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[2020] ZAGPPHC 39
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Labuschagne and Others v Menlyn Brake and Clutch CC and Others (44518/18) [2020] ZAGPPHC 39 (27 January 2020)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
DIVISION, PRETORIA
(1)
REPORTABLE:
YES
/NO
(2)
OF
INTEREST TO OTHER JUDGES:
YES
/NO
(3)
REVISED
CASE
NO: 44518/18
27/1/2020
In
the matter between:-
ELANA
LABUSCHAGNE
First Applicant
BAREND JOHANNES
VAN DER MERWE N.O
In his capacity
as a Trustee of the Bo-Kloof
Trust
Second Applicant
ANDREA MAGRIETA
VAN DER MERWE N.O
In her capacity
as a Trustee of the Bo-Kloof
Trust
Third Applicant
PIETER SCHALK
NEL N.O
In
his capacity as a Trustee of the Bo-Kloof
Trust
Fourth Applicant
and
MENLYN BRAKE
AND CLUTCH CC
(CK NO.
1997/003274/23)
First Respondent
PAUL
LABUSCHAGNE
Second Respondent
THE MASTER OF
THE HIGH COURT, PRETORIA
Third Respondent
RECEIVER OF
REVENUE, PRETORIA
Fourth Respondent
MOTOR INDUSTRY
BARGAINING COUNCIL
Fifth Respondent
JUDGMENT
RANCHOD, J
Introduction
[1]
The applicants seek an order,
inter
alia,
declaring that the first
applicant is the beneficial owner of a 23% member's interest in the
first respondent; that the Bo-Kloof
Trust (the Trust) (represented by
the second, third and fourth applicants) is the beneficial owner of a
36% member's interest in
the first respondent; the appointment of an
accountant to do a business valuation of the first respondent; an
order requiring the
first and/or the second respondent to purchase
the applicants' members interest in the first respondent;
alternatively an order
winding up the first respondent.
[2]
The second respondent denies that the applicants are owners of any
interest
in the first respondent. He alleges that the monies
allegedly invested in the first respondent by the applicants were in
fact a
loan to him personally by the applicants for him to purchase
the first respondent as a going business concern.
[3]
Henceforth, where I refer to the first and second respondents
together,
I will simply refer to them as 'the respondents' as the
third, fourth and fifth respondents have been cited only for any
interest
they may have in the matter and they have not entered an
appearance. The second applicant is referred to interchangeably as
the
second applicant or as Van der Merwe.
[4]
The second respondent's main contentions are, firstly, that the first
applicant does not have
locus standi
to bring this application; secondly,
that it is not competent for the applicants to seek relief in
relation to a different close
corporation (CC) to that cited in the
Notice of Motion; thirdly, that there is a material dispute of fact
on the papers, and fourthly,
that no case has been made out for the
alternative relief sought, i.e placing the first respondent under
final winding up.
Brief
background facts
[5]
The first applicant is the widow of the late Christiaan Rudolf
Labuschagne
(the deceased) and was appointed by him in his Will as
his sole heiress. The second, third and fourth applicants are the
trustees
for the time being of the Bo-Kloof Trust which was
established in August 1999.
[6]
The applicants allege that:
6.1
During 2009, the second applicant, the deceased and the second
respondent concluded
an oral agreement in terms whereof they
undertook to invest in the purchase of the first respondent.
6.2
In December 2009 and January 2010, the parties decided to implement
the terms of their
oral agreement to purchase the first respondent.
The agreement was that each of them would contribute to the purchase
price of
the first respondent and according to the amount of their
contributions would acquire a pro-rata member's interest in the first
respondent.
6.3
On 04 February 2010, Van der Merwe sent a written offer to purchase
to the then owner
of the first respondent, after the deceased and the
second respondent had given their input on it.
6.4
On 03 March 2010, the purchase price of R500,000 was paid over to the
seller. Van
der Merwe contributed R200,000; the deceased paid R95,438
and the second respondent the balance. It was agreed that the
purchase
of the business would be through a close corporation named
Blue Marlint Trading 142 CC represented by the second respondent. It
was also agreed that their respective member's interest in the first
respondent would be 36% (the Bo-Kloof Trust), 23% (the deceased)
and
41% (the second respondent) (apparently notwithstanding that the
respective monetary contributions were not in exactly the
same
proportions).
6.5
The name of the purchaser - Blue Marlint Trading 142 CC was
subsequently changed to
Menlyn Brake and Clutch CC (the first
respondent).
6.6
It was agreed that neither Van der Merwe, nor the deceased would be
included in the
daily activities of the business but would be
available to render assistance if and when the second respondent
required it.
6.7
Meetings were held between the members of the CC in subsequent years
to discuss the
affairs of the business.
6.8
In the latter half of 2017, at a meeting between the deceased and the
second respondent,
the latter produced a CIPC (Companies and
Intellectual Property Commission) document providing for both Van der
Merwe and the deceased
to sign off their respective member's interest
in the first respondent and to transfer them to the second
respondent. They refused
to sign the document.
6.9
After the meeting second respondent simply ignored his co-members of
the first respondent
and no financial statements were provided to
either of them even though they were entitled to them.
6.10
In a letter dated 02 November 2017 from second respondent's attorneys
to Van Der Merwe, the second
respondent for the first time alleges
that the member's interest of Van Der Merwe and the deceased were
provided by second respondent
as a 'security interest' for loans they
had provided to the second respondent. The loans had been repaid
hence the 'security interest'
(member's interest in the first
respondent) has been cancelled with retrospective effect to the date
that the loans were fully
paid up.
6.11
Van Der Merwe responded through his attorneys and denied that the
funds advanced by him and the deceased
were loans and asked second
respondent to provide the loan agreement. It was pointed out that
both Van Der Merwe and the deceased
had purchased member's interests
in the first respondent with their concomitant benefits.
6.12
The deceased died on 02 January 2015 and his wife, the first
applicant, inherited his member's interest
in the first respondent.
[7]
The second respondent's version is that:
7.1
When the business became available for purchase by him, he only had
about R240,000.00,
hence he approached his father (the deceased) for
a loan of about R300,000.00 as the purchase price was RS00,000.00.
The deceased
could only lend him R100,000.00 and it was then that his
father said he would approach Van Der Merwe.
7.2
Van Der Merwe was well known as a successful businessman.
7.3
He (second respondent) had informed the seller of the business that
he would
get about R300,000.00 in loans from his family. (However, no
confirmatory affidavit has been obtained from the seller.)
7.4
Van Der Merwe had agreed to lend him R200,000.00 but he had said that
he did
not simply want to lend him the money because 'What will
happen if the business was not successful?'
[1]
Discussion
[8]
The second respondent has not produced any documentary evidence that
Van
Der Merwe and the deceased provided the monies as a loan for him
to purchase the member's interests in the first respondent.
[9]
If Van Der Merwe loaned the monies in his personal capacity and his
registration
in the close corporation was simply a temporary security
interest then the second respondent has failed to establish that Van
Der
Merwe received a temporary security interest in his personal
name. The registration of the member's interest in the name of the
Trust does not support his contention. If the member's interest
granted to the applicants was simply a temporary security interest,
no statement has been made in the financial statements, nor has there
been any qualification in the CIPC registration to this effect.
One
would have expected a borrower to have made clear either in formal
registration papers or by way of a separate loan agreement
between
the parties that the monies advanced by the trust and the deceased
were in fact simply loans to the second respondent.
[10]
It is evident that from the inception of their business relationship
Van Der Merwe was reluctant
to lend the money to the second
respondent without knowing that the business would be managed
successfully. On the second respondent's
own version, it follows that
a security interest would have been no protection for Van Der Merwe,
or, for that matter, for the
deceased.
[11]
It is common cause that both the deceased and Van Der Merwe have been
repaid their loans to the
first respondent by it. Second respondent
avers that if the deceased and Van Der Merwe had sought an interest
or ownership in the
first respondent he would certainly not have
agreed to it because, he says, the business is nothing but a small
motor vehicle repair
facility and the idea that three families could
live off the income of the business 'is simply wrong'.
[2]
However, by second respondent's own admission, Van Der Merwe is a
successful businessman so he could hardly be considered as wanting
to
live off the income of the business. More importantly, why would
second respondent agree to registration of members' interests
in
favour of the deceased and Van Der Merwe if the monies advanced were
merely loans? In this regard, two documents, in my view
gainsay the
second respondent's version.
[12]
The first is an email dated 19 January 2010
[3]
from Van Der Merwe to his accountant requesting him to peruse a draft
purchase agreement relating to the purchase of the business
Menlyn
Brake and Clutch. He states that a CC is to be set up in which he,
the deceased and second respondent will invest in a defined
relationship in the new business.
[4]
He states further that the name 'Menlyn Break (sic) and Clutch' is
the name under which they are going to conduct the business.
[5]
[13]
The second document is the sale of business agreement.
[6]
It provides for the sale by Menlyn Brake and Clutch BK (with
registration number CK 1997/003274/23) to Blue Marlint Trading 142
BK
(BK 2010/000864/23) represented by the second respondent of the
business known as Menlyn Brake and Clutch. As I said, Blue Marlint
Trading 142 CC later underwent a name change to Menlyn Brake and
Clutch CC. A Disclosure Certificate issued by the CIPC (dated
6
November 2017) reflects that the deceased held 23%, the Bo-Kloof
Trust 31% and the second respondent 41% member's interest in
the
first respondent.
[14]
Furthermore, the second respondent admits that Van Der Merwe did not
want to lend the money
to him. This admission lends credence to Van
Der Merwe's assertion that he and the deceased had provided funding
as an investment
in the first respondent and not as a loan to the
second respondent personally. The allegation by the second respondent
that the
member's interest held by the deceased and Van Der Merwe was
'security interest' is, in the circumstances far-fetched and must be
rejected.
[15]
It is also to be noted that in the financial statements for the year
end 28 February 2011,
the financial statements of the first
respondent were signed by the deceased and Van Der Merwe together
with second respondent
as members of the first respondent and the
names of these same three persons are mentioned as being members of
the first respondent.
The same position presents itself in the
subsequent financial statements for the years 2012 up to and
including 2016. If what was
agreed upon was a loan, then what would
have been expected to happen was that the second respondent would
have owned the full 100%
member's interest in the purchaser (Blue
Marlint Trading 142 CC) and then, he would have provided some type of
security by way
of a pledge in the applicants' favour over the
member's interest and possibly the stock.
[16] The
second respondent has raised several points which, he avers, renders
the application
fatally flawed or, the matter must be referred to
oral evidence.
[17]
It is alleged that the incorrect CC has been joined in these
proceedings. It is so that
the headings of the Notice of Motion and
the Founding Affidavit refer to the registration number of the first
respondent as 1997/00327/23.
However it is important to note that the
body of the Founding Affidavit refers to the Certificate issued by
the CIPC dated 06 November
2016 and it is attached as annexure 'FA4'
to the Founding Affidavit with the correct registration number.
[18]
The cited first respondent is the correct first respondent. The only
mistake is in the
heading to both the notice of motion and the
founding affidavit which refers to the first respondent as having a
CK number 1997/003274/23
whereas it should have referred to the first
respondent as having a CK No 2010/00864/23 as is evident from
annexure 'FA4' attached
to the founding affidavit.
[19]
It is common cause that the close corporation Blue Marlint Trading
142 CC purchased the
business from Du Preez who was trading as Menlyn
Brake and Clutch CC under CK No. 1997/003274/23, as appears from the
sale agreement
attached as annexure '1'. The close corporation Blue
Marlint Trading 142 CC, subsequently changed its name to Menlyn Brake
and
Clutch CC, but retained the same registration number. This is
evident from the Blue Marlint Trading 142 CC registration number
which is the same number that has been cited in paragraph 10 of the
founding affidavit.
[20] If one
analyses the sale and purchase agreement attached as annexure '1' to
the answering
affidavit, it is obvious that the second respondent was
representing the purchaser, namely Blue Marlint Trading 142 CC in
which
the deceased, the Trust and the second respondent were members
according to the ratios agreed between them.
[21]
The second respondent suggests that the contract is not fair. This
is, unfortunately for
him, legally irrelevant. Contracts must be
abided by even if they pan out as unfair.
[7]
[22]
The second respondent contends that the first applicant does not have
locus standi
in
this application. The first applicant is the widow of the deceased
and has been appointed by his last Will and Testament as his
sole
heiress. Absa Trust Ltd was nominated as the executor in the estate.
However, it has agreed to renounce its nomination in
favour of first
applicant's attorneys. No evidence has been led about whether an
executor has in fact been appointed. In any event,
the first
applicant founds her
locus standi
as
the sole heiress to the deceased estate and in her capacity as the
beneficial owner of the deceased's member's interest in the
first
respondent. In my view she is entitled to protect her interests and
therefore has
locus standi.
[23]
The second respondent also takes issue with the relief sought in the
Notice of Motion to
the effect that the first and/or the second
respondents are to be directed to purchase the applicants' member's
interest in the
first respondent from the applicants.
[24]
A member may only be forced to purchase the member's interest of
another member pursuant
to an order granted in terms of
section 49
of
the
Close Corporations Act, 1984
.
[25] A
party who wishes to rely upon a statutory provision as a cause of
action must formulate
the relevant pleading in clear terms with
reference to that provision.
[8]
[26]
The applicants do not plead reliance upon
section 49
of the
Close
Corporations Act, nor do
the applicants make any of the allegations
necessary to sustain a cause of action based upon
section 49.
In
particular, there is no allegation that:
'any
particular act or omission of the corporation or of one or more other
members is
unfairly
prejudicial. unjust or inequitable
to him...
[9]
'
[27]
In my view no case has been made out for a forced buy-out. In the
circumstances the relief
sought on prayers 5, 6, 7, 8, 9, 10 and 11
cannot be granted. An appropriate order would be to grant prayers 1,
2, 3 and 4 of the
Notice of Motion. The estate of the deceased or the
first applicant and Bo Kloof Trust would then be entitled to
pursue claims
for their share of any profits earned by the first
respondent.
[28]
In the circumstances the following order is made:
1.
It is declared that the first applicant is the beneficial owner of a
23% member's
interest in the first respondent.
2.
It is declared that the Bo-Kloof Trust is the beneficial owner of a
36% member's
interest in the first respondent.
3.
The first respondent is directed, insofar as may be necessary, to
rectify
alternatively
to amend its register of members to reflect the first applicant and
the Bo-Kloof Trust as the holders of their respective member's
interest in the first respondent.
4.
The first respondent is further directed forthwith to issue the first
applicant
and the Bo-Kloof Trust with appropriate certificates in
respect of their respective member's interests.
5.
The second respondent to pay the costs of the application.
RANCHOD, J
JUDGE OF THE
HIGH COURT
Appearances:
Appearance
for the Applicant:
Adv JK Berlowits
Instructed by Eastes Inc
c/o
Verster/ Roos Inc Attorneys
76
Skilpad Avenue
Suite
3, Monpark Building
Pretoria
Appearance
for the Respondents:
Adv Bruwer
Instructed by Abacks Attorneys
c/o Macintosh Cross & Farquharson
834 Pretorius Street
Arcadia, Pretoria
[1]
Answering affidavit: p209, para 13.
[2]
Answering affidavit: p210, para 16.
[3]
Annexure 'FA5' to the founding affidavit at p52.
[4]
Stigting van BK waarin ans (Paul, Ben Tiaan) in 'n bepaalde
verhouding in die nuwe besigheid gaan bele.
[5]
'Die naam "Menlyn Brake and Clutch" is die naam waaronder
as die besigheid gaan dryf.'
[6]
'Verkoping van 'n sake-onderneming.'
[7]
Burger v Central South African Railways
1903 TS 571
at 576;
Rashid v Durban City Council
1975 3 SA 920
(D) 927 B-0;
Paddock Motors (Pty) Ltd v lgesund
1976 3 SA 16
(A) 28;
Neuhoff v York Timbers Ltd
1981 4 SA 666
(T) 673 O-E;
Artprint Ltd v Gerber Goldschmidt Group
SA
Ltd
1983 1
SA 25
(A} 263;
Dithaba Platinum (Pty) Ltd v Erconovaal Ltd
1985
4
SA 615 (T) 627-630
[8]
Yannakou v Apollo Club
1
974 (1) SA 614
(A) ;
Naude v
Fraser1998 (4) SA 539 (SCA).
[9]
This is an essential allegation to found a cause of action based
upon
section 49
of the
Close Corporations Act.