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[2014] ZAFSHC 115
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Van Niekerk v Dorper Genetics Bk and Others (1058/2014) [2014] ZAFSHC 115 (7 August 2014)
IN
THE HIGH COURT OF SOUTH AFRICA
FREE
STATE DIVISION, BLOEMFONTEIN
Case
No.: 1058/2014
In
the matter between:
LEON
LAWRENCE VAN NIEKERK
….................................................................................
Applicant
and
DORPER
GENETICS BK
…........................................................................................
First
Respondent
JOHANNES
DIFELO RAMOTHELLO
…............................................................
Second
Respondent
FRANS
CORNELIS DU TOIT
…...............................................................................
Third
Respondent
HEARD
ON:
31 JULY 2014
JUDGMENT
BY:
G.J.M. WRIGHT, AJ
DELIVERED
ON:
7 AUGUST 2014
[1]
The Applicant applies for the winding up of the First Respondent, a
closed corporation. The Applicant avers that he is a member
of the
closed corporation, the other members being the 2
nd
and 3
rd
Respondents. Before this court the Applicant was represented by
Advocate Cronje.
[2]
The 1
st
and 2
nd
Respondents oppose the application and are represented by Advocate
Motloung. The 3
rd
Respondent did not indicate any opposition to the application. He did
file an affidavit as part of the replying affidavit of the
Applicant.
The 3
rd
Respondent abides by the decision of the Court. He does however
indicate that he is of the opinion that the liquidation of the
1
st
Respondent will be justified. (See p 140 paragraphs 9 and 10)
[3]
In their Opposing Affidavit the 1
st
and 2
nd
Respondents raised a point
in limine
regarding the
locus standi
of the Applicant. Averments were made regarding the resignation of
the Applicant as member of the closed corporation. The point
in
limine
is not proceeded with as is
evident from the Heads of Argument prepared by Mr Motloung. During
the hearing of the matter he confirmed
that the Respondents are not
proceeding with the point
in limine
.
[4]
Section 15 (2) of the Close Corporation Act provides that, if a
member resigns, such resignation only takes effect when an amended
founding statement is registered.
In
casu
this is yet to take place. The
Applicant is therefore still considered to be a member of the 1
st
Respondent and therefore entitled to bring the application.
[5]
Before the start of proceedings, the 2
nd
Respondent filed
a Notice to Strike Out. In terms of the Notice, the 2
nd
Respondent wishes to have the whole affidavit of the 3
rd
Respondent, Du Toit, to be struck out as being inadmissible. The
affidavit of the 3
rd
Respondent is an annexure to the
Replying Affidavit of the Applicant.
[6]
When confronted about the late stage at which the application to
strike out has been brought, Mr Motloung submitted that the
Applicant
was made aware of the 2
nd
Respondent’s intention. This was allegedly done in paragraph 38
of the Opposing Affidavit. In that paragraph the 1
st
and 2
nd
Respondents respond to paragraphs 46 and 47 of the Founding
Affidavit. They attack the contents thereof as being hearsay and
therefore
inadmissible.
[7]
The Notice to Strike Out however does not refer to these offending
paragraphs, but instead to the affidavit of the 3
rd
Respondent. Mr Motloung submits that the 3
rd
Respondent confirms the hearsay information and as this confirmation
forms part of the Applicant’s reply, it should be struck
out as
it needed to be part of the founding papers (or so the argument of Mr
Motloung goes).
[8]
Mr Cronje for the Applicant correctly points out that the 3
rd
Respondent does not confirm the whole of the Applicant’s
version as set out in the Founding and Replying Affidavits. He
specifically does not confirm the contents of paragraphs 46 and 47 of
the Founding Affidavit. The 3
rd
Respondent only confirmed
the Applicant’s version regarding the removal of sheep as part
of his resignation. This may have
been relevant to the attack on the
Applicant’s
locus standi
. In any event, the Applicant in
his Replying Affidavit already indicated that he does not rely on
paragraphs 46 and 47 or the hearsay
contained therein (see P 116,
paragraph 42).
[9]
Mr Motloung further argued that, as Du Toit has been cited as a
respondent, it is improper for him to depose to an affidavit
supporting the Applicant. This is not a good argument. A respondent
is always entitled to side with an applicant if he does not
feel it
necessary or prudent to oppose the relief claimed in an application.
In casu
,
the 3
rd
Respondent indicated his decision to abide by the decision of the
court in the liquidation application.
[10]
Mr Cronje presented arguments regarding the late stage at which the
application to strike out was filed. The Notice of Enrolment
is dated
17 June 2014 and was served on the Respondents’ attorney on 18
June 2014. Heads of Argument for 1
st
and 2
nd
Respondent was duly filed on 25 July and contains no reference to an
anticipated application to strike out. It therefore does appear
that
the 2
nd
Respondent was tardy in launching the application to strike out.
However, nothing much turns on this as Mr Cronje indicated that
he
did have time to prepare. And he was able to properly address me on
the relevant issues.
[11]
The 2
nd
Respondent did not make out a proper case for the striking out of the
affidavit of the 3
rd
Respondent and the application should be dismissed with costs.
[12]
The application for the winding up of the 1
st
Respondent
closed corporation is brought on the ground that it would be just and
equitable to wind up the closed corporation. In
general it would be
just and equitable to wind up a closed corporation in circumstances
where the corporation’s substratum
has failed or disappeared or
where there is a justifiable lack of confidence in the conduct and
management of the corporations’
affairs.
See:
Moosa NO v Mavjee Bhawan (Pty) Ltd
1967 (3) SA 131
(T) at 137 B.
[13]
The question whether it would be just and equitable to wind up a
closed corporation should be based on a broad conclusion of
law,
justice and equity.
See:
Cunningham v First Ready Development
249
2010 (5) SA 325
(SCA) at 327 I.
[14]
The competing interests of all the parties should be considered with
due regard to justice and equity.
See:
Moosa
,
supra
, at
136 H.
[15]
The Founding Affidavit sets out a history of the deteriorating
relationship between the Applicant and the 3
rd
Respondent on the one side, and the 2
nd
Respondent on the other. The 2
nd
Respondent was tasked with the financial management of the closed
corporation. The Applicant sets out various instances of seemingly
irregular behaviour by the 2
nd
Respondent in his management of the corporation’s finances. The
2
nd
Respondent who deposed to the Opposing Affidavit of course denies any
wrongdoing. He in turn launched an attack on the Applicant’s
behaviour. The 2
nd
Respondent however also refers to the working relationship that has
deteriorated. (See p 52 / paragraph 3.4 of the Indexed Papers).
[16]
In his argument, Mr Cronje for the Applicant, referred to the various
instances of seemingly irregular behaviour by the 2
nd
Respondent. He specifically referred to annexure “DLN3”
to the Founding Affidavit, found on pp 36 – 38 of the
Indexed
Papers, and points out that the 2
nd
Respondent did not attempt to counter the allegations of impropriety
by annexing documentation to explain the various cheques and
payments. In response, Mr Motloung submitted that the allegations
made by the Applicant are so vague that there was no need for
the
Respondents to answer thereto and that the Applicant did not satisfy
the onus which rests on him. Mr Motloung referred in this
regard to
the judgment in
Geaney v Portion 117
Kalkheuwel Properties CC and Others
1998 (1) SA 622
(TPD) at 631 H. This part of the
Geaney
judgement however deals with the provisions of section 36(1)(d) of
the Closed Corporation Act which governs the cessation of membership.
This appears only to be relevant to the argument of Mr Motloung that
an alternative remedy is available. In the case of
Wackrill
v Sandton International Removals (Pty) Ltd and Others
1984 (1) SA 282
(W) Margo J held that it is essential that the party
who seeks an alternative remedy to a winding-up must set out by way
of a notice
of motion or in any other appropriate manner ‘the
precise relief required’.
In
casu
the Respondents made no attempt to
do this.
[17]
I do not find it necessary to deal with the various factual
allegations or to make a finding as to the veracity of the specific
allegations made by the parties against each other. The papers as a
whole present a clear picture of the three members of the 1
st
Respondent who clearly cannot work together anymore. All parties are
in agreement that the relationship has deteriorated. Mr Motloung
conceded that the Applicant showed that there is disharmony amongst
the members of the 1
st
Respondent. He submits however that this is not enough to show a
complete breakdown in the relationship. Mr Motloung also submitted
that the disagreements between the parties are focused on the
non-fulfilment of the conditions relating to the Applicant’s
resignation.
[18]
The disagreements and different viewpoints of the members of the
closed corporation deal with more than just the Applicant’s
resignation. It seems clear that his resignation came as a result of
the disagreements. It seems clear that all of it makes it
impossible
to effectively proceed with the main business and purpose for which
the closed corporation was incorporated.
[19]
The main argument by the Respondents is that liquidation is not the
appropriate remedy and that an alternative remedy is available.
If
the Applicant is unhappy, he should resign and be compensate for his
share in the membership. Mr Motloung also seem to suggest
in argument
that the parties should submit to an audit to clarify the financial
issues.
[20]
In the circumstances it appears fair and just to end the business
relationship between the parties and to do so by liquidating
the
closed corporation. With analogy to the law of partnerships, it
suffices to state that the closed corporation is in a state
which
could not have been contemplated by the parties when it was formed.
The dicta referred to in
APCO AFRICA
Incorporated v APCO Worldwide (Pty) Ltd
[2008] ZASCA 64
;
2008 (5) SA 615
(SCA) seem to comfortably fit the facts
in
casu
. I quote from p 629 F:
“
Refusal
to meet on matters of business, continued quarrelling, and such a
state of animosity as precludes all reasonable hope of
reconciliation
and friendly co-operation have been held sufficient to justify a
dissolution.”
[21]
As in
Geaney
matter, the financial affairs of the 1
st
Respondent corporation appear to be in a shambles. The winding-up of
the 1
st
Respondent will hold the advantage that the finances of the
corporation can be scrutinized and unravelled to the benefit of
creditors
and members of the corporation. The allegations made by the
Applicant regarding financial irregularities can then be properly
investigated
by the liquidator.
[22]
The 2
nd
Respondent did not really attempt to provide facts indicating that
the corporation is in a position to proceed with its core business.
The averments made by the Applicant in this regard (paragraphs 48 and
50 of the Founding Affidavit) are merely denied by the 2
nd
Respondent (see paragraphs 39 and 40 of the Opposing Affidavit).
Facts to indicate the contrary were not provided and the 2
nd
Respondent did not indicate that he plans on proceeding with the
business of the corporation should the Applicant and the 3
rd
Respondent resign their membership.
[23]
I am satisfied that a
prima facie
case has been made out for the relief claimed by the Applicant. And I
cannot find that the Applicant has an improper or ulterior
motive in
bringing the application.
See:
Wackrill
v Sandton International Removals
(Pty) Ltd
1984 (1) SA 282
(W) at 293 E – F.
[24]
It is customary to grant a provisional winding-up order and then
issue a rule
nisi
calling on all interested parties to show
cause why a final order would not be made. This may be prudent in the
light of the averments
made by the 2
nd
Respondent
regarding the involvement of the Department of Agriculture and Rural
Development in the projects and funding of the
1
st
Respondent. It is possible that further relevant facts may be
forthcoming from the Department. I also consider it prudent
to ensure
that the Department be made aware of the application and provisional
order.
[25]
The order that I intend to make differ from the Notice of Motion in
that I prefer to give the order in the format generally
used by the
Registrar in this Division. It encompasses all the relief claimed for
by the Applicant.
[26]
I make the following orders:
1.
The Second Respondent’s application
to strike out is dismissed;
2.
The Second Respondent is to pay all costs
pertaining to the application to strike out;
3.
The First Respondent is placed under
provisional liquidation in the hands of the Master of the High Court;
4.
A rule
nisi
is issued calling upon all interested parties to show cause, if any,
to the Court on
11 September 2014
at 9h30 why a final order of liquidation should not be granted
against the First Respondent;
5.
Service of this order must be effected on
the First Respondent at its registered office, or its principal place
of business within
the court’s jurisdiction;
6.
This order must without delay be published
in
Die Volksblad
and
The Government Gazette
;
7.
A copy of this order must be served on –
7.1
The Second and Third Respondents;
7.2
Every registered trade union that as far as
the Sheriff can reasonably ascertain, represent any of the employees
of the First Respondent;
7.3
The employees of the First Respondent by
affixing a copy of the order on any notice board to which the
employees have access on
the premises of the First Respondent or if
there is no access to the premises by the employees, by affixing a
copy to the front
gate of the premises from which the First
Respondent conducts any business;
7.4
The South African Revenue Services;
8.
A copy of this order as well as the
application papers (founding, opposing and replying) must be served
on the offices of the Department
of Agriculture and Rural
Development, Free State Province;
9.
Costs of the application shall be costs in
the liquidation.
_________________
G.J.M.
WRIGHT, AJ
On
behalf of applicant: Adv P.R. Cronjé
Instructed
by:
Blair
Attorneys
BLOEMFONTEIN
On
behalf of first and second
respondents:
Adv. S. Motloung
Instructed
by:
Qwelane, Theron &
Van Niekerk
BLOEMFONTEIN