About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: North Gauteng High Court, Pretoria
SAFLII
>>
Databases
>>
South Africa: North Gauteng High Court, Pretoria
>>
2015
>>
[2015] ZAGPPHC 540
|
|
De Lange v Zephan (Pty) Ltd and Others (82322/14) [2015] ZAGPPHC 540 (22 July 2015)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
DIVISION, PRETORIA
Case
No.: 82322/14
DATE:
22 JUNE 2015
In the matter
between:
ANNE-MARIE L. DE
LANGE
...........................................................................................
PLAINTIFF
And
ZEPHAN (PTY
LTD
................................................................................................
1
ST DEFENDANT
MAUREEN L.
GEORGIOU
N.O
...........................................................................
2ND
DEFENDANT
JOE CHEMALY
N.O
...............................................................................................
3RD
DEFENDANT
N.
GEORGIOU
.........................................................................................................
4TH
DEFENDANT
JUDGMENT
HIEMSTRA AJ
[1] The plaintiff is
one of 46 plaintiffs who instituted action against the defendants
based on the same cause of action. The parties
to all the actions
have agreed that the judgment in this matter will be determinative of
all the other matters. The particulars
of the other plaintiffs and
their case numbers are attached to this judgment as Annexure A.
[2] Although there
is only one plaintiff under this case number, I shall use the plural
when the matter under discussion concerns
the plaintiffs in all 46
cases and I shall use the singular when the matter under discussion
concerns only the plaintiff in this
case.
[3] The issues in
this, and the other matters, arise from the purchase by the
plaintiffs of shares in either Highveld Syndication
Company No. 21,
trading as Tyger Manor Syndication, previously known as Abrina 1639
Limited (HSC 21) or Highveld Syndi-cation Company
No. 22, trading as
Charles Crescent Syndication, previously known as Abrina 1642 Limited
(HSC 22). I shall refer to the companies
collectively as the Highveld
Syndication Companies (HS Companies). The agreements for the purchase
of shares in the two HS Companies
differ in some respects but these
differences have no bearing on the issues between the parties. Where
necessary, I shall indicate
in which respects the agreements differ.
[4] All 46
plaintiffs apply for summary judgment against the defendants for the
re-payment of the purchase price of their shares
against delivery of
their share certifi-cates in the respective HS Companies. The
plaintiff in this matter claims an amount of
R520 000 from HSC 21
against delivery of her share certificate. The total of the 46 claims
amounts to R29 955 000.
BACKGROUND
[5] On 9 February
2009 the Registrar of Companies and Close Corporations regis-tered
prospectuses accompanied by offers by the HS
Companies to the public
for subscription by way of public placing of 1 091 512 and 657 391
ordinary shares, re-spectively, with
a par value of 100 cents each in
the share capital of the HS Compa-nies plus linked loan accounts of
R999.00 per share. The promotor
of the offerings was PIC Syndications
(Pty) Ltd.
[6] In a “Directors’
Prologue”, included in the prospectus of HSC 21, the following
is recorded:
11 As the leader in
the property syndication industry since 1998, PIC Syndications (as
promotor) is proud to announce its latest
and largest investment
product Tyger Man¬or Syndication (HSC 21), totals R1 332 000 000
and comprises of eleven properties.
It enables investors to invest in
the commercial property sector, which is currently benefiting from
South Africa’s growing
retail trade. Tyger Manor Syndication
offers a unique opportunity because it includes a head lease
agreement as well as a buy¬back
agreement, providing investors
with peace of mind in the knowledge that their money is safe and
assured of guaranteed yields
It is recorded in
the prospectus that the promotor purchased eleven properties at
specified purchase prices and sold them to HSC
21 at specified
prices.
[7] The ’’Directors’
Prologue" further states that the following are key features of
the offer:
“HEAD LEASE
AGREEMENT
From the investment
date, and for five years until the buy-back of the investor’s
shares, the income is secured by a head
lease agreement
INCOME
The investor earns
12,5% per annum from the date of the investment. A head lease
agreement ensures the investor’s income for
a period of five
years from the invest¬ment date.
CAPITAL
The capital is
secured by a buy-back agreement The shares will be bought back af¬ter
5 years from the investment date, equally
to the purchase price.
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."
[8] There is no
similar "Directors' Prologue” in the prospectus attached
to the particu-lars of claims relating to HSC
22. However, both
prospectuses contain a paragraph entitled “Material contracts”.
It is recorded in both prospectuses
that the relevant company had
entered into a buy-back agreement with Zelpy 2095 (Pty) Ltd or its
nominee. Copies of the buy-back
agreements are included in the
prospectuses. In the case of HSC 21 it is marked “Annexure D”
and in the case of HSC
22 it is marked “Annexure C”.
These annexures are identical agreements between HSC 21 and HSC 22 on
the one hand, and
Zelpy 2095 Pty Ltd (or nominee), the N. Georgiou
Trust and N. Georgiou, the other hand. Zelpy 2095 has in the meantime
been renamed
Zephan (Pty) Ltd (the first defendant.)
[9] Annexures C and
D, mentioned above, record the following:
“1. The
SECOND, THIRD AND FOURTH PARTY (Zelpy 2095 Pty Ltd (or nomi¬nee),
the N. Georgiou Trust and N. Georgiou), jointly
and severally, hereby
ir-
revocably undertake
to re-purchase all of the shares sold by the FIRST PAR¬TY (HSC 21
or HSC 22, as the case may bej to the
original purchasers of the
shares five years after the individual initial purchase dates (herein
referred to as the ‘Repurchase
Date’ at R1.00 per share
with a link loan account of R999.00 (hereinafter referred to as the
‘Repurchase PriceV’
These are the
“Buy-Back Agreements” envisaged in the prospectuses.
Clause 6 of the
buy-back agreements is also relevant in that it provides for a
special resolution passed by 75% of the in HS Companies
for the
variation of the agreement, which must be reduced to writing and
signed by all parties. The relevance will appear later
in this
judgment.
[10] The
prospectuses included identical application forms for subscription to
the shares. Clause 5.3 of the application forms provides
as follows:
“5.3 Die
belegger stem hiermee onherroepelik saam om sy aandele in die
Maatskappy, vyf jaar na 1/1/2009 te verkoop teen ‘n
prys van
R1.00 per aandeel met ‘n gekoppelde leningsrekening van R999.00
aan Zelpy 2095 (Edms) Bpk of sy genomineerde. Die
aandele sal teen
betaling van die koopprys aan Zelpy 2095 (Edms) Bpk oorgedra word.
Enige verkoping van die aandele voor die periode
van vyf jaar vanaf
die datum soos hierbo vermeld verloop het; moet onderhewig wees aan
hierdie verkoopsooreenkoms van die aandele
aan Zelpy 2095 (Edms) Bpk”
[11] The offers to
purchase shares in the various HS Companies were accepted and share
certificates were issued to the plaintiffs.
[12] The plaintiffs
claim in their particulars of claim that the buy-back agreement is a
contract for the benefit of a third party.
They have accepted the
benefit by filling in the application form and the subsequent
allocation of the shares to them.
[13] The defendants
deny that it is such a contract. Counsel for the defendants, Mr P.
Rossouw SC, referred to the well-known judgment
of Corbett JA (as he
then was) in Joel Melamed and Hurwitz v Vorner Investments
[1984] ZASCA 4
;
1984 (3)
SA 155
AD at 291B-F where he said "... a contract for the
benefit of a third party is not simply a contract designed to benefit
a
third person: It is a contract between two persons that is
de¬signed to enable a third person to come in as a party to a
contract
with one or the other two ...the typical contract for the
benefit of a third person is one where A and B make a contract in
order
that C may be enabled, by notifying A, to become a party to the
contract between himself and A ... but broadly speaking the idea
of
such transac¬tions is that B drops out when C accepts and
thenceforward it is A and C who are bound to each other”
[14] Mr Rossouw
argued that it can be distilled from the above that there are two
el-ements which have to be satisfied, neither
of which appears from
the agreements:
1. It is essential
that the agreement contains enforceable contractual rights be¬tween
the original parties thereto. He argued
that this requirement has not
been met since the buy-back agreement, at best for the plaintiff,
only constitutes an undertaking,
given by the defendants to the HS
Companies, to pur¬chase the shares that they sold to the
plaintiffs after a five-year period.
The HS Companies, so goes the
argument, could not enforce this undertaking.
2. The agreement
must be designed to enable a third person to come in as a party
whilst the other party falls away. The buy-back
agreements contain no
indication that a third person (the plaintiffs) could replace the HS
Companies as a party to the agreements.
The first element
[15] I accept that
it is a necessary element for a contract for the benefit of a third
per-son that it must create enforceable rights
between the original
parties thereto. How-ever, I do not agree that the HS Companies had
not acquired enforceable rights against
the defendants.
[16] I can see no
reason why the respective HS Companies would not have been able to
enforce the agreements in the event of the
defendants failing to
repurchase the shares from the investors, as they have undertaken to
do. The HS Companies would have been
saddled with the obligation to
repurchase the shares by virtue of the prospectus, read with the
terms of application form. The
HS Companies would have been entitled
to sue for specific performance in order to relieve them from their
obligation, undertaken
in the prospectus.
[17] Mr Rossouw
referred to Total South Africa (Pty) Ltd v Bekker NO
[1991] ZASCA 183
;
1992 (1) SA 617
(A) in which a purported contract for the benefit of a third person
had been struck down. I find no support for his submission
in that
judgment. The issue in that case was not whether the contract created
enforceable rights between the parties. The facts
in Total SA are not
on all fours with facts in this matter. I do not intend to set out
the facts in the Total SA matter in detail,
but the essence was that
a certain Van Vuuren was indebted to Total SA. A certain Fourie
agreed with Total SA that: “Sub¬ject
to the condition that
Fourie faithfully carries out the terms of this agreement and
performs the obligations herein contained on
the dates thereof, Total
agrees not to proceed against Van Vuuren arising out of a settlement
that was made
The court found in
the circumstances of that case that there was no intention be¬tween
Total and Fourie that Van Vuuren could
by acceptance of the benefit
become a party to the agreement. Total and Fourie could at any time
cancel their agreement without
reference to Van Vuuren. Moreover,
there was no allegation that Van Vuuren had accepted the benefit.
[18] Based on the
judgment in Total SA, it must firstly be determined whether there had
been an intention between the HS Companies
and the defendants that
the plain-tiffs could by accepting the benefit become a party to the
agreement. I find that there was manifestly
such an intention. It is
the whole substratum of the agreement that the defendants would
“repurchase all of the shares sold
by the first party (the
relevant HS Company) to the original purchasers (the plaintiffs).”
The HS Company and the defendants
could not cancel this agreement
without reference to the plaintiffs. Each plaintiff clearly and
unequivocally accepted this benefit
by undertaking in his or her
application form by agreeing uonherroepelik... om sy aandele in die
Maatskappy, vyf
jaar na 1/1/2009 te
verkoop teen ‘n prys van R1.00 per aandeel met 'n gekoppelde
leningsrekening van R999.00 aan Zelpy 2095
(Edms) Bpk of sy
genomineerde."
The second element
[19] Mr Rossouw
argued that the agreement must be designed to enable a third per-son
to come in as a party whilst the other party
falls away. According to
the argument the buy-back agreements contain no indication that the
plaintiffs could replace the HS Companies
as parties to the
agreement. I do not agree. By the plaintiffs’ ac¬ceptance
of the benefit, the HS Companies were relieved
from their obligations
to¬wards the plaintiffs and they replaced the HS Companies as
parties to that clause of the agreements.
The plaintiffs did not
replace the HS Companies as parties to all the provisions of the
agreements because some provisions have
no bearing on them.
[20] I find that the
second element identified by Mr Rossouw has been met. The
shareholders, by accepting the benefit, have replaced
the relevant HS
Company as a party to the transaction in terms of which Zephan
undertook to repurchase their shares.
[21] Mr Rossouw
informed me at the outset of the trial that he and his junior, Mr M.
Mostert, had the previous night discovered
another reason why the
plaintiffs cannot succeed, namely that it turned out that the
buy-back agreements, Annexures C and D, had
not yet been signed when
the plaintiffs accepted the benefit. In other words, the contract for
the benefit of the shareholders
had not come into existence and there
was nothing for the plaintiffs to accept.
[22] I hasten to say
that this is an opportunistic point. The plaintiffs purchased the
shares because of the security of the buy-back
agreements. That made
the invest¬ment ostensibly risk-free. The investors were made to
believe that contracts in that form
had in fact been signed. It is
highly probable that such contracts had in fact been entered into, at
least orally. If that was
not the case, the HS Companies had
at¬tempted to commit fraud involving millions of Rands. In the
event, the buy-back agreements
were ultimately signed and the
undertakings contained therein stand. It matters not that the
buy-back agreements had been signed
after the plaintiffs had accepted
the benefit.
[23] It is not
uncommon for parties to a main contract to sign it only after the
third par¬ty had accepted the benefit. A good
example thereof is
contracts of sale of land where an estate agent more often than not
accepts his entitlement to commission even
before the parties to the
contract of sale have signed it.
[24] Christie in The
Law of Contract in South Africa 5th Ed. at 57 said: uThe proposi¬tion
that an offeree can accept and notify
the offeror of his acceptance
before the of¬fer is made is an odd one. But it has found its way
into judgments in which estate
agents have recovered their commission
by relying on clauses in contracts pre¬prepared by themselves and
signed by the buyer
and seller. Despite the phraseology of these
judgments it is clear that in such cases the estate agent makes the
offer, which is
accepted by signature of the contract
George Ruggier &Cov
Brook
1966 (1) SA 17
(NPD) is a case in point. In that mat¬ter,
the appellant, George Ruggier & Co (the plaintiff in the court a
quo), was an
es¬tate agent. The respondent, Brooks (defendant in
the court a quo), was the purchas¬
er of a property,
which he bought from one Forster. Brooks wrote to the plaintiff,
after indicating an increased offer to the seller,
and stated inter
alia the following:
“The offer is
subject to the following conditions:
(1)-(4)...
(5) Of the amount of
R1 000 (one thousand rand) which will be paid to you as commission
and fees for assistance and services rendered
in effecting the sale I
am agreeable to pay you half this amount namely R500 (five hundred
rand). The offer shall remain open until
4 p.m. on the 11th August
1961.”
The plaintiff
himself had inserted the stipulation into the contract between the
pur-chaser and the seller. The court held that
“By itself
inviting the defendant to make the offer in terms of the exh. “E”
it furnished, in advance, the communication
of its ac- ceptance of
the offer made to it... once Forster’s condition was agreed to
by the de-fendant, the intended contract
between the defendant and
the plaintiff had become completed.
At the time that the
plaintiff inserted the stipulation, whereby he communicated his
acceptance thereof, there had been no contract.
However, that did not
matter.The court upheld the stipulation which was intended for the
plaintiff’s benefit.
[25] Similar
scenarios exist in the case of sales of land by public auction. In
Taylor and Gibson v Behrand Company
21 SC 277
auctioneers were held
to be entitled, in their own name, to demand from the buyer of land
at a public auction a fair and rea-sonable
amount for auctioneers’
charges where the conditions of sale provided that the purchaser
should pay the auctioneers’
charges.
[26] Solomon J said
at 85, following Tradesman's Benefit Society v Du Preez
5 SC 269:
“When the
conditions at an auction provide that the purchaser is to pay the
auc¬tioneers’ charges, any person bidding
at the sale knows
that he is liable for those charges; and when he bids, and the
property is knocked down to him, surely there
is a vinculum juris
between him and the auctioneer, under which he undertakes to pay the
auctioneer his fair and reasonable charges
These cases were
expressly approved by the Appellate Division in Mutual Insurance
Company v Hotz
1911 AD 565
at 567.
[27] I therefore
find that there is nothing incongruous about the plaintiffs accepting
the benefit by submitting their application
forms in which they
agreed “onherroe- pelik... om sy aandele in die Maatskappy, vyf
jaar na 1/1/2009 te verkoop teen ‘n
prys van R1.00 per aandeel
met ‘n gekoppelde leningsrekening van R999.00 aan Zelpy 2095
(Edms) Bpk ofsy genomineerde"
The defendants duly accepted that
un-dertaking by the plaintiffs by entering into the Buy-Back
Agreement, and they are therefore
bound.
BUSINESS RESCUE
[28] The defendants
raised a further unrelated defence, namely that the rights of the
plaintiff and other plaintiffs have been restructured
by virtue of a
business rescue plan (BRP). It is submitted that the plaintiffs can
therefore not rely on the buy-back agreement.
Their rights have been
novated by the terms of the BRP.
[29] The effect of
the BRP on the investors, including the plaintiff, is that another
company, Orthotouch Limited, would purchase
the properties of the HS
Companies and take over the obligations of the defendants to
repurchase the shares of the in-vestors.
However, the repurchase
would take place 5 years from the date of the adoption of the BRP
instead of 5 years from the date of the
purchase of the shares.
Moreover, the income from the investments, whether by way of interest
or dividends, would be reduced.
[30] This defence
must be considered in the light of clause 6 of the buy-back
agree-ment. Clause 6 is a “non-variation clause”.
It
provides as follows:
“6 No
variation or consensual cancellation of this agreement shall be of
any force or effect unless reduced to writing and
signed by all the
parties to this agree¬ment accompanied by a special resolution
passed by 75% of the shareholders of the FIRST
PARTY (the HS
Companies), authorising the variation or cancella¬tion."
[31] This is a
variation of the buy-back agreement. The defendants, however, argue
that the shareholders have, by adopting the BRP
agreed to the
variation. The ques¬tion is therefore whether the adoption of the
BPR satisfies the requirements of clause 6
of the buy-back agreement.
[32] The deponent to
the affidavit resisting summary judgment said that the HS Com-panies
had run into financial difficulties and
were placed under business
rescue. A business rescue practitioner was appointed. A meeting in
terms of
s 151
of the
Com-panies Act 71 of 2008
of all creditors and
holders of voting interests was held on 14
December 2011. He
says that 99% of the investors voted in favour of the proposed BRP.
This, however, is a flimsy statement. This
was a meeting of creditors
and hold¬ers of voting interests (the investors). Subsections (2)
and (3) of
section 152
set out detailed voting procedures. Subsection
(2) provides exclusively for voting by credi¬tors. Subsection
(3)(c) specifically
sets out a procedure for voting by shareholders
whose rights are altered by the BRP. It provides for a separate
meeting of holders
of securities whose rights are altered by the
proposed BRP. The BRP negatively alters the rights of the
shareholders. I would have
expected of the deponent to have
elabo¬rated on the procedures adopted.
[33] The manner in
which a BRP must be adopted is set out in
s 152
(2) and (3). They
provide as follows:
“(2) In a vote
called in terms of subsection (1)(e), the proposed business rescue
plan will be approved on a preliminary basis
if-
(a) it was supported
by the holders of more than 75 percent of the creditors’ voting
interests that were voted; and
(b) the votes in
support of the proposed plan included at least 50 percent of the
inde-pendent creditors’ voting interests,
if any, that were
voted.
(3) If a proposed
business rescue pian-
(a) is not approved
on a preliminary basis, as contemplated in subsection (2), the plan
is rejected, and may be considered further
only in terms of
section
153
;
(b) does not alter
the rights of the holders of any class of the company’s
securi¬ties, approval of that plan on a preliminary
basis in
terms of subsection (2) constitutes also the final adoption of that
plan, subject to satisfaction of any conditions on
which that plan is
contingent; or
(c) does alter the
rights of any class of holders of the company’ securities-
(7) the practitioner
must immediately hold a meeting of holders of the class, or classes
of securities whose rights would be altered
by the plan, and call for
a vote by them to approve the adoption of the pro¬posed business
rescue plan; and
(ii) if, in a vote
contempiated in subparagraph (i), a majority of the voting rights
that were exercised-
(aa) support
adoption of the plan, it will have been finally adopted, sub¬ject
only to satisfaction of any conditions on which
it is contingent; or
(bb) oppose adoption of the plan, the plan is rejected, and may be
con¬sidered further only in terms of
section 153[My
emphasis]
[34] This action,
and those of the other plaintiffs, are only in respect of HSC 21 and
HSC 22. It must be noted that the meeting
held in terms of
s 151
was
in respect of HS Company Nos. 15, 16, 17, 18, 19, 20, 21 and 22.
There is no allegation regarding the outcome of the voting
in respect
of HSC 21 and HSC 22.
[35] The BRP has,
however, been adopted and has been implemented. It stands until
impeached by a court of law. The question is whether
it effectively
altered or varied the buy-back agreement. I have already found that
the plaintiff (and other plaintiffs) became
parties to the buy-back
agreements by virtue of their acceptance of the ben-efits.
[36] Even if the BRP
had been properly adopted in terms of the Act, it does not satis¬fy
the requirements of clause 6 of the
buy-back agreement. It cannot be
inferred from its adoption that 75% of the shareholders had agreed to
the variation. Clearly no
special resolution has been passed and the
variation has not been signed by the par¬ties.
[37] The BRP also
does not constitute a novation of the rights of the shareholders. A
novation implies a waiver of a party’s
original rights. It is
trite that there is a presump-tion against a novation or waiver. It
is not necessary to refer to the host
of cases in which this was held
and confirmed. I find that there had been no novation of the rights
of the plaintiff.
SUMMARY JUDGMENT
[38] It is only
necessary to refer to one of the requirements for resisting summary
judgment, namely that the defendant must set
out a defence that is
bona fide and good in law. As set our above, I have reached the
conclusion that the defences of the defendants
are not good in law.
[39] The order that
I make is only in respect of the above matter In accordance with the
agreement between the parties, this judgment
will be determinative of
ail 46 cas¬es. This order will therefore mutatis mutandis apply
to all the cases.
In the result I make
the following order:
Summary judgment is
granted against the defendants jointly and severally, the one paying
the others to be absolved, for
1. Payment of the
amount of R520 000.00 against delivery of share certifi¬cate HFS
2124500 to the defendants;
2. Interest at 9%
per annum on the said amount from 9 December 2014 to date of payment;
3. Cost of suit.
J. HIEMSTRA
ACTING JUDGE OF
THE HIGH COURT
Date heard:
2015-06-08
Date of judgment:
2015-06-09 3Z
Counsel for the
plaintiff Adv. L. Bolt
Attorney for the
plaintiff: Le Grange Attorneys
555 Justice
Mahomed Street
Muckleneuk
Pretoria
Ref.: Mr Le
Grange 133/14 Tel.: 012 344 2611
Counsel for the
defendants: Adv. P. Rossouw SC
Adv. M. Mostert
Attorney for the
defendants: Kyriacou Incorporated
First floor,
Fussel House
48 Athol Oaklands
Road
Melrose North
Tel: 011 444 2665
Fax: 086 653 5677
Ref.: Mk/snZ537
c/o Ross &
Jacobz Incorporated
457 Rodericks
Road
Lynnwood,
Pretoria