raise
collateral issues. Accordingly the judge erred in treating it as such.

[167] In fairness to the judge there are passages in the record that
suggest that counsel for TCM may have been under a misapprehension as
to the scope of the rule in Hollington v Hewthorn . Leading counsel
mentioned the case and was plainly concerned that without some

126
admission it would be necessary for him to c all all eleven witnesses who
had testified at the CCMA enquiry to show that the dismissal was fair, as
the rule might prevent him from relying upon the CCMA award . That
concern resulted in the defendants ’ attorney proposing to the plaintiffs’
attorney that the record of the evidence before the CCMA should be
accepted as evidence in the trial , a proposal that if accepted would have
resolved one of the key issues in regard to the conduct of the trial. The
plaintiffs did not explain why they did not agree to t his proposal and the
judge disallowed cross -examination of Luis directed at ascertaining why
this was unacceptable.127 That disallowance was based on Luis not having
been the author of the correspondence between the attorneys . That was
not a good reason for preventing counsel from cross -examining Luis on
their contents.128

[168] On the issue of the relevance of the CCMA award the status of
such an award was dealt with above. The grounds upon which Luis
contended that his dismissal was unfair for the purposes of thi s action
overlapped to a considerable extent with the grounds of unfairness
canvassed in the CCMA. The record of the CCMA proceedings was
before the high court , as were the reasoned findings of the initial
disciplinary hearing, the appeal and the CCMA comm issioner. Luis was
cross-examined to a limited extent129 on his basis for claiming that the
result of the disciplinary procedures was unjustified. The high court was
in a position to reach its own conclusions on whether there were grounds
for doubting the fi nding of the commissioner and it could do so in the
light of the reasons advanced by Luis for not accepting that conclusion.

127 In argument counsel merely said that ‘Of course’ they could not agree to that proposal.
128 Van Tonder v Kilian NO 1992 (1) SA 67 (T) at 72F -73J; Absa I -Direct Ltd v Lazar us NO and

Another [2017] ZAKSDHC 14; 2017 JDR 0572 (KZD) para 6.
129 Cross-examination was restricted by certain time constraints imposed by the judge.

127
But it did not do so, even though the fairness of the dismissal was of
central importance in the exclusion case advanced by Luis. That was an
erroneous approach.

[169] It is helpful to consider the grounds Luis put forward for not
accepting the CCMA award. His only complaint in regard to the
disciplinary hearing was that he was refused legal representation. As a
result, and acting on the a dvice of his attorneys , he withdrew after
handing in a document with the submissions prepared by his attorneys .
He refused to give evidence or be cross-examined. He attended the appeal
hearing and handed in submissions , but again was refused legal
representation. The record in the CCMA reflects that his complaint, about
being refused legal representation, was not pursued before the
commissioner. Luis could not recall what other complaint he had about
the appeal , save that he would not concede that the chair was
independent. As regards the proceedings before the CCMA his complaint
was that because of some confusion over the date for the hearing new
counsel was briefed and only had two days to prepare before the hearing
commenced. As a result he said that ‘due to lack of preparation we
weren’t allowed to present our case fully’. This complaint was not borne
out by an examination of the record of the CCMA proceedings. Whatever
initial problems may have been experienced by counsel , and none were
raised or appear from the record , the hearing proceeded on 18 March
2010 for five days and counsel cross -examined TCM’s witnesses,
including Wayne and Iqbal, by reference to a detailed trial bundle . There
is no indication from the transcripts that exist 130 of his being hampered in
doing this. The hearing was then adjourned from March to July whe n
Andrea gave evidence and was cross -examined. Luis gave his evidence

130 That in respect of Iqbal is incompletely transcribed.

128
over two days in July and was cross examined for a further two days in
September. Throughout there was no indicati on that counsel was
insufficiently prepared or that Luis was deprived of the opportunity to
present his case in full.

[170] The CCMA was the only tribunal having jurisdiction in South
African law to determine whether Luis had been unfairly dismissed from
his employment. Its binding decision that he had not was plainly relevant
to the same issue when raise d in the s 252 proceedings. At the very least
it raised a prima facie case for him to rebut that his dismissal had not
been unfair. That was particularly so in view of the fact that he had
invoked the jurisdiction of the CCMA to contest the fairness of his
dismissal. Proof that his dismissal was unfair was a necessary precursor
to his contention that as a result he had suffered unfair prejudice in his
capacity as a shareholder. In my view the situation was closely analogous
to that which applies in disciplinary proceedings involving advocates and
attorneys, where the legal practitioner in question has been convicted of a
crime by a competent court. That is taken a s prima facie evidence that
they committed the crime, but they are entitled to challenge the
conviction and show on the record of the trial that they should not have
been convicted. They are entitled to produce evidence other than that at
their criminal tr ial to show that they were not guilty of the offence of
which they had been convicted.

[171] I can see no reason why that approach should not be adopted in
relation to a CCMA arbitration . Luis was represented by counsel on the
instructions of the firm of attorneys who had advised and represented him
since the end of 2007 and which represented him in the trial of this
action. He was in a position in this trial to contend on the record that the

129
CCMA commissioner had erred. He made no attempt to do so. Nor did he
make any attempt to adduce evidence to show that the commissioner
erred. In some respects, such as his contention that his counsel had
insufficient time to prepare for the hearing before the CCMA , his case
was not borne out either by the dates on which the hearing took place, the
cross-examination of TCM’s witnesses or the detailed basis upon which
his own evidence was led. In short , he presented no evidence and
advanced no plausible reason for suggesting that the CCMA
commissioner’s assessment that his dism issal was fair was flawed in any
respect.

Conclusion on dismissal
[172] In the circumstances , the onus resting upon Luis of showing that
his dismissal was unfair, either procedurally or substantively , was not
discharged. It followed that while his dismissal may have prejudiced him,
he was not unfairly prejudiced in his capacity as a shareholder by it.
Insofar as his exclusion case rested on his dismissal as an employee apart
from the legitimate expectation that he claimed he had to continued
employment and status that case must fail. For those reasons, his primary
case based on his exclusion should have failed.

Absence of genuine negotiations and a fair offer
[173] Luis and Jose’s third source of alleged unfair prejudice was that
they were , as counsel put it, ‘locked in’ and unable to dispose of their
shares in the company. Counsel submitted that there is prima facie unfair
prejudice where a shareholder is locked in. He submitted that the lock -in
was a vital part of the case and urged us to look at the justice of the
situation because it involved people’s lives. There was a need for what he
termed a commercial divorce. He argued that the shareholders agreement

130
itself was not the problem, it simply did not go far enough. The problem
was that in this situation the minority shareholders were unable to
extricate themselves and realise the value of their shares and this needed
to be remedied.

[174] There were two elements to the complaint concerning the failure to
negotiate. The first was that Andrea had refused to engage in bona fide
discussions or negotiations with the aim of permitting the plaintiffs to
dispose of their shares, either to TCM, the remaining shareholders or a
third party. The second was that Andrea had prevented Luis and Jose
from having proper access to the finan cial documentation of TCM in
order to arrive at a fair assessment of the value of their shares. It was
contended that in order for them to comply with the requirements of
clause 13 of the shareholders agreement it was first necessary for them to
determine a fair value for their shares, based on adequate and accurate
information. Only then could they market the shares and find a third party
purchaser, which was a necessary precursor to them offering the shares to
their co -shareholders on the terms they had b een able to obtain in the
open market. This involved considering whether, and if so to what extent,
there was an obligation to provide that information and engage in
negotiations with a view to enabling Luis and Jose to exit the company
and dispose of their shares.

[175] In regard to negotiations, a lthough counsel submitted that the
problem did not lie with the shareholders agreement , in my view that is
precisely where it lay from the perspective of Luis and Jose . Luis
admitted this when saying that:
‘In hindsight, what the agreement says and what it should have said is actual ly quite
different.’

131
In his affidavit in the s 252 application he had been more explicit saying
that he had been advised that:
‘there are several glaring deficiencies and impracticalities in the agreement one of
which has left me in an untenable position.’
His problem lay with the effect of clause 10 , read with clause 13, of the
shareholders agreement. Clause 10 dealt with various situations that
would hinder a shareholder from performing their functions or place them
under a disability. One of those was a shareholder leaving the employ of
the company for any reason whatsoever . It provided that if they did so
they were deemed to have offered their shares to the remaining
shareholders on the terms set out in clause 13. That clause deal t generally
with a shareholder wishing to dispose of their shares . It set out in
considerable detail how any such disposal was to take place. There were
separate provisions relating to Tony and Iqbal. If one of th e other three
shareholders wished to dispose of their shares , or some of them, they had
to offer them to their co -shareholders at a price at which the disposing
shareholder wanted to sell the shares to an identified third party.
Thereafter there would either be a sale to the co -shareholders, or some of
them, or to the third party. Any sale to a third party required the consent
of the board of directors. The shareholders agreement did not impose an
obligation on the remaining shareholders to engage in negoti ations with
the departing shareholder to acquire their shares.

[176] Provisions restricting the disposal and transferability of shares may
operate to the prejudice of a minority shareholder wishing to exit the
company, by making it difficult for them to leave o r creating a locked in
situation. However, the basis upon which that situation was said to be
unfairly prejudicial was never explained. These were the terms the parties
had freely agreed. A claim that implementing them was unfair could only

132
be an attack on the fairness of the terms themselves. That amounted to
nothing more nor less than saying that the shareholders agreement was
unfair. Counsel rightly disavowed any such argument. It is not the court’s
function under s 252 to pronounce upon the fairness of agreements freely
entered into by persons of sound mind and contractual capacity. The
argument that a mere loss of faith, confidence or trust in management
constitutes unfair prejudice , unless arrangements are made to purchase
the disaffected shareholder’s shares, amounts to claiming a unilateral
right to withdraw from the company and would impose an obligation on
the company or the remaining shareholders to find the money to enable
this to happen . That is a compulsory purchase without agreement or
wrongdoing in the form of unfairly prejudicial conduct. It is one thing to
grant a remedy where the exercise of rights by the majority shareholders
has caused unfair prejudice to the minority. It is something entirely
different to confer upon a shareholder a right additional to those to which
they have agreed in a shareholders agreement and at the same time
burden the other shareholders with obligations they were not asked to
undertake and never accepted.

[177] In the present case Luis’s dismissal and Jose’s resignation triggered
the deemed offer provi sions in clause 10 of the shareholders agreement.
The structure of clause 13 was that an offer would be put to the remaining
shareholders in due course , but that was not for the purposes of
negotiation. Its terms would be fixed by the terms of an offer the
departing shareholders had obtained from a third party. They could either
accept or reject those terms. Any negotiations outside those terms were
entirely voluntary. There was no obligation on the remaining shareholders
to negotiate outside the terms of the agreement to acquire their shares at a
fair price. The plaintiffs were entitled to secure a third party offer to

133
purchase their shares , which they would then submit to the remaining
shareholders under clauses 13.14 to 13.17. It is difficult to see how a
failure to negotiate when one is under no obligation to do so can cause
unfair prejudice to another shareholder. The request from the disaffected
shareholder that the remaining shareholders should negotiate a basis for
their departure was a request to depart from what the parties agreed in the
shareholders agreement. The refusal to agree to that cannot on its own
amount to unfair prejudice to the disaffected shareholder.131 Although not
obliged to do so , Andrea had indicated a willingness to negotiate a basis
for Luis and Jose to depart, but they were not prepared to accept his terms
for doing so. In those circumstances he withdrew, but because the process
was entirely voluntary on his part it could not give rise to unfair prejudice
in the absence of his having given any other undertakings.

[178] The plaintiffs’ heads of argument drew attention to a what they
described as ‘Cornell i’s obnoxious and obstructive behaviour’ at the
meeting on 18 February 2009. They suggested that the litigation ‘was
necessitated to a significant degree’ by Andrea’s conduct. The
submission, like a number of others, was long on adjectives and short on
substance. Andrea had been asked to attend a meeting where the plaintiffs
would propose that they exit t he company and either TCM or the
remaining shareholders would purchase their shares. Andrea’s attitude,
formed against the background of Luis’s conduct since 2004, was
straightforward. The plaintiffs wanted to leave the company and cease to

131 This is not a case such as Tomanovic v Global Mo rtgage Equity Corporation Pty Ltd op cit, fn 61,
the facts of which appear to be unique. The parties held various businesses in a loose partnership and
agreed to separate those interests. Various heads of agreement were concluded to give effect to the

separation and as part of the process Mr Tomanovic resigned his directorships and forewent his salary
replacing it with what were described as loans against the ultimate purchase price of his interest. The
negotiations broke down and the other shareholder dema nded repayment of the loans while refusing to
restore Mr Tomanovic’s position as director and the payments made to him. That was held to be
unfairly prejudicial to him.

134
be directors at all. As a sign of their good faith he wanted the two of them
to stand down as executive directors immediately and accept a reduced
remuneration. In return he would assist in finding a purchaser for their
shares. In that way he would not be negotiating ‘with a gun to his head’.

[179] That was a legitimate , if hard -nosed, negotiating position. The
potential prejudice to the plaintiffs was limited because their goal in any
event was to cease to be executive directors or to work for TCM. The
judgment said that they could not have been expected to agree to him
alone finding an interested third party to buy their shares. Why ever not?
Like any other mandate they could have stipulated for a time period
within which he was to do that and he had the advantage over anyone else
of knowing the company intimately. Letting him find a purchaser meant
there was little risk of problems arising with the requirement that a third
party purchaser would require the approval of the board of directors to
acquire the shares. Imposing thi s requirement also had its risks for
Andrea and the company becaus e, if the subsequent search for a
purchaser was unsuccessful, he would be faced with the need to reinstate
and possibly compensate the plaintiffs. If he refused, a claim that they
had been u nfairly prejudiced by giving up their executive directorships
would inevitably follow.132 The approach taken by Andrea at the meeting
may have been a hard line approach, but that was to be expected against
the background of events and is not in any way unusu al in commercial
negotiations. Mr Geel accepted that his walking out was a form of
negotiation.


132 See Tomanovic v Global Mortgage Equity Corporation Pty Ltd op cit, fn 61, where the f ailure to
reach agreement on the terms of an agreed division of the business was held to have been unfairly
prejudicial where the claimant had in good faith resigned his directorships and after the breakdown in

negotiations the other party refused to reinstate him.

135
[180] In the heads of argument Andrea and the other shareholders were
criticised for ‘insisting on strict obedience to the terms of the agreement’.
There was, so the submission went, nothing to stop them from negotiating
in good faith outside of the special provisions of the shareholders
agreement. That is correct, but they were not obliged to do so and it was
not unfair for them to ask that their agreement be honoured. Any different
approach is nothing more than an endeavour to create an obligation to
negotiate on terms for the disaffected shareholder to depart, even though
the shareholders agreement imposed no such obligation . If upheld it
would impale the appellants upon the horns of a dilemma. If they
negotiated outside the items of the agreement, a failure to offer to
purchase the plaintiffs’ shares at a price acceptable to them could be
attributed to negotiating in bad faith. If they refused to negotiate outside
the agreement their refusal could be characterised as acting in bad faith.
Either way the outcome would create grounds for contending that there
was unfair prejudice in the conduct of the company’s affairs. Upholding
the argument would give the disaffected shareholder a unilateral right of
withdrawal. The remaining shareholders would always be obliged to
negotiate terms for the minority to depart and they would do so in the
face of the threat that otherwise a court would impose terms upon them.
But that is t he very situation the shareholders agreement was designed to
avoid, not only in relation to Luis and Jose, but in respect of all five
shareholders.

[181] The plaintiffs’ additional complaint was that they were obstructed
in obtaining the financial information they needed in order to formulate a
proposal that could be taken to potential purchasers for their
consideration. The argument on unfair prejudice was that under clause 10
of the shareholders agreement once a deemed offer was triggered ,

136
whatever the cause of that might be, the affected shareholder was entitled
to whatever information they w ished in order to be able to take their
shares to potential buyers and solicit offers. This appears to have been
treated as axiomatic, but I have difficulty in finding a l egal basis for it. If
such a right existed it must have been subject to some constraints. A
shareholder would possess the audited account s and that would be the
ordinary starting point in valuing the company’s shares . It seems to me
that disclosure of confidential information such as management accounts
would require restrictions to ensure that their confidentiality would not be
breached. That would be important, as buying the shares might only be of
interest to someone in the same industry , or even a current competitor, as
was apparent from Mr Geel’s evidence about whom he would approach
as a possible purchaser of the shares.

[182] In demanding this information Luis said that he was entitled to it in
his capacity as both a shareholder and as a director. Insofar as the former
was concerned reliance was placed upon clause 12 of the shareholders
agreement. Clause 12.1 imposed upon the parties an obligation to procure
that the company kept ‘proper and up to date accounting, financial and
other records’ in relation t o its business and affairs and to produce its
accounts according to accounting policies agreed by the board from time
to time, which accounts were to be available for inspection at all
reasonable times and upon giving reasonable notice to all shareholders. In
amplification of that, management accounts consisting of a balance sheet,
profit and loss account and cashflow statement , together with a written
management report , were to be produced monthly within twenty -five
business days of the end of each month . Audited AFS were to be
produced with six months of the company’s financial year end. In
addition there was an obligation ‘as soon as practicable’ to provide

137
shareholders with such other information as to the financial affairs and
business of the company as the shareholder might reasonably request
from time to time, including to explain any variations between budgeted
and actual figures of the company for any period.

[183] It does not appear to me that this clause was directed at enabling a
shareholder to place otherwise confidential information before a third
party adviser with a view to assessing what price the shareholder could
hope to obtain for their shares. On its face its purpose was to provide
shareholders with information that would enable them qua shareholder to
keep track of their interest in the company and assess how it was doing.
Luis demanded information for the purpose of placing it before Mr Geel
and his team so that they could undertake a valuation of his and Jose’s
shares. Increasingly, as time p assed, the purpose of the information was
to support a case that the accounts were inaccurate. I am not satisfied ,
without having had any detailed argument on this , that he was entitled to
do so. Both the frequency and the extent of the information demande d
seemed to exceed the reasonable information t hat this clause was
designed to provide to the shareholders in for them to know what was
happening in the company . Clause 12.2.2.3 suggests that the purpose of
seeking other information was to investigate discrepancies between
budgeted and actual figures and similar matters.

[184] The plaintiffs ’ heads of argument claimed that ‘all information
should have been candidly made available’ but failed to address which
information was information to which the plaintiffs were entitled or how
that should be identified. On any basis the right to information was
subject to a reasonableness limitation. However, t he approach was that

138
anything Luis asked for he was entitled to receive. 133 That was a
startlingly wide and in my vie w obviously incorrect, claim. It is
illustrated by the list of items contained in an email he addressed to
Andrea on 10 July 2008, which asked for the following in electronic
format for all TCM companies, divisions and subsidiaries including four
property owning companies:
‘1) Draft Financials for 2008 incl. a List of items still to be finalised.
2) Daily balances of ALL bank accounts until 10/072008 (Daily Balances.xls
spreadsheet)
3) Updated Management Accounts till end of May.
4) Updated Cash Flow Statements till the end of May
5) Combined (JBA 7 TCMSERVE) Age Analysis Report as of 29/02/2008 –
Technology Corporate Management only
6) Copy of actual Bank Statements 01/05/08 to 30/06/08 – Stand 226 only
7) Balances on Shareholders Loan Accounts as of 30/06/2008
8) Copy of Leases for Midrand, Melrose Arch, Cape Town and Bedfordview
9) Budgets from 2009 Financial Year – Still Outstanding from previous request.
Not surprisingly Andrea replied pointing out that Wayne had many tasks
such as finalising AFS and budgets and that the requests would be looked
at once he had time. A letter addressed to the plaintiffs’ attorneys on
7 October 2008 by TCM’s attorney complain ed of TCM being
continually inundated with requests addressed to Andrea and Wayne for
information. Those demands for information occurred during the period
when Mr Geel was working on his first valuation, which was dated
November 2008 , and it seems probable that their purpose was to assist
him in that task. The letter pointed out that TCM did not have t o comply
with unreasonable requests, nor was there any obligation on Andrea and
Wayne to provide explanations in writing.

133 In evidence he said: ‘As far as I understand directors regardless of whether executive or not they’re

entitled to all the information or all company related information, whatever they want.’ He appeared to
be oblivious to the obvious limitation that the information sought must be for the purpose of his
discharging his duties as a director.

139

[185] The heads of argument also dealt with a letter written by TCM’s
attorney to Mr Geel after the abortive meeting saying that it appear ed
during the course of the meeting that he had been furnished with TCM’s
confidential information to which he was not entitled without the consent
of TCM’s board of directors. No doubt that was due to the contents of Mr
Geel’s presentation. The informatio n was specified as consisting of
balance sheets, draft financial statements, management accounts, budgets,
bank statements and other documentation. Clearly it referred to
information furnished by Luis to Mr Geel for the purpose of the work
Luis had employed Mr Geel to undertake for his own personal purposes.
That is conceded in the heads of argument where it is said to have been to
enable the plaintiffs to stipulate a price for the sale of their shares ‘or,
later, to prepare their case’. In other words the requests were being used
for the purpose of obtaining early discovery. They were not directed at
any purpose under the shareholders agreement , nor had the information
been sought for any purpose arising from Luis discharging his duties as a
director of the company. There was nothing untoward in the company’s
attorney writing to a third party who had been placed in possession of
confidential information of the company asking for its return and warning
that if it was further disclosed there would be consequen ces. In the
commercial world information of that type may be disclosed for purposes
of a due diligence or similar exercise, but it is almost invariably done in
terms of a non -disclosure agreement to safeguard the confidentiality of
the information.

[186] While the plaintiffs failed to show that there were relevant
documents to which they were entitled and which they were denied , if
they were denied information to which they were entitled they had been

140
given a specific remedy to deal with this. That remedy lay under clause
12.2.3, but it was not invoked. There is also a difficulty with the claim
that it was impossible for the plaintiffs to take a proposal to the market
without the information that was allegedly withheld . It was not supported
by any evidence of an attempt to identify suitable potential purchasers, or
to test the waters in regard to price on the basis of the audited accounts
that were freely available to the plaintiffs and their advisers. Unless that
was done and it could be shown that the absence of particular data had
proved a stumbling block in attracting potential purchasers , this was pure
speculation. Lastly there was no evidence of the prejudice actually
suffered as a result of the lack of information. Mr Geel produced lengthy
and detailed repor ts setting a value on the shares of the company which
formed the basis of their claims in both the s 252 application and in the
present action. He does not appear to have experienced any difficulty in
doing so and although he updated the reports several ti mes over the years
of the trial, during which more and more documents were disclosed in
consequence of applications in terms of Rule 35(3), his valuation of
R160 million never changed.

[187] There was accordingly no substance in the contention that the
plaintiffs were unfairly prejudiced by being denied access to TCM’s
documents. There was also no basis for any adverse findings against
Andrea for his reluctance to disclose documents that he did not think Luis
was entitled to , or in his wishing to protect the con fidentiality of the
company’s documents.

[188] For those reasons the plaintiffs argument based upon the failure to
make a fair offer to purchase the shares , the alleged failure to negotiate
and the failure or refusal to produce documents , could not succeed. It

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follows that the secondary argument on behalf of Luis and Jose had to
fail. That left as the only possible basis for the claim a breakdown of the
relationships among the shareholders and a loss of trust and confidence in
the leadership of Andrea, accompanied by a lack of probity on his part in
the management of the company’s affairs. A lthough this was not
separately argued nor clearly held to exist in the judgment , the high court
made findings on each of the plaintiffs’ other complaints and the
plaintiffs submitted that these findings were unimpeachable, although the
submission was not developed in oral argument . It is accordingly
necessary to consider whether the plaintiffs were entitled to relief in
respect of those issues.

Loss of trust and confidence due to a lack of probity
[189] The fourth alleged source of unfair prejudice was that Andrea and
the other directors had shown a lack of probity in their conduct of the
affairs of the company and this, combined with the lock -in, amounted to
unfair prejudice. This argument was common to Luis and Jose. It was not
fully developed in the heads of argument, nor was it clearly set out in the
high court’s judgment, although findings were made on various matters
underlying the argument. Whether a proper factual foundatio n was laid
for this must be determined. The starting point must be those matters
pleaded in the particulars of claim that bear upon the issue. There are
three. The first wa s the treatment of the Supplies Division. The second
was a journal entry that was sa id to be an improper write -off of stock in
an amount of R11.2 million in 2008 . The third was an allegation that
Andrea had conducted the business from 2007 to 2012 in a manner that
caused the operating profit and EBITDA to be reduced; the operating
expenses to increase substantially and the gross profit to climb by about
50%. This was ascribed to Andrea intentionally, alternatively recklessly,

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failing to contain and/or reduce the operating expenses in proper
proportion to its gross profit, in order that ben efits might accrue to
shareholders by way of dividends and the growth and well -being of the
company and its ultimate profitability to shareholders would be ensured
and protected.

[190] On these three bases Luis accused Andrea and the other directors
of conduct that would reveal a lack of probity. But he accepted under
cross-examination that his accusations were not based on any facts known
to him. In fact much of it was based on the analysis and opinions of Mr
Geel. The high court made favourable findings conce rning Mr Geel’s
merits as a witness, accepted his evidence and reports about each of these
three issues. The appellants vigorously attacked those findings relying on
the judgment of this court in NPC.134 Surprisingly, the plaintiffs’ heads of
argument did not deal with the attack or seek to rebut it. The members of
the court were told with few exceptions that we did not need to read the
documents in the record referring to financial matters unless specifically
referred to.

[191] It is unnecessary to endorse all th e appellants’ criticisms of Mr
Geel as a witness. However, those criticisms had merit. The following
features of Mr Geel’s testimony should have given rise to caution, if not
disquiet, in weighing his merits as a witness.
(a) The terms of his engagement provid ed that he would not seek to
establish the reliability of the information received from Luis and
Jose and that he assumed no responsibility for the accuracy,
reliability of completeness of that information. He did not

134 PriceWaterhouseCoopers Inc and Others v National Potato Co -operative Ltd and Others [2015]
ZASCA 2; [2015] 2 All SA 403 (SCA) paras 96-114 (NPC)

143
investigate anything in the face of pl ausible and detailed
explanations in affidavits that he had read;
(b) He regarded Luis as his client and said that his responsibility was
to Luis, although he later tried to say that he understood his
obligations to the court as an expert witness;
(c) After he h ad changed from being a commercial adviser on a
possible sale of shares to an expert witness in an unfair prejudice
case, his fee arrangement with Luis remained on a contingency
basis under which he was to be rewarded depending on the amount
for which Luis’s shares would ultimately be sold. That gave him an
incentive to be partisan in his evidence. If a buy -out was made at
his valuation of R160 million his fee would be of the order of R5
million;
(d) To a considerable extent, insofar as the claim was based up on his
evidence, it was being advanced on his advice and according to his
analysis of the financial records of TCM. For example he accepted
that, until he raised it , Luis had no idea of what EBITDA was. He
accepted that the arguments in that regard were de vised by him. In
that situation there was a serious risk that he was seeking to justify
himself. A fair reading of the record showed that this is what he
did;
(e) Neither his reports, nor his evidence in chief, disclosed any of
these matters reflect ing on his independence and impartiality as a
witness whose duties were owed to the court and not to his client ;
(f) A careful and fair -minded reading of his evidence showed that he
was reluctant to make obvious concessions in answer to counsel’s
questions; that he often gave lengthy and argumentative answers to
simple and direct questions; that he was consciously trying to

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foresee the direction of cross -examination and forestall it; and on
some issues he was obviously evasive.
All in all , Mr Geel was not wholly indepe ndent, nor balanced and
impartial in his evidence. He quite explicitly adopted the approach of
Luis, his client, that if there was anything that appeared odd or unusual to
him, or about which he was unclear, that should be attributed to some
improper or ma lign purpose on the part of Andrea and his fellow
directors. That was not a proper approach for an expert witness to adopt.
It also meant that his evidence should have been approached with a far
higher degree of scepticism than it received.

[192] Before examining the various instances of conduct that allegedly
demonstrated a lack of probity , it is necessary to make one other
preliminary comment about the approach to the evidence. The judgment
and the heads of argument in this court emphasis ed and place d much
store on the fact that the appellants closed their case without calling
evidence. However, w hether that justified an advers e inference being
drawn, either generally or on a specific issue , depended on ‘the particular
circumstances of the litigation’.135

[193] The closure of the appellants’ case did not mean that the court had
to accept Luis’s allegations uncritically and at face value. They had to be
weighed in the light of the documentary evidence and the general
probabilities. The fact that on many issues Luis was contradicted by Jose
should have been dealt with , but the judgment did not mention those
contradictions. The general probabilities required that particularly careful
consideration be given to the impact of Luis’s clear sense of grievance
about his treatment. Throughout, this had manifested itself in allegations

135 Titus v Shield Insurance Co Ltd 1980 (3) SA 119 (AD) at 133E.

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of conspiracies and dishonesty against his co -directors and senior
executives in the company, although he could not point to a single fact to
suggest that any of the individuals concerned had acted in any way
dishonestly or failed to address matters independently and on the basis of
their genuine belief as to what was best for the company. Before
upholding his view that there was a conspiracy to get rid of him , some
consideration needed to be given to whether his complaints in regard to
the accounts and his accusations against Andrea and the other directors
were a product of his obsession that there was a conspiracy against him .
The other consideration was whether it was likely that the individuals
concerned being willing to behave dishonestly in to be in Andrea’s good
books.

[194] Andrea drove the process on behalf of TCM , so it is his conduct
that warrants the closest examination. In regard to the complaints about
the management of the business and the suggestion that deliberate
attempts were made to diminish the profits and reduce the value of the
company, consideration needed to be given to why he or any of the other
shareholders and directors would have done this when it would have been
to their own financial detriment. Furthermore, whatever the merits of Mr
Geel’s criticisms about the conduct of the auditors and the manner of
presentation of the AFS , the business was clearly doing well. Whether it
could have done better was wholly irrelevant. The all egation was that
Andrea had set out to harm it and thereby to cause harm to Luis, by
deflating the profits and the value of the shares, even though on both
aspects he would have suffered the same harm as Luis. That would truly

146
be a case of shooting himself in the foot.136 There is no indication in the
judgment that full account was taken of these problems. It proceeded
simply on the basis that because the defendants closed their case without
calling witnesses all of Luis’s complaints were undisputed. The
protracted cross -examination of the witnesses and the concessions
extracted from them, usually reluctantly, demonstrated that this was far
from being the case.

The Supplies Division
[195] The issue in this regard was a factual one. Was the Supplies
Division fully part and parcel of TCM , as were other divisions of the
company, or was it effectively a separate entity run by Frank and Fabio
(and later Iqbal as well) for their own benefit , whilst operating under the
TCM umbrella? The plaintiffs claim ed that it should b e included on the
basis that its trading activities were for the benefit of TCM and including
it would add about R10 million to the value of TCM as well as
contributing to its overall profitability. In treating it as separate , and
trying to move it to a st andalone company owned by Frank, Fabio and
Iqbal, they argued that the true value of the TCM was diminished and that
Andrea did this in to reduce the price payable for the plaintiffs’ shares. As
that issue only arose after 2007 the implication was that it was a new
development at that time when the problems between Luis and Andrea
became more intense. In response, t he defendants pleaded that the
Supplies Division was created in 1995 for the purpose of ensuring
continuity of TCM’s supply chain and to assist Frank by warehousing the
former business of Sternco within TCM, while it would still be conducted
for Frank’s personal risk and benefit. It was alleged that to the knowledge

136 The origin of the expression is the trench warfare in World War I where shooting oneself in the foot
was resorted to in order to avoid further service. In other words it referred to deliberate self -harm,

which is what Andrea was accused of.

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of the plaintiffs it had always been operated as if it were a separate entity
and all profits generated by it accrued to Frank and Fabio . From a legal
and accounting perspective its treatment in the books and records of TCM
might have posed some difficulties . However, no-one suggested that as
between the shareholders of TCM, if the arra ngements in respect of the
Supplies Division were as the defendants described them, they could not,
or should not, be given effect.

[196] Much of the relevant material was common cause. The origins of
the Supplies Division lay in Sternco (Pty) Ltd , a business importing
heavy industrial equipment run by Frank. From the early days of TCM’s
operations it also arranged for the importation of spare parts and other
items on behalf of TCM. Both Luis and Jose gave evidence about thi s,
but neither had a clear picture o f precisely what Sternco was doing on
behalf of TCM. Luis described them as freight agents. Asked to explain
how TCM dealt with the issue when Sternco went into liquidation, he
said:
‘At the time that Sternco went into liquidation, there aren’t many suppli ers overseas
that one can just shut the door on this one and move on to the next. You know this is
very specialised equipment and there is a handful, really a handful of suppliers in all
the countries right around … and it was very important for us to keep that supply line
open and keep a good relationship with the provider, with the supplier of parts . In
essence the supplier viewed us as the customer and Sternco was just the freight agent.
You know the relationship was between TCM and the provider of the s pare parts. So
if we were to default on any payments the supplier would be reluctant to actually
provide us with any more parts.’ (Emphasis added.)
At that time TCM was not an IBM agent and were competing with IBM
for this business. That was why it was imp ortant to keep the supply lines
open.

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[197] The evidence went on:
‘COURT: What did TCM then decide to do as far as this was concerned?
LUIS: Well, TCM had to honour those payments for equipment –
COURT: When you talk of payments, payments by Sternco to the suppliers?
LUIS: I don’t –
COURT: What are you actually talking about?
LUIS: I don’t know exactly if the payment was done from, you know because there is
a freight agent in the middle.
COURT: But they are acting as you say as freight agents?
LUIS: Yes, but from –
COURT: But your suppliers TCM is paying for those suppliers, is it not?
LUIS: I am not sure exactly how that works. I know with the import duties certain
things have been cleared. Sometimes you have to pay the freight agent and the freight
agent pays the supplier.
COURT: Alright.
LUIS: So you know I’m not too clear when it comes to how that whole operation fits
together.’
He confirmed that TCM honoured the obligations of Sternco and paid the
suppliers, thereby becoming a creditor of Sternco.

[198] This showed that Sternco w as more than a freight agent , because
they were incurring the liability to the suppliers to pay for the goods. The
description is rather more that of a purchasing agent on behalf of TCM ,
which seemed to accord with the evidence of Jose, who said:
‘In the very early days Sternco had been doing imports of equipment. Therefore they
had the knowledge of how to transfer funds overseas. They had the knowledge and
they had the contact for shipping agents. So they knew how to do things in that
respect. We had never done that before. We had no idea what a shipping agent was,
what a clearing agent was. How do you pay an invoice in South Africa, originating in
the US and the UK? We had no idea of those. And since they did have the knowledge
in the very early days they supplied us with that service. So I would source a part
overseas and I would hand all the paperwork over to Sternco. They would arrange the

149
transfer of funds to that company. … They would arrange for Skyline to collect the
goods. Skyline in turn had their own people doing the clearing of the goods. I n other
words paying the duties and import duties and so on, and at the end of the day they
would give us a bill that included all that. So it was the price of the goods, the
shipping, the clearing everything. It was very convenient.. We didn’t know how to do
it. They did.’

[199] Comparing these two accounts , it is clear that Jose had a firmer
grasp of the relationship between TCM and Sternco. He sourced the
spares and parts that had to be imported and he dealt with Sternco in that
regard. TCM was paying a fee to Sternco for this service and that would
be included in the bill at the end of it all. His explanation also ma de it
clear why TCM was concerned at Sternco going into liquidation and was
willing to discharge its debts . It posed an existential threat to its own
business.

[200] Jose was unclear about the basis for Frank returning to the business
after a brief hiatus . He said that he came back to carry on doing the
imports for TCM. At the same time he ca rried on with Sternco’s business
of importing heavy industrial machinery. He was still doing that business
when Jose gave evidence in 2016. Jose understood that the Supplies
Division was part of TCM and that Frank was paid a salary. The basis
upon which th is occurred does not appear to have been discussed with
him. Luis’s evidence was that, after the liquidation of Sternco , Andrea
mentioned to him that they were going to employ Frank ‘in order to keep
the freight portion of the company or the importing of t he spares going’.
He said that he expressed concern as to how the company was going to
carry that overhead and Andrea said that Frank would ‘bring in the
industrial part of the Sternco division or Sternco, the company to help
cover his overheads’. He was g oing to be an employee in receipt of a

150
salary and other benefits and on that basis Luis agreed that he would
come into TCM and manage the imports.

[201] The arrangement in regard to the industrial equipment obviously
puzzled counsel who was leading Luis and he sought to clarify matters by
way of a series of leading questions. This only served to create greater
confusion as appears from the following passages in the evidence:
‘MR SLON: And you mentioned that he would retain the industrial, his other or
Sternco’s erstwhile involvement in the importation of other goods, the Iscor … goods
and various other goods that were involved in the earlier dispensation.
LUIS: Well, the import of the goods really came into TCM, like I said t o help
subsidise Frank Cornelli’s over heads, you know overheads in the company because
there wasn’t enough goods being freighted into the country to have him as a sole
freight agent or a specialist in freight. It would have been a lot cheaper just to go to
another freight agent outside the co mpany, so he brought in the industrial part of the
business to help subsidise his overheads in the TCM, the company.
MR SLON: So the effect of all this was that Mr Frank Cornelli became an employee
of the company.
LUIS: That’s correct. Okay, that was the b asis of the agreement that I reached with
Mr Andrea Cornelli, that Frank Cornelli was going to be employed, would get the
same benefits. He was always going to be paid monthly salaries and that’s really what
the bases were.
MR SLON: Yes, and he would then do your imports as he had done before under
Sternco and he would do his own business, industrial goods in order to fund, in order
to supplement his income to make it economical for him?
LUIS: That’s correct.
Mr SLON: It would still have nothing to do with TCM?
LUIS: That’s correct.
MR SLON: The industrial part.
LUIS: Well, he was going to be employed, so that’s, you know the work flow as far as
spare parts or computers happened, okay.

151
[MR SLON]:137 And Jose was still going to be, is still the …
LUIS: Jose Di ez … would place the orders as he normally did and Frank would
manage the freight of the goods and run the industrial on the, you know, to subsidise
his –
COURT: You say subsidise?
LUIS: Yes.
COURT: What do you mean by that?
LUIS: … There wasn’t enough imports of computer equipment, of computer goods to
cover his cost to the company. Okay, so that’s how the industrials landed up in TCM,
okay, because TCM, okay, never had anything to do, okay, with industrial parts. Okay
we’re a computer company. So he broug ht in, okay, and the profits generated for that
helped cover his cost to company as an employee.
MR SLON: Did he have any obligation to TCM in regard to fees or costs that TCM
would be either expressly or tacitly incurring by virtue of this arrangement? Was there
any payback by him?
LUIS: Nothing. Not as far as I know.
MR SLON: And as I understand your version this became, the supplies division, this
so-called supplies division is what grew out of this arrangement with Andrea?
LUIS: Yes. That’s correct. Oka y, that’s what the supplies division was. It was always
a division. Okay, it was never going to be – it was owned by TCM.
COURT: The profits derived from the sale of machinery, to whom would they accrue,
industrial machinery?
LUIS: Well, it belonged to the company to help cover his overheads.
COURT: It belonged you say to –
LUIS: It belonged to TCM. Okay, it was invoiced by TCM, oka y. You know, TCM
invoiced it for [inaudible] on a TCM statement to its customers. It was the business of
TCM.’

[202] This lengthy a nd convoluted explanation failed to address any of
the key points raised in the defendants’ plea. It was not disputed that the
Supplies Division operated under the TCM umbrella, but that was not the

137 There is a gap in the record immediately before this passage and it appears that the name of counsel

was omitted because the following passage is a response from Luis.

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point of the defence, which was that it was located there to assist Frank,
whose existing separate business importing heavy industrial machinery
had been liquidated. If that business could be resuscitated and generate
profits, why would income accruing from it be used to cover overheads
incurred by a computer bu siness that could source the modest services
they received from Sternco from other freight agents? From TCM’s
perspective, why would they wish to enter into the business of importing
heavy machinery, when they were a highly successful computer business?
The two businesses had no connection and combining them produced no
synergies. From Frank’s perspective, why would he hand over to TCM a
business that he could run successfully and in which TCM had no
interest? The suggested arrangement made very little sens e and the
explanation given unravelled under cross-examination.

[203] Cross-examination of Jose and Luis revealed that:
(a) the Supplies Division worked in a separate section of the TCM
premises;
(b) the Supplies Division continued t o import heavy industrial
machinery, but no -one in TCM had anything to do with it and
there is not a single reference to it in any of the documents in the
record other than specific documents such as cheques and invoice
reconciliations used to calculate what was due to the Supplies
Division from TCM;
(c) while TCM banked with Standard Bank, the Supplies Division
banked with Mercantile Bank;
(d) Frank and Fabio had signing power s on that bank account and
were the only non -directors of TCM to have signing powers on
bank accounts in the company’s name;

153
(e) the bank account had an overdraft facility which was secured by
the pledge of a deposit account that TCM maintained with
Mercantile Bank for the sole purpose of providing that security;
(f) the bank account ran an overdraft even though TCM had ample
funds of its own to discharge the overdraft and thereby avoid the
incurrence of interest;
(g) on occasions the Supplies Division borrowed amounts from TCM
which were then repaid by deduction from amounts received from
debtors;
(h) the Supplies Division had its own employees;
(i) the Supplies Division had its own debtors and creditors;
(j) payments made to TCM in respect of accounts rendered to debtors
by the Supplies Division were reconciled separately and paid over
to the Supplies Division by way of cheques drawn on TCM’s bank
account and deposited in the Mercantile Bank account;
(k) administrative expenses incurred and paid by TCM Management
(Pty) Ltd, the management company for the group, on behalf of
subsidiary companies were recouped by charging a management
fee. The Supplies Division was charged a management fee in the
same way as subsidiaries;
(l) TCM Management paid the salaries of all employees in the group,
including subsidiaries, but in the case of the Supplies Division, it
recovered the amount of the salaries paid from the division;
(m) the salaries of Frank and Fabio , as with other employees of the
Supplies Division, were fixed by the m without reference to TCM
management;
(n) there were sales from the Supplies Division to TCM and vice
versa;

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(o) no management accounts were pr ovided to the directors of TCM
in respect of the Supplies Division until after the issue of
summons in this case;
(p) the Supplies Division operated entirely independently of TCM.
These arrangements were completely different from those of other
divisions, w hich had no employees of their own, no separate bank
accounts or bank facilities and no separate debtors and creditors. Putting
all these facts together it is plain that the Supplies Division operated as if
it were an entity separate from TCM.

[204] The Supplies Division continued Sternco’s main business of
importing heavy industrial machinery . Jose confirmed that th is line of
business had nothing to do with TCM. Nobody at TCM had any
involvement in it and no -one was interested in who the suppliers were ,
what w as being imported into South Africa or why. Frank simply
continued with Sternco’s business through the Supplies Division. The
trial court appears to have accepted this because it said:
‘The importation of Sternco’s industrial or mining goods would be retai ned by Frank
Cornelli and the benefits thereof would accrue to TCM in to subsidise the overheads
which Frank Cornelli’s employment now presented to TCM.’
With respect it is unclear what the court had in mind with this statement.
The idea that Frank was go ing to retain the business of importing
industrial or mining goods, but the profits would accrue to TCM to cover
TCM’s overheads made no sense. In what sense would he ‘retain’ the
business when the profits would accrue to TCM? What was he retaining?
If he was retaining the business presumably he would be liable for any
losses, something that would have been in the forefront of everyone’s
minds in the light of Sternco’s liquidation. Why would he agree to such
an arrangement?

155

[205] Jose confirmed that the idea w as to save what could be saved of
the Sternco business in order to help Frank and that he would run the
business of Sternco in the Supplies Division. This served the dual purpose
of assisting Frank and not disrupting TCM’s importation of parts and
equipment because Frank was familiar with that business. In other words
it was an arrangement that suited both parties. The proceeds of importing
heavy machinery were not subsidising TCM’s expenses in respect of
Frank’s overheads to TCM . The revenues generated by the Supplies
Division, whether generated from importing heavy machinery or dealing
with TCM’s importation of spares and stock, were being used to pay its
expenses, including Frank’s salary. When challenged to identify any time
when profits from the Supplie s Division accrued to TCM , Luis’s only
suggestion was that the overdraft with Mercantile Bank had been
reduced. But that did not involve any transfer of profits to TCM.

[206] Luis’s suggestion that matters in regard to the bank account at
Mercantile Bank were arranged so that TCM could monitor closely the
financial viability of the business was not plausible. It would have been
far easier and less costly, including avoiding the payment of interest on
an overdraft and releasing the investment pledged as security for the
overdraft, to operate the financial affairs of the Supplies Division in the
same way as the other divisions of TCM through its bank account with
Standard Bank. There would then have been no need to separate the
Supplies Divisions receipts every month and pay them into the Mercantile
Bank account. It is difficult to conceive of a clumsier and less effective
method of monitoring the financial viability of the Supplies Division and
no evidence was adduced to show that this was what was being done. Of
course, if the losses and liabilities of the Supplies Division, as well as its

156
profits and assets, accrued to Frank and Fabio such monitoring would
have been largely unnecessary.

[207] One would have expected the argument on behalf of the plaintiffs
in this cou rt to address the way in which the Supplies Division operated
and provide a plausible explanation for arranging its affairs in this
fashion, but it was not addressed at all . It ignored the allegations in the
plea as well as the detailed concessions about t hose operations by both
Luis and Jose. The heads of argument suggested that the defendants relied
solely on alleged contradictions between Luis and Jose and a challenge to
the judge’s construction of the addendum to the sale of shares agreement
dealing with the Supplies Division. As to the first the submission was that
Andrea was available to be called as a witness , but was not called. The
suggestion appeared to be that all the concessions on factual issues about
the operation of the Supplies Division shoul d be disregarded, because
Andrea had not testified and said that the concessions were correct ly
made. That is both a novel submission and plainly wrong. Once counsel
had put to Luis and Jose how the Supplies Division operated , and they
had confirmed that the propositions being put to them were correct , there
was no need to call Andrea to give evidence about those matters. Where
there were differences between the evidence of Luis and Jose, and on the
facts set out in paragraph 2 03 I do not think there were, Jose’s evidence
could not be rejected. He was a good witness who on these issues made
concessions more readily than Luis and seemed not to be affected by any
particular hostility towards Andrea. Unlike Luis he regularly voted in
favour of accepting the ann ual audited accounts and in favour of Andrea
continuing in his role as chairman of the company as well as supporting
his remuneration package He also signed the addendum and voted to
place the Supplies Division in a separate company with Frank, Fabio and

157
Iqbal as its shareholders. His only concern was it continuing to use the
TCM name.

[208] It is no part of this case for us to decide on the precise legal effect
of the arrangements in regard to the Supplies Division, or whether and, if
so, how it should have be en dealt with and disclosed in TCM’s accounts .
The fact that the trading operations of the Supplies Division were being
conducted under the TCM name with accounts being rendered and made
payable to TCM through its Standard Bank account might have resulted
in any claims arising from those operations being pursued against TCM.
Luis may have been technically correct in saying that in its current form it
was part of the business of TCM , but it added nothing in terms of either
profits or losses to the AFS, so th e effect was neutral. However, that is
not the issue confronting us. We are concerned with whether Luis and
Jose have been unfairly prejudiced by th is arrangement of its affairs . In
answering that question their awareness of the arrangement and
acquiescence in it was the important issue . If they were aware of and
acquiesced in it they cannot claim to have been unfairly prejudiced by
it.138

[209] Mr Geel’s evidence in regard to the change in presentation of the
annual accounts in 2009 to show a separate balance sheet for the Supplies
Division was addressed to the wrong issue. The only express mention of
the Supplies Division in the accounts for the previous years was a note
that first appeared in the 2004 accounts under contingent liabilities that
‘The company’s cal l account is pledged to the value of R2 800 000’. In

138 Blackman, op cit, fn 52, p 9-41 to 9-42: ‘An applicant cannot complain of conduct that was carried
out with his acquiescence or agreement, and still less of something done with his co -operation or
collaboration.’ The principle flows from Irvin and Johnson Ltd v Oelofse Fisheries Ltd; Oelofse v Irvi n

and Johnson and Another 1954 (1) SA 231 (E) at 243A -B and was recently affirmed in this court in
Parry v Dunn-Blatch and others, op cit, fn 12, para 48.

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2005 this note was expanded to say that the pledge was ‘as security for
the Supplies Division’s current account with Mercantile Bank’.
Thereafter the note remained the same until it was dealt with separately in
2009, where it was said that the management of the Supplies Division
share in 100% of the profits of the division. The note d id not suggest that
this was a new arrangement. Apart from this note , the accounts prior to
2009 do not indicate how the af fairs of the Supplies Division were dealt
with. If the arrangement for which the defendants contended were not
correct and only contrived in 2008 and 2009 , that could have been
exposed quite readily by looking at the books and accounts for the
Supplies Div ision, but those were not asked for , nor produced. The
inference is that the Supplies Division indeed operated as if it were an
entirely separate entity from TCM . It was irrelevant in those
circumstances whether its trading operations were included in TCM’ s
overall accounts or omitted, as long as they neither increased nor
decreased the trading profits shown in the accounts. Mr Geel considered
this question and his conclusion was that in each year that he reviewed
any profits before tax of the Supplies Div ision were distributed to Frank,
Fabio and Iqbal so that the profits of TCM were unaffected by it and the
value of the Supplies Division to TCM was nil.

[210] Luis was well aware of how the Supplies Division was being
conducted. He said that he signed 95% of the cheques for the division.
These reflected the transactions described earlier. In regard to the
employment of the Frank and Fabio there was a revealing exchange in
November 2002 about grading of employees for the purpose of the
December bonus. Mr Sarkis asked Andrea how he should deal with the
rating of directors and apparently furnished a list of names. The response
was that all directors should be given a two rating and then Andrea

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suggested ratings for four individuals including both Frank and Fabio at a
two rating. This email was copied to Luis, Tony, Jose and Frank. Luis’s
reply had a detailed comment about Frank, but said that he did not know
exactly what duties Fabio performed and therefore could not comment.
Andrea’s response to Luis was:
‘As for S upplies … the rating is irrelevant as they have self -jurisdiction on their
ratings, salary and bonuses. Our help (at month end ) is due to the strict cash
management we require to protect our investment at Mercantile.’
Luis did not question th is statement. An independent jurisdiction over
ratings, salaries and bonuse s was wholly consistent with the Supplies
Division operating as an independent entity outside the control of TCM.
The latter’s only concern was to protect its investment with Mercantile
Bank that had been pledged to secure the overdraft of the Supplies
Division.

[211] Two other facts bear upon this issue. The first is that all the
financial statements in the record commencing with the 2002 year up
until 2008 showed that Frank and Fabio had made substan tial long term,
interest-free, unsecured loans to TCM. In 2002 these were R891 711
(Frank) and R581 597 (Fabio). These loans substantially exceeded those
of Andrea and Luis. They had been r educed by 2008 to R425 104 and
R358 698 respectively. Neither Luis nor Jose could explain the m.
Employees do not ordinarily lend money to their employers, but people
with an interest in a business do. Mr Geel explained that they arose as a
result of the practice at the end of each financial year of granting bonuses
to the two of them in order to eliminate from TCM’s accounts any profits
earned by the Supplies Division. The bonuses were either partially paid
out, or not paid out at all , depending on the cash position of the Supplies
Division. In other words the distribution of the bonuses and their

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retention as loans, effectively to the Supplies Division, was entirely
consistent with the defendants’ explanation of the arrangements with the
Supplies Division.

[212] The second factor is the addendum to the sale of shares agreement
referred to in paragraph 7 that Luis refused to sign, but Jose signed . That
accompanied the addendum showing how the price of the shares
purchased by Iqbal had been computed and contained the following two
paragraphs:
‘3 Iqbal further agrees that he is aw are that the division known as the TCM
Supplies Division has reflected a nil net asset value in computing the purchase price.
4 All the parties are aware that the profits losses, assets and liabilities of the
TCM Supplies Division accrue for the benefit of Frank Cornelli and Fabio Cornelli.’
The addendum was prepared by the defendants’ attorney and signed by
Andrea, Tony, Jose and Iqbal. Jose said in evidence that he signed it
because he though it right at the time. Paragraphs 3 and 4 contained
statements of fact, not expressions of opinion. The judgement noted this
evidence, but said that paragraph 4 was ambivalent (I think this should
read ambiguous) and that the clause was capable of meaning that the
business properly belonged to TCM, but the financial be nefits would
accrue to Frank and Fabio. I can detect no ambiguity that would limit it to
the financial benefits . It said that the profits, losses, assets and liabilities
would accrue for the benefit of Frank and Fabio. The liabilities and the
losses cannot be ignored. Those were also for Frank and Fabio’s account.
Mr Geel had made the same error in saying that Frank and Fabio did not
take risk. Collectively the profits, losses, assets and liabilities
encompassed the whole of the business of the Supplies Div ision. That
was why paragraph 3 of the addendum said that nothing had been
included in the purchase price payable by Iqbal in respect of the Supplies

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Division. Jose said he signed the addendum as an accurate reflection of
the factual position. Luis did not explain at the time why he would not
sign it, nor did he send an email or in any other way query the correctness
of the statements in the addendum. When Andrea sought board approval
for housing the business of the Supplies Division in a separate company
at a board meeting on 9 September 2008 Jose voted in favour of the
resolution explaining that his only concern was the continued use of the
TCM name because if things went wrong it could redound to the
detriment of the group.

[213] If the addendum was factually incorrect, it would have created a
situation where the signatories had signed a formal document intended to
have binding legal effect knowing that its contents were false. It is
improbable that Jose and Tony would have been happy to sign it without
protest. Iqbal would have taken it at its face value , because he was
recorded at the board meeting on 9 September 2008 as saying that he had
always understood the Supplies Division to be a ‘Frank and Fabio
company’. He indicated that he was happy for them to have a BEE
partner other than himself. There is no reason to think that the addendum
was drafted to lend support to a description of the situation of the
Supplies Division that the signatories knew to be incorrect. On the
contrary the probabilities point in fa vour of it being a correct record of
the position. All the directors other than Luis, including Wayne and
Ms Bhula, confirmed the position at the 9 September 2008 board
meeting.

[214] The issue in relation to the Supplies Division was not whether it
was owned by and a division of TCM. Nor was it whether the
arrangement was properly reflected in the accounts of TCM . The issue

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was whether Luis and Jose had been unfairly prejudiced by the
implementation of the arrangements between TCM and Frank and Fabio
which had been in place since 1995 . The arrangements meant that the
Supplies Division operated de facto for the benefit of Frank and Fabio.
Luis and Jose knew that from the beginning and acquiesced in it . Luis’s
claim to have been unfairly prejudiced by the arrange ment was without
merit and his endeavour to obtain a financial benefit from that business
appears opportunistic. There was nothing secret about the arrangement
and it was discussed and implemented entirely openly. The arrangement
did not demonstrate a lack of probity on the part of Andrea. The high
court erred in concentrating on the question of ownership of the Supplies
Division and ignoring the arrangements under which all concerned had
agreed that it would operate. There was nothing dishonest about them and
they did not support the proposition that Andrea showed a lack of probity
in dealing with the Supplies Division.

[215] For the sake of completeness I should deal briefly with two other
points. The first is that Mr Geel devoted part of his report to the Supp lies
Division. He had no personal knowledge of the basis upon which the
Supplies Division had been established or the arrangements made in that
regard. In the circumstances his report and his evidence on this was
irrelevant. It is significant that everything he said about it was directed at
establishing a value for Luis and Jose’s shares. This was a feature of his
evidence. Including the Supplies Division added R10 million to his
valuation of the business. The other point is that , after Luis’s refusal to
sign the addendum to the Sale of Shares agreement , Andrea tried to
separate the Supplies Division by moving it into a separate company in
which the shareholders would be Frank, Fabio and Iqbal. While an off -
the-shelf company was acquired for that purpose no such transfer ever

163
took place because of the dispute over the situation of the Supplies
Division. It was alleged in the particulars of claim that a transfer had
occurred and the plaintiffs’ heads of argument in this court sa id that there
was a transfer . T his was incorrect. A lthough the company was formed
prior to the transfer being approved by the board of TCM , that was
because it was acquired as an ‘off the shelf’ company from someone who
provided that service. The complaint about the formation of the comp any
arose from an incorrect reading of the company’s founding documents. In
the result there was no merit in the claims about the Supplies Division
and the manner in which it was operating. Luis and Jose were not
subjected to any unfair prejudice thereby.

The R11.2 million write-off
[216] The first issue pleaded in regard to financial matters was that
Andrea procured an undervaluation of the inventory of TCM of a value of
approximately R11.2 million. Mr Geel identified this as an issue . He
explained that when un dertaking the valuation he used the management
accounts with which he was furnished, but agreed to wait to update the
report in the light of the audited AFS. However, these differed materially
from the management accounts:
‘as a result of a number of “peri od 13” or audit adjustments, with the principal
adjustment relating to a stock write-off of R11.2 million.’
He noted that Luis and Jose disagreed with the adjustments and were
strongly of the view that rather than writing off or making provision for
inventory obsolescence there was a need to write up the inventory values
because of saleable inventory stored in separate locations not being
included in the inventory count. The only other reference in his report to
this ‘inventory write -off of R11.2 million’ n oted that it had the effect of

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reducing finished goods from the management balance of R18.3 million
to the R7 million in the AFS.

[217] In his founding affidavit in the s 252 application Luis referred to
the fact that in the 2008 AFS the auditors had made a num ber of
adjustments, ‘with the principal adjustment relating to inventory write -
downs and write -offs in an amount of R11 .2 million’. He said that this
did not make sense and confirmed what he had said to Mr Geel, namely
that there needed to be a stock write-up due to saleable stock. He said that
all stock on hand was usable, had intrinsic value and a net realisable value
that exceeded its cost.

[218] In dealing with this adjustment Mr Geel said:
‘I said the major discrepancy that made no sense at all was the sig nificant adjustment
that was being provided for or raised in the draft audited financial statements and that
was in the area of inventory where there was a significant decrease in the value that
was being shown as inventory in these draft financial stateme nts, in comparison with
what we had seen in the draft management accounts. I say material and I will go there
I’m sure in due course. It was to the extent of an adjustment of some R11.2 million,
and that is very material in the financial statements of TCM.’
He added that there were some other adjustments , but the princip al one
was in the inventory area. The judge clarified that he was talking about
the inventory adjustment in the AFS. Mr Geel confirmed this and said
that there had been a material difference on the EBITDA number ‘and it
all arose [due] to, principally arose [due] to [an] R11.2 million adjustment
to inventory’. For him t his was important because the adjustment of this
inventory would have had the effect of increasing his opening figure for
EBITDA. He explained that the adjustment was made by a single journal
entry of a globular figure of R11.2 million. This effected the adjustment
between the management accounts and the audited accounts of R11.2

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million. In his view, given the nature of the bus iness this was impossible.
The write -off could only have applied to inventory , as TCM’s historic
practice in regard to maintenance spare parts was to write them off as
expenses when purchased and not capitalise them.

[219] In the course of the trial while Mr G eel was under cross -
examination the judge ordered the expert witnesses to meet and minute
their agreements and disagreements concerning this journal entry. The
minute of this meeting reflects the following:
‘8 Geel accepts and understands that the journal entry on page 810 removes the
closing balances at 28 February 2007 financial year (i.e. the opening inventory
balances at 1 March 2007 for the 2008 financial year) for the relevant accounts and
this was understood and is confirmed … This journal is not disputed.
9 Geel’s concerns are of a different nature namely that when comparing the balance
of each component and location of inventory as at 28 February 2007 per location,
there is no explanation for the significant reduction of these balances.
…
11 Whilst Geel understands the R11.2 million journal as … being the reversal of the
opening balances, the material difference in the components and locations of the
inventory as noted above and not followed up by the auditors are his real concerns.
Geel realises … that the R11.2 million arises from opening balances of inventory,
which required reversal. This is correctly reversed.’
The minute goes on to refer to an explanation Wayne gave to Mr Geel
concerning a change in the system for recording inventory that occu rred
during the 2008 financial year and continues:
’13 Geel remains concerned that there is no evidence of physical stock count of the
take on inventory balances into the perpetual system. Impey indicated that this is
correct but that [certain documents i n the Trial Bundle} do not deal with any
inventory counts. Any adjustment was made at year end, namely 28 February 2008.

inventory counts. Any adjustment was made at year end, namely 28 February 2008.
14 Geel remains concerned about the conduct of the auditors and evidence (or lack
thereof) in verifying the physical inventory at year end 28 February 2008.

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15 Impey is concerned that the inventory balances at 28 February 2007 may not be
reliable due to the lack of reliability of the [replaced] system, which was under the
control of De Sousa.’

[220] Everything Mr Geel had said prior to this point conveyed that his
criticism of the audited accounts was based on the auditors making the
disputed journal entry of R11.2 million. His evidence had been that this
was a straightforward write-off or write-down of stock values. There was
no justification for it. The concession that it was nothing of the sort , but
an entry that needed to be made in order to reverse and thereby remov e
the closing balances from the previous year, undermined all of his
evidence. He tried to shift the focus to his perception of the absence of
evidence of a physical stock count to determine the inventory balances
for take-on into the new system, saying that he remained concerned about
the conduct of the auditors and the lack of evidence of a verification of
the physical invent ory. He concluded that they had only attended at the
Midrand branch. But a concern about the quality of an auditor’s work was
irrelevant to the pleaded claim that Andrea had procured an
undervaluation of inventory for the ulterior purpose of reducing the v alue
of the plaintiffs’ shares, which is the claim in the particulars of claim. In
any event he ignored the fact that Luis said that the auditors had attended
stock counts at all five main branches with one Van Schalkwy k, then the
national logistics manage r, who reported directly to Jose as the logistics
director.

[221] With respect , the manner in which the judgment dealt with this
issue was unsatisfactory. In the first place the judge persisted in referring

167
to the journal entry as a stock write-off,139 when it was nothing more than
a standard adjustment to remove the closing balances from the previous
year’s accounts. He then said that Mr Geel’s evidence of ‘the stock write -
off’ called for an answer from the defendants. As Mr Geel conceded that
the journal entry was not a stock write-off, it is hard to see what evidence
the court had in mind. The problem was compounded by the judge citing
a statement by counsel that Andrea would testify that there was no
understatement of inventory and that the journal entry was ‘an accounting
adjustment’. This was precisely the concession made by Mr Geel.
Nonetheless the judge went on to say that Andrea should have entered the
witness box to explain the reasons for the non-existent stock write-off and
added that it was reasonable t o suppose that he would not have been able
credibly to explain the reasons for it. The fact of the matter is that the
R11.2 million journal entry was not a stock write-off and the endeavour
by Mr Geel to divert attention away from the fact that he had wron gly
taken an innocuous accounting entry as evidencing unexplained
impropriety, should have bee n rejected. In the result, there was no merit
in this ground for alleging that Luis and Jose were subjected to unfair
prejudice.

Inventory, maintenance spare parts and EBITDA
[222] These three issues took up a considerable part of the trial via the
evidence of Mr Geel and added considerably to the bulk of the documents
in the record. They should not have done so because they were not
pleaded and were not germane to any issue that was properly raised in the
pleadings. The only pleaded issue was that Andrea intentionally or
recklessly failed to control operating expenses to the detriment of the

139 This section of the judgment is headed ‘R11.2 MILLION STOCK WRITE -OFF’ and is described as
a stock write-off thereafter in paras 242-244, 247 and 251 to 254 of the judgment.

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company’s ability to pay dividends and its long -term well -being. A
comparison of Mr Geel’s consolidated report and the withdrawn notice of
amendment shows that the latter was based on the former . The notice of
amendment sought to extend the period under consideration to include
2013. The extension related to the value of inventory o n hand and
maintenance spare parts as well as alleging that with effect from the
financial year 28 February 2013 these had incorrectly been brought into
account as an asset under the category ‘property, plant and equipment’
and depreciated. It sought to update the EBITDA allegations to include
2013. This was novel and came from the 2013 changes to Mr Geel’s
report. The discussion of maintenance spare parts came in its entirety
from Mr Geel’s 2013 report, albeit that this source was not identified as
such in the consolidated report.

[223] Despite the withdrawal of the application to amend , the plaintiffs
went ahead and led the evidence of Mr Geel on all the matters covered by
the proposed amendment. The end result was that v irtually all of his
evidence and the bulk of the documents relating to it dealt with issues not
raised in the pleadings and in consequence were inadmissible. A n
objection to the evidence on inventory, maintenance spare parts and
EBITDA being led was rejected when the trial recommenced at the
beginning of 2014. When it resumed in 2015 the court permitted the
financial evidence to be further extended to include the 2014 year. It
became the heart of the case and in going beyond the pleadings forced the
defendants to engage with numerous collateral i ssues that had no
relevance to the pleaded case. This should not have happened. The
plaintiffs should have been confined to the pleaded issues.

169
[224] This is not mere pedantry or formalism. I am well aware that
pleadings exist for the benefit of the court and t hat in certain
circumstances the conduct of the parties may be such as to broaden the
scope of the dispute and the issues to be dealt with in the trial. But I am
also mindful of the remarks of Harman J in Unisoft140 quoted in the high
court’s judgment that:
‘Petitions under s 459 have become notorious to the judges of this court – and I think
also to the Bar – for their length, their unpredictability of management, and the
enormous and appalling costs which are incurred upon them by reason of the volume
of documents likely to be produced. … In the circumstances it behoves the court, in
my view, to be extremely careful to ensure that oppression is not caused to parties,
respondents to such petitions, or indeed, petitioners upon such petitions, by allowing
the parties to trawl through facts which have given rise to grievances but which are
not relevant conduct within the very wide words of the section.’
The particulars of claim underwent a substantial amendment in 2012
shortly before the first date for hearing. The attempt to amend them again
before the hearing resumed was abandoned. In those circumstances the
court should have been alert to any attempt to expand the issues by the
back door route of claiming that it was ‘corroborative and evidential’,
which was the justification put forward by counsel for the plaintiffs. What
it was said to corroborate was never clear and the court treated it as if the
issues had been broadened.

[225] As far as this appeal is concerned there is no reason not to hold the
plaintiffs t o their counsel’s disavowal of any intention to broaden the
scope of the case beyond the pleaded issues and the period they covered .
They alleged that:
(a) Andrea conducted the business of TCM from 2007 to 2012 during
which period EBITDA before dividends rece ived declined;

140 Re Unisoft Group Ltd, op cit, fn 40, p 611f-i.

170
operating expenses increased substantially; and gross profit
increased by about fifty percent. Specific amounts were given in
respect of the 2007 and 2012 years based on the approved AFS for
those years.
(b) Andrea had, during the same period, either intentionally or
recklessly failed to contain or reduce operating expenses to a
proper proportion of gross profit, such that the benefits might
accrue to the shareholders, particularly the plaintiffs, by way of
dividends and the growth, well -being and ultimate profitability to
shareholders, particularly the plaintiffs, were properly ensured and
protected.
The issues arising from these allegations were extremely narrow. The
figures referred to in (a) were admitted, so that there was no issue in that
regard. No impropriety on the part of Andrea and the board was said to
arise on the basis of the figures on their own. The sting of the complaint
was that, but for Andrea’s intentional or reckless failure to contain or
reduce operating expenses to a proper proportion of gross profit , greater
benefits would have accrued to shareholders and the long term growth,
well-being and ultimate profitability of TCM to shareholders and the
plaintiffs in particular would have been ensured and protected.

[226] Paragraph 260 of the judgment correctly identified this as the issue,
but then went on to say that there had been a reduction of the dividends
paid to shareholders and this had negatively impacted on the value of
TCM shares. TCM commenced paying dividends in the 2005 tax year,
when it paid a dividend of R8 million. That was the year in which Iqbal
joined the company. No dividend was paid in the 2006 tax year , but
dividends of R10 million each were paid in the 2007 and 2008 tax years.
In each of 2009 and 2010 it paid two dividends totalling R15 million and

171
in 2011 a single dividend of R15 million. In 2012 the single dividend rose
to R16 million. The judgment said that dividends had been reduced , but
that was factually incorrect for those years and incorrect for all the yea rs
for which information was available. In 2013 two dividends totalling R16
million were paid . In each of 2013, 2014 and 2015 two dividends
totalling R18 million were declared and paid. A first dividend of R6
million had been paid for the 2016 tax year. Th ese payments showed that
Mr Geel’s gloomy prognostication that if matters continued the prospect
of receiving a dividend might disappear entirely was unfounded, as was
the same view expressed by Luis in his founding affidavit in the s 252
application.

[227] The period from 2006 to 2012 was a period of consistent growth
of the company in regard to both revenue and gross profit. The plaintiffs
relied on Mr Geel’s evidence to contend that all was not as it seemed and
that by intentionally or recklessly failing to control expenses Andrea
reduced the benefits to which shareholders were entitled and damaged the
growth, well-being and ultimate profitability of the company. This was a
difficult case to establish given the obvious profitability and growth of
TCM during this period. It was not enough for the plaintiffs to show that
Andrea might have done a better job of running the company, or could
possibly have improved its performance had he adopted different policies.
That was irrelevant and would not constitute unfair prejudice. In any
event Mr Geel’s evidence did not remotely justify that allegation or
indeed seek to do so. He rather grudgingly conceded under cross -
examination that , notwithstanding his dire predictions , TCM was not
failing. His attitude was that:
‘The contention is if things were to continue, and I’m talking now that EBITDA
percentage and decline as it had then there’s trouble, but currently it’s liquid. It’s cash

172
positive. It’s got a quick ratio. It’s got a current ratio all that are positive and the
debtors collection days are positive.’
He accepted that it was a good solid company that had weathered the
storm of the recession. It d id not have attorneys chasing debtors. It ha d
good customers, good products from good suppliers and a reliable income
stream. The notion that Andrea was not keeping a close eye on costs was
based solely on the comparison with the comparative companies that are
dealt with below in paragraph 2 32. At the end it was no more than
uninformed guesswork on his part.

[228] Mr Geel sought to justify the claim that Andrea was damaging the
company in two ways. First he sought to suggest that inventory and
maintenance spare parts, which latter first came up in his 2013 report, had
been understated in TCM’s AFS. In the combined 2013 report, a fter
referring to the R11.2 million stock write-off, Mr Geel said that
consideration of the 2008 audited accounts led him to conclude that the
inventory figures were unrealistic and probably materially understated.
Luis told him that the inventory adjustments did not reflect reality , but
needed to be increased and that this was ‘a deliberate ploy by the CEO to
understate the results and thereby the ultimate value of TCM’. Mr Geel
undertook an analysis of the inventory figures in the audited accounts. He
concluded, on the basis of a couple of cryptic entries written by an
unknown audit clerk in the audit notes for 2008 and his own views on
how the company would operate, that it was improbable that the figures
in the audited accounts were correct. His original valuation of the TCM
group in 2008 on the basis of the management accounts was R348
million, but he adjusted it to R430 million on an inventory value of R33.9
million provided by Luis without any supporting information.

173
[229] This approach was illustrative of the significant flaws of Mr Geel
as a witness and his evidence generally. He had no knowledge of how the
business operations of TCM were conducted and did not accept Wayne’s
explanations or take up his offers to assist him .141 He was contractually
bound to r ely on what Luis told him a nd his conditions of contract
excluded any obligation to investigate the accuracy of that information.
This resulted in him relying on the undocumented and unsupported say-so
of a witness with a manifest grievance . He ignored Jose’s view that the
stock records were unreliable , even though they were under Luis’s and
Jose’s control. He criticised the auditors without checking his concerns
with them. He said that stock counts had not occurred or not been
attended by the auditors, when Jose said they had occurred and the
auditors were present . He queried the exclusion of inventory of R33 .8
million in the face of an explanation by the auditors that this had been
sold to FNB, invoiced and set aside . He accepted Luis’s word that there
was somewhere a secret warehouse with a significant inventory of
unidentified stock. The evidence showed that this was a storeroom
referred to as either ‘Andrea and Justines’s store’ or the ‘magpie store’
that everyone knew about.


141 Andrea and Wayne explained at a meeting the 2013 change in the way maintenance spare parts were
accounted for, namely that in 2012 TCM had acquired some large maintenance contracts, called BTR
(‘below the router’) contracts, where they would have to stock and supply the spare parts to perform
their maintenance obligations, whereas previously they had contracts with the OEMs (‘origina l
equipment manufacturers’) under which they paid a quarterly premium to the OEM’s in return for
which the OEM’s would supply the maintenance spare parts they needed on very short notice so that it

was unnecessary to maintain high levels of stock. Mr Geel dismissed this explanation without further
investigation because:
‘This explanation completely contradicts de Sousa’s, Diez’s and our understanding of TCM’s business
operations as well as contradicts with the details of maintenance spare balances held from 2007 to 2013
as per the Spares Valuation Reports discussed below.’

174
[230] Although not pleaded, the topic of maintenance spare parts 142
loomed large at the trial having emerged in the 2013 consolidated
summary. Mr Geel and Professor Wainer said that the method of
accounting for these adopted in 2013 was incorrect and ignored the
relevant provisions of the International Financial Reporting Standards.
This was irrelevant because it had no impact on the period from 2008 to
2012 to which the plaintiffs had, through counsel, expressly confined
their complaints. At that time and for more than twenty years prior t o
2013 the company’s practice had been to write the cost of spare parts off
as an expense on acquisition. Mr Geel knew this and Luis and Jose did
not suggest that they were unaware of that being the practice. It was
therefore not prejudicial to their inter ests as shareholders because there is
no unfair prejudice where the shareholders were fully aware of, and did
not object to, the practice in question.143

[231] Mr Geel’s EBITDA analysis was the basis for his suggesting that
TCM was poorly managed and that costs were not being properly
controlled. His reasoning in his first summary was that the decline in
EBITDA, despite an increase in revenue, was due to significant increases
in staff cost s, management fees and other operating expenses since 2008
and this ‘indica ted a degree of inefficient management of the operating
expenses’. There was no evidence of Andrea intentionally or recklessly
failing to control the expenses . Mr Geel expressed the view that ‘TCM is
significantly worse off than it was in 2008’ , but that was obviously not
the case, nor had TCM suffered ‘value erosion and destruction’.


142 Maintenance spare parts were spare parts kept in store to enable TCM to undertake maintenance
obligations in terms of maintenance agreements with clients, while inventory are parts and machines
kept as stock for sale.

kept as stock for sale.
143 Blackman, op cit, fn 52, 9 -41 (RS 3) sv ‘Applicant cannot complain of conduct to which he
acquiesced or in which he participated.’ See the cases in fn 138 ante.

175
[232] Mr Geel based this evidence on his comparison of TCM ’s
performance with that of three JSE listed technology companies that he
referred to as CoCos (Comparative Companies). H is conclusion was that
TCM’s performance was ‘contrary to the performance of the other CoCos
over this same period where they have shown growth’. The
appropriateness of these comparisons was challenged because Mr Geel
knew nothing about the businesses of the three companies (or TCM) and
selectively extracted information from their published accounts to show
TCM in a bad light . None of them were competitors of TCM, two were
investment holding companies and two derived the bulk of their revenue
from outside S outh Africa , so the y were not truly comparable . The
criticisms were forcefully and persuasively advanced in the appellants’
heads of argument and the plaintiffs’ counsel wisely made no endeavour
to defend the comparison , or the arguments advanced by Mr Gee l in
reliance on them.

[233] The basic flaw in Mr Geel’s testimony was that h e was unable to
escape from the fetters of his original mandate of placing a value on TCM
because Luis wanted to exit the company and realise the value of his
shares. His original repo rt in November 2008 had been drafted with that
in mind and it is apparent from reading the reports tendered as expert
summaries that his true purpose was to highlight matters that in his view
would increase the value of Luis’s and Jose’s shareholding as a starting
point in a negotiation for their shares to be purchased by the company or
the other shareholders . There was nothing wrong with his trying to do
that when he was looking to help them sell their shares. There was
everything wrong in his continuing with that approach once he became an
expert witness in the trial. In a revealing comment in evidence in chief he
said:

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‘In the view of Professor Harvey Wainer and myself, the extent of the profits recorded
in the financial statement directly affects the valuation of the shares.’
His evidence and the documents shows that this mindset never changed
and it explains much of the superfluous material in Mr Geel’s reports and
his evidence. The plaintiffs were seeking to have their co -shareholders
purchase their shares and wished to maximise the price. Influenced by the
fact that he was acting on a contingency fee basis, Mr Geel had a similar
interest.

Conclusion
[234] No matter how widely Mr Geel cast his net it did not support the
three grounds pleaded in support of a c ontention that Andrea and his co -
directors had acted with a lack of probity in regard to these matters.
Accordingly, the fourth alleged source of unfair prejudice also fails.

Favourable treatment of Iqbal
[235] The pleadings identified three issues in regard to Iqbal as
supporting a claim of unfair prejudice in relation to Andrea’s treatment of
him. The first was the endeavour to amend the sale of shares agreement
with a view to reducing the purchase price he was to pay for his shares
and to give him an extension of time within which to pay it. There was no
merit in this point as the proposed amendment was blocked by Luis. The
second was the conclusion of the retention agreements. The third was the
payment of bonuses. These two can be dealt with fairly briefly.

The retention agreements
[236] There were nine of these executed at approximately six monthly
intervals from 1 October 2008 until 18 July 2012. Each of them provided
for payment to Iqbal at three monthly intervals of an amount of R625 000

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styled as a Cash Reten tion Payment. The first of them was executed by
the company after Iqbal had made arrangements and paid Luis and Jose
for their shares. The retention agreements provided that if Iqbal left the
company’s employment during the retention period he would be obl iged
to repay the retention amount for that period. The particulars of claim
described these agreements as a sham which unduly favoured the Trust or
Iqbal at the expense of Luis and Jose and the other shareholders.

[237] It is unclear what the plaintiffs meant by saying that the retention
agreements were a sham. The judge found that they were simulated
transactions, but in what sense is unclear. He said that they were not
retention agreements and their true commercial purpose was to assist
Iqbal in paying for t he shares. That may have been the motive for
concluding the agreements , but it d id not make them simulated
transactions. As explained in Roshcon144 a simulated agreement is a
disguised transaction where the parties do not intend it to have effect
according to its apparent tenor, that is, the effect which its terms convey.
It requires not only a dishonest intention, but also the existence of a
different and unexpressed agreement or tacit understanding between the
parties that is the ‘real’ agreement.

[238] What is singularly lacking in this case is any indication of what the
‘real’ agreements, as opposed to the ‘simulated’ retention agreements,
were. The retention agreements were clear that Iqbal would be paid the
amounts specified in return for maintaining his curr ent level of
contribution as assessed by Andrea and still be ing in the employ of the
company until three months after the expiry of each period and not have

144 Roshcon (Pty) Ltd v Anchor Body Builders CC and Others [2014] ZASCA 40; 2014 (4) SA 319
(SCA) and the authorities cited there especially Zandberg v Van Zul 1910 AD 302 at 309 and

(SCA) and the authorities cited there especially Zandberg v Van Zul 1910 AD 302 at 309 and
Commissioner of Customs and Excise v Randles Brothers & Hudson Ltd 1941 AD 369 at 395-6. .

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given notice to terminate that employment, or having had his employment
terminated for cause, before that date. If he died the day after receiving a
payment his estate would have to repay it. The motive for entering into
the agreements may well have been to assist him in paying for the
remaining shares he had purchased from Andrea and Tony,145 but that did
not make the agreements other than they appeared to be on the face of it.
The fact that someone is employed out of motives of benevolence, or paid
more than their services are worth, does not mean that the contract is not
one of employment. The re was not hing simulated about the retention
contracts which were concluded openly and on straightforward terms.

[239] The retention agreements were only concluded after discussion at a
board meeting on 9 September 2008. Both Luis and Jose were at the
meeting and Iqbal withdrew while the subject was discussed. The reasons
for concluding the agreements appear from the minutes of that meeting .
The key elements were managing key contracts and for BEE purposes. At
the meeting although Luis raised some concerns about the terms of the
draft agreements tabled by Andrea, the clauses he raised did not appear in
the final agreements. He said that he was happy with the amounts
suggested. Jose said that in principle he agreed with it. However Luis
voted against the motion and Jose and Iqbal abstained. It passed with the
support of the remaining directors.

[240] The judgment said that there was obviously no need to enter into
any retention agreement in order to guard against the loss of Iqbal’s
services. It did so on the basis that there was no evidence that he wished
to leave and because he was generously remunerated. It ignored the
discussion at the board meeting on 9 September 2008, where genuine

145 Before any of the retention agreements were concluded Iqbal had paid Luis and Jose for their shares.

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concerns were raised about the prospect of losing Iqbal and the impact
that would have on the business. Neither Luis not Jose said that these
fears were misplaced or that restraint agreements were a sham. Tony
raised the question of his age, then nearly seventy, and the need to keep
him working. When those contemporaneous discussions are considered ,
the conclusion that there was no basis for the restraints was not justified.

Bonuses
[241] The pleaded complaint was that Andrea drastically reduced the
bonuses to which Luis and Jose were ordinarily entitled with a view to
humiliating them and benefitting o thers in to win their loyalty. The
evidence showed that each year a bonus pool was established to cover all
bonuses and bonuses were then awarded on the basis of an assessment of
performance. In the result annual bonuses fluctuated on the basis of the
amount of the bonus pool and the assessment of the individuals
concerned of whom there were a number. It is correct that in one or two
years Luis and Jose received no or smaller bonuses than others , but
beyond their saying that this was victimisation there was no factual basis
upon which the court could judge whether the amount of the bonuses had
been fairly determined. It was not established that their treatment in
regard to bonuses was unfairly prejudicial to them.

TCM’s payment of litigation costs
[242] The last pleaded ground of unfairly prejudicial conduct was that
Andrea had procured that the funds of TCM were used for the purpose of
discharging the legal costs incurred by the defendants in the s 252
application proceedings that were dismissed. This was said to be to the
financial detriment of TCM. It was based upon what in the United

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Kingdom is referred to as the legal costs principle, described as follows in
Crossmore Electrical:146
‘The company is a nominal party to the [unfair prejudice petition], but in subst ance
the dispute is between the two shareholders. It is a general principle of company law
that the company’s money should not be expended on disputes between the
shareholders: see Pickering v Stevenson (1872) L.R.14 Eq 322.’
We were not referred to any So uth African authority on the point but it is
endorsed by the authors of Blackman:147
‘It is a general principle of company law that the company's money should not be
expended on disputes between shareholders. The general rule is that the company has
no business whatever to be involved in such an application, on the principle that the
company's moneys should not be expended on disputes between shareholders and in
particular its moneys ought not to be used to defend the majority shareholders in what
is essenti ally a dispute between them and other shareholders. The use of the
company's funds by the majority in defending the application is a misuse of the
company's funds, confers a distinct financial advantage on the majority, and
prejudices and discriminates aga inst the applicant; it is both unfair and infringes the
basic principle that the powers and funds of a company may be used only for the
purposes of the company.’ (Footnotes omitted.)

[243] The principle is well -established in England and in many such
petitions in that jurisdiction the company is not even joined to the
proceedings. In the absence of an undertaking to be personally
responsible for the legal costs the majority shareholders may be restrained
by an injunction from causing the company to incur expen diture on legal
or professional services for the purposes of the petition or any other
aspect of the dispute ,148 including a counterclaim by the company at the

146 Re Crossmore Electrical and Civil Engineering Ltd [1989] BCLC 137 (Ch D) at 138.
147 Blackman, op cit, fn 52, 9-54 (RS 2).
148 Gott v Hauge [2020] EWHC 1473 para 53.

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instance of the majority shareholders. The following summary of the
application of the principle in Koza149 is apposite. It reads:
‘It is clear from these judgments that, whatever the procedural context in which the
issue arises, the court is concerned to identify the true substance of the proceedings
and that which constitutes the real contest. If the r eal contest is between parties other
than the company itself, it will be a misfeasance for the company's directors to cause
its funds to be expended on the legal costs of that contest. That does not of course
mean to say that there may not be some legal ex penditure which it is proper for the
company itself to incur in the context of a shareholders' dispute. The incurring of legal
costs in relation to the company's obligation as a party to give disclosure is one such
example. There will be others, but they a re limited to those aspects of the dispute in
respect of which the company has its own independent interest to protect.’

[244] In general the principle is a sound one and unless the company
will be affected by the relief sought in an unfair prejudice case it w ill
probably be unnecessary for it to be joined. If the implementation of any
order made will require the company ’s co-operation, or the company is
directly affected, for example , where a buy -out is sought against the
company itself, it must be joined. Ho wever, that does not mean that the
company should enter the lists or bear the costs of defending the unfair
prejudice claim. That will remain a dispute between the shareholders in
which it is not and should not be a contestant. It may incur and pay costs
on certain matters where its own interests are at stake, for example over
matters of disclosure or whether the terms of the relief being sought are
appropriate.

[245] Matters become complicated where the joinder of the company is
pursuant to a claim for substan tive relief against it. That was the case in

149 Koza Ltd v Koza Altin Işletmeleri AS [2021] EWHC 786 (CH) para 66.

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the s 252 application and is the case here. In that situation, the assumption
made in the high court that the company is purely a nominal defendant
and should not be incurring any costs in defending the action i s unduly
facile. That assumption was reflected in the findings on the merits in this
action and the various costs orders made by the high court. An order that
the company buy back shares will affect it because compliance may place
an undue strain on its re sources to the actual or potential detriment of its
creditors. It may even threaten the viability of the company. Although it
might have no interest in whether the minority shareholder has been
subjected to unfair prejudice, it would be directly affected b y an order to
purchase their shares. How the company should respond in that situation
will depend on the facts of the particular case. Prima facie it should not
bear all the costs of defending the s 252 claim, but it is entitled to resist
the relief claime d against it. Where the allegations by the disaffected
shareholder impinge on the company directly, for example, where it is
contended that its accounts are not a true reflection of its business or that
it is engaged in fraudulent trading, there may be a need for it to defend its
business reputation. If left unchallenged, such allegations might have
potentially disastrous consequences for the business, leading to its
bankers withdrawing support or its suppliers refusing it credit.

[246] Deciding on t he proper a pproach for the company to adopt
introduces the possibility of a conflict between the personal interests of
the majority shareholders and the interests of the company. One cannot
resolve these potential complexities by adopting an a fortiori rule that in
all instances it is improper for the company against which relief is sought
to resist that claim on its merits and incur costs in doing so. I do not agree
with the English case cited in paragraph 314 of the High Court’s

with the English case cited in paragraph 314 of the High Court’s
judgment that there is a ‘heavy onus’ on the company to justify such

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expenditure. That is judicial hyperbole. The simpler approach is to ask
whether on the evidence the company’s funds were properly expended in
its own interests.

[247] The complaint in the pleaded case was that TCM paid the costs of
opposing the s 252 application .150 That application was dismissed on the
basis that once the answering affidavit was delivered it was apparent that
there was an irresoluble dispute of fact on the papers . The court ordered
each party to bear its own costs up to the date of filing of that affidavit
and ordered Luis and Jose to pay the costs thereafter. The costs to which
the complaint related were therefore those incurred by TCM up to and
including the filing of that affidavit and the attorney and client
component of the costs after that date. We were not informed as to the
amounts involved but, even if it is assumed that procuring that the
company pay these costs was unfairly prejudicial to Luis and Jose, the
remedy would not be a buy -out order. The obvious order, if the majority
shareholders improperly arranged for the company to expend its funds
defending a claim brought against them by an aggrieved minority
shareholder, would be one that compel led the majority to reimburse the
company for the funds imprope rly expended, not an order that TCM
purchase the shares of Luis and Jose for a consideration of R160 million
or such other amount as the court might determine as the fair value of
their shares.



150 The judgment dealt with the matter as if the complaint extended to the costs of the present action,
but that was not the pleaded case. If the company paying the costs of defending the action were to be
considered the court needed to take into account that Luis and Jose did not bring proceedings to prevent
it from doing so and that the s 163 application was directed not at stopping this but at procuring that
TCM pay their legal costs as well.

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Jose’s claim
[248] Insofar as Jose’s claim ran in parallel to and was based on the same
grounds as that of Luis there is no need to say anything further. It was
distinct in that prior to 2004 his status as a shareholder was no more than
a spes and he was not a director at all. He may have had an expectation of
being made a shareholder but that expectation was satisfied when he and
Tony received 10% stakes from Luis and Andrea at around the time of
the BEE deal with Iqbal. From 2004 onwards he could hardly lay claim to
having an expectation of being a director, because his appointment to that
role was dependent on Luis nominating him for that position. As to his
expectations of participation in the day to day management of the
business that was dependent on his continued employment and subject to
the qualification of ther e being no legitimate grounds for the termination
of that employment.

[249] Given those limited expectations the difficulty facing Jose was
that he was still working for TCM in 2009, when the s 252 application
was brought; in 2010 when the present action was c ommenced; and even
in 2012 when this action first came to trial. He had not been excluded
from the company as an employee and remained an executive director,
who actively participated in board meetings. The treatment of which he
complained in his evidence was treatment that affected him as an
employee, but not as a shareholder. Whether it would have given rise to a
claim before the appropriate labour tribunals is neither here nor there. It
did not give rise to him suffering any unfair prejudice in his capac ity as a
shareholder. That is no doubt why the attempt was made in 2013 to
expand the scope of the case in order to include within it the
circumstances leading up to the termination of his employment. But the

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application for an amendment was withdrawn and counsel for Jose nailed
his colours to the mast of the period specified in the pleadings, that is, the
period up until 2012. As with virtually all of his objections, counsel’s
objection to Jose giving evidence about the circumstances leading up to
his dismissal was rejected, but it should have been upheld.

[250] For those reasons Jose’s case had to stand or fall with the case
advanced on behalf of Luis based on issues other than Luis’s exclusion
from employment and participation in the day to day management and
operations of the business.

Conclusion on unfair prejudice
[251] The plaintiffs’ case that the affairs of the company had been
conducted, principally by Andrea, in a manner that was unfairly
prejudicial, unjust or inequitable to them was not established. Section 252
does not confer a right to exit a company on the grounds of a breakdown
in the relationship between or among the shareholders , or to demand that
the remaining shareholders make a reasonable offer to acquire the shares
of the disaffected shareholder. Accordingly, the failure to negotiate terms
to enable Luis and Jose to exit and realise the value of their shares was
not unfair prejudice, as it was not coupled with prior unfair prejudice that
they had suffered on some other basis. TCM ceased to be a sm all
domestic company managed by its founders in a manner akin to a
partnership. It became a very large company that for essential business
reasons changed its shareholding structure in 2004 and regulated that
structure in a formal fashion through the terms of the sale of shares
agreement and, in particular, the shareholders agreement. As a
consequence of those changes, to which both Luis and Jose were parties,
they did not have a legitimate expectation of continued employment and

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status. As that formed the basis for their main argument that they had
suffered unfair prejudice by being excluded from participation in the day
to day management of the operations of the company their main argument
had to fail. Luis did not show that his dismissal was unfair and ga ve rise
to unfair prejudice in his capacity as a shareholder. That disposed of the
second basis for the claim. The claim based on a refusal to negotiate
terms for their withdrawal in the absence of other unfair prejudice was
legally unsound. Lastly the claim that Andrea conducted the affairs of the
company or treated the plaintiffs in a manner that showed a lack of
probity and constituted unfair prejudice to them in their capacity as
shareholders was not established on the facts.

[252] Mindful of the risks in classifying a s 252 claim into categories and
dealing with those categories as discrete claims , instead of treating the
claim as a single claim consisting of different elements and arising from a
number of separate events, I have considered whether there is any basis
for taking the events that have been proved and viewing them collectively
to see whether they show that the plaintiffs suffered unfair prejudice.
There are two reasons why that must result in a negative answer. The first
is that it was for the plaintiffs to identify the course of conduct which was
unfairly prejudicial to them and they have not done so. Their case
consisted of an unconnected series of events on which they have tried to
project a deliberate pattern of behaviour by Andrea designed to force
them out of the company. Whether those events were taken individually
or collectively they did not establish that. The second reason is that this is
not how they presented their case. That rested firmly on the proposition
that this was a small domes tic company of the nature of a partnership
between Luis and Andrea giving rise to Luis having certain legitimate

between Luis and Andrea giving rise to Luis having certain legitimate
expectations concerning his role in TCM . Once that foundation was not

187
established, the remaining elements of unfair dismissal and failure to
make an offer or enter into reasonable negotiations to enable their exit fell
away.

[253] The appeal must accordingly succeed on its merits. The high
court’s order must be set aside and appropriate orders made in relation to
the costs of the action. However, before dealing with those it is necessary
to say something about the order granted by the high court and then to
deal with the fair trial issue.

The high court’s order
[254] The high court ordered TCM to purchase the shares of the plaintiffs
and to take transfer o f them at a purchase consideration to be determined
by a referee ‘of the nature of and akin to’ a referee appointed in terms of
s19bis of the Supreme Court Act 59 of 1959 .151 It gave directions as to
the basis upon which the referee was to determine the valu e of the
plaintiffs’ shares. It then dealt with the costs of the action and the
reserved costs of the s 163 application and the associated application for
recusal; the wasted costs of the postponement of the trial on 2 October
2012; and the costs relating to the withdrawn application for leave to
appeal and the application in terms of rule 35(3) brought on 4 December
2015. The appeal’s success means that the order must be set aside, but the
following comments are made for the guidance of courts seized with
matters of this kind in the future.

[255] Before making a buy-out order against TCM the high court needed
to consider whether any unfair prejudice suffered by the plaintiffs had

151 The reference to the 195 9 Act was presumably dictated by s 52 of the Superior Courts Act 10 of
2013.

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been resolved by the two offers TCM made to purchase Luis and Jose’s
shares and, if not, whether it was in a position to determine the
appropriateness, of making such an order against TCM. Both needed to
be considered against the background that it had been agreed and ordered
that the issue of the value of the plaintiffs’ shares would be separated
from the remaining issues in the case.

[256] Under the heading: ‘Where the prejudice lies’ the judgment held
that the defendants had not made a fair or proper offer to purchase Luis
and Jose’s shares. Two offers were made in the course of the litiga tion.
The first was one of approximately R54 million on 3 December 2014,
accompanied by a valuation from Grant Thornton, the company’s
auditors. The second was made on 17 February 2016, accompanied by a
further valuation from the same firm, of R50 094 000 for Luis’s shares
and R11 037 000 for Jose’s shares. The judge said the first offer was
suggestive of an absence of bona fides by Andrea and that he found it
hard to accept that the second offer was a genuine, valid and bona fide
offer. On that basis he concluded that Andrea and the other shareholders
failed or refused to engage in bona fide discussions or negotiations with
the aim of permitting Luis and Jose to dispose of their shares at a fair
value.

[257] As the value of the shares was by agreement not befor e him, the
judge was in no position to assess whether either offer was a fair offer in
regard to amount and payment. Insofar as curing unfair prejudice was
concerned that was the primary question. As both offers were substantial
and supported by valuations from the auditors ,152 whether they were fair
offers could only be decided once the value of the shares had been

152 Not the auditors whose work attracted criticism from Mr Geel.

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assessed. The plaintiffs’ attorneys said that the first offer was a genuine
offer, but no reasons were given for allowing it to lapse. Nor was Grant
Thornton’s valuation criticised. It appears to have been prepared on a
similar basis to those of Mr Geel and his team from KPMG. The second
offer came at a very late stage of the proceedings on 17 February 2016,
giving a short period for acceptance, wh ich the judge said was
inadequate. He therefore concluded that it was not a genuine and bona
fide offer. It is a novel proposition that, because an offer is made at a late
stage of proceedings , it is not to be regarded as genuine and bona fide.
Had it been accepted it would not have been so characterised. Also the
judge refused to receive the valuation on which the offer was based so
could not assess whether it was genuine.

[258] Insofar as the appropriateness o f making a buy -out order against
TCM was concerned the high court needed to consider the impact of such
an order on the company, but it was not in a position to do so because by
agreement it had not received any evidence in regard to the value of the
shares. It was accordingly not possible to determine whether the company
was in a position to pay the indeterminate amount t hat was to be
determined by the referee . If payment of that amount would seriously
damage TCM’s finances or its commercial viability, there was no
mechanism for addressing and revisiting that question. The horse of
TCM’s obligation to purchase the shares would already have bolted and
as the referee was appointed as an expert not an arbitrator the scope of
any challenge to the determination was limited.153


153 The judge referred to his majority judgment in Perdikis v Jamieson 2002 (6) SA 356 (W) para 5.
This reference was unaffected by the Supreme Court of Appeal overruling the majority judgment on
the point in issue in that case in Tamilram v Trustee, Lukamber Trust and Another [2021] ZASCA 173;

2022 (2) SA 436 (SCA) para 15.

190
[259] This had implications going beyond the shareholder dispute. The
purpose of a buy -out order is not to bring the company to its knees. It is
to remedy the unfair prejudice by enabling the disaffected shareholders to
leave and realise their investment. The remedy is a broad equitable one.
Considering its impact on the company, its employees, creditors and
customers was essential in determining what should be made . While Mrs
Oberem might not have had a direct and substantial interest in the
outcome of the case , she had a more general interest in whether all of
Luis’s shares were sold or whether half were preserved to be transferred
to her as part of the liquidation of the joint estate. Over a thousand
employees were interested in the future of their jobs. A number of
extremely large nationwide bu sinesses were dependent upon TCM’s
maintenance services. There is also the concerning factor that the order
fixed the date of valuation as the date of the judgment, that is, 31 March
2017. That was eight years after Luis had been dismissed and four years
since Jose had resigned. The figures we have, which do not take the
picture up to the date of judgment, show that this was a period of
substantial growth of the company. The court needed to consider whether
the plaintiffs were entitled to benefit from any increase in the value of the
shares during the period when they had no involvement in the operations
of the company. It could n ot do that in the light of the fact that the
valuation of the shares and the date upon which such valuation was to be
made were not before the court. Had it been appropriate for it to make an
order, and the respondents had pursue d their claim for a buy -out order
against TCM , the court should have confined its order to declaratory
relief in regard to its finding that there had been un fairly prejudicial
conduct in terms of s 252.

191
Fair trial issues
[260] At the outset, counsel for the applicants raised various issues
relating to the fairness of the trial. He indicated, however, that the
applicants preferred the case to be decided on the meri ts, because, if the
fair trial points succeeded, that would result in a remittal to the court
below for the trial to commence anew – a prospect that no one relished.
The fair trial points concerned some unfortunate interchanges between
the judge and leading counsel for the defendants; interventions in, and the
imposition of deadlines on , the cross -examination of witnesses ; and
restrictions on both the subject -matter of evidence 154 and cross -
examination.

[261] The fairness of a trial is distinct from any question of bias
although the two may overlap. No issue of bias was raised in this case.
The difference between the two is that whether a trial was fair is a matter
of objective judicial assessment, while possible bias is assessed through
the eyes of the notional f air-minded and informed observer. A trial is
unfair where judicial conduct disrupts the presentation of the case on one
side or otherwise prevents the court from properly appraising the case on
its merits. That is what is said to have occurred in this case.

[262] A preliminary question facing us was whether we were obliged ,
irrespective of our view of the merits , to determine the fair trial issues .
The S upreme Court in the United Kingdom addressed the question in

154 A key issue was Luis’s allegation that he was unfairly dismissed. He was reluctant to permit cross -
examination arising from the record of evidence in the CCMA hearing. When counsel told him that, if
the fairness of the dismissal remained in issue, he would need to call all eleven witnesses who had
given evidence in those proceedings unless it could be agreed that the record of that evidence should

stand as evidence in the trial, the judge responded without argument that he would not permit that to
happen.

192
Serrafin v Malkiewicz ,155 where the unfairness w as directed at the
claimant, a litigant in person. Lord Wilson said;
‘What should flow from a conclusion that a trial was unfair? In logic, the order has to
be for a complete retrial. As Denning LJ said in the Jones156 case …
“No cause is lost until the judg e has found it so, and he cannot find it without a fair trial, nor
can we affirm it.’
Lord Reed observed during the hearing that a judgment which results fr om an unfair
trial is written in water.’

[263] This is the converse situation , where the allegation of un fairness is
made by the defendants and the plaintiffs assert that the trial was fair. I n
that situation I think that the court is not bound to make a final
determination of the question, and it may tailor it s response to the
unfairness to suit the circumstances. In Hamman v Moolman this court
held that it could deal with the case on the information before it, but
affording the factual findings of the judge less weight than would
normally be given to the findings of a trial judge and a similar approach
has been taken in some other cases .157 In this case we were firmly of the
view after the hearing t hat the appeal had to succeed on its merits. The
plaintiffs said that the trial was fair , so there can be no prejudice to them
in deciding the case on its merits.

[264] It is desirable nonetheless to make a limited number of
observations for the guidance of judges who have to deal with long and

155 Serrafin v Malkiewicz and others [2020] UKSC 23 para 49.
156 Jones v National Coal Board [1957] 2 All ER 155 (CA). This has been cited with approval in a
number of decisions of this court, eg S v Cele 1965 (1) SA 82 (A); Hamman v Moolman 1968 (4) SA
340 (A); S v Rall 1982 (1) SA 828 (A) and the Con stitutional Court, albeit in a slightly different
context viz S v Basson 2007 (3) SA 582 (CC) para 33.

context viz S v Basson 2007 (3) SA 582 (CC) para 33.
157 In that case the alleged unfairness was directed at the defendant . The court overturned the judgment
in favour of the plaintiff and dismissed the clai m. In Solomon and Another NNO v De Waal 1972 (1)
SA 575 (A) the judge’s interventions were hostile to the plaintiff’s case . T he court found that as
demeanour of the witnesses was not a key aspect of their credibility , the case could be decided and the
appeal upheld on the written record. I have reservations whether it would now be accepted that the
court could on its reading of the record uphold the trial cou rt’s judgment as occurred in Rondalia
Versekeringskorporasie van SA Bpk v Lira 1971 (2) SA 586 (A).

193
complex matters such as this. In more leisurely times courts , while not
acting as ‘silent umpires’ to use Lord Denning’s expressi on, were more
inclined to leave the conduct of the case to counsel and to limit
interventions to elucidating evidence, making procedural rulings and
rulings on admissibility , and preventing long-winded and unnecessary
evidence in chief or abusive or repetitive cross-examination. With courts
under far greater pressure than in the past, a more active case
management role is expected of the judge. The Constitutional Court in S v
Basson158 approved the following statement by Harms JA in this court,
that:159
‘Fairness of court proceedings requires of the trier to be actively involved in the
management of the trial, to control the proceedings, to ensure that public and private
resources are not wasted, to point out when evidence is irrelevant, and to refuse to
listen to irrelevant evidence. A supine approach towards litigation by judicial officers
is not justifiable either in terms of the fair trial requirement or in the context of
resources.'

[265] In a trial of the length of this one, with copious documents and a
good deal of technical evidence on financial matters, the task of the judge
is an onerous one. A balancing act is required because ‘there is a thin
dividing line between managing a trial and getting involved in the
fray’.160 It is inevitable that on occasions the participants, including the
judge, will show signs of stress and impatience , but greater restraint in
expressing their feelings is required of judges. The stresses imposed upon
the judge when the emotions of the parties run high as they did in this
case are particularly great . At one stage the judge described it as a war
and counsel for the plaintiffs said that it was a most unpleasant trial. The

158 S v Basson, op cit, fn 156, para 33.
159 Take and Save Trading CC and Others v Standard Bank of SA Ltd 2004 (4) SA 1 (SCA) para 3.

159 Take and Save Trading CC and Others v Standard Bank of SA Ltd 2004 (4) SA 1 (SCA) para 3.
160 Ibid, para 4.

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task of the judge in that situation is onerous and unenviable. I emphasise
two matters. Judicial tolerance of t he technique of cross -examination
adopted by the cross -examiner is essential. Some cross-examiners are
pithy, quick and to the point, focussing on the relevant and ignoring the
dross. They are few and far between. Many cross -examinations are long
and tedio us and much of the content may seem to the judge of little
relevance. But extreme patience is called for and intervention is only
warranted where it is necessary to elucidate a point, or where it is clear
that the questions are irrelevant or repetitious. 161 Where the intervention
takes place at a late stage and involves the imposition of time constraints ,
the greatest caution is called for, in order to ensure that the cross -
examiner may complete their task and cover the appropriate material
required for a proper discharge of their duty towards their client.162

[266] The second point is th e need to be particularly careful to avoid
giving the impression of favouring a particular view of the qualities of a
witness, or the relevance or merits of an issue , and allowing this to
influence the approach to the conduct of the case. It is inevitable that
judges form prima facie views, sometimes strong prima facie views,
about issues in a case. Nonetheless, they must be careful not to allow
those views to affect the conduct of th e trial in a way that unfairly
prevents the one party from fully presenting their case. Whether the ir
prima facie views are correct can only be determined when every relevant
witness has testified in full and the judge has heard the arguments on both
side. The danger is that, when prima facie views are given effect during
the running of the trial, they may affect the one party’s ability to present
its case fully. That is when unfairness occurs even when it is unintended.

161 S v Cele 1965 (1) SA 82 (A).

161 S v Cele 1965 (1) SA 82 (A).
162 C/f SAP SE v Systems Applications Consultants (Pty) Ltd and Another [2024] ZASCA 26 paras 23 -
29.

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For that reason it is often wise to reserve decisions having final effect,
such as costs orders, until the end of the trial.

[267] Only a few comments are necessary on the issues giving rise to the
fair trial complaint. The first is that the reported judgment ascribes the
delays in the case to a deliberate endeavour to delay the proceedings, the
fault being laid at the door of leading counsel and Andrea. In fairness to
both of them, w hile they were by no means blameless in relation to the
protracted and diffuse course that the trial took, laying a ll the blame on
them was unjustified. The expansion of the issues ; uncooperative
witnesses; repeated inconclusive judicial interventions and the debates
that followed; the s163 application ; and Mrs Oberem’s participation ; all
contributed substantially to t he pedestrian progress of the case. None of
the protagonists was free from responsibility for the delays that beset the
trial.

[268] The primary complaint related to the judge’s decision to curtail the
cross-examination of both Mr Geel and Luis. In the case of Luis t hat
precluded counsel from asking questions on matters that were
undoubtedly pertinent to the decision in the case. Prima facie that was an
irregularity in accordance with the principle expressed in the following
terms by Schreiner JA:163
‘The disallow ance of proper questions sought to be put to a witness by cross -
examining counsel is an irregularity which entitles the party represented by the cross -
examiner to relief from a Higher Court, unless that Court is satisfied that the
irregularity did not prejudice him.’
There is no doubting the judge’s right to curtail cross -examination where
it is repetitive, irrelevant or an attack on the witness’s credibility on

163 Distillers Korporasie (SA) Bpk v Kotze 1956 (1) SA 357 (A) at 361H.

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collateral issues, but it is a power to be exercised with great caution. As
this court stressed in Cele,164 in view of the important role that cross -
examination plays in our system of evidence, any decision by a judge to
curb its exercise, by disallowing questions or restricting the time allowed
for that purpose, must be approached with patience and d iscernment. An
important consideration will be whether similar constraints were placed
upon counsel for the other party so as to avoid the impression of disparate
treatment of the two sides of the case, and the stage that has been reached
in the cross-examination when the restriction is imposed.

[269] As regards the unfortunate exchanges between the judge and
leading counsel it would have been better had they not occurred. We fully
understand the frustration that the trial judge must have felt in this case in
the light of his perception that it was being dragged out and unduly
delayed and the obdurate approach adopted by counsel to every aspect of
the case. Nonetheless exchanges between the judge and counsel may have
an impact on the lay litigants and judges must be alert to avoid any
impression that their personal feelings about counsel and the manner in
which counsel is conducting the trial are influencing the ir ability to
consider and weigh the issues in a dispassionate and impartial way. I
endorse the sentiment expressed by Ploos van Amstel J that:165
‘It is important that presiding officers treat legal representatives who appear before
them with courtesy and respect. This is part of the right of access to courts which is
guaranteed in our Constitution. A litigan t who sees his legal representative being
treated with disrespect by a presiding officer may well feel that he is not getting a fair
hearing or form the perception that the presiding officer is not as impartial as she
should be. This has the potential to e rode the confidence of the public in our courts.

should be. This has the potential to e rode the confidence of the public in our courts.
There are very few problems in court that cannot be dealt with firmly but politely.’

164 S v Cele, op cit, fn 161, at 91B-G.
165 Absa I-Direct Ltd v Lazarus NO and Another, op cit, fn 244 para 9.

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[270] Despite any deficiencies there may have been in the conduct of the
trial it is nonetheless possible for us to reach a clea r conclusion and
determine the appeal on the merits, as requested by the appellants’
counsel, without making a finding on the fair trial issue. That seems to us
desirable. The parties would prefer a decision on the merits and given the
passage of time it is in the interests of justice that this dispute be brought
to a conclusion without the expenditure of further judicial resources upon
it. I accordingly refrain from saying anything further on the issue.

Costs
[271] The costs of the appeal and the trial must fo llow the result. They
should include the costs of two counsel. There are however separate
appeals in relation to certain costs orders made by the trial court in the
course of the proceedings. In each case the second to fifth appellants were
ordered to pay costs jointly and severally, the one paying the others to be
absolved, on the scale as between attorney and client. I will deal with
each in turn. Fortunately I can be brief because the judgment dealt with
two of these orders in a single paragraph containing no reasons and the
third order was mentioned in one brief paragraph. All three orders were
clearly founded on the judge’s view that the defendants ’ approach to the
litigation had been obstructive and that there was no merit in their
opposition to the cl aim. As that has been held to be mistaken the costs
orders must be revisited.

[272] The first relat ed to the adjournment of the trial in October 2012
when it was first set down. The case had been set down for ten days and
the parties said that they were unable to give the Deputy Judge President
an assurance that it would be finished in that time. He accordingly
refused to allocate a judge to hear the matter as it would become part -

198
heard. An attempt by the defendants to have a judge allocated to deal with
an arg ument that the delay was occasioned by the failure to deliver a
summary in respect of the evidence of Professor Wainer was rebuffed by
the Deputy Judge President. Where costs are incurred and wasted in that
situation the trial court does not ordinarily was te further judicial time
investigating in granular detail the causes of, or responsibility for, the
adjournment. The parties had underestimated the time taken to complete
the trial and given the length of time it in fact took the Deputy Judge
President was clearly justified in refusing to allow it to commence. The
wasted costs occasioned by the adjournment should be costs in the cause.

[273] The second set of costs were those attendant upon the application
to amend the particulars of claim dated 9 December 2013 and the Rule
35(3) notice dated 4 December 2015. The application for amendment was
withdrawn and the Rule 35(3) notice was not pursued. I can see no
justification for requiring the defendants to pay these costs. The plaintiffs
should be ordered to pay them jointly and severally, the one paying the
other to be absolved, including the costs of two counsel.

[274] The third set of costs related to the s 163 application brought by
Luis and ultimately not pursued further, notwithstanding defendants’
counsel expressing concern on various occasions that it would be
resuscitated. That application led to the defendants seeking the judge’s
recusal from hearing that application, but not the trial itself. Recusal was
apparently argued extensively 166 over two days. We did not re ceive
detailed argument on the merits of either application. Having read both ,
each had their strengths and weaknesses.

166 The record of the argument was not included in the record on appeal, but reference to the portion of

the transcript excluded from the record shows that it ran t o nearly 200 pages over two days of argument
leaving aside the procedural issues that were debated before the argument.

199

[275] On the s 163 application this judgment has already held that the
judge was correct in his conclusion that the company was obliged to p ay
the dividend to Luis and not to Mrs Oberem. Whether TCM was wrong to
withhold payment and issue an interpleader notice was, as the judge said,
an interesting question. It became an academic question when Luis and
Mrs Oberem settled the issue and I see n o good reason to revive it.
Whether success on that question would have translated into success in
the s 163 application was another matter altogether. The judgment says
that the launch of the application was both necessary and reasonable and
the relief sought therein justified. I have doubts in regard to the first two
propositions and considerable reservations about the court’s power to
grant the relief sought. The glaring problem confronting the application
was that it was brought under the equivalent of s 252 in the 2008 Act,
seeking an order that TCM pay Luis and Jose’s costs of the litigation. Part
of the plaintiffs’ case in this action was that it was improper for the
company to expend its funds on a dispute among the shareholders. That is
a general pr inciple that is endorsed in this judgment , but then t he old
adage that what is sauce for the goose is sauce for the gander comes to
mind. If it was wrong for the defendants to cause the company to expend
its funds in a dispute with the minority shareholder s, I fail to see on what
basis it was proper to ask the court to compound the impropriety by
making the company pay the minority shareholders’ costs as well. The
remedy was to stop the majority from abusing their position by way of an
interdict, joined wit h an order to repay TCM any costs that should not
have been paid from its resources.

200
[276] Insofar as the recusal application was concerned the judge had
made two orders for costs against Andrea, Tony and the Trust , but not
TCM. In each instance he rejected submissions that he should reserve the
costs as it was inappropriate for him to d etermine whether TCM was
purely a nominal defendant at that stage. This judgment holds that he was
incorrect in th e view that TCM was a nominal defendant in the light of
the subs tantial relief sought against TCM. The point of the recusal
application was that he was being asked in the s163 application to rule
that, because TCM was a nominal defendant , it had improperly been
funding the other defendants’ defence to the s 252 applica tion and this
action. Because of the strong views he had already expressed on the
‘nominal defendant’ point, it was submitted that he should recuse himself.
Luis had deposed to an affidavit in which he said that th ose strong views
were a reason why it was particularly appropriate for him to deal with the
s 163 application. Against that background it cannot be said that a careful
lawyer could not reasonably have advised the defendants to bring the
recusal application. But that does not mean that it would hav e succeeded.
If as contended the judge had effectively pre -empted the decision in
respect of one of the grounds of unfair prejudice , there may have been
merit in the judge’s response that an application for recusal would need to
encompass the trial as well as the s 163 application.

[277] Accordingly, the outcome of these two applications was neither
clear nor inevitable. These were interlocutory issues raised in the middle
of a lengthy trial. In the absence of full argument it seems undesirable to
determine either issue definitively in these proceedings. The order of the
trial court cannot stand because of the misdirections on which it was
based. The fair order to be made at this stage is that each party should
bear their or its own costs in relation to both applications.

201

The order
[278] In the result it is ordered that:
1 The application by the intervening applicant for conditional
leave to intervene is dismissed and the intervening applicant is
ordered to pay the costs of opposition by the first and second
respondents in the main application, such costs to include the
costs of one counsel.
2 The application for leave to appeal is upheld with costs, such
costs to include the costs of the application for leave to appeal
before the high court and the costs of two counsel.
3 The appeal is upheld with costs, including the costs of two
counsel and the judgment of the High Court is altered to read as
follows:
(a) The plaintiffs’ claim is dismissed with costs, such costs to
include those consequent upon the employment of two
counsel.
(b) The costs of the adjournment on 2 October 2012 including
the costs consequent upon the employment of two counsel
are to be costs in the cause in the action.
(c) The plaintiffs are ordered jointly and severally, the one
paying the other to be absolved, to pay th e costs of the
application to amend the particulars of claim dated
9 December 2013 and the costs of the application in terms of
Rule 35(3) dated 4 December 2015, such costs to include
those consequent upon the employment of two counsel.

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(d) Each party is to bear his or its costs of the application in
terms of s 163 of the Companies Act 71 of 2008 and in
respect of the recusal application by the first applicant.


__________________________
M J D WALLIS
ACTING JUDGE OF APPEAL

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Appearances
For applicants: Ian Green SC (with him P Cirone)
Instructed by: Roy Stoler Attorneys, Sandton;
Honey Attorneys, Bloemfontein
For respondents: A Subel SC (with him B M Slon)
Instructed by: Amanda Martin Attorneys, Sandton;
Matsepes Inc, Bloemfontein.
For intervening party: K J van Huyssteen (Attorney);
Fluxmans Inc,
Sandton.