About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: High Court, Northern Cape Division, Kimberley
SAFLII
>>
Databases
>>
South Africa: High Court, Northern Cape Division, Kimberley
>>
2015
>>
[2015] ZANCHC 17
|
|
Demetriades and Another v Tollie and Others (1995/2014) [2015] ZANCHC 17 (18 September 2015)
IN
THE HIGH COURT OF SOUTH AFRICA
(Northern
Cape Division, Kimberley)
Saakno
/ Case number:
1995/2014
Datum
verhoor/Date heard:
21/08/2015
Datum
gelewer/Date delivered:
18/09/2015
In
the matter between:
CHRISTODOLOUS
DEMETRIADES
First
Applicant
NICOS
DEMETRIADES
Second
Applicant
and
MZWANDILE
RIJN TOLLIE
First
Respondent
DEEPS
BETTING GROUNDS (PTY) LTD
Second
Respondent
ANGEL
BETTING WORLD (PTY) LTD
Third
Respondent
COMMISSIONER
OF THE COMPANIES AND INTELLECTUAL
PROPERTY
COMMISSION
Fourth Respondent
Coram: Erasmus,
AJ
JUDGMENT
ERASMUS,
AJ
INTRODUCTION:
[1]
The applicants seek confirmation of a rule nisi issued on
14 November 2014, rectified by virtue of an order
dated 5
Dec
ember 2014 (‘the main application’). In
terms of the
rule nisi
the respondents were called to show
cause as to why the following order should not be made final:
“
1.1
that the first respondent be declared a delinquent director of the
second respondent;
1.2
that the first respondent be disqualified from acting as a director
of the second respondent;
1.3
that the third respondent (
which
should have been referred to as the fourth respondent – my
insertion)
be
ordered and directed pursuant to the order in terms of paragraph 1.1
of the rule nisi to amend its records accordingly;
1.4
that the first respondent be ordered to pay the second respondent the
amount of R25,000.00;
1.5
that the first respondent and the third respondent be ordered to take
all necessary steps to withdraw
the application for a bookmaker
license currently pending before the Northern Cape Gambling Board;
1.6
that the first respondent be interdicted and prohibited from,
1.6.1
interfering with or taking any part in the administration and running
of the business of the second respondent;
1.6.2
entering upon any of the second respondent’s business premises;
1.6.3
communicating in any way directly or indirectly with any of the
directors or employees of the second respondent
other than through
the applicant’s attorneys;
1.6.4
communicating or purporting to communicate with the Northern Cape
Gambling Board on behalf of the second respondent;
1.7
that the first respondent together with any other respondents
electing to oppose this application, jointly
and severally, the one
paying the other to be absolved pro tanto be ordered to pay the costs
of the application on an attorney
and client scale.
”
[2]
Paragraphs 1.6.1 to 1.6.4 operated as an
interim
interdict, pending the final determination of this application.
[3]
The first respondent (‘Tollie’) gave notice of his
intention to oppose the application on 4 December 2014. During
this stage of the proceedings Tollie was represented by Mr.
Kgotlagomang of Towell & Groenewaldt Attorneys. On 5
December
2014, and by agreement between the parties, the application
was postponed until 8 May 2015 to the opposed roll and the
rule
nisi
was extended until the said date. It was further ordered that Tollie
and the third respondent (‘Angel Betting’) file
their
answering affidavits on or before 13 February 2015 and that the
applicants file their replying affidavits, if any, on or
before 6
March 2015.
[4]
Tollie and Angel Betting failed to comply with this court order in
that the answering affidavit was only filed on 7 May 2015.
An
application for condonation for the late filing of the opposing
papers was also filed on this day. This resulted in the
main
application being postponed on 8 May 2015 to 21 August 2015 and the
rule
nisi
once again being extended until that date. Tollie and Angel
Betting were ordered, jointly and severally, to pay the wasted
costs
occasioned by the postponement on a scale as between attorney and
client.
AD APPLICATION
FOR CONDONATION
[5]
The applicants opposed the application for condonation. In the
application for condonation the applicants in the main
application
were cited as the first and second respondents respectively, Deeps
Betting Grounds (Pty) Ltd (‘Deeps Betting’)
as the third
respondent, Angel Betting as the fourth respondent and the
Commissioner of Companies and Intellectual Property Commission
as the
fifth respondent. I shall refer to the parties in the
application for condonation as in the main application.
[6]
This application for condonation was argued before me on 21 August
2015. I dismissed the application and indicated that my reasons
would
follow. The reasons for dismissing the application follow
hereunder.
[7]
In the founding affidavit Tollie states that he is the sole
shareholder and director of Angel Betting. At the stage when
the application papers in the main application were served Tollie was
in Cape Town, but he was informed telephonically that the
application
would be heard on 14 November 2014. Tollie alleged that he had
sent a letter to the Registrar and the applicants’
attorney,
Mr. Honiball, informing them that he could not adequately reply to
the application on 14 November 2014. Honiball
did not receive
such letter and same could not be found at the Registrar’s
office.
[8]
According to Tollie settlement negotiations in respect of the main
application were on-going and therefore the answering affidavit
was
not filed before the return date of 5 December 2014. He
acknowledges that he was aware of the court order to the
effect that
the answering affidavit had to be filed on or before 13 February
2015.
[9]
Tollie alleged that after 5 December 2014, further discussions took
place between himself and Honiball in an effort to settle
the
disputes. Mr. Kgotlagomang was aware of the fact that Tollie
was negotiating with Honiball in person.
[10]
Tollie alleged that he made numerous attempts to contact Kgotlagomang
regarding the continuation of the matter and the
filing of his
opposing affidavit, but all attempts were unsuccessful.
[11]
Honiball admits that Tollie approached him on numerous occasions
regarding a possible settlement. Honiball undertook
to convey
the settlement proposal to his clients, but informed Tollie that he
should file his answering affidavit if he wished
to oppose the main
application. He also informed Tollie that settlement
negotiations would not result in the suspending of
court
proceedings.
[12]
Kgotlagomang confirms Honiball’s version in respect of the
settlement negotiations taking place during January
2015. He
stated further that Tollie, contrary to his advice and instructions
given during their telephonic conversation,
failed to bring him the
application papers. Tollie instructed him to brief a certain
counsel in Johannesburg and indicated
that he would forward the
application papers directly to counsel. Kgotlagomang prepared
the brief and arranged a consultation
with counsel during December
2014. During this consultation Tollie was instructed to submit
further information to Kgotlagomang.
At the end of January 2015
Kgotlagomang arranged a further consultation with Tollie in order to
finalize the answering affidavit.
Due to an unforeseen funeral
that Tollie had to attend, this consultation had to be re-scheduled.
[13]
At the beginning of February 2015 Kgotlagomang requested an extension
of time to file the answering affidavit, which
was refused by the
applicants’ attorneys. When he informed Tollie about
this, he remarked that they were in any event
waiting for Honiball’s
response to the settlement proposals. Subsequent to these
events, Kgotlagomang’s secretary
called Tollie again to arrange
a consultation to finalize the answering affidavit but was informed
that Tollie would not be able
to attend. When she enquired why
not, he responded that he was ‘stuck’ in Cape Town.
After Tollie failed
to attend the consultation and before a further
consultation could be arranged, Kgotlagomang’s mandate was
terminated on
5 May 2015.
[14]
Tollie further averred that he attended the offices of Webbers
Attorneys, Bloemfontein, on 15 April 2015. He consulted
with a
certain Mr. Loubscher in respect of a different matter. He
expressed concern that Kgotlagomang did not provide him
with feedback
regarding the main application and was concerned as to whether he was
attending to the matter at all. In response
hereto Loubscher advised
him that he could not act on his behalf whilst Towell &
Groenewaldt was already acting as such. Tollie
then attended
the offices of Towell & Groenewaldt, but was once again unable to
get hold of Kgotlagomang. He then proceeded
to consult with
Loubscher on 22 April 2015 regarding the main application.
[15]
On 23 April 2015 Loubscher contacted the correspondent attorneys in
Kimberley to provide him with a copy of the file
contents to consider
the matter. He received the scanned copies of the contents of
the court file on 28 April 2015.
[16]
On 5 May 2015 Tollie consulted with Loubscher in respect of the main
application and the answering affidavit was prepared.
Tollie
was informed that he had to terminate the mandate of Towell &
Groenewaldt Attorneys and this was done by sending an
e-mail message
on 6 May 2015.
[17]
Tollie submitted that he has reasonable prospects of success in the
main application as the applicants
17.1
had knowledge of his involvement in Angel Betting and that he did not
act fraudulently
vis-à-vis
Deeps Betting,
17.2
had not made out a case for an
interim
and final interdict, and
17.3
did not have the necessary authority to act on behalf of Deeps
Betting to claim payment of the amount of R25,000.00 and
that there
is no legal basis for such claim.
[18]
In reply to the answering papers, Tollie denies being aware of the
fact that his answering affidavit had to be filed
irrespective of the
settlement negotiations. The file contents had not been
requested from Towell and Groenewaldt on 23 April
2015 because their
mandate had not been terminated at that stage.
[19]
Tollie admits that counsel was briefed on his behalf during December
2014 and that a consultation took place. He
reiterated that he
had attempted to make arrangements with Kgotlagomang, without
success, but provided no further details in this
regard. He
submitted that Kgotlagomang should have withdrawn as attorney if he
could not get instructions from Tollie, but
that he was the one to
eventually terminate Kgotlagomang’s mandate.
[20]
Tollie did not provide any additional information or reasons for
non-compliance with the court order of 5 December 2014.
More
specifically no information was provided in respect of the period
February 2015 up to his first consultation with Loubscher
on 15 April
2015.
THE LEGAL POSITION
[21]
In terms of Rule 27(3) of the Uniform Court Rules (‘the
Rules’), a court may, on good cause shown, condone
any
non-compliance with the Rules. Although a court has wide
discretionary powers to condone non-compliance with the Rules, such
discretion is subject to the requirement and safeguard that good
cause must be shown for such non-compliance. In
NEDCOR
INVESTMENT BANK LTD v VISSER NO
[1]
the following was said:
“
Rule
27(3) requires 'good cause' to be shown by the plaintiff. This gives
the Court wide discretion. (Du Plooy v Anwes Motors (Edms)
Bpk
1983
(4) SA 212 (O)
at 216H - 217A.) The requirements are, first, that
the plaintiff should at least tender an explanation for its default
to
enable the Court to understand how it occurred. (Silber v Ozen
Wholesalers (Pty) Ltd
1954
(2) SA 345 (A)
at 353A.) Secondly, it is for the plaintiff to
satisfy the Court that its explanation is bona fide and not patently
unfounded.
”
[22]
In
STANDARD
GENERAL INSURANCE COMPANY LIMITED v EVERSAFE (PTY) LTD
[2]
the legal position was stated as follows:
“
It
is well-established that an applicant for any relief in terms of Rule
27 has the burden of actually proving, as opposed to merely
alleging,
the good cause that is stated in Rule 27(1) as jurisdictional
prerequisite to the exercise of the Court's discretion.
Silber v Ozen
Wholesalers (Pty) Ltd
1954
(2) SA 345
(A)
at 352G. The applicant for any such relief must,
at least, furnish an explanation of his default sufficiently full to
enable the
Court to understand how it really came about and to assess
his conduct and motives (Silber v Ozen Wholesalers (supra at
353A)).
Where there has been a long delay, the Court should require
the party in default to satisfy the Court that the relief sought
should
be granted. Gool v Policansky
1939 CPD 386
at 390.
”
And
further:
“
An
applicant for relief under Rule 27 must show good cause and the
question of prejudice does not arise if it is unable to
do so.”
[3]
[23]
In the matter of
UITENHAGE
TRANSITIONAL LOCAL COUNCIL v SOUTH AFRICAN REVENUE SERVICE
[4]
the principles were stated as follows:
“…
condonation
is not to be had merely for the asking; a full, detailed and
accurate account of the causes of the delay and their
effects must be
furnished so as to enable the Court to understand clearly the reasons
and to assess the responsibility. It must
be obvious that, if the
non-compliance is time-related then the date, duration and extent of
any obstacle on which reliance is
placed must be spelled out
.
”
[24]
Adv. van Niekerk SC, on behalf of the applicants submitted that
Tollie fell well short in his effort to satisfy these
requirements
and that he has not met the jurisdictional prerequisite of good
cause, as alluded to in the judgments cited above.
He submitted
further that Tollie failed to divulge all relevant facts and
circumstances regarding his failure to comply, even after
being
called to do so by way of the answering affidavit.
[25]
Adv. Hefer, on behalf of Tollie and Angel Betting, submitted that I
should look at the interdependence of the reasons
for and extent of
omission on the one hand and the merits of the case on the other.
He conceded however that should I find
that Tollie has not shown good
cause for his failure to timeously file his answering affidavit, the
other requirements and factors
need not be considered. This is
how I understand the position to be, as set out in
CHASEN
v RITTER
[5]
.
The issue of prejudice towards the other party does not arise if the
applicant is unable to show good cause.
[6]
[26]
Mr. Hefer further submitted that Tollie has shown good cause for his
non-compliance with the Rule and court order.
In this regard he
referred to Tollie’s allegations that since the granting of the
order on 5 December 2014, he had made numerous
attempts to contact
Kgotlagomang regarding the continuation of the matter and the filing
of his opposing affidavit but was unable
to reach him. He
pointed out that Kgotlagomang’s version is not supported by
correspondence in support of his efforts/attempts
to get hold of
Tollie for purposes of finalizing the answering affidavit.
Kgotlagomang should have withdrawn as legal representative
if Tollie
had failed to furnish instructions.
APPLICATION OF THE
LAW TO THE FACTS
[27]
Kgotlagomang set out what steps he had taken. Tollie failed to
provide the requested information and failed to
attend arranged
consultations. Tollie was aware of the contents of the court
order. He failed to divulge that, as far
back as December 2014
he had a consultation with counsel in respect of the main
application. When confronted with this fact
in the answering
affidavit, he merely criticised the fact that Kgotlagomang did not
expressly state what the purpose of this consultation
was. I
pause here to state that Kgotlagomang’s version that the reason
for this consultation was to prepare the answering
affidavit cannot
be otherwise interpreted. In his replying affidavit Tollie
merely ignores these allegations by Kgotlagomang
and it therefore
stands uncontroverted. Despite the very specific allegations of
Kgotlagomang to the effect that Tollie had
to provide further
information to enable counsel to finalise the answering affidavit and
that he did not honour these arrangements
made by Kgotlagomang,
Tollie attributed his failure to comply on the alleged unsuccessful
attempts to contact Kgotlagomang.
These allegations are without
any degree of particularity as to dates on which such efforts were
made and to the nature of such
efforts.
[28]
Tollie did not deal with the period February 2015 to 15 April 2015,
the day of the first consultation with Loubscher.
He also did
not explain his failure to timeously consult another attorney if
Kgotlagomang was to blame.
[29]
Given the lack of particularity, the uncontradicted allegations by
Kgotlagomang and Honiball pertaining to the instructions
to file the
opposing affidavit despite settlement negotiations continuing, the
lack of any factual allegations pertaining to what
steps were taken
between February and April 2015 in order to ensure compliance with
the court order, I was of the view that Tollie’s
explanation is
not
bona
fide
and that it is patently unfounded. He
failed
to show good cause for the non-compliance, hence my dismissal of the
application for condonation. I do not deem it
necessary to deal
with the other requirements as Tollie had not satisfied the
requirement of good cause.
AD MAIN APPLICATION
[30]
In view of the application for condonation being dismissed the main
application stands to be adjudicated on the version
of the
applicants.
[31]
At the onset of argument in the main application Mr. Van Niekerk
indicated that the applicants do not seek confirmation
of paragraph
1.3 of the
rule
nisi
as the application papers and court order have not been served on the
fourth respondent. It is not necessary
to make such
an order
due
to the automatic inherent effect of an order declaring a director
delinquent.
[7]
THE FACTS:
[32]
The applicants and Tollie are directors and shareholders of Deeps
Betting. In terms of a written agreement of sale
entered into
on 24 December 2013, the applicants bought 49 % of the issued shares
in Deeps Betting for the amount of R3.5 million
rand. Tollie
holds the remaining 51 % of the issued shares. Prior to this
agreement Tollie held 100 % of the issued
shares in Deeps Betting.
The applicants complied with the terms of the written agreement and
paid the purchase price as stipulated
in the agreement. Tollie
accepted such payment.
[33]
Deeps Betting is the holder of seven temporary bookmaker licences
entitling it to do business as such in the towns of
Kimberley, De
Aar, Kuruman, Postmasburg, Springbok, Upington and Colesberg.
Persuant to these licences being issued, Deeps
Betting commenced
doing business in Kimberley and is in the process of opening further
business premises in the towns referred
to above. The
abovementioned licences referred were issued by the Northern Cape
Gambling Board (‘the NCGB’)
during September 2013 and are
still valid.
[34]
Subsequent to the sale agreement and on 11 February 2014 the
applicants and Tollie entered into a written shareholders
agreement.
In terms of clause 16.1, under the heading “
GOOD
FAITH
”,
the parties agreed to cooperate and consult with each other regarding
the activities of Deeps Betting, it being their intention
that
34.1
the relationship between them shall be governed by the principles of
utmost good faith as such principles are understood
in the context of
a partnership, as if they were partners in a partnership, and
34.2
the affairs of Deeps Betting shall be administered and promoted with
the highest degree of integrity between the shareholders.
[35]
The applicants further aver that they, as directors, owe Deeps
Betting a duty of utmost good faith in terms of the common
law as
well as the provisions of sections 75, 76 and 77 of the Companies
Act, Act 71 of 2008 (“
the
Act
”).
This duty entails that the directors act in the best interest of
Deeps Betting, promoting the business thereof and
further entails the
duty not to compete with the company for personal gain. It also
entails the duty to inform other directors
of any dealings by a
specific director that could in any away affect the business dealings
of Deeps Betting.
[36]
On 16 September 2014 the NCGB published advertisements in the
Provincial Gazette of five entities who had applied for
bookmaker
licences. Potential objectors were invited to lodge objections
within a certain period of time.
[37]
Subsequent to this advertisement the first applicant had a discussion
with Tollie about the advisability of or otherwise
objecting to these
applications for licences. At this stage Tollie tried to
convince him that it was not worth objecting
to any of these
applications as he had allegedly spoken to a source at the NCGB and
that he could guarantee that none of the said
applicants would be
successful in their application. According to Tollie an
objection by Deeps Betting would only result
in annoying members of
the NCGB and that this would be extremely detrimental to Deeps
Betting’s future business dealings.
Despite assurances of
Tollie, the applicants decided that they would indeed object to the
applications and informed Tollie accordingly.
He did not go along
with the decision, but as the majority of directors were entitled to
object on behalf of Deeps Betting, they
proceeded therewith. The
applicants then instructed their attorneys to inspect the
applications referred to above and prepare the
objections thereto.
[38]
One of the entities who had applied for bookmaker licences appeared
to be Angel Betting. At the time of the advertisement
in the
Provincial Gazette the applicants were unaware of the existence of
Angel Betting and/or details regarding the company’s
shareholders or directors. After the perusal receipt of the
copies of the applications and during the perusal of Angel Betting’s
application, it appeared that Angel Betting had applied for bookmaker
licences in respect of 12 towns in the Northern Cape, including
the
city of Kimberley.
[39]
On further perusal of this application it also emerged that Tollie,
apart from being the 100 % shareholder of the issued
shares in Angel
Betting, was also the sole director of Angel Betting. A successful
application would result in Angel Betting operating
in direct
competition with Deeps Betting and more specific its business in
Kimberley and Tollie gaining financially form ooportuniteis
that
should have been persued by him on behalf of Deeps Betting.
[40]
In an annexure to the said application form is a document referred to
as “GENERAL TERMS AND CONDITIONS” which
contains the
terms and conditions for all bets offered. There are several
references to Deeps Betting and even a reference to “Angel
Betting World Website”
,
which
is listed as ’
deepsbettingbets.net’
.
The documentation creates the impression that the form
used by Angel Betting is that of Deeps Betting. The name
of
Deeps Betting appears to have merely been replaced by the words
‘Angel Betting World’ and the person who prepared
the
application merely neglected to change the name of Deeps Betting to
Angel Betting in several places on this form. It
appears
further that the terms and conditions for all bets offered by Angel
Betting is the same as that of Deeps Betting.
[41]
Clause 15 of the shareholders agreement, entered into between the
applicants and Tollie, contains a confidentiality clause
in terms of
which the applicants and Tollie acknowledge that any information
supplied in connection with each other’s technical,
industrial
or business affairs which has or may in any way whatsoever be
transferred or come into possession or knowledge by any
of them, may
consist of confidential or proprietary data, disclosure of which or
use thereof by third parties might be damaging
to the party
concerned. The parties to the agreement agreed to hold such
material and information in the strictest confidence
and to prevent
any copying thereof by whatever means.
[42]
It is further alleged that no resolution was ever taken by the board
of directors entitling any of the directors to remuneration
from
Deeps Betting, as the business of Deeps Betting was a new one.
The first applicant, in his personal capacity, advanced
monies to
Tollie by means of a loan from the end of July 2014. It had
nothing to do with Deeps Betting. When the first applicant
became
aware of Tollie’s conduct as referred to earlier, he decided
not to honour his personal undertaking and stopped paying
Tollie the
amount of R25,000.00 at the end of October 2014.
[43]
On 29 October 2014 Tollie insisted that the amount of R25,000.00 be
paid into his bank account referring to it as “
his
salary
”.
Instructions were given to the employees of Deeps Betting not to pay
any disbursements from Deeps Betting unless
authorised to do so by at
least two directors. On 31 October 2014 Tollie called one of
the employees of Deeps Betting and
requested him to pay R20,000.00 of
Deeps Betting’s funds into Tollie’s personal bank
account. The employee advised
him that he would need permission
from Deeps Betting’s Chief Executive Officer before making such
payment. Tollie proceeded
to scream and shout at the employee,
accusing him of being disrespectful and threatening to have the
employee suspended for his
actions.
[44]
The first applicant instructed the employee as well as the Chief
Executive Officer (‘CEO’) not to make any
payments to
Tollie. Tollie subsequently threatened the CEO that his
temporary licence to act as an employee of Deeps Betting
would be
revoked at the insistence of Tollie. Such threat, if acted upon, will
have serious detrimental consequences for the business
dealings of
Deeps Betting. Tollie again called the abovementioned employee,
informing him that he would be at the premises
of Deeps Betting on
Monday 3 November to take his money and that no-one would stop him.
On Sunday 2 November 2014 Tollie
arrived at Deeps Betting’s
premises in Kimberley, requesting the money from the employee.
To defuse the situation,
the first applicant telephonically
instructed the employee to give the money to Tollie on condition that
he sign for the receipt
thereof in the daily cash reconciliation.
Tollie refused to sign for the money and the employee did not
hand over the money.
Tollie conveyed to the employee that the
CEO has been suspended and that he (Tollie) would request the NCGB to
revoke the
CEO’s temporary licence to act as an employee of
Deeps Betting. He also informed the employee that he had
applied for
other licences which are in direct opposition to Deeps
Betting and that it was his intention to have investors and partners
in
the Northern Cape Province doing business with him, in competition
with Deeps Betting. Tollie left the premises but again
telephoned and informed the employee that he would come and collect
his money the following morning.
[45]
On Monday 3 November 2014 Tollie arrived at Deeps Betting’s
premises in Kimberley and demanded his money from the
employee. He
then took R25,000.00 and ordered the employee to capture the
transaction as “salary” on the daily cash
reconciliation
after which he left.
THE LEGAL POSITION:
[46] In terms of
section 162(2) of the Act:
“
A
company, a shareholder, a director… may apply to a Court for
an order declaring a person delinquent or under probation
if-
(a)
The
person is the director of that company…; and
(b)
Any
of the circumstances contemplated in
(i)
subsection
(5)(a) to (c) apply in the case of an application for declaration of
delinquency…
”
[47] Subsection
5(a) to (c) provides as follows:
“
(5)
A court
must
(my
emphasis)
make
an order declaring a person to be a delinquent director if the
person-
(c)
while a director-
(i)
grossly
abused the position of director;
(ii)
took
personal advantage of information or an opportunity, contrary to
Section 76(2)(a);
(iii)
intentionally…
inflicted harm upon the company… contrary to Section 76(2)(a);
(iv)
acted
in a manner-
(aa)
that amounted to gross negligence, willful misconduct or breach of
trust in relation to the performance of
the director’s
functions within, and duties to, the company…”
[48] In terms of
section 76(2)(a) and 76(3) of the Act:
“
(2)
A
director of a company must-
(a)
not
use the position of director, or any information obtained while
acting in the capacity of a director-
(i)
to
gain an advantage for the director, or for another person other than
the company or a wholly-owned subsidiary of the company;
or
(ii)
to knowingly cause harm to the company or a subsidiary of the
company; and...
(3)
Subject to subsections (4) and (5), a director of a
company, when acting in that capacity, must exercise the powers
and
perform the functions of director-
(a)
in
good faith and for a proper purpose;
(b)
in
the best interests of the company; and ...”
[49]
The
principles
which govern the actions of a person who occupies a position of trust
were confirmed by Heher JA in
PHILLIPS
v FIELDSTONE AFRICA (PTY) LTD and ANOTHER
[8]
where
he stated:
“
The
fullest exposition in our law remains that of Innes CJ in
Robinson
v Randfontein Estates Gold Mining Co Ltd,
supra,
at 177-180. It is, no doubt, a tribute to its adequacy and a
reflection of the importance of the principles which it sets
out that
it has stood unchallenged for 80 years and undergone so little
refinement.
‘
Where
one man stands to another in a position of confidence involving a
duty to protect the interests of that other, he is not allowed
to
make a secret profit at the other’s expense or place himself in
a position where his interests conflict with his duty.
The principle
underlies an extensive field of legal relationship. A guardian to his
ward, a solicitor to his client, an agent to
his principal afford
examples of persons occupying such a position. As was pointed out
in
The
Aberdeen Railway Company v Blaikie Bros.
(1
Macqueen 474), the doctrine is to be found in the civil law (Digest
18.1.34.7), and must of necessity form part of every civilized
system
of jurisprudence. It prevents an agent from properly entering into
any transaction which would cause his interests and his
duty to
clash. If employed to buy, he cannot sell his own property; if
employed to sell, he cannot buy his own property; nor can
he make any
profit from his agency save the agreed remuneration; all such profit
belongs not to him, but to his principal. There
is only one way by
which such transactions can be validated, and that is by the free
consent of the principal following upon a
full disclosure by the
agent . . . Whether a fiduciary relationship is established will
depend upon the circumstances of each case
. . . But, so far as I am
aware, it is nowhere laid down that in these transactions there can
be no fiduciary relationship to let
in the remedy without agency. And
it seems hardly possible on principle to confine the relationship to
agency cases.
’ “
[50]
Secton 76(2) envisages a fiduciary duty in respect of a director of a
company. This entails,
inter
alia
,
not to improperly compete with the company. If a director
places himself in a situation of conflict of interest by acting
in
promotion of his personal interest and/or the interest of a trade
competitor, it would constitute a breach of his duties as
director.
[9]
[51]
Where a director has taken personal advantage of information or
opportunities at his disposal to gain benefits for himself
or has
breached his position of trust, it will constitute circumstances in
terms of
sub-section
(5)(c)
.
[10]
T
he
first order of delinquency against a director
under
the Act
appears
to have been granted in
KUKAMA
v LOBELO and OTHERS
[11]
and
indicates
that
courts will not shy away from placing directors under delinquency
should circumstances warrant this.
[52]
In
terms of section 162(6)(b) of the Act:
“
A
declaration of delinquency in terms of-
(b)
subsection
(5) (c) to (f)-
(i)
may
be made subject to any conditions the court considers appropriate,
including conditions limiting the application of the declaration
to
one or more particular categories of companies; and
(ii)
subsists for seven years from the date of the order, or such longer
period as determined by the court at
the time of making the
declaration, subject to subsections (11) and (12);”
[53]
In respect of the final interdict sought, the requirements for same
have been set out in
SETLOGELO
v SETLOGELO
[12]
and these have been confirmed in several subsequent cases. The
requirements are that the applicant must establish a clear right,
an
infringement of the right and the absence of any other suitable
remedy.
APPLICATION OF THE
LAW TO THE FACTS:
[54]
Tollie clearly stood in a fiduciary relationship with Deeps Betting
and also owed his co-shareholders in Deeps Betting,
his co-directors
and Deeps Betting itself a duty of trust and good faith in terms of
the shareholders agreement referred to earlier.
Tollie also
owed Deeps Betting a duty of good faith in terms of the provisions of
section 76(2) and (3) of the Companies Act, as
well as in terms of
the common law.
[55]
Mr. Hefer submitted that the circumstances of the matter do not
warrant Tollie to be declared a delinquent director of
Deeps
Betting. I disagree.
[58]
The only reasonable inference that can be drawn from the Angel
Betting’s application for the bookmaker licences,
is that
Tollie made use of information gathered by him in his capacity as a
director of Deeps Betting. The use of the
documents
and/or information of Deeps Betting not only constitutes a breach of
the shareholders agreement, but a serious breach
of Tollie’s
fiduciary duty as a director of Deeps Betting. His conduct, as
was submitted, amounts to a breach of Section
76(2) of the Act.
[59]
Tollie intended to and did in fact commit a serious breach of his
duties by applying for a bookmaker licence on behalf
of Angel
Betting, in direct competion with Deeps Betting and promoting his
personal interests in conflict with the interest of
Deeps Betting.
[60]
I am satisfied that the applicants have proved that Tollie grossly
abused the position of director in that he took advantage
of
the information of Deeps Betting and seized an opportunity to
directly compete with Deeps Betting through Angel Betting.
I am
also satisfied that he intentionally inflicted harm upon Deeps
Betting by insisting on and taking the R25,000.00 from Deeps
Betting
and further, that Tollie acted in a manner that amounted to a breach
of trust by using the forms and/or information of
Deeps Betting in
the application for the bookmakers licence, with the intention to
compete with Deeps Betting.
Such
acts satisfy the requirements as set out in section 162(5)(c) of the
Act.
[61]
The
effect of an order of delinquency is that a person is disqualified
from being a director of a company, as set out in section
69(8)(a) of
the Act.
A
declaration of delinquency may be made on the basis of
section
162 (5) (c)
–
(f)
subject to
any
conditions the Court sees fit. In terms of paragraphs 1.1 and
1.2 of the
rule
nisi
Tollie
is
declared
a delinquent director of Deeps Betting and is disqualified from
acting as a director of Deeps Betting. The terms
in which the
order is framed appear to me to fall within the ambit of sections
162(5), read with the provisions of
162(6)(b)
of the Act. Given the circumstances of this case, the condition
limiting the declaration of delinquency in respect
of Deeps Betting
only is justified.
[62]
In respect of paragraph 1.4 of the
rule
nisi,
Mr. Hefer submitted that the allegations pertaining to the relief
that Tollie be ordered to pay Deeps Betting the amount of
R25,000.00
do not disclose any cause of action. He further submitted that
the applicants have not succeeded in showing the
necessary authority
and/or grounds for the claim for the payment of R25,000.00 on behalf
of Deeps Betting. Although Mr. van
Niekerk did not specifically
deal with these aspects in his heads of argument, he did submit
during argument that a case had been
made out for such relief.
[63]
In my view the founding affidavit does not contain allegations to
sustain a claim for damages based on contract or delict.
Although it can be envisaged that the claim could fall under the
provisions of section 77(2) of the Act, the founding affidavit
does
not contain the necessary averments to sustain the claim for
payment
of the said amount.
[64]
In respect of paragraph 1.5 of the
rule
nisi
,
namely that Tollie and Angel Betting be ordered to take all necessary
steps to withdraw the application for a bookmaker licence
currently
pending before the NCGB, Mr. Hefer submitted that this relief is a
mandatory interdict and that the applicants had to
establish a clear
right in this regard. The clear right is dependent on whether
it can be found that Tollie breached the
relationship of trust and
the provisions of the Act. He submitted that such clear right
can only exist if Tollie has indeed
breached the relationship of
trust and if the applicants have established and proved that he used
certain information or documentation
of Deeps Betting in its
application before the Northern Cape Gambling Board. I have
already made a finding to this effect.
I am further satisfied
that Tollie committed an act of interference with the right of Deeps
Betting through the application for
a bookmakers licence in respect
of Kimberley, in competition with Deeps Betting. The position
is different in respect of
the other towns in which Deeps Betting has
no interests and/or licences. Mr. Van Niekerk conceded that the
relief sought
in this regard should only be in respect of the
application for the licence in Kimberley. I fully agree with
this concession.
[65] In respect of
paragraph 1.6 of the
rule nisi
, Mr. Hefer submitted that no
allegation has been made to believe that Tollie would in future
interfere with the operations of Deeps
Betting. He submitted
that confirmation of the interdict is also dependent on whether
Tollie should be declared a delinquent
director. Mr. van
Niekerk submitted that the applicants, as shareholders of Deeps
Betting, have a clear right to insist that
no shareholder or director
misappropriate company funds or unlawfully interfere with the
administration of the company and the
running of its business. He
submits that Tollie has infringed these rights and that there is no
other remedy available to the applicants
to safeguard these rights.
As I have already found that the applicants have made out a case that
Tollie should be declared
a delinquent director and given his past
interference with the operations of Deeps Betting as set out in the
founding affidavit,
I am satisfied that the applicants have made out
a case for a final interdict and that paragraph 1.6 of the
rule
nisi
should be confirmed.
[66]
In respect of costs, Mr. van Niekerk submitted that the costs should
follow the outcome and further that because of the conduct
of Tollie,
which was the direct cause of this litigation, the Court should
express its displeasure by awarding costs on a punitive
scale, to wit
attorney and client costs. Tollie committed a serious breach of
trust and acted in a callous manner which,
in my view, warrants a
punitive cost order in respect of the main application. The
same, however, cannot be said of the application
for condonation and
there is no reason for a punitive cost order in respect thereof.
[67]
I make the following order:
1.
Paragraphs
1.1 and 1.2 of the
rule
nisi
is
confirmed;
2.
Paragraphs
1.3 and 1.4 of the
rule
nisi
are
discharged;
3.
Paragraph
1.5 of the
rule
nisi
is
confirmed in respect of the application for the bookmaker licence for
Kimberley in that the first and third respondents are ordered
to take
all necessary steps to withdraw the application for a bookmaker
licence currently pending before the Northern Cape Gambling
Board in
respect of kimberley;
4.
Paragraphs
1.6 of the
rule
nisi
is
confirmed;
5.
Paragraph
1.7 of the
rule
nisi
is
confirmed in as far as the first and third respondent are
ordered, jointly and severally, the one paying the other to be
absolved
pro
tano
to pay the costs of the main application on an attorney and client
scale;
6.
The
applicant in the application for condonation (first respondent in the
main application) is ordered to pay the costs of the application
for
condonation on a scale as between party and party.
_________________
SL ERASMUS
ACTING JUDGE
For
the Applicants:
Adv. J.G. van
Niekerk SC (oio Van de Wall & Partners)
For
the Respondents:
Adv.
J.J.F. Hefer (oio Duncan & Rothman Inc)
[1]
2002 (4) SA 588
(T) at 591H
[2]
2000 (3) SA 87
(W) at 93 par
[12]
[3]
at 95E-F
[4]
[2003]
4 ALL SA 37
(SCA) par [6]; Also reported as
2004
(1) SA 292 (SCA)
[5]
1992 (4) SA 323
(SE) at 329C
[6]
Standard General Insurance
supra
at 95E to F
[7]
Kukama
v Lobelo and Others
(38587/2011)
[2012] ZAGPJHC 60 (12 April 2012) & [2013] ZAGPJHC 72 (31 May
2013);
[8]
[2004]
1 All SA 150
(SCA) par [30]; See also
Da
Silva and Others v CH Chemicals (Pty) Ltd
[2008] ZASCA 110
;
2008
(6) SA 620
(SCA) par [18]
[9]
Da
Silva and Others v CH Chemicals (Pty) Ltd
supra
at
641;
Atlas
Organic Fertilizers
(
Pty
)
Ltd v Pikkewyn
Ghwano
(
Pty
)
Ltd
1981 (2) SA 173 (T)
at 198 - 199
[10]
Grancy Property Limited
and Another v Gihwala and Others; In Re: Grancy Property Limited and
Another v Gihwala and Others
(1961/10;
12193/11)
[2014] ZAWCHC 97
(26 June 2014) para 156 and 206;
Msimang
NO and Antoher v Katuliiba and Others
[2013]
JOL 29907 (GSJ)
[11]
(38587/2011)
[
2012
]
ZAGPJHC
60
(12
April
2012
)
[12]
1914
AD 221
at 227