Count Gotthard SA Pilati v Witfontein Game Farm (Pty) Ltd and Others (16803A/2011) [2013] ZAGPPHC 12; [2013] 2 All SA 190 (GNP) (1 February 2013)

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[2013] ZAGPPHC 12
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Count Gotthard SA Pilati v Witfontein Game Farm (Pty) Ltd and Others (16803A/2011) [2013] ZAGPPHC 12; [2013] 2 All SA 190 (GNP) (1 February 2013)

REPORTABLE
IN THE NORTH GAUTENG
HIGH COURT, PRETORIA
(REPUBLIC OF SOUTH
AFRICA)
Case Number:
16803A/2011
DATE:01/02/2013
In the matter between:
COUNT GOTTHARD S.A.
PILATI
…....................................................
Applicant
and
WITFONTEIN GAME FARM
[PTY] LTD
…..........................................
First
Respondent
DR GUNTHER SCHLOSSER
…..........................................................
Second
Respondent
BERTHOLD VON
SETHE
.....................................................................
Third
Respondent
THE SOUTH AFRICAN
REVENUE SERVICE
....................................
Fourth
Respondent
THE COMPANIES AND
INTELLECTUAL
PROPERTY
COMMISSION
…................................................................
Fifth
Respondent
JUDGMENT
POTTERILL J
1 The Applicant in the
notice of motion applied for the following relief:
1.1 “Setting aside
the transaction and agreement in terms of which the First Respondent
purchased portions 2 and 3 of the
farm Witfontein 154 KQ [‘the
property’] by ordering the transfer of the property to the
Applicant. The third respondent
is to pay the costs of the transfer
alternatively the Applicant, first respondent and third respondent
jointly and severally;
1.2 That the shareholding
of the Applicant be transferred to the third respondent alternatively
to the first respondent and that
the purchase price for such shares
be reimbursed to the Applicant;
1.3 That the loan
account of the Applicant in the first respondent be rectified to
reflect the purchase price of the property paid
by the Applicant as
well as the transfer costs and improvements to the property paid for
by the Applicant in the amount of R5 305 300-00;”
1.4 Alternatively the
Applicant must be compensated in the amount of R5 305-00 being
the value of the property plus all non-capital
expenditure incurred
by the respondent on the property in return for the transfer of the
Applicant’s shareholding in the
first respondent to the third
respondent.
1.5 In the further
alternative an order directing rectification of the share register of
the first respondent to reflect an equal
shareholding of 50%
shareholding each between the Applicant and the third respondent. The
loan account must be rectified to reflect
the amount of R5 305 300.00
and the Applicant must be appointed as a director. To affect this
court must order the first
respondent to amend its memorandum of
incorporation or to create an unanimous shareholder agreement and to
direct an issue or exchange
of shares.
1.6 Alternatively
Witfontein Game Farm [Pty] Ltd must be wound up as it would be just
and equitable to do so.
In the Applicant’s
heads of argument the Applicant now seeks relief only in terms of
prayers 1, 2 and 3 of the amended notice
of motion on the
”undisputed evidence”. The relief sought in prayers 1, 2
and 3 read as follows:
“
1 Setting aside
the transaction and agreement in terms of which the First Respondent
purchased Portion 2 and 3 of the farm Witfontein
154KQ [hereinafter
referred to as “the Property”] by ordering the transfer
to the Applicant of such property by the
First Respondent, and that
the Applicant’s loan account in the first Respondent be written
off;
2. That the Applicant
shall pay the costs of the transfer of the property;
3. That the shareholding
of the Applicant in the First Respondent be transferred to the Third
Respondent;”
The Applicant contended
that the third respondent raised factual issues rendering the
adjudication of the other prayers impossible
[par 2 of the heads] and
it was submitted that these factual disputes must in the event that
the application is not granted on
the “undisputed facts”,
be referred to trial in terms of section 163(2)(1) of Act 71 of 2008
[‘the Companies
Act”].
In the supplementary
heads, handed up in court, in paragraph 4.9 counsel on behalf of the
Applicant concluded as follows:
“
Because of the
factual disputes which are arisen, particularly with regard to the
content of the oral agreement concluded in 2003
and the circumstances
surrounding the conclusion of that agreement, the Applicant accepts
that he cannot rely on his averments
in this regard in order to
obtain relief on the papers.”
4 The above relief is
sought in terms of section 163 of the Companies Act of which the
salient portions on which the Applicant relied
reads as follows:
“
(1) A shareholder
or director of a company may apply to a Court for relief if-
Any act or omission of
the company, or a related person, has had a result that is
oppressive or unfairly prejudicial to or that
unfairly disregards
the interests of, the Applicant…
The powers of a
director… of the company, or person related to the company,
are being or have been exercised in a manner
that is oppressive or
unfairly prejudicial to, or that unfairly disregards the interests
of, the Applicant
(2) Upon considering an
application in terms of subsection (1), the court may make any
interim or final order it considers fit,
including-
……
(h) an order varying or
setting aside a transaction or an agreement to which the company is a
party and compensating the company
or any other party to the
transaction or agreement;”
………
(l) an order for the
trial of any issue as determined by the court.”
5 For ease of reference I
will refer to the first respondent as “Witfontein”, the
second respondent as” Schlosser”
and the third respondent
as “Von Sethe”.
Only Von Sethe is
opposing the application. Witfontein is not opposing because it was
advised not to utilize company money for
shareholder disputes.
Schlosser abides by the decision of the court, but did file a
comprehensive affidavit.
6 I find it necessary to
next set out the versions of the Applicant and von Sethe before
returning to the common cause facts pertaining
to the shareholding in
Witfontein and the management of the portions. The Applicant wanted
to purchase property in South Africa.
Von Sethe told him that as the
Applicant was a foreigner without permanent residence it would be
problematic for the Applicant
to purchase property in South Africa.
At that stage Von Sethe had bought property [“portion 1”]
in South Africa.
The Applicant attempted to buy the property
[portions 2 and 3] adjacent to the property that Von Sethe operated
on. To facilitate
the purchase he was told by von Sethe that as a
foreigner the best way to purchase property in South Africa was
through a company
and Witfontein was ideal for this purpose. He
therefore concluded an oral agreement with von Sethe and Schlosser.
This entailed
that the Applicant would buy the neighbouring property
through Witfontein and he would acquire 49% of the shareholding of
Witfontein.
A shelf company, Witfontein, was utilized for this
purpose. The parties expressly agreed that after Schlosser retired,
Schlosser’s
shareholding would be transferred to the Applicant
at no cost. Schlosser represented to him that he was an attorney
acting on
behalf of the Applicant; this would render the Applicant
and von Sethe to be equal shareholders. Prior to this agreement and
the purchasing of portions 2 and 3 von Sethe told the Applicant that
the Applicant could “leave” Witfontein at any given
time
and take portions 2 and 3 with him or sell same on the open market
for his own benefit. Contrary to such agreement von Sethe
now owns
51% [fifty one percent] of the shares in Witfontein and the Applicant
only 49% [forty nine percent] of the shares. In
reply in par 22.7 the
Applicant stated that “in fact [he] believed that he was buying
the farm and thereafter bringing it
into the First respondent, not
that I was only buying shares in the first respondent and that this
money would be used by the First
Respondent to purchase the farm.”
The requisite
shareholders’ meetings were never held until the Applicant
complained about the lack thereof, and then such
were held at a time
and place which was not convenient to him because the Applicant spent
a major portion of his time in Europe.
The Applicant’s
investments in Witfontein were not shown in Witfontein’s
balance sheets, notwithstanding requests,
and very poor excuses were
presented as explanations. The fact that every party paid all their
own bills, taxes and salaries resulted
in the financial picture of
Witfontein being totally skewed in favour of von Sethe. The fact
that Witfontein did not have a bank
account clearly showed that the
factual position was that the two farms were managed totally
separately. Von Sethe refused to
allow the Applicant to separate
from Witfontein and to transfer the properties to the Applicant in
any form. None of the amounts
spent by the Applicant to improve the
value of the property was reflected against the loan account in the
books of Witfontein and
no quid pro quo was given to him for this
investment except for the share premiums which had no growth. In
reply he for the first
time stated that he did submit records of
expenditure relating to portions 2 and 3 as well as invoices that
where in lieu of loan
accounts but it was never reflected in the
financial statements. [PR7 dated 7 December 2005]. In contrast the
loan account of von
Sethe grew for no apparent reason. He effected
improvements of R3, 2 million by building a luxurious lodge on
Portion 3 and by
effecting general repairs and improvements to
Portion 2 and 3 of the property. In reply he for the first time
attached photographs
reflecting the averred luxury lodge. Von Sethe
misled him because as a prudent business man he would not have paid
in excess of
R2 million to buy a share in a company that at that
stage was only worth a fraction of such amount; at the very least he
would
have done so for 50% shares in the company. He did in reply
concede that he himself was a lawyer but knew nothing of the South
African law. In reply he also denied that Schlosser was an admitted
attorney in Germany. He only in 2008 realized that von Sethe
was not
going to honour the oral agreement and that is why he only then
raised it for the first time. The result hereof is that
the
relationship between the parties had completely broken down and they
could not continue to work together as shareholders.
In reply he
denied that he no longer was interested to have property in South
Africa. Schlosser remained the only director and
he acted
exclusively on behalf of von Sethe. Schlosser represented to the
Applicant that he had the capacity to represent the
Applicant as
attorney and therefore had a duty to protect the Applicant’s
interests. The e-mails/letters of his former attorney
dated 21
February 2008 [CP7] and 15 April 2009[ CP9] were attempts to settle
the divorcing of the Applicant from Witfontein and
portions 2 and 3,
but it failed. This also demonstrated the irreconcilable differences
between the parties.
7 Von Sethe and Schlosser
denied that Schlosser was a party to the concluded oral agreement.
Von Sethe also denied that the Applicant
would receive1% shares as
Schlosser only had one share. They also both denied that the one
share of Schlosser with Schlosser’s
retirement would be
transferred to the Applicant at no cost. The one share was already
transferred to von Sethe in May 1989 long
before the Applicant was
involved in Witfontein. Von Sethe set out that the Applicant did not
hold a substantial loan account
in Witfontein with the year 2010
reflecting an amount of R22 310 00. Von Sethe explained that
his loan account did in fact
fluctuate upwards because he annually
provided Schlosser with a loan account certificate which reflected
his expenses incurred
for Witfontein. The loan account of the
Applicant can not be rectified because it was never alleged that it
was incorrect prior
to the issue of this application. The averred
amount of R3 million as improvements was never substantiated or
proven. The Applicant
did receive the financial statements of
Witfontein wherein the loan accounts where reflected; in fact he
thanked Schlosser therefor.
Von Sethe averred that there was no
oppressive conduct on his part. The real reason why the Applicant
brought this application
was because he wanted to terminate his
involvement in Witfontein because of the political and socio-economic
climate in South Africa.
8 Schlosser confirmed
that he only held one share and not 1% share. He confirmed that the
single share was transferred against
payment on 10 May 1989. He took
strong exception to the averment that he colluded with von Sethe
pertaining to the one share and
submitted that the facts disproved
this averred collusion. He confirmed that he was the only director
of Witfontein. Witfontein
was specifically incorporated to purchase
portion 1. The main aim of the company was a game farm for trophy
hunting on a commercial
basis. However in reality the Applicant and
von Sethe separate from each other on an ad hoc basis organised
hunting trips. He
denied that the Applicant held a substantial loan
account in Witfontein. He did every year send out the draft loan
account certificates
to which the Applicant did not respond.
Expenses like electricity, water etc. resulted in an increase in the
loan account whereas
having hunting parties on the Applicant’s
portions would reduce a loan account. He denied that the financial
statements
were skewed in favour of von Sethe. The averments of how
it was skewed were so vague that he could not comment on it. He
never
consented to any improvements and there is no proof that the
value of portions 2 and 3 has increased. He never visited the farm.

He denied that Witfontein was a shelf company. He floated it against
payment when he was still a consultant with Webber Wentzel
and
Bouwens Inc. He submitted that he managed Witfontein bona fide and
in its best interests. He acted in the best interests
of Witfontein,
the Applicant and von Sethe and never acted exclusively in the
interest of von Sethe. He in fact proposed the shareholders

agreement. The Applicant did receive a quod pro quo for his
investment in that he received 49% shares. The first time the
Applicant
complained about a shareholders meeting was in 2009. He
denied that the relationship between him and the Applicant had broken
down because on 12 January 2012 the Applicant accepted that Schlosser
remain the director of Witfontein. It is his responsibility
to manage
Witfontein and not the shareholders working together. It was his duty
to run the daily affairs of Witfontein. In the
articles the
management of the company vests in the board of directors. He denied
that he ever acted as the Applicant’s attorney.
He did not know
of any instance where von Sethe used his majority shareholding to
outvote the Applicant and the Applicant was not
prejudiced in any
manner.
9 Allen Paterson the
qualified auditor of Witfontein also filed an affidavit. He had no
interest in the litigation and deposed to
the affidavit solely as an
independent and objective witness. He attached all the documents
pertaining to Witfontein that he had
in his possession. The annexures
revealed that Witfontein was registered and incorporated on 25 April
1989. The main business was
the operation of a game farm for trophy
hunting on a commercial basis. On the date of incorporation one share
was issued and allotted
to Schlosser and on 10 May 1989 99 999
shares were issued and allotted to von Sethe against a paid purchase
price of R349 996,50.
On the same day Schlosser transferred his
one share to von Sethe. This is reflected in the minutes of the first
director’s
meeting. Witfontein had prior to this bought portion
1 and it was registered in Witfontein’s name on 24 July 1989.
On 30 July 1994, 30 July
1996, 28 July 1997, 2 September 1998, 27 July 1999 and 31 May 2000
annual general meetings were held.
These were not formal annual
meetings and von Sethe agreed to and resolved thereto in writing.
Although there are no minutes for
the years 2001 and 2002 there was
nothing to indicate that the same did not happen as in the previous
years. There were no formal
annual general meetings between and
including 2004-2007. The financial statements for those years were
prepared and audited and
approved by Schlosser. Schlosser prepared a
loan certificate for the two shareholders but only von Sethe
certified these certificates.
On 19 February 2004
Witfontein purchased portion 2 and 3. “ Prior to the
registration of property 2 into the First Respondent’s
name, it
appears that the Applicant deposited the sum of R2 100 000,00
into an Absa Bank account for the credit of Inter-Disciplinary

Services CC (account no. 4055144267). The conveyancing attorneys were
Trollip, Cowling & Janeke Inc who advised that the purchase
price
of property 2 of R1870 000,00 and that the transfer costs would
amount to R203 473,00. The total costs for the transaction
would
consequently amount to R2 073 473,00”[Par 4.16].
On a meeting of
shareholders and directors held on 12 May 2005 an additional ordinary
100 00 shares were issued and allotted to
the Applicant as 98 000
shares and to von Sethe 2000 shares. Consequently von Sethe held
102 000 of the issued share
capital and the Applicant held
98 000 shares resulting in the 51%-49% split.
He confirmed Schlosser’s
version about the annual general meeting to be held on 16 October
2009. The notice convening this
meeting was sent to von Sethe and the
Applicant on 10 July 2009. The Applicant did not attend the meeting
and because there was
no quorum the meeting was adjourned to 31
October 2009. At this meeting there was a quorum because Schlosser
held a proxy for
von Sethe and the meeting was duly constituted. The
Applicant phoned an employee of Schlosser indicating that he required
the minutes
of this meeting because he was not aware of this meeting.
For the meeting of 2 November 2010 the Applicant informed the same
employee
of Schlosser that he could not attend this meeting at he
wanted to drive form the airport to the farm before nightfall. The
meeting
was rescheduled for 4 November 2010. On the 4th of November
2010 von Sethe signed a proxy nominating the chairman of the meeting

to be his proxy. As just Schlosser was present the meeting was
adjourned to 30 November 2010. On this date the Applicant was present

as well as Schlosser as proxy for von Sethe.
On 12 January 2012 an
annual general meeting was held. In attendance was Schlosser, Chris
Leistner (an attorney and proxy of the
Applicant), von Sethe and his
son-in-law as an invitee and Paterson himself. The usual resolutions
were passed. Although this notice
of motion was by then issued, upon
the filing of a notice of intention to oppose, the Applicant’s
attorney would keep the
matter in abeyance for settlement
negotiations. Various settlement proposals were discussed but the
matter could not be resolved.
10 It would be prudent to
next set out as background the common cause chronological facts.
These facts remained relevant in deciding
all the issues before me
even though the Applicant requested that the issues on these facts be
referred to oral evidence.
10.1 On 16 February 1989
Witfontein purchased a property from the Groblers. [This property
will for ease of reference as referred
to above be known as”
portion 1”.]
10.2 Schlosser, an
attorney of Germany practising in South Africa as a business
consultant on request of Von Sethe floated Witfontein
Game Farm on 25
April 1989. On the date of incorporation Schlosser as nominee took up
one[1] share.
10.3 In that same year
Schlosser’s one[1] share was transferred to von Sethe as well
as a 99 999 shares that were issued
and allotted to von Sethe at
a purchase price of R349 996.50. At date 10 May 1989 von Sethe
was the 100% shareholder of Witfontein.
Schlosser was the only
director of Witfontein. The company records reflected all the
aforesaid. Witfontein was a game farm with
the main object of hunting
or experiencing the typical safari of South Africa. The idea was to
operate a hunting trophy farm but
as Portion1,[ 2 and 3 later
referred to] are landlocked this dream did not materialize.
10.4 Portion 1 was
registered into Witfontein’s name on 24 July 1989.
10.5 The Applicant during
1999 visited South Africa by invitation of von Sethe. The Applicant
expressed interest in buying property
in South Africa. Von Sethe only
managed to buy the neighbouring farm, hereinafter referred to as
“Portions 2 and 3”
in 2003. The transaction culminated in
that Witfontein purchased portions 2 and 3 and the Applicant acquired
an allotment of 49%
shareholding in Witfontein with von Sethe holding
51%.
10.6 The oral agreement
between the Applicant and von Sethe was that the Applicant would
manage Portions 2 and 3 on his own and
pay all expenses pertaining
thereto and von Sethe would pay all expenses for Portion 1 and manage
it on his own.
10.7 On 16 July 2004
Schlosser wrote a letter to the Applicant with the relevant portion
being the following: “As previously
discussed over the phone it
will now become necessary for you to acquire an interest in
Witfontein Game Farm(Pty) Ltd by the issue
of new shares in such
proportion as may be agreed between yourself and Mr von Sethe.”
Schlosser also suggested that the Applicant
and von Sethe formalise
their shareholding relationship with a shareholders agreement.
10.8 On 12 May 2005 at a
meeting of directors and shareholders new shares were issued and
allotted; 98,000 to the Applicant and
2000 shares to von Sethe.
10.9 In a fax dated 21
July 2005 Schlosser informed the Applicant that the shareholding in
the company was now 51% for von Sethe
and 49% for the Applicant.
10.10 In an e-mail form
the Applicant in response to the fax dated 21 July 2012 he replied as
follows:
“Thank you for
your fax from 21 July, 2005 and I advise you, to share the operation
expenses in proportion to the shareholding
(Von Sethe 51%;PIlati
49%)”
10.11 On 22 November 2006
Schlosser forwarded to the Applicant a draft shareholders agreement.
In this draft clause 2.3 sets out
the shareholding as 51% for von
Sethe and 49% for the Applicant.
In an e-mail dated 18
January 2008 the Applicant informed Schlosser that he wanted to
sell portions 2 and 3. He specified the
reasons for this as
follows:
“
Since my purchase
of the farm the situation in the region changed significantly because
of
- the formation of a
nature reserve on the farm
- an extensive building
development on the neighbouring farm –about 900 metres away
from my houses
- a land tax (most
probably with the right of the authorities to enter) is
lurking”[p259]
He also set out that the
political climate in South Africa had changed unfavourably. He gave
Schlosser two scenarios, one if he
and Von Sethe both intended to
sell their properties what should transpire, or one setting out what
should transpire if only he
wanted to sell the property. He inter
alia refers to him selling his shares of 49%.
10.13 On the 16th of May
2008 the Applicant wrote a long letter to von Sethe [PR3] with inter
alia the following content:
“
3. It is correct
that I have informed Heinz regarding my thoughts, to possibly take
over your business shares, or in due time look
for a new partner who
maybe could take over shares in the company. We would have an
interested party, but this would depend very
much on the specific
conditions which are still unknown.…
4. I have written to Dr
Schlosser and wait for his statement regarding the 1% share in the
company that he used to have, but in
my opinion no longer has after
your acquisition of shares.”
10.14 On 26 March 2009
von Sethe wrote a letter to the Applicant with the following relevant
portion:
“
In January 2008
you informed me that you want to withdraw your investment from South
Africa because you did not trust the political
situation. On
12/11/2008 you told me that you no longer want to sell but that you
want to get out of the farm company as a partner,
and on 19/11/2008
we agreed mutually to sell the whole company, that means portion 1, 2
and 3. As you remember, I am emotionally
very attached to this farm
and it was not easy for me to decide for the first time to give up
the farm and sell it, as I nevertheless
confirmed with you on
19/11/2008. The political situation of the country did not change,
the future president will be Zuma, which
means that the country will
be led into a unknown future, which may be unpleasant for foreign
farmers in 2 to 3 years. That is
why I still want to sell the farm
company and I think that we should offer the portions of the farm on
the market as soon as possible.”
10.15 The Applicant did
effect improvements to portions 2 and 3.
11 On the above versions
of the Applicant and the respondent, as well as the common cause
facts, the Applicant in the supplementary
heads submitted that the
Applicant would not be entitled to the relief claimed and that on
these facts the matter must referred
to oral evidence. On behalf of
the respondent it was argued that the Applicant knew that there would
be disputes of fact and changed
tack as the matter went along and
that the application should be dismissed. The Applicant did however
submit that there are not
disputes of fact relating to the management
of Witfontein and that on these facts the relief sought in the
amended notice must
be granted. The respondent argued that they are
so trivial that the application must be dismissed with attorney and
client costs.
I find it practical to first decide the issues on which
the Applicant submitted it should be successful in the relief
claimed.
It was however necessary to first set out the above facts as
background in understanding the facts now relied on for the relief

claimed.
12.1 The Applicant
averred that contrary to section 163(1)(a) of the Act von Sethe had
conducted himself in a manner that unfairly
disregarded the interests
of Applicant. This conduct firstly flowed from the fact that the
since the incorporation of the company
Schlosser was the only
director and von Sethe was the majority share-holder. It was argued
that from these facts it was obvious
that Schlosser held office as
the only director at the behest of von Sethe. The fact relied on for
this general proposition is
that von Sethe wrote a letter to a
neighbour on a company letterhead without consulting with the
Applicant. The nature of the letter
was to complain about the
neighbour, Mr Mac Gillevray, locking the gate that gave von Sethe
access to and from a public road to
the portions. The letter set out
who the director is, who the two shareholders were and also their
percentage shareholding and
where they reside when on the portions.
The letter is dated 22 November 2009 and also explained that the
relations between the
shareholders are “critical.”
Von Sethe replied that
this letter indicated that he signed the letter as the majority
shareholder of Witfontein. He in his capacity
as a shareholder had in
terms of the oral agreement a right to attempt to ensure and protect
a right of way over the farm of the
said MacGillivray. Von Sethe
also set out that the letter was in a friendly and gentlemanly tone
and was no proof of an altercation
between him and the neighbours.
Von Sethe’s unilateral conduct must be seen against the
background that he and the Applicant
would manage each portion on its
own. However he acted in the best interest of Witfontein because the
value of any farm would be
negatively affected if that farm is
“blokland” without any right of access to a public road.
The Applicant himself
also wrote a letter to this neighbour without
informing von Sethe. In this letter the Applicant informed the
neighbour that he
did not know of any legal action to be taken
against the neighbour and he did not support such action.
12.2 The further
complaint of the Applicant was that he was not advised or consulted
with regard to the taking of legal action by
the company and he did
not support such action.
Von Sethe simply
persisted that he need not consult with the Applicant before taking
the action because this action, if to be taken
is at board level. No
basis was set out by the Applicant why he as a shareholder should
have been consulted before the board took
a decision to institute
legal action.
12.3 The Applicant is
also relying on the fact that von Sethe did not properly maintain the
fire breaks on Portion 1, thus exposing
the company and indirectly
the Applicant to damages’ claims. Von Sethe admitted that a
fire did break out on Witfontein but
not due to negligence pertaining
to fire-breaks. The fire-breaks on portion 1 were constructed and
maintained in a way that he
regarded as effective. The Applicant
contended that the fire spread because Von Sethe did not maintain the
fire breaks on his portion
of the farm and that was the reason why
the fire spread. This contention of his he averred was confirmed in a
letter from Mokolo
dated 27 October 2010. The relevant portion of
this letter reads as follows:
“When we arrived
there the fire was burning on 2 sides of the gate on Witfontein side
and we immediately started to fight
it. ..Because of the extremely
strong wind that was blowing during this day the fire jumped to
Mokolos side and was quickly brought
under control thanks to Mokolos
staff.
We learned that David,
Mr von Sethes(sic) gardener burned dry leaves and branches at midday
and left them unattended. This fire
started to spread and as he is
the only person on the farm he was unable to bring the fire under
control by himself quickly because
of the very strong wind blowing.
We were informed by David that there is no fire fighting equipment
available on Witfontein Game
Farm.
Mokolos staff and Mr
Heinz Billy did the necessary after fire checks during the following
night and early morning. “
Von Sethe stated that he
need not have consulted about the firebreaks on Portion 1 just as the
Applicant did not consult with him
about the firebreaks on portions 2
and 3. The Applicant persisted that this stance reflected von Sethe’s
attitude that he
did not consult his co-shareholder regarding
activities on company property that could prejudicially affect the
company and the
co-shareholder.
12.4 The Applicant also
relied on the conduct of von Sethe in negotiating rental with the
Mokolo River Nature Reserve. He complained
that he received no
benefit from it and was not consulted about it and Von Sethe
unilaterally decided not to accept the offer.
Von Sethe replied that
there was no negotiation process, he was asked to consider an offer
and he did not accept the offer. The
offer only related to the
portion that he managed for his own expenses and income. If he did
decide to accept the offer the board
would have had to approve it.
The Applicant contended
that all the above illustrated von Sethe’s entitlement to
manage Witfontein but the Applicant was
denied this right and these
actions amount to text book oppression of a minority shareholder.
12.5 The Applicant set
out that von Sethe invited Heinz Billy [hereinafter referred to as
“Billy”] in 2002 to the farm
where the Applicant met him.
In 2004 the Applicant invited him to meet him in Austria in 2004. In
Austria he “agreed with
Billy on behalf of the First respondent
and in terms with the agreement with the Second and Third
respondents, that he could stay
at the old farm house on Portions 2
and 3 of the property to supervise the construction work of the new
farm houses” [par
42.4].
In October 2004 “I
gave Billy a lifelong right of residence on Witfontein Portions 2 and
3 as my employee in accordance with
the agreement with the Third
Respondent.” [par 42.6.5]. Von Sethe and Schlosser contacted
the Department of Home Affairs
and informed them that Wifontein did
not employ Billy and therefor his work permit is invalid. This
despite the fact that the agreement
was throughout that each of the
shareholders could employ their own staff. This was also contrary to
the information supplied on
an application for a hunting license
submitted by Schlosser for Witfontein wherein it was stated that
Billy was to be appointed
as the person that will exercise the
powers, functions and duties on behalf of the owners of the farms.
The Applicant contended
that Schlosser and von Sethe vexatiously and
with a probable view to exclude Billy from the farm and thereby take
over complete
control of his portions of the farms. In supplying
false information to Home Affairs they were having Billy deported.
This was
a further attempt to dis-enfranchise the Applicant from the
management of Witfontein which is a “direct arch with the
original
agreement between the parties” [par 46].
Billy in his
confirmatory affidavit stated that he was an employee and friend of
the Applicant and confirmed what the Applicant
stated pertaining to
him.
Von Sethe admitted that
Schlosser did sign the application for a hunting license in 2006. A
natural person had to take responsibility
for the license and it was
done by Billy on an ad hoc basis. Von Sethe however strongly denied
that Billy ever was an employee
of Witfontein or was duly authorized
to represent Witfontein. On 18 June 2009 Billy applied to renew a
hunting license wherein
he indicated that he was the owner of the
farm and applied in the name of Witfontein. These false allegations
could have serious
consequences when future applications for hunting
licenses are to be made. Von Sethe took the matter up with the
immigration officials
by providing them with affidavits. They did
this to protect Witfontein and not to take over control of the farm
or to act vexatiously.
Billy is employed by the Applicant and not by
Witfontein. In reply the Applicant denied that Billy gave false
information because
as he was employed by the Applicant he was
therefor de facto employed by Witfontein.
12.6 The Applicant is
also relying on the above incidents as evidence that von Sethe was
locked in various disputes with the neighbours.
Good relations with
the neighbours “is very important for the value of the First
Respondent’s property as well as for
the vision that we had for
the First Respondent, to keep proper relations with its neighbours,
some of whom are serious players
in the game preservation business in
the area. Clearly the Third Respondent does not have the same vision
for the First respondent
as I do “[par 41.9].
13.1 The incidents as set
out in paragraph 12 above are relied upon by the Applicant for the
relief as set out in the amended notice
of motion as constituting
acts or omissions unfairly disregarding the interests of the
Applicant.
13.2 The bad relations
with the neighbours and the omission to maintain proper firebreaks
were affecting the Applicant’s interests
in that the value of
the property was being affected. His interests were also affected in
that he and the respondents don’t
have the same vision for the
property.
13.3 The other affected
interest was his interest in the management of his property and the
property of Witfontein. The Applicant
relied on the fact that since
the incorporation of Witfontein Schlosser was the only director of
the company and von Sethe the
majority shareholder thus Schlosser
held office as director on behest of von Sethe. Von Sethe acted as if
he was authorised to
act on behalf of Witfontein by writing letters
to third parties and making decisions about an offer and the taking
of legal action
unilaterally. Although it is common cause that those
decisions could only be taken at board level in reality Schlosser
would not
have taken those decisions. Schlosser was only a
smokescreen because for 23 years he only did the administrative work
and he did
not manage Witfontein for the purpose it was established.
Von Sethe dogmatically applied the principle of the majority ruled
thereby
disregarding the interests of the minority. The Applicant was
never consulted or requested to give some input. It is correct that

shareholders of a company are not involved in the management of the
company but practically von Sethe was whereas the Applicant
was
completely excluded. It was thus argued on behalf of the Applicant
that von Sethe was conducting himself in a manner that unfairly

disregarded the interests of the Applicant.
13.4 The interests of the
Applicant were prejudiced when Schlosser and von Sethe reported Billy
to the immigration officials. They
were acting mala fide with the
intent to exclude/evict Billy from the farm and taking over the
portions of the farm of the Applicant.
14.1 On behalf of von
Sethe it was argued that the facts relied on are so trivial that they
effectively constitute de minimus curat
lex and could never
constitute grounds for the relief sought in terms of Section
163(1)(a) of the Act.
14.2 Each party was
responsible for their own firebreaks on their respective portions of
the property. There were no facts set out
how the averred failure to
maintain the firebreaks unfairly prejudiced the Applicant. There was
no need to consult with the Applicant
pertaining to the firebreaks in
terms of the common cause agreement. There was no evidence how this
complaint impacted on him
as a shareholder.
14.3 The unilateral
conduct of writing a letter on a company letterhead did not unfairly
disregard the interests of the Applicant.
He was writing a letter on
behalf of himself in that he was affected in his beneficial use of
Portion 1. This was in line with
the common cause fact that each
party would have the beneficial use, management and expenses of their
respective portions and they
need not consult with each other. It was
argued that in any event he acted in good faith because it was to the
benefit of all the
parties to ensure that the farm is not “blokland”.
He never in this letter gave the impression that he was acting on

behalf of Witfontein. There are no facts to set out as to how this
conduct impacted negatively on the Applicant.
14.4 The complaint that
he had no say in the affairs of Witfontein and that the majority
ruled is incorrect. There was not a single
fact put forward where a
majority decision was taken and the Applicant was outvoted. In
general shareholders do not have a say
in the day to day running of
the company with the director fulfilling this function. The
shareholders themselves had drawn a line
between the management of
the company, i.e Schlosser and the management of the portions of the
farm by each shareholder.
14.5 The reporting of
Billy to the deportation authorities did not unfairly prejudice the
Applicant. Billy was still on the farm.
It was untrue that Schlosser
and von Sethe under oath lied to the authorities; in fact they told
the truth that Billy was not the
owner or employed by Witfontein. The
Applicant in reply admitted that Billy was not employed by
Witfontein. Their conduct was in
response to Billy untruthfully
stating that he was employed by Witfontein. Von Sethe did not have an
opportunity to react to the
replying statement that the correct
authority to have reported it to was the Limpopo Environmental
Department and not the Immigration
Department. It was argued that
once again there were no facts to explain how this conduct complained
of unfairly disregarded the
interests of the Applicant.
15.1 “Interests”
is not defined in the Act. In the interpretation and application of
this Act effect must be given to
the purposes as set out in section 7
of the Act [s5(1)].
Section 7 identifies the
following as the purposes of the Act relevant to this dispute:
“
(a) promote
compliance with the Bill of Rights as provided for in the
Constitution, in the application of company law;
balance the rights and
obligations of shareholders and directors within companies;
encourage the efficient
and responsible management of companies”
In terms of Section 5(2)
a Court interpreting or applying the Act may consider foreign company
law where appropriate.
Section 158 of the Act
reads that a court when determining a matter before it must when
making an order in terms of this Act:
“
(a) ...must
develop the common law as necessary to improve the realisation and
enjoyment of rights established by this Act; and
(b)(i) …must
promote the spirit, purpose and objects of this Act; and
(ii) if any provision of
this Act, or other document in terms of this Act, read in its
context, can be reasonably construed to
have more than one meaning
that best promotes the spirit and purpose of this Act, and will best
improve the realisation and enjoyment
of rights.”
15.2 The Applicant argued
that in view hereof section 163 must be interpreted widely. I was
referred to Cassim Contemporary Company
Law (2011) p692:” In
all likelihood a judicial construction will be given (one hopes) to
extend rather than to limit the
remedy (following the approach under
the previous regime).”
I was referred to the
Canadian decision of Stech v Davies (1987)53 Alta LR (2d) 373 at 379
where the Court interpreted the meaning
of “unfairly
disregards” as “to unjustly and without cause…pay
no attention to, or ignore or treat as
of no importance the interests
of” an Applicant.
This section is wider
than section 252 of the old Act, Act 61 of 1973, because the
complaint can also be against acts or omissions
of a related person.
The phrase.” or that unfairly disregards the interest of, the
Applicant”…set out a sufficient
new jurisdictional
requirement versus acts of omissions being oppressive or unfairly
prejudicial. The Applicant supported the view
of Cassim supra:
“
Section 163(1)
does not necessarily require that the ‘conduct’ be
unlawful in the sense that it infringes any legal
rights of the
Applicant [p680]…..The oppression remedy operates typically as
a mechanism for the protection of minority
shareholders [p683]…The
unfair disregard of the ‘interests’ of the Applicant did
not previously form part of
the oppression remedy. Its explicit
inclusion under the new Act arguably indicates that even where the
conduct complained of does
not affect any rights of the Applicant as
derived, for instance, from the Act or the company’s memorandum
of incorporation,
the Applicant will still have locus standi if the
interests are affected…’Interest are wider than ‘rights…

and may include equitable consideration [page685].
15.3 The Applicant
submitted that the reliance in argument on behalf of von Sethe on
Louw v Nel 2011(2) SA 172 (SCA) as authority
on oppression of
minority shareholders [in terms of the old Act] and the concept of
fairness in a corporate context is dangerous
in view of the wording
of section 163 and the approach to the interpretation and application
of the new Act. The court in the Louw-matter
supra did not attempt to
interpret and apply the old Act in a manner which promoted compliance
with the Bill of Rights as provided
for in the Constitution in the
application of the Company Law. Human dignity of a minority
shareholder is enshrined in Section
10 of the Constitution and part
and parcel of the pacta sunt servanda principle.
15.4 The reliance by
counsel for von Sethe on Australian authority is also misplaced
because the Australian Act does not contain
a provision which refers
to the disregarding of the interests of an Applicant and the
Australian Courts are not enjoined to apply
constitutionally
entrenched rights in interpreting its company’s legislation.
The interpretation adopted in Australia that
the various concepts
used in this Section are to be viewed as a composite whole is not in
line with South African law pertaining
to the interpretation of
statutory law; that if possible effect is given to each word or
phrase in order to avoid tautology [ NST
Ferrochrome (Pty)Ltd v CIR
2000(3) SA 1040 (SCA)1047]
15.5 It was concluded
that on the facts set out the interests of the Applicant is unfairly
disregarded. A court can fashion an appropriate
remedy which is
tailor-made for the circumstances. It was argued that in view of the
fact that the Applicant paid the purchase
price and financed the
improvements for portion 1 and 2 and the portions were managed
separately from portion 1 the practical way
is to grant the prayers
in the amended notice of motion. It was argued that this was the most
practical way to protect the Applicant’s
interests and end the
acrimony between the shareholders.
16.1 On behalf of von
Sethe it was argued that for the Applicant to make out a cause of
action based on s163(1)(a) the Applicant
had to establish three
components:
(i) any act or omission,
i.e. conduct;
(ii) which had a result;
a consequence
(iii) that consequence
had a particular effect; in casu unfairly disregarded the interests
of the Applicant.
16.2 The interests
unfairly disregarded must be interests operating in the corporate
world in the Applicant’s capacity as
a shareholder. It was
argued that it is very difficult to give a separate and distinct
meaning to “oppressive”, “unfairly
prejudicial”
and “unfairly disregards” in such a manner that they
don’t overlap. It was thus argued that
the Australian approach
of viewing the concepts as a composite whole and the individual
elements should be considered as different
aspects of commercial
fairness.
16.3 Corporate fairness
is not requiring lawfulness to override unfairness of consequences,
but is recognition of corporate context
and its basic democratic
principle of majority rule as a particular concept of fairness.
16.4 The Applicant did
not show any result of interests being unfairly disregarded. The
incidents now relied on are isolated and
even if viewed holistically
are de minimus.
16.5 The Applicant’s
complaint that he had no say in the company affairs is reliant on
incidents were von Sethe acted pertaining
to his portion in terms of
their oral agreement. The general complaint in the founding affidavit
of the Applicant that he had no
say in the affairs of the company was
responded to by von Sethe in general that shareholders do not have a
say in the run of the
affairs of the company and can not be
interpreted as an exclusion of the Applicant in the running of
Witfontein. The Applicant
did not deny Schlosser’s averment
that “I know of no instance at which the Third Respondent
outvoted the Applicant
by allegedly using his majority shareholding
as the resolutions passed throughout were those which had gone
before” [par
31].
16.6 The Applicant set
out no facts as to what the consequences of these averred incidents
were and how it impacted on the interests
of the Applicant.
It was thus argued that
the Applicant’s application must be dismissed with costs on an
attorney and client scale.
17.1 Section 252 of the
old Act read as follows:
“
(1) Any member of
a company who complains that any particular act or omission of a
company in unfairly prejudicial, unjust or inequitable,
or that the
affairs of the company are being conducted in a manner unfairly
prejudicial, unjust or inequitable to him or to some
part of the
members of the company, may subject to the provisions of subsection
(2), make an application to the Court for an order
under this
section.”
For ease of reference I
again quote section 163(1)(a):
“
Any act or
omission of the company, or a related person, has had a result that
is oppressive or unfairly prejudicial to or that
unfairly disregards
the interests of, the Applicant…”
17.2 An act or omission
that “unfairly disregarded the interests” of the
Applicant is a new phrase in this act. The
Applicant thus argued
that the application of this section is wider as the section in the
old Act and would encompass the incidents
relied on and specifically
that the respondents were acting in a manner which did not enable the
Applicant to enjoy fair participation
in the affairs of the company.
In general and in company
law the concept “interests” would be a wider concept than
“affairs of the company”
[s252(a)]. Cassim’s
submission that “interests" would be wider than”
rights” is also correct in as
far as “rights” are
applicable pertaining to this section. The section does not state
that the interests of the Applicant
being unfairly disregarded should
be interests affected in any particular capacity.
17.3 On behalf of von
Sethe it was argued that no matter how wide interests are to be
interpreted it must be placed in context of
the regulatory Act and
its operation in the corporate world. The Applicant’s interests
in casu must in the context of s 163
be in his capacity as a
shareholder which it is not.
17.4 I would think that
the concept interests could include interests not flowing from the
memorandum of incorporation of the company,
but from an understanding
or agreement between the parties. Interests “arise[s] out of
fundamental understanding between
the shareholders, which formed the
basis of their association but was not in contractual form.”
[Saul D Harrison & Sons
Plc, Re [1995] 1 B.C.L.C at 19- English
Court of Appeal]. The acts complained of need thus not necessarily
flow from the Articles
of Association or by example from a majority
vote, but for instance from a breach of trust or acrimony between the
parties flowing
from the fundamental understanding between the
shareholders. Canadian Courts interpret the phrases similar to those
in s163 on
a general fairness standard based on the reasonable
expectations of the Applicant and not only strict legal rights.
17.5 The test however is
whether the acts or omissions that unfairly prejudiced the
Applicant’s interests resulted in affecting
the Applicant in
his capacity as a shareholder. The precise question is whether the
harm which the Applicant has suffered is something
he or she is
entitled to be protected from.
17.6 The interests the
Applicant is relying on could, dependent on the merits thereof,
qualify as interests, but must result in
unfair prejudice to him in
his capacity as a shareholder. The result of the act or omission must
be unfairly prejudicial and not
the act. Hennochsberg on the
Companies Act, 71 of 2008
, Vol 1, p568 is in agreement with counsel
for von Sethe that
s163
’s phrase “ ‘has had a
result’ indicates that the act must be completed, that must be
oppressive or unfairly
prejudicial. It is also the result, and not
the act, that must be oppressive or unfairly prejudicial.” I
agree that it is
thus the effect of the challenged conduct which is
critical.
17.7 In the matter at
hand the Applicant would be entitled to relief in terms of
s163
if he
can prove the following:
(1) any act or
omission on the part of von Sethe and Schlosser;
(2) which had a result
or consequence;
(3) which was
oppressive, unfairly prejudicial or unfairly disregarded the
interests of the Applicant.
The undisputed facts the
Applicant were relying on for the application to succeed was found on
specifically the phrase “unfairly
disregarding the interest of
the Applicant.”
17.8 The Applicant argued
that in view of the new concept of “unfairly disregarding the
interests” of an Applicant the
legislature did not intend that
the three concepts in (3) above be interpreted as a composite whole.
In any event such interpretation
is in conflict with the South
African rule of statutory interpretation where effect should be given
to each phrase in order to
avoid tautology. The Applicant relied
specifically on the phrase that the respondents conducted themselves
in a manner that “unfairly
disregarded the interests” of
the Applicant.
17.9 On behalf of von
Sethe it was argued that it is impossible to define each concept
without them overlapping. Counsel also relied
on Australian law
wherein it was found that the concepts must be interpreted as a
composite whole as merely being different aspects
of the essential
criterion i.e. commercial fairness.
Section 163
as now formulated
closely resembles the s241 of the Canadian Business Corporations Act,
RSC 1885, CC-44. Section 163 also resembles
232 of the Australian
Corporations act 2001(Cth). Applying s5(2) of the Act a Court can
thus take cognisance of Canadian and Australian
Company law in
applying and interpreting section 163 and the third respondent’s
reliance on Australian case law is not misplaced.
17.10 I was urged by
counsel on behalf of the Applicant to consider case law on Section
252 with great caution due to the difference
in wording and also the
approach to be adopted in terms of the new Act. It is correct that
the new Act expressly in section 7 has
as one of its purposes to
promote compliance in Company law with the Bill of Rights. The
Applicant thus argued that the new phrase,
“interests”,
coupled with this explicit purpose and application of the Act
rendered reliance on case law pertaining
to s252 of the old Act to be
done with great caution.
17.11 The submission that
the courts would not in company law prior to the new Act have
promoted compliance with the Bill of Rights
is incorrect because in
terms of section 39(2) of the Constitution a court must when
interpreting any legislation promote the spirit,
purport and objects
of the Bill of Rights. Louw v Nel (supra) was decided by the Supreme
Court of Appeal in 2011 and the third
respondent thus can
instructively rely on this matter keeping in mind that it centred on
section 252.
17.12 In the Louw-matter
supra the purpose of section 252 was expressed as follows:
”
[t]he combined
effect of subsections (1) and (3) is to empower the court to make
such order as it thinks fit for the giving of relief,
if it is
satisfied that the affairs of the company are being conducted in a
manner that is unfairly prejudicial to the interests
of a dissenting
minority”[p23][my emphasis].
Although section 163 may
be wider than s252 this quote is equally applicable to the purpose of
section 163. This is so because in
this quote “interests being
unfairly prejudiced” features pertinently as the expressed
purpose in ironically the words
of s163 and not of s252. As the
Applicant is relying specifically thereon I do not find it necessary
to decide whether all the
phrases must be read as a composite whole,
but I do find that interests unfairly prejudiced must result in
commercial unfairness
affecting the Applicant in such capacity.
18.1 It was argued that
the interests pertaining to the fire-breaks and von Sethe’s
acrimony with the neighbours were affecting
the Applicant’s
interests in that the value of the property was being affected. His
interests were also affected in that
he and the respondents did not
have the same vision for the property.
This argument is to be
rejected. There was a fire but not in one of the letters from the
neighbours do they state that it was due
to negligence with the
fire-breaks. The neighbours averring negligence pertaining to the
lack of a firebreak or proper maintenance
of one could have been
expected in lieu of the statement in [CP30] that they in 1998 advised
von Sethe to establish a firebreak
on his side of the farm. However
the neighbours gave as the reason for the fire starting that a fire
was left unattended and the
fire spread due to the extreme strong
winds. The criticism was that the neighbours had to fight the fire as
there was no manpower
or fire-fighting equipment on the portion of
the farm of von Sethe.
Furthermore there are no
facts setting out that the averred acrimony with the neighbours could
and have resulted in affecting the
value of the property; in fact one
neighbour offered to rent some of the property. In terms of the
common cause understanding between
the parties that each party would
maintain at their own cost the fire breaks on each portion there can
be no foundation for the
submission that the Applicant needed to be
consulted and informed pertaining to the firebreaks. There are no
facts set out how
this interest was unfairly prejudiced.
18.2 The parties had the
same vision for the farm, but the property is “blokland”
and this prevented their ideal of
a trophy hunting game farm
realising. Von Sethe did break a lock to a gate, but the relevant
neighbour did not complain that he
was not entitled to access but was
very concerned and upset that he left the gate unlocked with big five
roaming the property.
Access though the neighbouring property was
utilized since the property was bought and even before that. The
Applicant had access
to a public road whereas portion 1 did not have
access. Von Sethe securing access to portion 1 did not result in any
unfair prejudice
to the interests of the Applicant as the owner and
manager of portions 2 and 3 or as shareholder. There is no evidence
of how the
value of the property or Witfontein was affected. These
interests simply did not result in commercial unfair prejudice to the
Applicant’s
shareholding or even his share in the property.
18.3 The fact that
information was given to the deportation authorities about Billy once
again has not resulted in any unfair prejudice.
It is common cause
that Billy was not employed by Witfontein and incorrectly declared so
on a further application for a fire arm.
It was not argued that this
incorrect statement should not have ben corrected but that it should
have been done at another authority
and not the deportation
authority. Even if there was an element of malice on von Sethe and
Schlosser’s behalf in reporting
it to the deportation
authorities the result of the act or omission must be unfairly
prejudicial and not the act. Billy is still
on the farm and the
Applicant is in control of his portions of the farm. This incident
did not result in prejudicial unfairness
to the Applicant. The
averment that the respondents’ intention was in so doing to
evict Billy and take over the Applicant’s
portion of the farm
is a quantum leap with no substance. There was not a single fact to
sustain an eviction and takeover of portions
2 and 3 by the
respondents.
19.1 The high water mark
of the Applicant’s interest relied on is that he had no say in
the affairs of the company whereas
von Sethe did. When Schlosser
acted as Director of Witfontein he only acted on behalf of von Sethe.
The affected interests were
originally set out as a complaint of
disenfranchisement of the Applicant in the management of the company.
It was later conceded
that the shareholders do not manage a company,
but the director. The affected interests where then moulded to the
active involvement
of von Sethe in Witfontein unfairly prejudicing
the Applicant.
19.2 The argument that
Schlosser only acted on behalf of von Sethe is rejected. The only
fact relied on for this submission is that
von Sethe was the majority
shareholder and therefor Schlosser effectively only acted for von
Sethe. This may be the de facto situation
but this averment is
insufficient to sustain unfair prejudice to the interests of the
Applicant because there is not a single further
fact setting out
conduct or a result of such conduct before court. There simply is no
cause of action i.t.o. s163 based on this
argument.
19.3 It was argued that
von Sethe was conducting himself as if he was authorized to act on
behalf of the company. This was because
he wrote a letter on a
letterhead of Witfontein to the neighbours pertaining to access of
the property. He also was not consulted
before von Sethe threatened
to institute legal action pertaining to access to the property. Von
Sethe also had discussions with
a third party regarding a rental
offer; he did not consult with the Applicant or take it to the Board.
19.4 The running of
Witfontein and the shareholding therein can not be seen in isolation.
The agreement between the parties that
each party would run and
maintain their own portions of the property in Witfontein had a role
to play. There was thus by agreement
a difference pertaining to the
management of the company and the management of the portions.
Von Sethe’s
involvement was all relevant to his portion of the property in
keeping with the understanding between the parties.
If von Sethe
accepted the rental offer on his portion the Board would have to
approve it. If he was denied access to his portion
he in terms of the
understanding had the right to address it. The Board had to sanction
any legal action and not a shareholder.
If legal action was to be
taken by Witfontein on behalf of the shareholder whose access was
being denied him then it again centred
round the management of von
Sethe’s portion of the property. These acts, not individually,
not holistically, resulted in
any unfairness to the Applicant. The
Applicant has not suffered any harm or prejudice flowing from one of
these incidents. In terms
of the agreement between them he could not
have expectations to be consulted pertaining to von Sethe’s
portion.
19.5 In keeping with the
objective to construct “unfairly prejudicial” wide and
not to equate it with “oppressive”
the Applicant did not
show that the respondents acted with a result unfairly prejudicial to
the Applicant. The Applicant could
not show that the value of his
shareholding or his portions of the property was diminished. I can
not find that these incidents
complained of infringed upon his
entrenched rights in the Bill of Rights, not his right to information
neither his dignity. Mere
dissatisfaction with or disapproval of the
conduct of the respondents did not render their acts unfairly
prejudicial to the Applicant.
There was no unreasonable or
unethical conduct rendering the acts or omissions unfair.
Even in constructing
unfairness very widely using as guide all the factors set out in the
following; ”..fairness is a matter
of balancing the interests
of all involved in the light of the history and structure of the
company and in terms of the policies
underlying the section and the
Act, the duties of the directors, the rights and duties of a majority
shareholder in relation to
a minority shareholder, and the agreements
or understanding outside the articles which may give rise to
legitimate expectations
in the conduct and interest of the
stakeholders.” [–Blackman MS,Jooste RD and Everingham GK;
Commentary on the
Companies Act (2002
) (2) p9-26] I can not find that
the acts or omissions of the respondents resulted in unfairly
prejudicing the interests of the
Applicant.
20 Accordingly the
application on these facts is dismissed.
21.1 The Applicant argued
that due to the factual dispute on the papers pertaining to the other
affected interests relied on for
relief the matter must be referred
to trial in terms of section 163(2)(l) of the Act.
21.2 The respondent
argued that the Applicant in fact abandoned his cause of action as
set out in the founding affidavit and then
“hoisted his petard”
to the answering affidavit of the Third Respondent and that the court
should in following Administrator,
Transvaal v Theletsane 1991(2) SA
192 (A) 196H-I reject the grasping at straws of the Applicant and
dismiss the application. The
Applicant changed tack from his
entitlement to become a shareholder and co-director of the company to
incidents that were de minimus.
The Applicant should have foreseen a
factual dispute pertaining to his shareholding and role in the
company and should have not
proceeded by way of application.
21.3 The Applicant argued
in reply that the legislature intended that an Applicant applying for
relief in terms of Sect 163(1) of
the Act must institute motion
proceedings [“may apply”]. Therefor an Applicant could
not be penalised in that an Applicant
should have anticipated
conflicts of fact which could only be resolved by referral to oral
evidence. This is so because section
163(2)(l) authorises a court to
grant “an order for the trial of any issue as determined by the
court.” The Applicant
persisted that the undisputed facts
relied on where in the founding affidavit and the Applicant is
seeking the same relief. The
third respondent’s reliance on the
Theletsane-matter was misplaced because it could not be argued that
no trace of a case
was set out in the Applicant’s affidavit.
The answering affidavit did not deal equivocally with any facts and
there was no
prejudice to the third respondent. The matter at hand
was a matter that could be distinguished from the Theletsane-matter
as it
was in the matters of South Pensinsula Municipality v Evans &
Others 2001(1) SA 272 (C) at 291 B-E, Sokhela v MEC for Agriculture

(KZN) 2010(5) 574 (KZN) at 601 G-602C and Sea Front for ALL v MEC,
Environmental Planning 2011(3) SA 55 (WCC) at 68 I-69 A.
21.4 The Applicant was at
the hearing of the matter asking for relief on facts that on no
reading of the founding affidavit was
the main or primary facts. The
relief and its many alternatives sought were also amended
extensively. I need not address the facts
and relief sought in terms
of a quasi-partnership because the Applicant did not proceed on this
basis. The alternative relief sought
for compensation to be paid to
the Applicant was no longer pursued. The alternative relief no longer
pursued was that of a complete
restructuring of the contractual and
corporate relationship between the Applicant and the third
respondent. The rectification of
the loan account is also not
pursued. The original outcome sought by the Applicant was that he
would in his own name hold the two
properties as well as the R2.1
million that he originally paid and effectively that the equivalent
book value of the two properties
was to be reflected in the rectified
loan account and written off. All of this was to be done on the
respondents’ costs.
There is thus substance
in the argument that upon receiving the opposing affidavit the
Applicant changed his stance on what factual
basis he is relying for
immediate relief and in fact the original unreasonable relief sought
was amended.
The facts relied on for
relief as set out in paragraphs 17.4-17.7 supra were however set out
in the founding affidavit. The main
relief i.e. the setting aside of
the transaction and agreement in terms of which Witfontein purchased
Portions 2 and 3, ordering
the transfer to the Applicant of such
property by the First Respondent, and that the Applicant’s loan
account in the first
Respondent be written off was also sought in the
original notice of motion. Although I agree that they changed tack as
to on what
facts they were relying in their affidavit substantiated
by the affidavit of the third respondent I can not find that the
Applicant’s
case in fact was argued only on the respondent’s
affidavits for relief as was done in the Theletsane-matter supra.
The facts
relied on now may be incidental but they were in the
founding affidavit.
22.1 The question remains
whether the averred factual dispute must be referred to oral evidence
in terms of s163(2)(l). On behalf
of von Sethe it was argued that
referring the matter to trial will serve no purpose. The reason for
this is that the main jurisdictional
fact of the Applicant was that
he was to receive Schlosser’s 1% shareholding in Witfontein
when Schlosser retired rendering
him equal shareholding. This fact
was destroyed by the objective evidence as set out by the affidavits
and annexures of von Sethe.
This argument was also fuelled by the
argument in par 19 supra, i.e. the Applicant had to change tack to
pull the application through
because he could no longer rely on this
fact.
22.2 The fact that s163
authorises a court to refer any issue to trial does not negate the
principle that it will only refer a matter
if there is indeed a bona
fide factual dispute. Where final relief is sought on application an
Applicant will only be successful
if the undisputed facts together
with the facts contained in the respondents affidavit affords him the
relief applied for; Plascon
Evans Ltd v Van Riebeeck Paints (Pty) Ltd
[1984] ZASCA 51
;
1984 (3) SA 623
(A) at 634E-635C and Wightman t/a JW Construction v
Headfour (Pty) Ltd And Another
[2008] ZASCA 6
;
2008 (3) SA 371(SCA)
22.3 The Applicant is
very vague in his affidavit pertaining to the oral agreement that was
concluded on which his original cause
of action was wholly reliant.
He initially stated that the agreement was concluded between himself,
Schlosser and von Sethe. In
reply he conceded that Schlosser was not
a party to the oral agreement. He stated that he was misled by von
Sethe informing him
that as a foreigner he would struggle to buy
property and that he should use the company as a vehicle. On his own
version he however
as far back as 1999 offered to buy the
neighbouring property in his own name; he did not aver that he then
attempted to buy the
property through the company. He also did not
disclose when the oral agreement was concluded but it would seem that
it was only
concluded before the Applicant bought the property in
2003. The respondent’s version must be accepted that Witfontein
was
not a shelf company used as vehicle to purchase portion 1 ;i.e.
Witfontein was specifically incorporated to purchase portion 1.
The
Applicant contradicted his own version that von Sethe informed him
that as “ a foreigner without permanent residency
would find it
very difficult to buy property he had to do it through the company”.
[p9 par 10]
On p588 par 22.7 he
stated as follows:
“
I in fact believed
that I was buying the farm and thereafter bringing it into
Witfontein.”
This contradicts his own
version that as a foreigner he would not be able to buy property in
his own name. In a letter from his
own attorney the reason why it was
suggested to buy it through the company is set out as:
“
The proposal is
made to him instead of buying the game farm in his own name he should
also buy it through the company of the fist
friend, his neighbour.
(f) He is made to
understand that to buy, the game farm on his own name would be much
more costly and it would be much more to his
benefit to buy his farm
also through the company of the neighbour.”
The fact that this letter
was written after the transaction was concluded does not render it
irrelevant; it just gave another reason
as to why the transaction was
structured the why it was. The version that he was misled that he
could only buy the property through
the company is contradicted on
his own version and is on the papers untenable.
22.4 The crux of the
Applicant’s application is that he would only have bought the
property if he was a 50% shareholder and
he expected to become that
in terms of the oral agreement. In the founding affidavit he set out
that they initially agreed that
he would buy the neighbouring
property and would acquire 49% of the shareholding of the company.
“The express agreement was
that when the Third Respondent
retired, his 1% [one percent] shareholding would be transferred to me
free of charge after which
the Third respondent and I would be equal
shareholders of the First Respondent”[p9 par11]. The court is
never enlightened
as to why there is reference to “the initial
agreement” featured because there is no mention of a further
agreement.
The reference to the third respondent is obviously wrong
and is in fact a reference to Schlosser. Only in the replying
affidavit
did the Applicant clarify the oral agreement as that he
would become a 50% shareholder when Schlosser “retired as a
director
or shareholder’ [par 22.9 of the replying affidavit].
The argument on behalf of von Sethe that the agreement was set out so

vaguely that it should be rejected has merit. This is so because the
generalised facts set out by Applicant were contradicted with
the
respondent’s facts setting out chapter and verse rendering the
Applicant’s version untenable. What would happen
if Schlosser
never retired, would the Applicant then never become a 50%
shareholder? What if he retired as a shareholder but not
as a
director or visa versa? What would happen if Schlosser died and it
fell within his estate? If he was adamant that he would
only have
given ownership of the property on condition that he become a 50%
shareholder one would assume that the oral agreement
would have been
concluded with Schlosser as the shareholder who had to transfer his
shares, which the Applicant conceded it was
not. The Applicant, an
experienced businessman and lawyer, would not have concluded such a
vague agreement, even with old acquaintances.
The lacuna in his
affidavit with the undisputed facts the respondents put up in defence
render his version palpably implausible.
22.5 The objective facts
show that Schlosser never had 1% shareholding, but only 1 share. It
could thus never have been the understanding
that the transfer of the
1 share would result in the Applicant having 50% shareholding in the
company. Even if the Applicant was
misinformed the companies records
cleared showed this and yet the Applicant for 5 years took no steps
to protest or request rectification
of the records. His reply that he
did not act when he noticed this situation in correspondence was
because he “considered
at that time that this was a mere cost
division between the Third Respondent and I, as the Second Respondent
was still acting as
director” [par 47.2 of replying affidavit].
In an e-mail from the Applicant to Schlosser dated 26 July 2005 the
Applicant
advised Schlosser “to share the operation expenses in
proportion to the shareholding (Von Sethe 51%;Pilati 49%).” The

costs thus clearly relate to the shareholding in the company.
22.6 Furthermore on one
of his versions the shareholding would be 49% until Schlosser retired
as shareholder or director. Schlosser
obviously was not a shareholder
anymore but “was still acting as a director” [par 47.2]
The question then is on what
basis the Applicant claimed 1%
shareholding if Schlosser was still acting as a director, which he
still is, that rendered on his
version a fair splitting of costs in
49%-51%.
22.7 The Applicant did
not when, on Schlosser’s initiative, he is sent the
shareholders agreement take the opportunity to
set the matter
straight. The Applicant averred he did makes notes on the agreement
but did not disclose to the court what notes
he made on the agreement
and is completely silent on the fact that this agreement in 2006
still reflected the shareholding as 49%
for him and 51% for von
Sethe.
22.8 In the Applicant’s
replying affidavit he proffered another reason why he never would
have consented to a minority shareholding:
“
I would not
readily have agreed to take a minority shareholding if I had not been
brought under the false impression that I could
not originally take
an equal or majority shareholding in a South African company”
[par 28 of the replying affidavit]
This is now a further and
new representation in the replying affidavit denying the respondents
an opportunity to respond thereto.
This averment contradicted his own
version that he willingly took up a minority shareholding with a
promise to become an equal
shareholder. The Applicant’s version
is untenable.
22.9 I can not find that
there is a bona fide dispute or that this issue must be referred to
trial.
23.1 All the secondary
issues raised relate to the averred oral agreement and his minority
shareholding. His further complaints
were that his loan account in
the books of Witfontein did not reflect the debt due for the
improvement of the property nor his
investment in buying the
properties. He was unfairly prejudiced that no proper shareholders
meeting were held and when arranged
it was held at a place and time
inconvenient for him. He did not receive a return on his investment
in the company and he did not
have equal management rights in the
company. All of this led to acrimony between the parties and the
court must step in.
23.2 There was no
acrimony between the parties from 2003-2008. The first time the
Applicant raised any alleged unfair prejudice
in writing was in April
2009. This was after he on 18 January 2008 sent an e-mail to
Schlosser with the tenure that he wanted
to realise his investment in
Witfontein and take his money out of South Africa. The e-mail is
silent about any entitlement to his
other 1% shareholding and what
would happen to that. The acrimony only commenced when the Applicant
wanted to separate himself
from the properties and Witfontein. The
acrimony did not result from any act or omission by the company that
unfairly prejudiced
the Applicant in his capacity as a shareholder or
in his capacity as the manager of portions 2 and 3.
23.3 For many years there
was no complaint about shareholders meetings. In the founding
affidavit the averment was simply that the
meetings were not held
until he complained. On the one hand there is the complaint that no
meetings were held but on the other
hand he avers that it was
difficult for him to attend them because he was often not in South
Africa. Paterson in his affidavit
set out that there were informal
meetings held and Schlosser confirmed that not once was there a
majority decision that affected
the Applicant in any way, let alone
unfairly. The Applicant could not show a result that unfairly
prejudiced his interests flowing
from these informal meetings or
meetings not held.
23.4 It is common cause
that the Applicant did not sign a loan account certificate. In the
application he did not set out a single
figure as to what his loan
account should be. For many years he did not once complain about the
audited reports. Only in reply
did he refer to one letter dated 7
December 2005 wherein he stated the following:
”
I invested
locally-taxed money into the house of the farm-invoices and copies
enclosed- and also machinery and equipment (e.g. a4x4)
for the farm.
I am going to ask Mr von Sethe if he agrees that we put this in the
balance sheet and will tell you about it”
[PR7].
He did not set out what
von Sethe’s reaction was to his request to put it in the
balance sheet, or that von Sethe unreasonably
refused to do so, or
that he approached Schlosser and that he refused to entertain the
figures. Once again the Applicant was confronted
with a new fact in
reply. The court is not informed what action the Applicant took from
the date of this letter to secure the amounts
reflected in the loan
account or balance sheets and how this was unfairly refused. This is
another grasping at straws.
24 The Applicant did not
on the facts set out a cause of action for relief in terms of s163
nor that in terms of s163(2)(l) the
matter must be referred to trial.
25.1 There is now
acrimony between the Applicant and von Sethe and the question is
whether the court must attempt to order fair
relief separating the
parties. In terms of section 163(2) the Court has wide powers and the
Court is at large to fashion an appropriate
remedy. The purpose of
section 163 is however set out supra as ” [t]he combined effect
of subsections (1) and (3) is to empower
the court to make such order
as it thinks fit for the giving of relief, if it is satisfied that
the affairs of the company are
being conducted in a manner that is
unfairly prejudicial to the interests of a dissenting
minority”[p23][my emphasis].
15.2 I am not satisfied
that the affairs of the company were conducted in a manner that was
unfairly prejudicial to the interests
of the Applicant. In the
Louw-matter supra in paragraph [23] the following was found:
“
Thus, the court’s
jurisdiction to make an order does not arise until the specified
statutory criteria have been satisfied.”
25.3 Accordingly I can
make no order because the criteria were not satisfied.
26.1 On behalf of von
Sethe a punitive cost order was prayed for. It was argued that the
Applicant did not disclose material facts
to the court and did not
play open cards with the court. The Applicant made untruthful and
misleading statements and had to change
tack demonstrating the
vexatious and reckless nature of the application.
26.2 The Applicant argued
that this application was novel in that no case law has been reported
on section 163 and some lee-way
must be allowed.
26.3 The application was
certainly novel, in more than one way, but special circumstances must
exist before a court grants a punitive
cost order. The Applicant did
change tack and did in the founding affidavit set out bald and vague
facts. However the specified
criteria of section 163 were open to
debate, i.e. whether a result must flow from the conduct and how the
criteria were to be interpreted.
Dependant on the interpretation the
Applicant may have been successful. Under these circumstances I am
inclined not to grant a
punitive cost order.
27 I accordingly make the
following order:
27.1 The application is
dismissed with costs, costs to include the costs of two counsel to
the extent that two counsel were employed.
__________________
S. POTTERILL
JUDGE OF THE HIGH
COURT
CASE NO: 168803A/2011
HEARD ON: 13 November
2012
FOR THE APPLICANT:
ADV. J.P. VORSTER SC
ADV. J.R.
MINNAAR
INSTRUCTED BY:
Leistner Attorneys
FOR THE THIRD
RESPONDENT: ADV. M.M. OOSTUIZEN SC
INSTRUCTED BY: MP van
Staden Attorneys
DATE OF JUDGMENT: 1
February 2013