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[2018] ZAGPPHC 282
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Poole v Zephan (Pty) Ltd and Others (39110/2016; 39109/2016) [2018] ZAGPPHC 282 (22 January 2018)
IN
THE REPUBLIC OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
(GAUTENG
DIVISION, PRETORIA)
CASE
NO: 39110/2016
39109/2016
SYDNEY
CLARENCE WILLIAM POOLE
PLAINTIFF
And
ZEPHAN
(PTY) LTD
1
st
DEFENDANT
NICOLAS
GEORGIOU N.O
2
nd
DEFENDANT
MAUREEN
LYNETIE GEORGIOU N.O.
3
rd
DEFENDANT
JOE
CHEMALY
N.O
4
th
DEFENDANT
NICOLAS
GEORGIOU N.O
5
th
DEFENDANT
HIGHVELD
SYNDICATION NO 22 LIMITED
6
th
DEFENDANT
PIC
SYNDICATIONS (PTY)
LTD
7
TH
DEFENDANT
JUDGMENT
KHUMALO
J
INTRODUCTION
[1]
The Plaintiff, Sydney Clarence William Poole ("Poole") is
applying for Summary
Judgment in two (2) actions that he instituted
against the 1
st
to 5
th
Defendants claiming
specific performance in agreements that Poole alleges were concluded
between himself and a company called Zephan
(Pty) Ltd ("Zephan"),
the 1
st
Defendant, and were binding to the 2
nd
to 5
th
Defendants of which the Defendants are in breach.
The case numbers are 39109/16 and 39110/16.
[2]
The 2
nd
Defendant, that is Nicolas Georgiou, 3
rd
Defendant, Maureen Lynette Georgiou and 4th Defendant, Joe Chemaly
are trustees of the N Georgiou Trust TMP 757 ("the Trust")
and cited in their representative capacity as such. Nicolas Georgiou
("Georgiou") the 2nd Defendant is also cited in
his
personal capacity as the 5th Defendant. Georgiou is the sole
shareholder and director of Zephan. They are all referred to as
"the
Defendants."
[3]
There is no claim against Highveld Syndication No 22 Limited trading
as Charles Crescent
Syndication ("HFS 22) and PIC Syndications
(Pty ) Ltd ("PIC"), the 6
th
and 7
th
Defendants, respectively. They are only cited as interested parties
in the matter. Neither of the two Defendants has entered an
appearance to defend.
[4]
The remainder of the Defendants have raised defences on the point of
law as well as procedure.
[5]
Poole, on 20 May and June 2010, through the marketer and promoter
PIC, ("hereinafter
referred to interchangeably as "the
promoter" or "PIC"), acquired HFS 22 shares in two
transactions comprising
each of 2000 units at a share price of R1
000.00 per unit amounting to a total investment of R2 000 000.00 (
Two Million Rand)
that were held by Zephan in HFS 22.
Poole
relies upon the following averments made in his particulars of claim,
that:
[6]
In terms of a Registrar of Companies and Close Corporation's duly
registered prospectus, the promoter,
acting on behalf of FHS22
marketed and offered to the public by way of public placing
subscription to 657 391 ordinary shares with
a par value of 100 cents
each in the share capital of HFS 22 at an issue price of 100 cents
per share plus a share premium of R999
per share with opening and
closing dates 11 May and 10 August 2009.
[7]
Not all the shares in HFS 22 were subscribed to by members of the
public by 10 August 2009,
and therefore the remainder of the shares
were acquired or taken up by Zephan who then became owner/holder of
the shares under
the same terms, conditions and warranties as set out
in the registered prospectus of the FHS 22 offer to the public.
[8]
Zephan offered for sale the shares through PIC its duly authorised
marketer/promoter.
The shares offered were acquired by Poole,
according to Zephan's instruction /mandate to the promoter, on the
same terms, conditions
and warranties set out in the prospectus.
[9]
During the sale, the promoter furnished Poole with a quotation in
respect of Resale: Highveld
Syndication 22...on shares bought from
Zelpy (as Zephan was previously known), a copy of the registered
prospectus of HFS 22 and
Application Forms for purchase of Units in
Highveld Syndication No 22 Ltd. Poole accepted the quotation and
confirmed his intention
to participate in the syndication company and
to purchase
[10]
Besides the purchase price, the quotation sets out the following
information:
Illustrative
values:
(1) Capital
growth over five years :100%
(ii) Buy back
date 30 September 2014.
Income
No income is
paid during the five years of investment.
Capital
The
resale value of the investment before the buy- back agreement serves
only as an indication, as the resale of the shares will
be offered on
the basis of supply and demand.
*The
investment value illustrates the capital growth of the investment if
the investor should keep the shares for five years up
to the
guaranteed buy-back agreement of the investor's shares.
*The
investment return illustrates the effect of the buy-back agreement
calculated by the duration of the investment.
[11]
In the prologue to the prospectus, the directors of HFS 22 presented
the key features
of the offer to be, inter alia, that:
*CAPITAL:
The capital is secured with a buy-back
agreement. The shares will be brought back by Zelpy 2095 (Pty) Ltd
(Zephan) or its nominee
after S years from the investment date,
providing 100% capital growth to the investor;
*
COSTS: All costs, including commissions are paid for by the promoter.
Investors have 100 % allocation of their investment capital
*BUY-BACK
AGREEMENT: The guaranteed buy-back agreement ensures that the shares
will be bought back from the investors five years
from the investment
date;
*INVESTMENT
TERM: An investment period of five years and longer offers investors
the maximum benefit; (as set out in the illustration
of the return on
an investment of R100 000.00 from the investment date to the
guaranteed buy back of shares five years from the
investment date)
[12]
In the prospectus it is stated that:
[12.1]
The main business: HFS 22 is a loan stock investment holding company,
with its main investment policy in the following properties.
[12.2]
The equity of FHS 22 will be divided into 888 000 authorised and
888 000 issued shares ,each consisting of
R 1 share capital and
a permanent non-separable linked loan account of R999 per
share.Shares are available in multiples of R1000
with a minimum
investment if R1000.00.These funds will be utilised to acquire
properties.
[12.3]
The purpose of the offer:is to raise capital to acquire the
properties known as…and “to enable HFS 22
to raise funds
to pay the purchase price for the seven properties.
[12.4]
The minimum subscription that must be raised in order to provide the
purchase price required to purchase the properties
is R888 000
000.00
[12.5]
Prospects, Financial Information and Assets to be acquired:
(i)
Investors receive capital growth on their investment
with the buy- back of their shares according to the buy-back
agreement pro
rata to their share; Investors enjoy capital growth
through the increase in the value of the property; and
[12.6]
The material contracts which have been entered into by HFS 22 since
its incorporation on 4 August 2005 to date of the
prospectus, other
than the ordinary course of business are :
(i)
The purchase agreements of the properties;
(ii)
The buy back agreement between HFS 22 and Zelpy 2095
(Pty) Ltd
(Zephan)
or
its nominee.
[13]
At all relevant times the promoter was duly represented by its duly
authorised advisor
and in terms of the Advise Record of Mutual
Understanding it was agreed and recorded between Poole and PIC
(Promoter)
inter alia
that:
(a)
Poole accepted the advice offered by the advisor;
(b)
Poole instructed the advisor to implement the proposed investment
product
of which the key features, terms, conditions and exclusions
are inter alia, that:
*the
product is an investment in authorised ,issued, unlisted shares, each
consisting of R1 share capital and a permanent non-separble
linked
loan account of R999.00
*the
investment capital is secured through a buy back agreement and the
income through a head lease agreement as disclosed in the
prospectus.
*the
minimum proposed investment term of the product is 5 years and in
order to achieve the benchmark it is not possible to guarantee
the
invest capital, nor the targeted return except where the buy-back and
head lease agreements apply:
*Poole
understands that it is possible to sell units of this investment at
any time after the registration as described in the prospectus
*confirmation
of investment will be sent to the Plaintiff by PIC ADM (Pty) Ltd and
Eugene Krger & Co Inc.Attorneys
[14]
He accepted, inter alia, the following terms and conditions as
contained in the prospectus:
[14.1]
Resale of Units: Shareholders
are compelled to sell their shares five years from the
investment
date, according to the terms of the buyback agreement.
However,
they may sell their shares before the (buy-back) agreement comes into
force.
[15]
The promoter
is also alleged, in the Application Form
completed by Poole to have
warranted:
[15.1]
that Poole will be the effective owner of the shares as from the date
of transfer of the shares in his name;
[15.2]
that Poole shall have the right, power and authority to sell the
shares free of any liens, options, charges or any encumberances
of
whatever nature and any resale is subject to the provisions of clause
5.3.
[15.3]
that Poole agrees to sell his shares in HFS 22
at a price of R1,001.00 per share with a linked account of R999.00 to
Zephan or his
nominee.
The shares will be
transferred against payment to Zephan.
Any
sale by Poole of the shares before the five year period from the
abovementioned date must be subject to the buy-back agreement
of the
shares to Zephan.
[15.4]
that Poole acknowledges that the units are sold without any
warranties other than those set out in the prospectus and in
respect
thereof and all risk and benefit thereof shall pass to the investor
on the date of registration of the shares in his name.
[15.5]
That the signature of the agreement by the parties shall be deemed to
supersede any previous verbal or written agreements
between the
parties.
[15.6]
that the agreement is subject inter alia to the conditions stipulated
in the prospectus of which the Poole is fully aware
of.
[15.7]
That if Poole sells his shares before the date of the buy-back
agreement, h5will be responsible for the cost of the resale.
[16]
The material terms of the buy-back agreement which was concluded
between HFS and Zephan,N Georgio
and the Trust duly representred by
Georgiou who was also duly authorised by all the trustees (2
nd
to 5 Defendants) are said to be that :
[16.1]
Zephan,the Trust and N Geogiou (5
th
Defendant ) jointly and severally herby irrevocably
undertakes to re-purchase all the shares sold
by FHS 22 to the
original purchasers
of the shares five years after the individual initial
purchase date (herein referred to as “Repurchase Date “)
at R
1,001.00 per share with the share premium of R
999.00{hereinafter referred to as the “Repurchase Price”];
[16.2]
Should Zephan, the Trust and Georgiou, jointly and severally, fail to
pay the relevant shareholders the Repurchase
Price of the shares on
the Repurchase
Date:
[16.2.1]
The shareholders may elect to either:
[16.2.1.1]
Claim the full amount of rental income received by Zephan, the Trust
and the Georgiou, jointly
and severally, in respect of the immovable
properties owned by HFS 22, together with mora interest at a rate of
10% per annum on
the aforesaid amount, (which) amount will
immediately become due and payable by Zephan, the Trust and Georgiou
jointly and severally
to HFS 22; or
[16.2.1.2]
Claim specific performance for the repurchase
of the shares at the Repurchase Price.
[17]
Poole therefore alleges that:
[17.1]
at all
relevant times he relied
upon
the truth
and correctness of the statements
and representations made in the quotation, the prospectus and
application form.
He had paid the purchase
price and as a result was issued with a share certificate number
HFS2234613 dated 26 October 2010.
[17.2]
it was the intention of Poole, Zephan, the Trust and Georgiou at all
relevant times that the terms and conditions contained
in the
prospectus and the buy-back agreement will be mutatis mutandis
applicable to the agreement entered into between Poole and
Zephan,
the parties;
[17.3]
Zephan, the Trust and Georgiou in terms of the
buy-back agreement contractually bound themselves jointly and
severally, to re-purchase
all the shares bought by Poole on 30
September 2014,
alternatively after 5 years
from 01 July 2010 alternatively after five years from the initial
purchase date at RlOOl.00 per share
with inked loan account of
R999.00
[17.4]
he irrevocably contracted and undertook to sell his shares in HFS 22
on 30 September 2014 alternatively after five years
from 1 July 2010
alternatively after fives from 01 July 2010 alteratively after 5
years from the initial purchase date of the shares
(the Repurchase
Date) at a price of R4000 (Four Million Rand) (the Repurchase Price”)
to Zephan read with the terms and conditions
contained I the buy-back
agreemt.
[18]
He therefore elects to claim specific
performance for the repurchase of the shares by Zephan,the Trusust
and Georgiou
, jointly and severally in the
amount of R4 000 000.00 ( Four Million Rand). He tenders to fulfil
his undertaking and offer for
his sale of shares in HFS to Zephan on
the terms and conditions set out as aforementioned, and the share
certificate issued to
him and transfer of the shares to Zephan,
alternatively the Trust and alternatively Georgiou against payment to
him of the re-purchase
price by Zephan, the Trust and Georgiou,
jointly and severally the one paying the other to be absolved.
Defendants
Opposition
[19]
In opposing the Applications the 2nd to 5th Defendants have fi led
identical Answering Affidavits
deposed to by N Georgiou making
allegations based on the following defences, that:
[19.1]
There is no contractual nexus between Poole
and the Defendants,
therefore no contractual
rights that Poole can enforce against the Defendants. As a
result there is no
vinculum juris
between
Poole and the Defendants. Poole's specific claim against the
Defendants based on the terms of the buy-back agreement is
therefore
denied.
[19.2]
Even if the buy-back agreement did create enforceable rights in
Poole's favour, those rights were novated through the implementation
of a business rescue plan in respect of the HFS Syndication Companies
including HFS 22, which plan is binding on all the shareholders
of
these companies, including Poole.
No
vinculum juris
[20]
It is submitted by the Defendants that Poole seeks to enforce
specific performance of an agreement
to which he was never a party,
or to which he was not privy since the buy-back agreement was
concluded between HFS, Zephan, the
Trust and Georgiou. In order for
him to have pleaded an unassailable cause of action, he would have
had to plead that he was a
party to the contract that he is seeking
to enforce, alternatively that the buy-back agreement constituted a
stipulatio alteri
in
his favour, the benefit of which he has accepted. He had instead
pleaded that the parties to the buy-back agreement were indeed
HFS,
Zephan and the Trust.
[21]
Furthermore it is submitted that the agreement allegedly entered into
between Poole and Zephan
upon which Poole’s claims is based
does not exist.
The agreement has not been
pleaded or attached
. The only agreement
pleaded or attached to which Poole is a party are ,the advice record
of mutual understanding and the Application
form for the purchase of
unites I Highveld 22 entered into between Poole and the PIC. If the
agreement is Poole’s cause of
action (which is not clear) the
claim is impeachable since Poole has failed to comply with Rule 18
(6) pertaining to the pleading
of agreements, and therefore not
entitled to summary judgment.
Lapse
of the benefit prior to acceptance (or exercise)
[22]
If it is accepted that the buy-back agreement did constitute a
stipulatio alteri
in
Poole's favour, the Defendants argue that the benefit was no longer
open for acceptance by the time the benefit became ripe for
acceptance, the reason being that Poole could only have elected to
accept the benefit conferred by the buy-back agreement once
the five
year period had lapsed and the Plaintiff has not sold the shares as
is illustrated by the provisions of the prospectus
that:
"Shareholders
are compelled to sell their shares, five years from the investment
date, according to the buy-back agreement.
However,
they
may sell their shares before the agreement comes into force."
(my emphasis)
[23]
The Defendants submit that in the light thereof Poole's contention
that the mere acquisition
of shares constituted acceptance of the
alleged benefit cannot be correct. Prior to the benefit being ripe
for acceptance,
the business rescue plan
however effectively Intervened by
restructuring the rights of HFS 22
shareholders,
and also restructuring HFS 22's
rights (if it had any) in terms of the buy-back agreement prior to
Poole being able to accept te
benefit and step into the shoes of FHS
22 after the lapse of five years.
Shares
purchased falling outside the scope of the buy-back agreement
[24]
the Defendants argued that the buy-back agreement makes it clear that
it was applicable to
shares sold by HFS 22 to
the original purchasers
of those shares. On
Poole's own version he however purchased the shares not from HFS 22
but after Zephan had taken up the shares
and instructed PIC to
on-sell the shares.
Poole was therefore not
the original purchaser as contemplated in the buyback agreement,
he
would therefore never have been able to enforce the terms thereof.
[25]
Lastly
HFS 22
together
with other Syndication Companies, ran into financial difficulty and
were placed
under business rescue on 7
September 2011
with a business rescue
practitioner being appointed. A business plan was voted upon and
approved by 99% of the investors in the
HFS 22 who were present and
voted at a meeting convened in terms of s 151 of the Companies Act 71
of 2008 ( "the Act").
[26]
All the investors are bound to the terms of the business rescue plan
by virtue of the provisions
of s 152 (4) of the Act. The business
rescue plan not only restructured the rights of the HFS Syndication
Companies and the creditors
of the HFS Syndications It also novated
the right of the shareholders in HFS 22.
Determination
by the court
[27]
For the Defendant to defeat a motion for Summary judgment he should
present a defence that is
bona fide and good in law whilst conversely
the Plaintiff is to establish a cause of action with lucidity and
accuracy, setting
out the terms relied upon(in a written agreement if
applicable),upon which the cause of action is based to succeed in the
motion
for Summary Judgment;
Moosa and Other
NNO v Hassam
201
92) SA 410
(KZP) at 413
B-414B;
Maharaj v Barclays National Bank
Limited
1976 (1) SA 418
(A) at 426.
[28]
The issue of
nexus
raised by the Defendant is of serious
importance as it relates to the locus standi of the Plaintiff. Absent
the establishment of
contractual
nexus
there can be no action
against the Defendants. The plaintiff in an action must show a
proprietary right or a
contractual
nexus
in or
with the parties before the merits of the case could be considered.
The particulars of claim should, therefore to my mind,
prima facie
cloth the Plaintiff with legal standing to sue Zephan for the
specific performance arising from the buy-back contract concluded by
Zephan and HFS 22 as alleged. If such standing is not apparent ex
facie the particulars of claim or contract mentioned, the particulars
lack the precision or lucidity that is required to entitle it to a
summary judgment.
[29]
Poole's legal standing in relation to the buy-back agreement that was
concluded by
HFS 22 and Zephan is not apparent and the challenge
raised by the Defendants bona fide and good in law and since it is
not clear
in the particulars of claim, Plaintiff has to prove the
existence of a business relationship/locus standi and or the
nexus
between himself and the Defendants upon which the Defendants can
be held liable in terms of alleged contract and the law of agency,See
also
Potchefstroomse Stadsraad v Kotze
1
960 (3) SA 6
I 6 (A);
Seal a Cafe
v
Rand Advance (Pty) Ltd
1975 (1) SA 28
(N): and
Glolinco
v
Absa Bank Ltd ta United Bank
2002
(6) SA 470
(SCA) referred to in Defendants' heads of argument.
[30]
The Defendants have further raised a contention in respect of the
conciseness
and clarity of Poole's cause of action due to his failure
to refer to any terms or annex a copy of the agreement that he
allegedly
concluded with Zephan from which the specific performance
claim allegedly arose (or is based).
[31]
It is evident from Poole's particulars of claim that the agreement is
an important
link in the chain of Poole's cause of action against
Zephan, however no information/terms of the agreement in relation
thereto
are pleaded nor is a copy thereof annexed to the summons. The
particulars of claim are therefore lacking or not concise for the
purposes of a summary judgment. A Plaintiff that relies upon a
written contract is bound by the requirements of the subrule 18
96)
of the High Court Rules and obliged ,if possible.to give the
information required in precise terms; South African Railway and
Harbours v Deal Enterprises 9Pty) Ltd 1975 930 SA w AT 953a.
[32]
Furthermore the Defendants have the alternative contented that the
buy-back agreement that Poole
seeks to rely upon has been offered in
the agreement between HFS 22 and Zephan to the purchasers who
originally bought the shares
from HFS 22 and Poole is not the
original purchaser having bought the shares from Zephan. The defence
prima facie
is a good
defence and challenges Pooles
Locus Standi
to sue reliant on the terms of the buy back
agreement
. Poole In his particulars of claims
has indeed alleged that the
material terms of
the buy-back agreements which was concluded between HFS and Zephan,N
Georgiou and the Trust
duly represented by
Georgiou were that Zephan, the Trust and NGeorgio jointly and
severally, irrevocably
undertake to repurchase
all shares sold by FHS 2 to the
original
purchasers
.Poole would therefore have to
prove the right disputed by the Defendants.
[33]
The aforementioned content ions already raised indicate that there
are triable issues upon which
particulars of claim can be challenged.
[34]
In the alternative the Defendant has also alleged that if the court
might not agree with it on
the aforementioned issues it has a good
defence still , due to the fact that before the buy-back agreement
was to come into effect
on a date stipulated as September 2014 or 5
years from date of purchase of the shares, HFS 22 with whom Zephan
concluded the agreement
and whose right Poole alleges to have
acquired when he subscribed to the shares held by Zephan, has been
placed under business
rescue and encumbered by the business rescue
plan that was adopted prior the effective date of the buy-back
agreement. The Defendants
also refer to a moratorium on legal
proceedings as contemplated in s 133 of the Act that was operative
till 31 December 2016.
[35]
According to Poole, it is Zephan, the Trust and Georgiou who are
supposedly bound by the agreement.
Consequently, the impact of HFS
22's encumbrance by the business rescue plan to the alleged specific
performance required by Poole
has not been elucidated with clarity in
the Defendant's affidavit. Zephan has failed to indicate how (if
contractual nexus is found)
is it incapacitated from buying back the
shares by the HFS 22's shareholders adoption of a business rescue
plan, or put in other
words how Poole's alleged claim becomes
unenforceable against Zephan, the Trust and Georgiou. The averment
that the rights of shareholders
has been substituted with the rights
in the business rescue plan is not sufficient to indicate the nature
of the defence. The court
is unable to make out if the allegations
will constitute a defence to the Plaintiff 's claim against Zephan,
the Trust and Georgiou
if proven at the trial; see
Maharaj.
It therefore remains in doubt with this
specific defence if the Plaintiff's claim can be met on trial.
Nonetheless since it is pleaded
in the alternative to defences which
the court has found to be bona fide and good in law, it would be of
no prejudice if the matter
is referred to tri al : see
Gruhn
v M Pupkewitz
&
Sons
(Pty) Ltd
1973 (3) SA 49
(A) at 58. The court
discretion could be exercised in the Defendant's favour if there is
doubt as to whether the Plaintiff's case
is unanswerable; see
Tesven
CC v South African Bank of Athens
2000 (1) SA
268
(SCA).
[36]
Under the circumstances the following order is made:
1.
The Application for Summary Judgment is refused with costs to be
costs in the action.
2.
The Defendants are granted leave to defend Plaintiffs actions under
the abovementioned case numbers;
3.
The parties are to file their papers as applicable in the rules
N
V KHUMALO
JUDGE
OF THE GAUTENG HIGH COURT -PRETORIA
For
Plaintiff:
L Bolt
G
Swanepoel
Instructed
by:
Le Grange Attorneys
Ref:
Mr Le Grange
Tel:
(012)
323-6460
For
1
st
.5
th
Defendants:
M Mostert,
Instructed
by:
Kyriacou Incorporated
Ref:
A van Eck/Jos
Tel:
(012) 348-1626