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[2017] ZASCA 54
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Moraitis Investments (Pty) Ltd and Others v Montic Diary (Pty) Ltd and Others (799/2016) [2017] ZASCA 54; [2017] 3 All SA 485 (SCA); 2017 (5) SA 508 (SCA) (18 May 2017)
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THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case no: 799/2016
In the matter between:
MORAITIS
INVESTMENTS (PTY) LTD
FIRST APPELLANT
APOSTOLOS MORAITIS NO
(as trustee of the
Moraitis Trust)
SECOND APPELLANT
ANTHANASIOS MORAITIS NO
(as trustee of the
Moraitis Trust)
THIRD APPELLANT
CHRISTOS MORAITIS NO
(as trustee of the
Moraitis Trust)
FOURTH APPELLANT
APOSTOLOS
MORAITIS
FIFTH APPELLANT
and
MONTIC DAIRY (PTY)
LTD
FIRST RESPONDENT
MONTIC TRANSPORT
(PTY) LTD
SECOND
RESPONDENT
EMONTIC
INVESTMENTS (PTY) LTD
THIRD RESPONDENT
MONTIC ASSETS
(PTY)
LTD
FOURTH RESPONDENT
HUNTERS PROPERTIES (PTY)
LTD
FIFTH RESPONDENT
TROPICA FOODS (PTY) LTD
SIXTH
RESPONDENT
TROPICA INVESTMENTS
(PTY) LTD SEVENTH RESPONDENT
KARL KEBERT NO
(as trustee of the Karl
Kebert Trust)
EIGHTH RESPONDENT
MICHAEL SEGAL NO
(as trustee of the Karl
Kebert Trust)
NINTH RESPONDENT
SOLLY GROSS NO
(as trustee of the Karl
Kebert Trust)
TENTH RESPONDENT
APOSTOLOS MORAITIS NO
(as trustee of the Karl
Kebert Trust)
ELEVENTH RESPONDENT
KARL KEBERT NO
(as executor of the late
Julie Lamer)
TWELFTH RESPONDENT
KARL KEBERT
THIRTEENTH RESPONDENT
THE SHERIFF,
JOHANNESBURG
FOURTEENTH RESPONDENT
Neutral citation:
Moraitis Investments (Pty) Ltd v
Montic Dairy (Pty) Ltd
(799/2016)
[2017] ZASCA 54
(18 May 2017)
Coram:
LEACH, TSHIQI, WALLIS and SALDULKER JJA and FOURIE
AJA
Heard
:
8 May 2017
Delivered
:
18 May 2017
Summary:
Settlement agreement – order of
court – grounds for rescinding order – lack of authority
to conclude settlement
agreement – failure to prove lack of
authority –
ss 75
,
112
and
115
of the
Companies Act 71 of 2008
– principle of unanimous assent
ORDER
On appeal from:
Gauteng Division, Johannesburg of the
High Court (Matojane J, Hawyes AJ concurring, Moshidi J dissenting):
The appeal is
dismissed with costs.
JUDGMENT
Wallis JA (Leach, Tshiqi
and Saldulker JJA and Fourie AJA concurring)
[1]
An agreement of settlement, especially one
made an order of court, is usually a sign that the hostilities
between the litigants
have ended. In this case it led to a new front
being opened in the conflict between the parties. The fresh bone of
contention was
the authority to conclude the settlement agreement.
The appellants contended that the fifth appellant, Mr Apostolos
Moraitis (Mr
Moraitis), was not authorised to conclude the settlement
agreement by either the first appellant, Moraitis Investments (Pty)
Ltd
(Moraitis Investments), or the Moraitis Trust. The trust is
represented in the present litigation by Mr Moraitis and his two
brothers,
the trustees of the trust and in that capacity the second
to fourth appellants. They accordingly brought proceedings against
all
the other parties to the settlement agreement seeking to have it,
and the order making it an order of court, set aside. The application
succeeded at first instance, but an appeal to the full court of the
Gauteng Division, Johannesburg of the High Court (Matojane
J, with
Hawyes AJ concurring and Moshidi J dissenting) overturned that
decision and dismissed the application. This further appeal
is with
the special leave of this court.
The background
[2]
The principal actors in this drama were Mr
Moraitis and the thirteenth respondent, Mr Karl Kebert. For many
years they were engaged
in business together. The main business was a
dairy business conducted through a company, Montic Dairy (Pty) Ltd
(Montic), the
first respondent. Other companies were formed to hold
properties and engage in other activities related to the dairy
business.
These are the second to sixth respondents. As is customary,
Mr Moraitis and Mr Kebert held their respective interests indirectly.
In Mr Moraitis’ case, the vehicle was the Moraitis Trust of
which he and his daughters were the capital beneficiaries. The
Moraitis Trust was the sole shareholder of Moraitis Investments,
which held a 20 percent stake in each of the first, second, fourth,
fifth and sixth respondents and a 25 per cent stake in the third
respondent.
[3]
Mr Kebert held his interests in the
companies through the Karl Kebert Trust (the Kebert Trust),
[1]
which is represented in this appeal by the eighth to eleventh
respondents. The Kebert Trust owned 100 per cent of the shares in
Tropica Investments (Pty) Limited (Tropica Investments) the seventh
respondent, which in turn was the owner of the balance of the
shares
in the first, second, third, fourth, fifth and sixth respondents.
[4]
In 2006 Mr Moraitis and Mr Kebert fell out.
Litigation ensued before what was then the North Gauteng High Court.
Moraitis Investments
and the Moraitis Trust sought the liquidation of
the six companies in which Moraitis Investments held shares,
alternatively an
order that the shares owned by Moraitis Investments
be purchased by the respondents. They alleged that winding up the
companies
would be just and equitable, or that a purchase order would
put an end to the deadlock between Mr Moraitis and Mr Kebert. On 19
October 2007, Sapire AJ made an order, pursuant to an agreement
between the parties to that litigation, that Tropica Investments
and
the Kebert Trust, to which he referred compendiously as the Kebert
Group, would purchase the shares owned by Moraitis Investments
in the
various companies. The parties agreed, and Sapire AJ ordered, that an
independent third party, acting as a valuer, would
determine the
purchase price of the shares and loan accounts. Ernst & Young
Advisory Services Limited (Ernst & Young) was
appointed to
undertake the valuation. Its valuation, which would have involved the
payment of a little over R5 million to
Moraitis Investments,
satisfied no-one. The companies whose shares were to be valued,
together with Tropica Investments and the
Kebert Trust, commenced
proceedings to set aside the valuation and have a far lower valuation
substituted for it. Moraitis Investments
and the Moraitis Trust
opposed those proceedings and it was suggested that in truth there
had been an under-valuation.
[5]
While these latter proceedings were
ongoing, Mr Kebert, in his capacity as the executor in his late
mother’s estate, commenced
an action in the then South Gauteng
High Court against Mr Moraitis personally. He sought payment of a
substantial sum in respect
of the purchase price of his late mother’s
interest in the company owning the Exotica Hotel on the island of
Zakynthos. He
alleged that his mother and Mr Moraitis had jointly
developed the hotel, which was being run by the latter’s
children, and
that prior to her death she had agreed to transfer her
interest to Mr Moraitis for €500 000. The overall picture
is of
litigious hostilities extending over a broad front involving
all of the parties to the present proceedings and being conducted
simultaneously in the Pretoria and Johannesburg courts.
[6]
When the dispute regarding the hotel was
set down for hearing the parties engaged in intensive negotiation,
instigated by Mr Moraitis’
attorney, leading to the drafting
and signature of the settlement agreement. The agreement recorded
that it was in settlement of
case number 2009/52206, being the
litigation over the hotel, and also of the two cases in the North
Gauteng High Court, namely
case number 41065/2006 (the liquidation
application) and case number 23631/2010 (the valuation dispute). It
reflected all of the
parties to the current litigation as parties to
the settlement, but there were only two signatories, namely Mr
Moraitis and Mr
Kebert. Each signed on behalf of all the various
entities falling on their own side of the fence. Of importance for
present purposes
is that Mr Moraitis signed on behalf of Moraitis
Investments and the Moraitis Trust. Both he and Mr Kebert warranted
that they
were duly authorised to sign on behalf of the trusts and
companies whom they purported to represent. The settlement agreement
was
then made an order of court by Mojapelo DJP.
[7]
The settlement provided for the shares held
by Moraitis Investments in the first to sixth respondents to be
transferred to Mr Kebert
or his nominee against payment to Mr
Moraitis of R600 000. On behalf of his mother’s estate and
himself Mr Kebert abandoned
any claims in relation to the hotel. The
agreement was partially implemented in the sense that a payment of
R600 000 due to
Mr Moraitis was made. Problems surfaced when
transfer was demanded of the shares held by Moraitis Investments in
the six companies.
[8]
On 30 September 2013 the present
proceedings were launched in the South Gauteng High Court
[2]
with a view to having both the settlement agreement and the order of
court set aside. The principal contention in regard to the
invalidity
of the settlement agreement was that Mr Moraitis had not been
authorised by the Moraitis Trust and Moraitis Investments
to conclude
it on their behalves and that it was therefore invalid and
unenforceable against them. The relevant allegations were
made by Mr
Moraitis on behalf of both Moraitis Investments and the Moraitis
Trust, without a trace of embarrassment or an explanation
of the
basis on which he had originally warranted his authority to act on
their behalves. Alternative arguments that he advanced
were that the
agreement involved the disposal of the whole of the business of
Moraitis Investments and that he and Mr Kebert had
personal interests
in the transaction. As such he invoked ss 75, 112 and 115 of the
Companies Act 71 of 2008 (the
Companies Act) to
contend that the
agreement was unlawful and void. In regard to the order making the
agreement an order of court, he contended that
once it was shown that
the agreement was invalid or unenforceable for any of these reasons
the court order fell to be set aside.
The law
[9]
The focus of the original judgment by
Windell J and those delivered in the full court fell on the issue of
Mr Moraitis’ authority
to execute the settlement agreement on
behalf of the Moraitis Trust and Moraitis Investments. That was not
surprising, because
the application and the argument was premised on
the proposition that by virtue of the claimed lack of authority the
settlement
agreement itself was void and unenforceable. Building on
that it was contended that it followed
a
fortiori
that the consent order had to
be set aside. The points raised in terms of the
Companies Act were
hardly addressed.
[10]
In my view that was not the correct
starting point for the enquiry, because it ignored the existence of
the order making the agreement
an order of court. Whilst terse the
order was clear. It read:
‘
The
Agreement of Settlement signed and dated 05 September 2013 is made an
order of court.’
For so long as that
order stood it could not be disregarded. The fact that it was a
consent order is neither here nor there. Such
an order has exactly
the same standing and qualities as any other court order. It is
res
judicata
as between the parties in
regard to the matters covered thereby.
[3]
The Constitutional Court has repeatedly said that court orders may
not be ignored. To do so is inconsistent with s 165(5)
of the
Constitution, which provides that an order issued by a court binds
all people to whom it applies.
[4]
The necessary starting point in this case was therefore whether the
grounds advanced by the applicants justified the rescission
of the
consent judgment. If they did not then it had to stand and questions
of the enforceability of the settlement agreement became
academic.
[11]
The heads of argument did not address the
grounds for the rescission of a judgment in any detail, so the
parties were afforded an
opportunity to deliver supplementary heads.
Those delivered on behalf of the appellants were dismissive of the
court’s concerns
in this regard, describing them as not germane
to the appeal, beyond raising the possibility that Mr Moraitis may
have perpetrated
a fraud. This was a surprising contention, coming as
it did, from counsel representing him. It is unusual for a lawyer to
charge
their client with fraud. In this case the even more surprising
implication was that in bringing the application Mr Moraitis was
seeking to rely on his own fraud. The supplementary heads delivered
on behalf of the respondents submitted that absence of authority
did
not fall within the narrow grounds that our courts recognise as
justifying the setting aside of an order of court.
[12]
The issue is far more nuanced than the
arguments suggest. The approach differs depending on whether the
judgment is a default judgment
or one given in the course of
contested proceedings. In the former case it may be rescinded in
terms of either rule 31(2)(
b
)
or rule 42 of the Uniform Rules, or under the common law on good
cause shown.
[5]
In contested proceedings the test is more stringent.
[6]
A judgment can be rescinded at the instance of an innocent party if
it was induced by fraud on the part of the successful litigant,
or
fraud to which the successful litigant was party.
[7]
As the cases show, it is only where the fraud – usually in the
form of perjured evidence or concealed documents – can
be
brought home to the successful party that
restitutio
in integrum
is granted and the judgment
is set aside. The mere fact that a wrong judgment has been given on
the basis of perjured evidence
is not a sufficient basis for setting
aside the judgment. That is a clear indication that once a judgment
has been given it is
not lightly set aside, and De Villiers JA said
as much in
Schierhout
.
[8]
[13]
Apart from fraud the only other basis
recognised in our case law as empowering a court to set aside its own
order is
justus
error.
[9]
In
Childerley
,
where this was discussed in detail, De Villiers JP said that
‘non-fraudulent misrepresentation is not a ground for setting
aside a judgment’ and that its only relevance might be to
explain how an alleged error came about. Although a non-fraudulent
misrepresentation, if material, might provide a ground for avoiding a
contract,
[10]
it does not provide a ground for rescission of a judgment. The scope
for error as a ground for vitiating a contract is narrow and
the
position is the same in regard to setting aside a court order.
[11]
Cases of
justus
error were said to be ‘relatively rare and exceptional’.
[12]
Childerley
was
considered and discussed by this court in
De
Wet
[13]
without any suggestion that the principles it laid down were
incorrect.
[14]
The same issue arose indirectly before this
court in
Gollach and Gomperts
.
[14]
I say indirectly because the case was not concerned with a judgment,
but with the avoidance of an agreement of compromise (a
transactio
)
on the basis of non-disclosure. The judgment repays careful
consideration. The general principles were stated as follows:
[15]
‘
A
transactio
,
whether extra-judicial or embodied in an order of Court,
[16]
has
the effect of
res
judicata
. …It
is obvious that, like any other contract (and like any order of
Court), a
transactio
may
be set aside on the ground that it was fraudulently obtained. There
is authority to the effect that it may also be
set aside on the
ground of mistake, where the error is
justus.
’
The judgment then referred
to
Childerley
and the refusal to accept that a judgment could
be set aside on the grounds of
justus
error induced by a
non-fraudulent misrepresentation. It continued as follows:
‘
The
matter then before the Court was an action to set aside a judgment
delivered in a defended case. Concerning judgments entered
by
consent, the learned JUDGE-PRESIDENT accepted that they could, “under
certain circumstances”, be set aside “on
the ground of
just error”. It appears to me that a
transactio
is
most closely equivalent to a consent judgment.
Such
a judgment could be successfully attacked on the very grounds which
would justify rescission of the agreement to consent to
judgment.
I am not aware of any reason why
justus
error
should
not be a good ground for setting aside such a consent judgment, and
therefore also an agreement of compromise, provided
that such error
vitiated true consent and did not merely relate to motive or to the
merits of a dispute which it was the very purpose
of the parties to
compromise.’ (Emphasis added.)
[15]
The appellants seized upon the passage
highlighted in the above quotation to contend that it provided
authority for the broad proposition
that any ground justifying the
avoidance of a contract would also provide grounds for setting aside
a consent judgment granted
pursuant to an agreement of compromise. In
my view that inverts what Miller JA was saying, by reading that
sentence without regard
to what preceded it. Miller JA had dealt with
the grounds on which a court could set aside a judgment, and
identified fraud and,
in limited circumstances,
justus
error as providing such grounds. He
then drew an analogy between a consent judgment and a
transactio
and said that the grounds upon which a
judgment could be attacked were the very grounds justifying
rescission of the agreement to
consent to judgment. As he had just
dealt in detail with the grounds for setting aside a consent
judgment, it can hardly be thought
that he was intending to say that
there were other unspecified grounds, or that any grounds existing at
common law for avoiding
an agreement would also provide a basis for
rescinding a consent judgment granted pursuant to that agreement.
That would have involved
over-ruling what had been said in
Childerley
in the passage he had cited without
criticism. His judgment cannot be taken to say anything more than
that fraud and
justus
error,
where sufficient to set aside a judgment, would also be sufficient to
set aside a compromise that gave rise to that judgment.
[16]
Counsel for the respondents, Mr Symon SC,
very properly drew our attention to the judgment of Van Zyl J in
Kruisenga
,
[17]
where he said that:
‘
The
principle is that when a judgment is not passed on the merits of a
dispute … but rather derives its existence from an
agreement,
its continued existence is subject to the validity of the agreement.’
There are two
difficulties with this statement. First, the distinction it draws,
between judgments ‘not passed on the merits
of a dispute’
and other judgments, lacks any foundation in our jurisprudence. There
is no difference in law between an order
granted in the case of a
default judgment; an order pursuant to a settlement prior to the
conclusion of opposed proceedings; or
the order in a judgment
pronounced at the end of a trial or opposed application. As the
Constitutional Court has said it is an
order ‘like any
other’.
[18]
Second, the proposition is over-broad and inconsistent with the
authorities discussed above. Were it correct a material, but
non-fraudulent,
misrepresentation justifying rescission of the
agreement of compromise would also justify the rescission of the
judgment granted
pursuant to that compromise, but that is not the
case. Its defect lies in approaching the question from the direction
of the agreement
instead of from the direction of the judgment. The
latter is the correct approach, because the judgment operates as
res
judicata
and precludes a claim based on
the agreement.
[19]
Unless and until the judgment has been set aside, there can be no
question of attacking the compromise agreement. It follows that
the
necessary starting point for the enquiry must be whether there are
grounds upon which to seek rescission of the court order.
Only then
can there be any issue regarding the rescission of the compromise.
[17]
Insofar as the appellants rely upon the
provisions of
ss 75
,
112
and
115
of the
Companies Act they
must
therefore bring their case within the scope of the principles set out
above. In regard to their contentions based on Mr Moraitis’
alleged lack of authority to conclude the settlement agreement on
behalf of Moraitis Investments and the Moraitis Trust another
principle comes into play. This is that the court can only grant a
consent judgment if the parties to the litigation consented
to the
court granting it. If they did not do so, but the court is misled
into thinking that they did, the judgment must be set
aside.
[20]
This is something different from avoiding a contract on the grounds
of fraud, duress, misrepresentation or the like. In those cases
the
injured party has an election to abide by the agreement. When one is
concerned with an absence of authority to conclude the
agreement in
the first place, that is not a matter of avoiding the agreement, but
of advancing a contention that no agreement came
into existence.
[18]
There are several cases that make this
point, but I need only refer to two. In
De
Vos v Calitz and De Villiers
[21]
Ms de Vos was sued in the magistrates’ court. She was urged by
her legal adviser to settle, but was adamant that she would
not do
so. Her attorney, after a conversation with her brother, whom he bona
fide believed was authorised to give instructions
on her behalf,
accepted a settlement proffered by the other side that provided for
judgment to be granted against Ms De Vos by
consent. Before the
magistrate could be approached, Ms de Vos learned of the agreement
and repudiated it on the grounds of her
attorney’s lack of
authority. Although this was conveyed to the magistrate, judgment was
nonetheless entered against her.
The judgment was set aside on
appeal, on the grounds of the attorney’s lack of authority, but
the court made it clear that
it could have been rescinded on the same
grounds.
[19]
The other case,
Washaya
v Washaya
,
[22]
also involved a legal practitioner agreeing to a consent order
without any authority from his client to do so. The legal
practitioner
said that he had settled the case on his own initiative
in the belief that his client would thereafter ratify what he had
done.
After referring to earlier decisions, commencing with
De
Vos
, the court held that the order had
to be rescinded, saying that:
‘
To
my mind that ends the matter. … It is clear, in terms of these
precedents, common sense and justice that once a Court
is not
satisfied that a party consented to judgment then that
party is entitled to
restitutio
in integrum
. Put
differently, had the Court granting the judgment been aware that the
party had not consented it would not have acceded to
the request that
it enter judgment. The judgment must therefore be set aside.’
[20]
A gloss has subsequently been placed upon
this proposition that, while lack of authority is the preponderant
factor, on its own
it may not suffice unless there is a reasonable
explanation for the circumstances in which the consent judgment came
to be entered.
[23]
There is merit in this because the court is being asked to set aside
its decision in circumstances where it is
functus
officio
. However, in the light of my
conclusion on the facts it is unnecessary to express a final view on
this. The case can be disposed
of in relation to Mr Moraitis’
authority to represent the Moraitis Trust and Moraitis Investments on
the basis that the central
proposition that a court may not grant an
order making a settlement agreement an order of court, unless the
parties to the agreement
consent thereto, is correct.
[24]
Authority
[21]
The appellants’ primary case was that
Mr Moraitis had no authority to enter into the compromise on behalf
of Moraitis Investments
and the Moraitis Trust and no authority to
agree to that compromise agreement being made an order of court.
Counsel for the appellants
correctly accepted that the onus rested on
his clients to establish the lack of authority on which they relied.
He rested his argument
principally on a lack of authority to
represent the Moraitis Trust and, accordingly, I will deal with that
first and with the position
of Moraitis Investments thereafter.
[22]
In the founding affidavit Mr Moraitis
canvassed the terms of the trust deed under which the Moraitis Trust
was constituted. The
trust was established in 1997 and the original
trustees were Mr Moraitis and his brothers. Clause 6.1 prohibited the
conclusion
of any agreement or transaction to which a trustee or
their spouse was a party, or in which they had an interest, unless
there
was at least one disinterested trustee in office and that
trustee, or the majority of disinterested trustees, voted in favour
of
entering into the transaction or agreement. The trustees were
authorised to conduct their business as they thought fit (Clause
6.3.2) and were entitled to delegate any of their powers to
committees consisting of one or more trustees (Clause 6.5).
[23]
The legal principles on which the
appellants rely are trite. Unless the trust deed otherwise provides
the trustees must act jointly.
They may however authorise a third
party, including one of their number, to act on their behalf and
conclude agreements that bind
the trust.
[25]
In reliance on those principles Mr Moraitis dealt with the issue of
authority, so far as it concerned the Moraitis Trust, in the
following terms:
‘
At
the time that I signed the settlement agreement, neither the third
nor the fourth applicants in their capacities as the trustees
of the
Moraitis Trust, had authorised me to conclude the settlement
agreement on their behalf, in their capacities as trustees
of the
Moraitis Trust. Nor had we had a meeting of trustees to discuss
settlement of all the pending litigation by any one trustee
on behalf
of the Trust. …
I am advised
that in order for the settlement agreement to be valid and
enforceable as against the Moraitis Trust, it was necessary
for all
three trustees to sign the settlement agreement jointly, in their
capacity as trustees, alternatively it was necessary
for the third
and fourth applicants to have authorised me to conclude the agreement
on behalf of the trustees representing the
Trust.’
The third and fourth
appellants deposed to brief confirmatory affidavits, saying only that
they had read the affidavit of Mr Moraitis
and each of them confirmed
‘the contents thereof applicable to me, and to me in my
capacity as trustee of the Moraitis Trust
and to the Moraitis Trust’.
[24]
In the heads of argument it was submitted
that this was not disputed. That submission was incorrect. In his
answering affidavit,
Mr Kebert drew attention to the warranty
contained in the settlement agreement, which stated that:
‘
Moraitis
warrants that he is authorised to enter into this settlement
agreement on behalf of his Trust (as Trustee) and Moraitis
Investments (Pty) Ltd and that Moraitis Investments (Pty) Ltd and his
Trust have authorised Moraitis to enter into this settlement
agreement on their behalf.’
He said that Mr
Moraitis should be held to this warranty and that ‘his denial
of authority (such as it is) must be rejected’.
Earlier he said
that the assertion that Mr Moraitis was not authorised to represent
the Moraitis Trust was ‘false and unsubstantiated
and should be
rejected’. In the light of that unequivocal statement it is
hard to see on what basis it could be contended
that it was
undisputed that Mr Moraitis lacked authority to represent the
Moraitis Trust. The real question was whether there was
a bona fide
dispute about his authority. If there were, in the absence of a
reference to oral evidence, which was not sought, the
appellants
would have failed to discharge the onus. This was because the
application of the
Plascon-Evans
rule
meant that the case had to be determined on the version of the
respondents.
[25]
The respondents were not party to the
internal workings of the Moraitis Trust. In order to avoid the
conclusion that Mr Kebert’s
denials were bare denials that
could be disregarded they had to make their case in the third
category of a dispute of facts referred
to in the well-known passage
from the
Room Hire
case,
[26]
namely where the respondent has no direct knowledge of the facts
stated by the applicant, but denies them and gives evidence to
show
that the version of the applicant is untruthful or unreliable. And in
that situation less evidence will suffice to raise a
dispute of
fact.
[27]
That is what Mr Kebert set out to do.
[26]
Mr Kebert explained in his original
answering affidavit that the Moraitis Trust was a vehicle created by
Mr Moraitis to hold the
shares in Moraitis Investments and that Mr
Moraitis was the governing mind behind the trust and decided all
matters on its behalf.
He said that throughout their lengthy business
association Mr Moraitis had never required the permission of the
remaining trustees
in regard to any business decision. All of these
allegations attracted bare denials from Mr Moraitis in his replying
affidavit,
who brushed them off by saying that he had already dealt
with them. He had not done so and as statements of fact they stood
unrebutted.
[27]
Mr Kebert went further in a supplementary
answering affidavit by providing information regarding the manner in
which Mr Moraitis
dealt with the various cases in which they were
involved. Starting with the liquidation application, he pointed out
that the attorney
representing Moratis Investments and the Moraitis
Trust was a Mr Ioullanou. He was also the attorney representing those
entities
in the litigation concerning the valuation by Ernst &
Young, and Mr Moraitis in the litigation over the hotel. As such he
had
presumably been responsible for preparing affidavits and was
involved in the settlement negotiations and the drafting of the
settlement
agreement, including the warranty of authority.
[28]
Turning to the founding affidavit in the
liquidation proceedings, Mr Moraitis deposed to it in his capacity as
a director of Moraitis
Investments and as a trustee of the Moraitis
Trust. He attached resolutions to this effect executed on the same
day as the affidavit
was sworn, and reflecting decisions by Moraitis
Investments and the Moraitis Trust taken in Johannesburg. Both
resolutions were
signed by Mr Moraitis. Accepting, as we must, that
these statements by Mr Moraitis correctly reflected his authority,
there needed
to be an explanation of the manner in which that
authority was conferred upon him. There was none.
[29]
On the merits, in the founding affidavit in
the liquidation application, Mr Moraitis explained the background to
his business relationship
with Mr Kebert and the nature of that
relationship. He described it as being akin to a partnership. Its
business was conducted
‘as a group’. Their relationship
extended beyond a commercial one to one as friends. The emphasis
throughout was that
the businesses were in truth those of Mr Moraitis
and Mr Kebert and the companies and trusts merely vehicles through
which they
were pursuing their own interests. The manner in which
they were conducted indicated to any observer that Mr Moraitis and Mr
Kebert
had been vested with the relevant authority to represent the
trusts and companies in business dealings. Although Mr Moraitis
delivered
a supplementary replying affidavit in regard to this
material he did not deal with the substance of the factual
allegations.
[30]
The liquidation proceedings eventually came
before Sapire AJ and the parties agreed on an order in terms of which
the interest of
Moraitis Investments in the various companies would
be purchased by either Tropica or the Kebert Trust. This was the
alternative
relief that had been sought in the application. Far from
disavowing this settlement and the resultant order by Sapire AJ, the
appellants
all wish to pursue it, because the relief they seek in
these proceedings would revive the litigation over the Ernst &
Young
valuation and the implementation of Sapire AJ’s order.
Accordingly the conclusion of the settlement and the agreement to
have it made an order of court were authorised by the Moraitis Trust
and Moraitis Investments. They were represented by Mr Moraitis
and
their attorney was Mr Ioullanou, who were also responsible for the
conclusion of the settlement agreement that is in issue
here. Yet
there is not a jot or tittle of evidence to indicate on what basis
the conclusion of the earlier settlement agreement
and the consent to
Sapire AJ’s order was any different from the settlement
agreement and order in issue in this case. If
the earlier settlement
agreement was authorised, valid and binding that must hold true for
the latter one, in the absence of evidence
showing that the
circumstances in which they were concluded were different.
[31]
Coming to the circumstances in which the
settlement was concluded, the evidence shows that the initiative came
from Mr Moraitis’
legal representative in the hotel dispute.
This was Mr Ioullanou, who was the attorney for both Moraitis
Investments and the Moraitis
Trust, in the liquidation application
and the dispute over the Ernst & Young valuation. He was the
person who, on their behalf,
concluded the agreement with Ernst &
Young. As the attorney he was aware that the settlement agreement was
intended to be comprehensive
and cover all the disputes between the
parties in all the existing litigation. He must have been aware of
the terms of the settlement
agreement signed by Mr Moraitis and the
warranty of authority that it contained on behalf of his clients. Yet
there is no affidavit
from him explaining on what basis he permitted
his one client, Mr Moraitis, to say that he had authority to
represent his other
clients, Moraitis Investments and the Moraitis
Trust, if that was not in fact true. All that we have is a letter
addressed to Mr
Moraitis’ current attorney saying that his
office and counsel did not at any stage contact the third and fourth
appellants
to discuss the settlement negotiations and settlement
agreement. Like the affidavits the letter is a carefully worded
statement
that avoids dealing with the facts. It is entirely
consistent with there being no need for any such discussion, because
he was
aware that Mr Moraitis was already authorised to enter into
settlement negotiations and a settlement agreement on behalf of the
Moraitis Trust.
[32]
This is a substantial body of evidence that
casts doubt on the claim that Mr Moraitis was not authorised by his
co-trustees to negotiate
a settlement of the disputes in which they
and he were embroiled, and to cause the resultant agreement to be
made an order of court.
It is plain that he was the driving force
behind all the litigation and acted on behalf of the Moraitis Trust
and Moraitis Investments
in instituting, conducting and, in the case
of the liquidation application, settling the litigation. He is
equally the driving
force behind the present litigation. Accepting
that his actions in all these matters were duly authorised by his
co-trustees the
inevitable question is how that authority was
conferred in those instances and what difference there was between
them and the present
one. There is nothing to indicate that there was
any difference.
[33]
The issue can be summed up in a single
stark question. In executing the settlement agreement Mr Moraitis
said expressly that he
was authorised to represent ‘his’
trust. In his affidavit he said that he was not so authorised. Why
should we believe
that he was lying when he signed the settlement
agreement, but telling the truth in his affidavit? Counsel was unable
to provide
an answer to that question. That brings us back to the
point at which this analysis commenced, namely that the onus rested
on the
Moraitis Trust to prove that Mr Moraitis lacked the authority
to conclude the settlement agreement on its behalf and to agree to
its being made an order of court. In the absence of any attempt to
explain the workings of the trust or how issues of authorisation
had
been dealt with in the past, or any of the matters highlighted by Mr
Kebert, that onus was not discharged.
[34]
At the risk of being accused of heaping
Pelion upon Ossa, there is merit in the criticism that the statements
by Mr Moraitis are,
in the absence of a full explanation of precisely
how the trust operated and how the relevant decisions were taken,
assertions
of a legal conclusion rather than factual evidence in
regard to authority. The question whether a person was authorised to
act
on behalf of another is ordinarily a question of fact involving
the drawing of inferences or conclusions from primary facts in the
context of legal principle.
Lord Wright
said in his speech in
Caswell v
Powell Duffryn Associated Collieries Ltd
:
[28]
‘
Inference
must be carefully distinguished from conjecture or
speculation. There can be no inference unless there are
objective facts from which to infer the other facts which it is
sought to establish … But if there are no positive proved
facts from which the inference can be made, the method of inference
fails and what is left is mere speculation or conjecture.’
The absence of any
information concerning the process followed when these different
pieces of litigation were instituted and conducted
and the extent of
the knowledge of the trustees concerning them, as well as the general
manner of conducting the business of the
trust, leads to the
conclusion that there is an absence of facts from which to draw the
inference that the claims by Mr Moraitis
to have lacked authority in
this specific instance are correct.
[35]
The situation of Moraitis Investments can
be dealt with fairly simply. Authority to represent it could emanate
from two sources.
There could be a decision by its sole shareholder,
the Moraitis Trust, that it should conclude the agreement, or there
could be
a decision taken by its two directors, Mr Moraitis and Mr
Kebert. In order to succeed in establishing its case Moraitis
Investments
had to prove that neither source of authority was present
when the settlement agreement was concluded. It did not discharge
that
onus on either ground. The same evidence that indicated that Mr
Moraitis had authority to represent the Moraitis Trust served to
indicate that he had authority to represent the trust in its capacity
as sole shareholder of Moraitis Investments in concluding
the
settlement agreement. In addition he and Mr Kebert were the two
directors of Moraitis Investments. The suggestion that, because
he
did not say, when signing the agreement, that he was doing so in that
capacity, Mr Kebert’s manifest agreement to the
settlement
agreement can be disregarded, is without merit. The agreement did not
need to be signed by both directors in order to
bind the company. It
sufficed if it was signed by one of them with the authority of the
other. If Mr Moraitis lacked authority
Mr Kebert would have known and
intervened. The only inference from his not doing so was that he
confirmed that Mr Moraitis had
the authority that he warranted he
had, to represent Moraitis Investments in concluding the settlement
agreement. The objection
of lack of authority in this regard must be
rejected.
Sections 112
and
115
of
the
Companies Act
[36
]
These provisions govern the disposal by a
company of the whole or greater part of its assets or the undertaking
of the business.
The appellants contend that the settlement
agreement, involving as it did, the transfer to Mr Kebert of the
interests of Moraitis
Investments in the first to sixth respondents,
fell within the ambit of the sections and accordingly could only be
validly effected
by way of a special resolution in terms of
s 115(2)(
a
)
of the
Companies Act. As
no such resolution was taken they submitted
that the transaction was void.
[37]
The purpose underpinning the requirements
of
ss 112
and
115
is to ensure that the interests and views of
all shareholders are taken into account before the company disposes
of the whole or
the greater part of its assets or the undertaking
itself. In the case of a special resolution
ss 65(9)
and (10)
stipulate the majority that must be achieved for such a resolution to
be passed. Where the company only has a single shareholder
these
requirements become a mere formality. In those circumstances it seems
to me that the principle of unanimous consent can be
invoked in
answer to the appellants’ contention. That principle, long
recognised in English company law, from which our courts
have
received much guidance,
[29]
was accepted as part of our law relating to companies, under both the
1926 and the 1973 Companies Acts.
[30]
I can see nothing in the current Act to suggest that the principle no
longer finds application. The problems that this court identified
in
Quadrangle Investments
[31]
and those identified by Professor Beuthin in his article on the
topic
[32]
do not arise here to preclude the invocation of the principle.
[38]
In the present case the Moraitis Trust was
itself a party to the settlement agreement and, for the reasons
already given, the appellants
have failed to prove that this was not
authorised by the trustees. It cannot then be said that it did not,
by its own agreement
to the settlement, agree to Moraitis Investments
becoming a party to the settlement agreement.
Section 75
of the
Companies Act
[39
]
The appellants’ contention under this
head was that both Mr Moraitis and Mr Kebert had a personal interest
in the subject
matter of the settlement agreement and that they had
not disclosed those interests at a meeting of the board of directors
in accordance
with
s 75(6)
of the
Companies Act. As
I understand
the contention it goes further than mere non-disclosure.
Section
75(6)(
d
)
requires a director who has such a personal interest to withdraw from
the meeting and play no role in the deliberations of the
board. It
seems to follow that the appellants were contending that neither Mr
Moraitis nor Mr Kebert could be party to a decision
by the board of
Moraitis Investments to conclude the settlement agreement and that it
could only be authorised by a members’
meeting or the court
under
s 75(10).
[40]
The argument must fail for the same reason
as the earlier arguments about
ss 112
and
115
of the
Companies
Act. It
recognised that the agreement could have been concluded with
the authority of the Moraitis Trust and the appellants have failed
to
prove that the trust did not authorise the conclusion of the
settlement agreement.
Rule 42
and the common
law
[41]
In the heads of argument (although it had
not been mentioned in the founding affidavit) there was a suggestion
that
Rule 42(1)
might avail the appellants on the basis that the only
parties to the litigation in which the order was made were Mr
Moraitis and
Mr Kebert in his capacity as the executor of his
mother’s estate. Accordingly it was suggested that both
Moraitis Investments
and the Moraitis Trust were absent when the
order was made. I do not agree. Once it is accepted that it has not
been shown that
the Moraitis Trust and Moraitis Investments were not
parties to the settlement agreement, they were bound by the provision
in clause 15
thereof that they consented and agreed to it being
made an order of court. Accordingly, when the agreement was submitted
to the
judge for that purpose, counsel was acting for all the parties
to the settlement agreement. The rule cannot be invoked in those
circumstances.
Result
[42]
The appeal is dismissed with costs.
M J D WALLIS
JUSTICE
OF APPEAL
Appearances
For appellant:
L W De Koning SC
Instructed by:
Mills & Groenewald, Vereeniging;
Phatshoane Henney Attorneys, Bloemfontein.
For respondent: S Symon SC (initial heads of
argument by C M Eloff SC)
Instructed by:
Ramsay Webber Inc, Illovo;
Lovius Block Attorneys, Bloemfontein.
[1]
In some places in the papers this is referred to
as the Karl Kebert Family Trust but it is unnecessary to resolve
this discrepancy.
[2]
This was a misnomer as by then the court had
become the Gauteng, Johannesburg Division of the High Court.
[3]
Eke v Parsons
2016
(3) SA 37
(CC) paras 29-31;
Provincial Government North
West and Another v Tsoga Developers CC and Others
[2016] ZACC 9
;
2016 (5) BCLR 687
(CC) para 47.
[4]
Department of Transport and Others v Tasima
(Pty) Ltd
[2016] ZACC 39
;
2017 (2) SA
622
(CC) paras 177-183. There is a narrow exception where a court
makes an order that is on its face beyond its powers, as with the
order to appoint a specific individual as a provisional liquidator
that was in issue in
Master of the High
Court (North Gauteng High Court, Pretoria) v Motala
NO and Others
[2011]
ZASCA 238
;
2012 (3) SA 325
(SCA). That order was invalid as the
power to appoint a provisional liquidator was exclusively vested in
the Master and accordingly
the Master could not be held to be in
contempt by declining to make the appointment. See
Tasima
para 197 and
Provincial
Government North West v Tsoga Developers CC and Others
[2016]
ZACC 9
;
2016 (5) BCLR 687
(CC) para 50.
[5]
De Wet and Others v Western Bank Ltd
1979
(2) SA 1031 (A).
[6]
Ibid at 1041B-E.
[7]
Makings v Makings
1958
(1) SA 338
(A);
Rowe v Rowe
[1997] ZASCA 54
;
1997 (4) SA 160
(SCA) at 166G-J.
[8]
Schierhout v Minister of Justice
1927
AD 94
at 98.
[9]
Childerley Estate Stores v Standard Bank of
South Africa Ltd
1924 OPD 163
(
Childerley
).
[10]
GB Bradfield
Christie’s
Law of Contract in South Africa
7 ed
(2016) para 7.1, p 315-6.
[11]
Childerley
at
165 and 168.
[12]
Childerley
at
166.
[13]
De Wet
fn 5
ante.
[14]
Gollach & Gomperts (1967)(Pty) Ltd v
Universal Mills & Produce Co (Pty) Ltd
1978
(1) SA 914
(A) at 922F-H (
Gollach and
Gomperts
).
[15]
Gollach and Gomperts
at
922B-E.
[16]
An extra-judicial
transactio
is an agreement of compromise between
the parties that is not made an order of court. It is said to have
the effect of
res judicata
because,
like a judgment, it finally disposes of the disputes that are the
subject of the compromise. They may not be resuscitated,
in the same
way as a court order precludes the parties from resuscitating their
dispute.
[17]
MEC for Economic Affairs, Environment and
Tourism v Kruisenga and Another
2008
(6) SA 264
(Ck) para 53 (
Kruisenga
).
[18]
Eke v Parsons
supra
fn 3, para 29.
[19]
Eke v Parsons
and
Tsoga Developers CC
supra,
fn 3.
[20]
Kruisenga
,
supra,
para 54.
[21]
De Vos v Calitz and De Villiers
1916
CPD 465.
[22]
Washaya v Washaya
1990
(4) SA 41
(ZH) at 45E-G.
[23]
Georgias and Another v Standard Chartered
Finance Zimbabwe Ltd
2000 (1) SA 126
(ZS) at 132B-D;
Ntlabezo and Others v
MEC for Education, Culture and Sport, Eastern Cape
2001
(2) SA 1073
(Tk H) at 1081B-E.
[24]
The judgment on appeal in
Kruisenga
,
whilst not directly in point, is consistent with this conclusion.
MEC for Economic Afffairs, Environment
and Tourism, Eastern Cape v Kruizenga an Another
[2010]
ZASCA 58
;
2010 (4) SA 122
(SCA) para 7.
[25]
Nieuwoudt and Another v Vrystaat Mielies
(Edms) Bpk
2004 (3) SA 486
(SCA) paras
20 and 23;
Thorpe and Others v
Trittenwein and Another
2007 (2) SA
172
(SCA) para 9.
[26]
Room Hire Co (Pty) Ltd v Jeppe Street Mansions
(Pty) Ltd
1949 (3) SA 1155
(T) at
1163.
[27]
Gericke v Sack
1978
(1) SA 821
(A) at 827D-G.
[28]
Caswell v Powell Duffryn
Associated Collieries Ltd
[1940] AC 152
(HL);
([1939]
3 All ER 722)
at 733E – F.
[29]
R C Beuthin ‘The Principle of Unanimous
Consent’ (1974) 91
SALJ
2.
[30]
Sugden and Others v Beaconhurst Dairies (Pty)
Ltd and Others
1962 (3) SA 174
(ECD)
at 179H-181A;
Gohlke & Schneider
and Another v Westies Minerale (Edms) Bpk and Another
1970
(2) SA 685
(A) at 693E-694E.
[31]
Quadrangle Investments (Pty) Ltd v Witind
Holdings Ltd
1975 (1) 572 (A).
[32]
Fn 29 ante
.