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[2013] ZAFSHC 108
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Knipe and Others v Kameelhoek (Pty) Ltd and Another, Knipe and Others v Schaapplaats 978 (Pty) Ltd and Another (1936 /2011, 1937/2011) [2013] ZAFSHC 108; 2014 (1) SA 52 (FB) (27 June 2013)
FREE STATE HIGH
COURT, BLOEMFONTEIN
REPUBLIC OF SOUTH
AFRICA
Case No.: 1936 /2011
In
the matter between:-
KNIPE, MOIRA
ELIZABETH
................................................
1
st
Applicant
KNIPE, MOIRA
ELIZABETH N.O.
......................................
2
nd
Applicant
KNIPE, MOIRA
ELIZABETH N.O.
.............................
3
rd
– 8
th
Applicants
KNIPE, MOIRA
ELIZABETH N.O.
..............................
9
th
13
th
Applicants
LOTZ, CAROL JESSIE
KATHLEEN
.................................
14
th
Applicant
LOTZ, JOHN-D KNIPE
......................................................
15
th
Applicant
LOTZ, ANDRé
GUILLUAME KNIPE
.................................
16
th
Applicant
LOTZ, MOIRA ELICIA
KRYSTAL
.....................................
17
th
Applicant
On
behalf of
LOTZ, LINDSAY RICHELLE
.........................
18
th
Applicant
and
KAMEELHOEK (PTY)
LTD
.............................................
1
st
Respondent
THE
MASTER OF THE FREE STATE
HIGH
COURT
..................................................................
2
nd
Respondent
Case No.: 1937/2011
In
the matter between:-
KNIPE, MOIRA
ELIZABETH
.
...............................................
1
st
Applicant
KNIPE, MOIRA
ELIZABETH N.O.
......................................
2
nd
Applicant
KNIPE, MOIRA
ELIZABETH N.O.
.............................
3
rd
– 8
th
Applicants
KNIPE, MOIRA
ELIZABETH N.O.
..............................
9
th
13
th
Applicants
LOTZ, CAROL JESSIE
KATHLEEN
.................................
14
th
Applicant
LOTZ, JOHN-D KNIPE
......................................................
15
th
Applicant
LOTZ, ANDRé
GUILLUAME KNIPE
.................................
16
th
Applicant
LOTZ, MOIRA ELICIA
KRYSTAL
.....................................
17
th
Applicant
On
behalf of
LOTZ, LINDSAY RICHELLE
.........................
18
th
Applicant
and
SCHAAPPLAATS 978
(PTY) LTD
..................................
1
st
Respondent
THE
MASTER OF THE FREE STATE
HIGH
COURT
..................................................................
2
nd
Respondent
_____________________________________________________
HEARD ON:
23 MAY 2013
_____________________________________________________
JUDGMENT BY:
DAFFUE, J
_____________________________________________________
DELIVERED ON:
27 JUNE 2013
_____________________________________________________
I
INTRODUCTION
[1] This is the extended
return date of rules
nisi
issued in two applications in terms
whereof the companies, Kameelhoek (Pty) Ltd and Schaapplaats 978
(Pty) Ltd, were placed under
provisional liquidation in the hands of
the Master by the Full Bench of the Free State High Court.
II
BACKGROUND TO
THE LITIGATION IN THIS COURT
[2] Moira Elizabeth Knipe
(“Mrs Knipe”) and others, including her daughter Carol
Jessie Kathleen Lotz (“Carol”)
launched two separate
applications under numbers 1936/2011 and 1937/2011 for provisional
liquidation of the companies Kameelhoek
(Pty) Ltd and Schaapplaats
978 (Pty) Ltd respectively, which were by agreement simultaneously
argued before Jordaan J who dismissed
both applications with costs.
However leave to appeal was granted to the Full Bench.
[3] On 23 July 2012 both
appeals were heard by the Full Bench and in terms of its judgment of
30 August 2012 the appeals succeeded
with costs. The orders of the
court
a quo
were set aside and provisional winding-up orders
were granted against both companies with return date 11 October 2012.
When the
Full Bench heard the appeals the application papers in each
application totalled in number just over seven hundred pages. The
paper
war continued hereafter and the papers increased in each
application to approximately two thousand pages. In this process the
rules
nisi
were extended several times.
[4] Pursuant to the
granting of winding-up orders Jacqueline Moira Deborah Vigne
(“Jackie”), a daughter of Mrs Knipe,
brought an
application seeking leave to be joined in the applications and to
file answering affidavits in opposition of the granting
of final
relief. These applications were strictly speaking not necessary as
she as a shareholder in both companies is an interested
party and all
interested parties were called upon by the Full Bench to show cause,
if any, why final orders of winding-up should
not be granted. She
therefore had a right to advance reasons which she made use of. Her
affidavit consists of sixty six pages and
the annexures thereto
ninety three pages. Her brother Johnny, supported by the other
brother, André, also advanced reasons
why final orders of
winding-up should not be granted. His affidavit consists of sixty one
pages and the annexures thereto about
four hundred and sixty pages.
[5] Mrs Knipe replied to
the affidavits of Johnny and Jackie in a eighty page affidavit and
the annexures thereto are in excess
of eighty pages.
[6] Robert Petrus Jansen
(“Pieter”) brought an application to intervene in the
proceedings. He is the fifth child of
Mrs Knipe, the other four
having been referred to above, being Carol, Jackie, André and
Johnny. The companies opposed this
joinder application and both their
attorney and André filed affidavits, relying on several
further annexures.
[7] Further affidavits
were filed by various parties and accepted by agreement. I shall
later herein refer thereto. The papers are
voluminous and as
mentioned contain various sets of affidavits and annexures. Different
issues arise, some vital, but the majority
merely peripheral. As will
be shown later these proceedings, formidable as they are, are but a
skirmish in a full-blown campaign
– a family war – being
fought on several fronts. The
dramatis personae
are Mrs Knipe,
an eighty one year old widow and mother of the abovementioned five
children, and the five children. Mrs Knipe and
Carol are in the same
camp, whilst Jackie, André and Johnny are on the other side.
Pieter is apparently fighting his own
battle. Mrs Knipe will be
referred to herein as such and the children will be referred to,
without any disrespect to them, by their
names.
III
FACTUAL
BACKGROUND LEADING TO THE PRESENT APPLICATIONS
[8] Mrs Knipe’s
husband, Henry Bazzet Louis John Knipe, (“the deceased”)
passed away on 28 June 2007. At the time
of his death he had
accumulated a considerable estate,
inter alia
consisting of
interests in various entities. For purposes hereof the relevant
entities are the two companies (Kameelhoek and Schaapplaats),
of
which he was the sole director, which companies own the farms
Kameelhoek and Langeberg respectively. These two farms are adjacent
to each other and are, for all intents and purposes, one farm. They
are 9597.6323 hectares in extent and worth approximately R60 million.
At the time of the death of the deceased the shares in the companies
were held by family trusts of which he and Mrs Knipe were
the
trustees and their five children were beneficiaries of the trusts.
[9] On 15 April 2008 Mrs
Knipe and her five children and their legal representatives met at
the offices of attorneys Duncan and
Rothman in Kimberley where they
reached certain agreements
inter alia
also pertaining to the
farms Kameelhoek and Langeberg. The terms of the agreements were
recorded in writing by Mr Venter of Duncan
and Rothman in a letter
dated 25 April 2008 addressed to all role players. Paragraphs 2 and 9
under the heading “Kameelhoek
and Langeberg” read as
follows:
“
2. Elkeen
van die begunstigdes naamlik Carol Lotz, André Knipe, Johnny
Knipe, Peter Knipe en Jackie Vigne sal op aanvraag
die koste van die
waardasie aan Duncan & Rothman betaal.
9. Indien die eiendom verkoop word sal
elkeen van die begunstigdes se aandeel en/of belang aan hulle
uitbetaal word en die trust
ontbind word.”
It
was agreed that a valuation of the farms would be obtained to allow
André and any other beneficiary to put in an offer
to purchase
the shares/interest of the others at market value. In the event of no
offer being made or the offeror failing to obtain
a 100% loan by 30
September 2008, the farms would be sold and for that purpose it was
agreed that Auction Alliance auctioneers
of Bloemfontein would be
instructed to do so by private treaty.
Nowhere in this letter is
an indication that the beneficiaries – the five Knipe children
- would not share in the proceeds
of the farms in equal shares.
Furthermore Mrs Knipe, who was appointed as executrix in the estate
of the deceased, and on or about
18 November 2008 appointed as sole
director of the companies and who was the sole remaining trustee of
the trusts that held the
shares in die companies, resolved on 21
August 2009 to dissolve the trusts and instructed an attorney to
transfer the shares in
both companies in equal proportions to her
five children. Such transfer was registered on or about 1 October
2009. When the matter
was heard by the Full Bench appellants’
counsel accepted that the appeal should be decided on the basis that
each of the
five Knipe children held 20% of the shareholding in each
of the companies.
[10] On a shareholders’
meeting of the companies held on 27 August 2010, the legality of
which is in dispute, Mrs Knipe was
removed as director of the
companies and André, Johnny and Jackie were appointed as
directors thereof and they subsequently
took control of the
companies.
[11] Several High Court
applications have been launched in the Northern Cape High Court, some
of which are still pending and I refer
to the following:
11.1. Application no
1568/2007 for the removal of Mrs Knipe as executrix of the deceased
estate and trustee of the various trusts
– the issue of her
removal as executrix is still pending;
11.2. Application no
1132/2008 by Pieter in order to compel Mrs Knipe to comply with her
statutory duties as executrix;
11.3. Application no
1968/2010 wherein a declaratory order was sought by Mrs Knipe
pertaining to the transfer of shares and the
appointment of new
directors of the companies – the matter is pending;
11.4. Application
276/2011 pertaining to spoliatory and interim interdictory relief
sought by Carol;
11.5. Application no
304/2011 is an application by Carol seeking urgent spoliatory and
other interim relief; and
11.6. The failed
application for winding-up of the two companies in one application.
[12] It is apparent that
members of the Knipe family are at logger heads with each other and
that a family feud of tremendous proportions
exists which will not be
terminated whether or not final orders are granted herein. The Full
Bench referred to the admission of
Mrs Knipe’s averment that
the family is “… extremely dysfunctional” as
illustrated by “…
family feuds, disagreements, fights,
disputes and litigation”. The companies’ counsel
submitted that there are wide
ranging and bitter disputes between the
members of the Knipe family of a magnitude seldom seen. It is also
common cause that prior
to the provisional winding-up order, André,
Johnny and Jackie managed the affairs of the companies to the
exclusion of Carol
and Pieter and to be able to do so, they had to
remove the sole director, Mrs Knipe, and the one person who as
trustee of the various
trusts dissolved those trusts and allocated
the shares to her five children in equal proportions. No meaningful
dialogue between
the parties is possible. They cannot approach any
issue with open minds and in good faith. The children want to harvest
the wealth
which has been created by their late father with the
financial and other support of Mrs Knipe. Accusations of greed are
rife.
[13] The Full Bench found
that it had been proven on a balance of probabilities that, at the
stage when the deceased passed away,
the cattle and game on the two
farms did not belong to the companies. It is unnecessary for purposes
hereof to reconsider this
issue again, save to state that this
remains a bone of contention. No new evidence was put forward to
challenge the finding of
the Full Bench. Another bone of contention
is Carol’s alleged hunting rights on the farms. This was also
dealt with by the
Full Bench and it is not necessary to deal
extensively with this aspect again, save to consider the further
allegations made in
particular by Johnny in this regard in his
reasons why final relief should not be granted.
[14] Jordaan J’s
finding that there were serious disputes, discord and lack of trust
between at least some of the shareholders
of the companies and that
they were unable to work together were not contested before the Full
Bench and consequently the Full
Bench, which accepted this approach,
merely considered whether the situation was wrongfully caused by
Carol. The Full Bench eventually
found as follows in para [23]:
“
Whilst I am
sure that Carol is as much to blame as any of her siblings for the
absence of a personal relationship of trust and confidence
between
them, I am satisfied that she is not wrongfully responsible for the
situation that she relies on for winding-up.”
Provisional winding-up
orders were therefore granted on the ground that it was just and
equitable that the companies be liquidated.
It is reiterated that the
Full Bench agreed with the court
a quo
’s conclusion that
the applicants, either on their own showing are not creditors of the
companies, or that their claims were
disputed on
bona fide
and
reasonable grounds. The Full Bench approached the matter on the basis
that Carol was a shareholder of the companies and that
she had
locus
standi
in that capacity to seek orders based on the ground that
it is just and equitable to wind-up the companies.
IV
FACTS NOT IN
DISPUTE
[15] The following facts
are not in dispute:
15.1. The companies own
the farms Kameelhoek and Langeberg in the district of Kimberley
respectively, as set out in paragraph [8],
supra
. These farms
are regarded by all and sundry as one farming unit.
15.2. The deceased
created family trusts which were allocated shares in both companies
in equal proportions.
15.3. The deceased and
Mrs Knipe were the only trustees in respect of all these trusts. When
the deceased passed away, Mrs Knipe
became the sole trustee.
15.4. The family trusts
were created for the benefit of the five children and they were equal
beneficiaries of the trusts.
15.5. On 15 April 2008 It
was accepted that by all and sundry that the five children of the
deceased and Mrs Knipe would equally
share in the proceeds of the two
farms, whether or not André or one or more of the children
bought the shares/interests
of his, her or their siblings, or in the
event of a private treaty to a third party on the basis as
anticipated.
15.6. Mrs Knipe, in her
capacity as sole trustee, terminated all the trusts and thereafter
transferred the shares in the two companies
to the five children in
equal proportions and this equal allocation was accepted by all. It
must be mentioned at this stage that
it turned out that prior to the
filing of André’s answering affidavit dated 11 May 2011
the three newly appointed
directors obtained so-called evidence that
André and Johnny are each entitled to 42% shareholding in each
company and Carol
and Jackie 8% each. These “facts” were
suppressed from the court
a quo
and the Full Bench. This is
now their case notwithstanding their earlier acceptance of an equal
shareholding.
15.7. The members of the
Knipe family are engaged in a serious family feud and it is not
possible for André, Johnny, Jackie,
Pieter and Carol to work
together.
V
ISSUES IN DISPUTE
[16] Numerous issues are
in dispute in these application papers, consisting of approximately
two thousand pages each. However the
essential aspects on which Carol
was required to convince this court regarding the question whether a
final winding-up order should
be granted on the just and equitable
ground can be reduced to the following:
16.1. Whether Carol is
the cause, if not the sole cause, of the lack of trust and confidence
amongst the shareholders of the companies.
16.2. Whether the
companies are domestic companies akin to partnerships in order to
qualify for winding-up on the basis of just
and equity.
16.3. Whether winding-up
is the solution, bearing in mind an alternative remedy such as
inter
alia
contained in section 163 of the Companies Act 71 of 2008
(“the Act”).
VI
APPLICABLE LAW
[17] Aspects to be
considered are:
17.1. the issue of
factual disputes in application procedure and the law concerning
that;
17.2. the just and equity
ground relating to winding-up of companies and especially whether a
“guilty” party should
be granted relief in such
circumstances;
17.3. whether the option
of relief in terms of section 163 of the Act is viable
in casu
;
and finally
17.4. what the approach
to the application of the intervening applicant (Pieter) should be.
A.
Factual Disputes
and Application Procedure
[18]
Carol seeks final relief and in the circumstances the well-known test
enunciated by Corbett JA in
Plascon-Evans Paints Ltd v
Van Riebeeck Paints (Pty) Ltd
[1984] ZASCA 51
;
1984 (3) SA 623
(A) at 634 –
635C is of application and I quote the following:
“
Secondly,
the affidavits reveal certain disputes of fact. The appellant
nevertheless sought a final interdict, together with
ancillary
relief, on the papers and without resort to oral evidence. In such a
case the general rule was stated by VAN WYK J (with
whom DE VILLIERS
JP and ROSENOW J concurred) in
Stellenbosch
Farmers' Winery Ltd v Stellenvale Winery (Pty) Ltd
1957
(4) SA 234
(C)
at
235E - G, to be:
‘
...
where there is a dispute as to the facts a final interdict
should only be granted in notice of motion proceedings if the
facts
as stated by the respondents together with the admitted facts in the
applicant's affidavits justify such an order... Where
it is clear
that facts, though not formally admitted, cannot be denied, they must
be regarded as admitted.’
This rule has been
referred to several times by this Court (see
Burnkloof
Caterers (Pty) Ltd v Horseshoe Caterers (Green Point)(Pty) Ltd
1976
(2) SA 930 (A)
at
938A - B;
Tamarillo
(Pty) Ltd v B N Aitkin (Pty) Ltd
1982
(1) SA 398
(A)
at
430 - 1;
Associated
South African Bakeries (Pty) Ltd v Oryx & Vereinigte Bäckereien
(Pty) Ltd en Andere
1982
(3) SA 893 (A)
at
923G - 924D). It seems to me, however, that this formulation of
the general rule, and particularly the second sentence thereof,
requires some clarification and, perhaps, qualification. It is
correct that, where in proceedings on notice of motion disputes
of
fact have arisen on the affidavits, a final order, whether it be an
interdict or some other form of relief, may be granted if
those facts
averred in the applicant's affidavits which have been admitted by the
respondent, together with the facts alleged
by the respondent,
justify such an order. The power of the Court to give such final
relief on the papers before it is, however,
not confined to such a
situation. In certain instances the denial by respondent of a fact
alleged by the applicant may not be such
as to raise a real, genuine
or
bona
fide
dispute
of fact (see in this regard
Room
Hire Co (Pty) Ltd v Jeppe Street Mansions (Pty) Ltd
1949
(3) SA 1155
(T)
at
1163 - 5;
Da
Mata v Otto NO
1972
(3) SA 858
(A) at 882D - H). If in such a case the respondent has
not availed himself of his right to apply for the deponents
concerned
to be called for cross-examination under Rule 6 (5)
(g)
of the
Uniform Rules of Court (
cf
Petersen v Cuthbert & Co Ltd
1945 AD 420
at 428;
Room
Hire
case
supra
at 1164) and
the Court is satisfied as to the inherent credibility of the
applicant's factual averment, it may proceed on the basis
of the
correctness thereof and include this fact among those upon which
it determines whether the applicant is entitled to
the final relief
which he seeks (see eg
Rikhoto
v East Rand Administration Board and Another
1983
(4) SA 278 (W)
at
283E - H). Moreover, there may be exceptions to this general rule,
as, for example, where the allegations or denials of the respondent
are so far-fetched or clearly untenable that the Court is justified
in rejecting them merely on the papers…”
[19] In motion
proceedings the parties thereto may at the hearing of the application
request that the matter be referred for oral
evidence in order to
provide for the proper adjudication of certain specified factual
disputes. Normally the applicant is the party
who seeks such relief.
However in
Kalil v Decotex (Pty) Ltd and Another
1988
(1) SA 943
(AD) at 979B – E the court found that in a proper
case the court should acceed to the request of a respondent to
present
oral evidence on disputed issues. This should be so in
particular at the stage when a final winding-up order is to be
considered.
[20] Courts are generally
reluctant in motion proceedings to decide disputes of fact solely on
probabilities disclosed in contradictory
affidavits in disregard of
the additional advantages of
viva voce
evidence. See
Trust
Bank van Afrika Bpk v Western Bank Bpk en Andere NNO
1978 (4)
SA 281
(AD) at 294D – 295A and 299H – 300A. It is
accepted that this is particularly apposite in winding-up
applications where
the consequences of final orders are drastic
indeed. Although serious disputes of fact may be found to exist the
issue in adjudicating
an application is whether the essential aspects
on which the applicant is required to convince the court in order to
obtain the
required relief, are in dispute and whether it is possible
to resolve that dispute on the papers. As indicated
supra
the
test is where there is a dispute as to the facts a final order should
only be granted in motion proceedings if the facts stated
by the
respondent together with the admitted facts in applicant’s
affidavit justify such an order, unless it is found that
the
allegations or denials of the respondent are so farfetched or clearly
untenable that the court is justified in rejecting them
merely on the
papers.
[21] The onus rests upon
Carol in seeking a final winding-up order to satisfy the court on a
balance of probabilities that it is
indeed just and equitable finally
to liquidate the companies. The degree of proof is higher than that
for the grant of a provisional
order insofar as a mere
prima facie
case needs to be established to obtain provisional winding-up. See
Kalil v Decotex (Pty) Ltd and Another
,
supra
at
979B – E;
Paarwater v South Sahara Investments (Pty) Ltd
[2005] 4 ALL SA 185
(SCA) at para [3] p 186.
B.
Just and
Equitable
[22] In
Rand Air
(Pty) Ltd v Ray Bester Investments (Pty) Ltd
1985 (2) SA 345
(W) at p 350 the court considered the just and equity ground to be
falling into five broad categories, to wit:
(i) disappearance of the
company’s
substratum
;
(ii) illegality of the
objects of the company and fraud committed in connection therewith;
(iii) deadlock in the
management of the company’s affairs;
(iv) grounds analogous to
those for the dissolution of partnerships;
(v) oppresion.
These categories do not
constitute any kind of
numerus clausus
and it is open to the
courts to devise other categories, if so required. Only the fourth
and fifth categories may be found to be
applicable
in casu
and
consequently the case law referred to herein will focus on these
issues.
[23]
Before dealing with applicable case law it is apposite to state that
on the accepted evidence, the companies are solvent. That
being the
case, their winding-up should be considered in accordance with the
provisions of s 81(1)(d) of the Act and not in accordance
with s
344(h) of the Companies Act, 61 of 1973 (the 1973 Act). Having said
this, the approach in considering whether it is just
and equitable to
wind-up a company in terms of the Act is in essence not any different
to what it is (or was) in accordance with
the 1973 Act which still
applies to the winding-up of companies which are not solvent. The
legal basis for winding-up remains the
same. See
Budge
and others NNO v Midnight Storm Investments 256 (Pty) Ltd and another
2012 (2) SA 28
(GSJ) at paras [5] to [12]. The
only possible change in attitude might be the fact that there is a
greater emphasis in the Act
to the rescuing of companies than in
terms of the 1973 Act.
[24] A
domestic company, or quasi partnership, or a company akin to
partnership may be liquidated due to a complete breakdown of
the
relationship of reasonableness, good faith, trust, honesty and mutual
confidence which should exist between the directors and/or
shareholders thereof. See e.g.
Moosa, NO v Mavjee Bhawan
(Pty) Ltd and Another
1967 (3) SA 131
(T) at 136 and further;
Ebrahimi v Westbourne Galleries Ltd
[1972] 2 ALL ER 492
(HL) at 500;
Lawrence v Lawrich Motors (Pty) Ltd
1948
(2) SA 1029
(W) at 1032;
Budge v Midnight Storm
Investments
supra
at paras [15] to [21]; and
Erasmus
v Pentamed Investments (Pty) Ltd
1982 (1) SA 178
(WLD) and
the detailed analysis at 181A – 185C. See also the contribution
by J J Henning in
LAWSA
, 2nd ed, vol 19, pp 272 and 273
wherein the author specifically deals with “just or lawful
cause” pertaining to the
dissolution of partnerships. Recently
the Supreme Court of Appeal considered the just and equitable ground
with reference to some
of the above judgments in
Apco Africa
(Pty) Ltd and another v Apco Worldwide Inc
[2008] ZASCA 64
;
2008 (5) SA 615
(SCA) at paras [16] to [30]. In para [29] the Court found that if one
of two partners threatens civil and criminal action, including
prosecution for fraud, it will not be possible for them to work
together as they ought to do. The Court found in para [30] that,
on
the analogy of partnership law, the company was in a state which
could not have been contemplated by the parties when it was
formed
and that it ought to be terminated as soon as possible.
[25] In
Paarwater v
South Sahara Investments (Pty) Ltd
,
supra
, the one
shareholder contended that the respondent was a domestic company or
quasi partnership and had to be liquidated due to
a breakdown of the
personal relationship between the two shareholders. The Supreme Court
of Appeal agreed with the findings of
the court
a quo
to the
effect that it was not possible on the papers to
“
find on a
balance of probabilities that a personal relationship existed between
the appellant and Bothma, which admittedly is not
good, which
precludes the further proper functioning of SAB and which destroys
the role of new investors in funding the project
of the meat
processing venture. In addition it has not been established by the
appellant that there is scope for coming to the
conclusion that the
respondent company cannot be properly managed and that the applicant
and the respondent cannot deal at arm’s
length with the
co-investors in SAB”.
Par [14] p 191J –
192B.
It should be noted that
in that matter the parties were strangers to each other before they
entered into the business venture. The
shareholders’ agreements
entered between the parties recorded pertinently that the
relationship between them did not constitute
a partnership.
[26] The House of Lords
authority in
Ebrahimi v Westbourne Galleries Ltd
1973
AC 360
and the equally famous
In re Yenidje Tobacco Co Ltd
[1916] 2 CH 426
(CA)) has been accepted by the courts of this country
on innumerable occasions. It is settled law, also in this country,
that in
a case for winding-up of a so-called domestic company on the
basis that it is just and equitable, it may properly be held that
“
a limited
company is more than a legal entity, with a personality in law of its
own; that there is room in company law for recognition
of the fact
that behind it, or amongst it, there are individuals with rights,
expectations and obligations inter se which are not
necessarily
submerged in the company’s structure”.
Per Lord Wilberforce in
Ebrahimi
,
supra
, at 379B –
C.
See also the judgment of
Kriegler J in
Rentekor (Pty) Ltd and Others v Rheeder and
Berman NNO and Others
1988 (4) SA 469
(TPD) at 500A – G
and in particular the following
dictum
:
“
Our law thus
recognises that in the relationship between shareholders in a company
there may at one and the same time be a formal
pecuniary nexus and
also an
intuitus
personae
,
a special relationship of mutual personal trust. Where that
relationship is breached, even dehors the affairs of the company,
(for example adultery by one of two directors/shareholders in
Lawrence’s
case
supra
),
a winding-up order may be found to be just and equitable.”
[27] An applicant who
relies on the just and equitable ground must come to Court with clean
hands. He must not himself have been
wrongfully responsible for, or
have connived at bringing about, the state of affairs which he relies
upon for winding up of the
company. However in
Vujnovich and
Another v Vujnovich
[1990] BCLC 227
(PC) the Privy Council
found at p 231 that although the minority shareholder had been partly
responsible for the breakdown in the
relationship between the
parties, his conduct was not causative of the breakdown in confidence
on which the petition was based
and therefore this did not bar him
from obtaining a winding-up order on the just and equitable ground.
[28] The rights and
obligations of minority shareholders who allege oppressive or
prejudicial conduct by the majority must be considered.
The Supreme
Court of Appeal found in a as yet unreported judgment (
Bayly
and Others v Knowles
(174/09)
[2010] ZASCA 18
(18 Maart 2010)
at para [24] that the principle of encouraging affected parties to
use the procedures provided in the articles
or in a shareholders’
agreement to avoid the expense of money and spirit to be laudable.
Furthermore in the context of s
252 of the 1973 Act (the predecessor
of s 163 of the Act) the failure of the minority shareholder to
accept a reasonable offer
for his shares and to leave the company in
the hands of the majority, was regarded as at least strong evidence
of a willingness
to endure treatment which is
prima facie
inequitable despite the choice of a viable alternative and
consequently it would not ordinarily behove such a shareholder to
continue
to complain about oppression.
[29] The following
dictum
in
Bayly
,
supra
, at para [29] is relevant:
“
Counsel
for Knowles, perhaps appreciating the weakness of his client’s
case for the purchase of Bayly’s shares, concentrated
on the
relief of liquidation on the just and equitable ground. But Horn J
had not made such an order and Knowles had not noted
a conditional
cross-appeal against his failure to do so. Strictly-speaking that
excludes consideration of the matter. It needs
to be pointed out,
however, that in urging this aspect of his case, counsel fell into a
double trap: liquidation would destroy
a perfectly viable company, as
all agreed; but, in doing so, it would provide no redress to Knowles
for such oppression as he may
have suffered. The first consequence is
one that a court will avoid except in the most extraordinary
circumstances; the second
would favour revenge above reason –
financially Knowles might even be prejudiced by a sale in
liquidation. Nothing more need
be said on this aspect.”
C.
Section
163
of the
Companies Act 71 of 2008
[30] Although I have
indicated
supra
that the companies are solvent and that the
winding-up procedure should be considered in accordance with s 81 of
the Act and not
in terms of the 1973 Act, it is instructive to
consider that s 347(2) of the 1973 Act provides that, in the event of
a winding-up
application by members of the company and it appears
that the applicants are entitled to relief, the Court shall make a
winding-up
order, unless it is satisfied that some other remedy is
available to the applicants and that they are acting unreasonably in
seeking
to have the company wound-up instead of pursuing that other
remedy.
[31] Section 163 of the
Act provides protection against oppressive or prejudicial conduct.
Its predecessor, s 252 of the 1973 Act
and the case law pertaining
thereto, are instructive when interpreting s 163. There is no doubt
that the minority shareholders
are bound by the decisions of the
prescribed majority shareholders in a company if those decisions on
the affairs of the company
are arrived at in accordance with the law,
even where they adversely affect the rights of the minority
shareholders. However the
majority shareholders are obliged to use
their powers
bona fide
for the benefit of the company as a
whole. See
Sammel and Others v President Brand Gold Mining Co
Ltd
1969 (3) SA 629
(AD) at 678,
Garden Province
Investment and Others v Aleph (Pty) Ltd and Others
1979 (2)
SA 525
(D) at 531 and more recently
Louw v Nel
2011 (2)
SA 172
(SCA) at para [22] and further. There is also no doubt that
the mere subordination of the wishes of the minority by the exercise
of the voting power of the majority is not of itself oppressive. For
a general discussion see
Count Gotthard SA Pilati v Witfontein
Game Farm (Pty) Ltd and Others
[2013] 2 ALL SA 190
(GNP) and
the conclusion of the court at paragraph [19] p 210 – 211 that
the result of the act or omission must be unfairly
prejudicial and
not the act or omission itself. See also
Henochsberg on the
Companies Act
71 of 2008
, vol 1, p 567 and further.
[32] Alleged unfairness
disappears if the minority shareholder is offered a fair price for
his shares. This is the situation in
English Law as well as in this
country. See
Bayly v Knowles
,
supra
, at paras
[23] and [24]. In the light of open tenders which were made herein
whilst I was preparing this judgment, to which I shall
refer later
again, it is necessary to consider offers for shareholding in more
detail. In
Re Data Online Transactions (UK) Ltd
[2003]
BCC 510
it was held reasonable for a petitioner to refuse an
otherwise acceptable offer where there was not a reasonable prospect
that
the offeror would be able to meet the financial commitment
involved. It is also mentioned in
Henochsberg
,
supra
,
at 571 that the offer, although reasonable, may be so tainted by bad
faith or ulterior motive as to excuse non-acceptance.
[33] The powers of the
court to grant relief in accordance with
s 163
are very wide and
could touch on many aspects of the company’s business, even
including the appointment of directors.
Section 163
(2) determines in
particular that the court may make any order “it considers fit”
and provides some examples of the
powers that the court may exercise
although the courts’ powers are not limited to those. See
Kudumane Investment Holding Ltd v Northern Cape Manganese
Company (Pty) Ltd and Others
34403/2011, decided on 11 June
2012 (GSJ) at par [61] as well as
Peel and Others v Hamon J&C
Engineering (Pty) Ltd and Others
[2013] 1 ALL SA 601
(GSJ).
Courts may order that the majority purchase the shares of the
minority or that the majority sell their shares to the minority
and
they have an unfettered discretion as to the method of fixing the
price of such shares which should obviously be a fair price
to be
determined objectively. See
Henochsberg
at 574.
Notwithstanding the wide discretion conferred on Courts it is
essential that the party seeking relief under the section
formulates
such relief. See
Louw v Nel
supra
at para [32].
D.
Application to
intervene
[34] I have referred to
Pieter’s application to intervene and this aspect should also
be considered. In short, Pieter’s
application is based on the
contention that he is a shareholder of the companies and that the
companies are insolvent and unable
to pay their debts. The allegation
of insolvency is directly in contrast with all the evidence thus far,
the submissions of counsel
for applicants and respondents and the
findings of the Full Bench. Should the provisional winding-up orders
be discharged, Pieter
intends to seek fresh provisional winding-up
orders based on the inability of the companies to settle their debts.
Mr Steyn, on
behalf of respondent and Mr Gilliland, on behalf of
Pieter were allowed to argue only whether Pieter should be allowed to
intervene
as intervening applicant.
[35] Several points
in
limine
have been taken on behalf of the companies. It is in view
of the conclusion I have reached herein unnecessary to consider
these.
Pieter relies on insolvency or inability to pay creditors and
to bolster his case he refers to requisitions allegedly filed with
the Master by various creditors. He did not present any proof in this
regard. Requisitions are not claims made under oath by creditors
for
purposes of proof in accordance with the provisions of
s 44
of the
Insolvency Act, 24 of 1936
read with s 364 of the 1973 Act. The
documents referred to have not been attached to his papers. In reply
a list of so-called creditors
has been attached. No case has been
made out in the founding affidavit and Pieter cannot be allowed to
build a case in reply. Pieter
is guilty of reliance on inadmissible
hearsay in order to prove factual insolvency. This cannot be
countenanced.
[36] A member of a
company can only apply for winding-up on one or other of the grounds
referred to s 344 (b), (c), (d), (e) or
(h) of the 1973 Act. The
inability of the companies to pay their debts – s 344 (f) -
cannot be relied upon by a member as
a ground for winding-up. See
Henochsberg
at 722(1). Pieter’s case is based on actual
insolvency which is in any event not a ground for winding-up, but
which may indicate
an inability to pay.
[37] Reliance is also
placed on evidence of a meeting before the Master’s
representative in support of a version that a claim
had been “proven”
against the companies. This is unheard of. No claims can be proven
prior to the final winding-up
of a company. Pieter has not even made
out a
prima facie
case to be allowed to intervene. That being
the case, and in the light of the relief to be granted herein in
respect of the main
applications as well as the fact that Pieter’s
applications caused an unnecessary increase of almost three hundred
pages
in the already voluminous bundles of documentation, Pieter is
not entitled to costs and should in fact pay the respondents’
costs for opposing the applications.
VII
APPLICATION OF
THE LAW TO THE FACTS
[38] In the ultimate
analysis this Court has to consider whether Carol as the only
remaining applicant with
locus standi
has proven that it is
just and equitable that the companies be finally wound up. Both Mr
Geyer, on behalf of applicant, and Mr
Snellenburg on behalf of
Jackie, are of the view that the dispute can be adjudicated on the
papers although they seek different
outcomes. Mr Geyer has submitted
that a proper case has been made out for confirmation of the rules
nisi
whilst Mr Snellenburg argued that the rules should be
discharged. Mr Steyn, on behalf of respondent, submitted that the
matter
should be referred for oral evidence in order for the Court to
be in the best position to adjudicate the disputes. His repeated
submission that oral evidence is the medicine required by these
matters and the family is cynical and sarcastic. Oral evidence
will
not heal and is not required to determine the real issues.
Submissions were also made on behalf of respondents that liquidation
of the companies is in any event not the only option available
insofar as the Court has a wide discretion to consider the plight
of
minority shareholders and in doing so to utilise the provisions of s
163 of the Act. It was submitted that a value can be placed
on the
shareholding of Carol and orders made as to the sale of her
shareholding to the other shareholders and the manner of payment.
I
have considered all allegations by the various parties, but for
purposes hereof it is unnecessary to deal with all these. As
stated,
relevant aspects are not in dispute. I shall deal only with aspects
that might play a role in disturbing the findings of
the Full Bench.
[39] Johnny deposed to
confirmatory affidavits on behalf of the companies in opposing the
application initially. He has now advanced
reasons in opposition of
the applications for final winding-up orders on behalf of the
companies and as an interested party in
his capacity as shareholder.
André, who deposed to the companies’ opposing affidavits
initially, filed confirmatory
affidavits in his capacity as
shareholder in support of Johnny’s opposition. From the onset
Johnny held the view that the
applications should be referred to oral
evidence.
[40] It is apparent that
Johnny paid mere lip service to his allegation that “he did not
want to steal his mother’s
joy or discredit her”.
Although this was his initial stance, the remainder of his affidavit
shows his animosity towards his
mother and Carol to such an extent
that he specifically wants his mother, a lady who I have been told is
81 years old, to be subjected
to cross-examination on a wide variety
of aspects and even the disputes arising in the several Northern Cape
High Court matters
referred to above. Johnny cannot understand why
Carol has such an obsession with the farms as he put it, especially
insofar as
she and her children will eventually inherit several other
farms in respect of the discretion to be exercised by Mrs Knipe in
her
favour to the ultimate exclusion of the other children, according
to Johnny. These discretionary trusts which have been set out
in
detail in Johnny’s affidavit and which are totally irrelevant
for purposes of this application are the Witpan Trust, the
Spytfontein Trust, the Rockwood and Pollock Trusts and the Troon
Investment Trust. The first four trusts are the owners of several
farms and the last trust is the owner of property in Hermanus. Carol
is accused that her greed does not have any bounds. The record
shows
that this is probably a general family attribute. Johnny and André
(and Jackie for that matter), have a motive to
discredit Carol and
Mrs Knipe insofar as they believe that Carol and her children will
eventually become the heir/heirs of the
remainder of the wealth
accumulated by the deceased and Mrs Knipe. Therefore there is a drive
to unilaterally reduce Carol’s
shareholding in the companies to
8%. They have already ensured that she shall not have any say in the
management of the companies
by not electing her as director. Mrs
Knipe, who was responsible for the allocation of their shares to
them, has been kicked out
of the management of the companies.
[41] Johnny, André
(and for that matter Jackie), rely on certain historical data and
averments by the present company secretary,
Mr Pretorius, and an
auditor, Mr de Jager to the effect that the shareholding of Pieter’s
trusts in the companies were bought
out many decades ago and that
André and Johnny’s trusts were entitled to an increased
shareholding, i.e. 42% each
in the two companies. These letters and
reports are not under oath, but notwithstanding this, all
beneficiaries in the presence
of their respective attorneys accepted
at the offices of Duncan and Rothman attorneys in Kimberley on 15
April 2008 that the five
children should be regarded as equal
beneficiaries of the farms owned by the two companies. Everyone also
accepted the equal allocation
of shares when Mrs Knipe dissolved the
trusts in 2009. It is also strange that notwithstanding the
information allegedly obtained
from the auditors as long ago as
October 2010 pertaining to what their shareholding in the companies
should be, these facts were
suppressed and not conveyed to the court
in the initial opposing affidavits. Therefore the Full Bench accepted
that the five children
are equal shareholders in the two companies.
The insistence by André, Johnny and Jackie that the twins are
entitled to 42%
shareholding each in both companies is a major cause
for concern which must have contributed to the distrust.
[42] Much is made of the
fact that the deceased bought the farms belonging to the two
companies for the twins, i.e. Johnny and André.
The deceased
was a businessman and an auditor and the objective facts contradict
such an intention. Although the twins were still
at university when
the farms were bought and the trusts created, the deceased did not do
anything over all these years to give
managerial powers to Johnny and
André by, for example, making them trustees of the trusts
and/or directors of the companies.
Instead he managed the companies
as the sole director and he and Mrs Knipe were at all relevant times
the only trustees of the
various trusts. There is nothing on record
to indicate that the deceased and/or Mrs Knipe at any stage
anticipated that Johnny
and André would eventually be placed
in a position where they could run and manage the companies with the
exclusion of any
of the other children. It is Johnny’s version
that Carol’s unhappiness is unrelated to her reduced
shareholding. What
cannot be denied is that the farms owned by the
companies have always been run and managed as a domestic family
company to the
exclusion of any outsiders and there is no reason to
conclude that after the death of the deceased it should be any
different.
[43] Carol’s
alleged hunting rights has nothing to do with her shareholding. It is
a contractual issue and her disputed rights
can and should be
adjudicated in another forum. The Full Bench accepted the existence
of these rights based on the documentation
provided. Instead of
challenging this aspect by obtaining statements from the particular
Department’s officials or evidence
of a handwriting expert,
Johnny now wants to investigate this through oral evidence and to
subpoena witnesses from the Department.
This is requested
notwithstanding the undisputed evidence that Carol indeed exercised
hunting rights during the lifetime of the
deceased.
[44] Jackie went out of
her way to discredit her mother, Mrs Knipe in particular and also her
sister Carol. According to her the
exclusive motive in bringing the
applications is to benefit Carol and her children. This cannot be
true as Carol and all the other
shareholders will have to accept that
if final winding-up orders are granted, the farms will have to be
sold, probably at prices
lower than valuation and/or market value and
that considerable costs will have to be paid out of the companies’
funds before
distribution of the nett proceeds to shareholders can be
effected. Jackie also mentions that Mrs Knipe is motivated by greed
in
bringing the application. There is absolutely no basis or
foundation for such an allegation. Mrs Knipe cannot gain anything
from
a winding-up of the companies. It is clear from the evidence
that Jackie feels prejudiced insofar as the close corporation which
conducted the diary business in which she held membership was finally
wound up and Mrs Knipe and Carol are blamed for this. Jackie
describes her mother as a housewife who had absolutely nothing to do
with the businesses of the deceased and his creation of wealth.
The
objective facts show that this is false. Mrs Knipe is from a rich
family and she created her own wealth independently from
the
deceased. She was clearly the deceased’s confidant insofar as
they have been married for over fifty years and she was
co-trustee of
the various family trusts. Jackie’s impression that Mrs Knipe
favoured Carol and her children might be correct
and this may also be
a motive why Jackie would accuse Mrs Knipe and Carol for causing the
dysfunctional family relationship. The
version of Jackie pertaining
to the birthday party has been shown to be false. Contrary to what
she tried to convey in her affidavit,
i.e. that she did not attend
the party and that no photo was taken of her as was the case with all
the other guests, a photo has
been submitted showing her enjoying a
glass of wine.
[45] The threats and
assaults complained of by Mrs Knipe are denied by Jackie, André
and Johnny, but the objective facts
indicate that Mrs Knipe obtained
family violence interdicts against them in 2010. Surely a mother
would not do that if there was
no cause for concern. It is also
indicated by Mrs Knipe that Johnny did not speak to the deceased for
seven years prior to his
death.
[46] Although there are
several disputes that are incapable of being adjudicated upon on the
affidavits, the fact remains that neither
Johnny, nor Jackie made any
meaningful contribution and neither of them presented acceptable
evidence to the effect that Carol
was the sole cause for the
breakdown in the trust relationship. The findings of the Full Bench
were not disturbed. No new facts
were disclosed to disturb the
findings that there is no relationship of mutual trust and confidence
amongst the shareholders which
is a requisite for the existence and
proper functioning of a domestic family company. Surely it has not
been shown that the companies
are not domestic family companies.
[47] I have seriously
considered other options than granting a final winding-up order,
especially insofar as I am of the view that
solvent companies should
really be wound-up as a last resort only. Unfortunately it is not
possible to adjudicate the issue of
the shareholding ratio on the
papers and in my view it would be an unnecessary waste of time and
financial resources to refer the
matter for oral evidence in order to
ascertain what the true shareholding ratio should be. I can just
imagine that it might be
very difficult to limit cross-examination as
counsel would do their best to cross-examine on a wide variety of
matters on the basis
that they should be allowed to do so in order to
establish the veracity of the versions of the various witnesses.
Respondent’s
counsel has already indicated that he wanted all
disputes (also the Northern Cape High Court disputes) to be resolved
in this Court
by way of the presentation of oral evidence. It is on
the evidence before me not possible to make any finding in respect of
the
purchasing of Carol’s shares by one or more of the other
shareholders. It is on the papers before me impossible to come to
a
just and fair purchase price in the circumstances.
[48] An aspect which is
regarded as important when exercising my discretion is the fact that
the companies are in reality property
holding companies. They don’t
trade and as found by the Full Bench the cattle and game on the farms
are not their property.
In this sense winding-up will have the same
effect as a forced sale of immovable property held by co-owners who
are at loggerheads
with each other. The companies don’t have an
infrastructure such as offices, staff (except may be for one or two
labourers),
livestock or contracts with third parties such as
investors who may be prejudiced by winding-up. Apart from the ongoing
civil actions
referred to above, the most damning evidence of a lack
of trust is the supplementary affidavit filed by André a few
days
before I heard arguments herein. Therein he stated that the
directors of the companies had decided to lay complaints against Mrs
Knipe and Carol and that criminal proceedings had been instituted
against them following actions and averments which were or still
are
to be adjudicated by the Northern Cape High Court in the various
civil matters. This reminds me of the action taken in
Apco
Africa
supra
and that Court’s finding that such
action was clear evidence that no working relationship can ever be
restored in such circumstances.
I am satisfied that Carol has shown
on a balance of probabilities that the companies should be finally
wound-up on the just and
equitable ground.
[49] I have considered
the open tenders allegedly made on behalf of the companies and by
André, Johnny and Jackie. At first
blush these tenders appear
to be laudable and a serious attempt to pay Carol what she is
entitled to for her shareholdings and
to settle all disputes amongst
the parties. The provisional liquidators are not parties to the
tenders. The directors of the companies
retain residual powers to
oppose the winding-up applications and to appeal final winding-up
orders, but other than that, upon provisional
winding-up all their
powers and duties as directors terminated and they were deprived of
all control over the companies. Therefore
they could not make the
tenders on behalf of the companies. Furthermore, the offerors insist
that the winding-up application be
withdrawn immediately whilst they
may or may not make payment of the amount offered some time in the
future. There is no clear
indication that they would be able to raise
the purchase price. In conclusion the offers are not
bona fide
and
Carol and the other applicants were within their rights to reject
same without fear that it might be to her/their prejudice.
The
dictum
of the SCA in
Bayly v Knowles
supra
does not
apply.
[50] Pieter’s
application to intervene is without foundation. Insofar as it is my
intention to grant final winding-up orders,
the only issue that needs
to be considered in that regard, is what costs order should be made.
Even on the basis that I might have
discharged the rules
nisi
,
no case has been made out by Pieter to intervene. Consequently he is
not entitled to any costs and in fact, a costs order should
be made
against him.
[51] The unsuccessful
applicants are not entitled to their costs. However the costs of
Carol, the fourteenth applicant, should be
costs in the liquidation.
The costs of opposition in winding-up matters should be considered in
accordance with the provisions
of s 342(1) of the 1973 Act, read with
section 97(3)
of the
Insolvency Act, 24 of 1936
. See
Pienaar v
Thusano Foundation and Another
1992 (2) SA 552
(BGD) at 592D.
In this judgment Friedman AJP was of the view that even a
bona
fide
and reasonable opposition was not enough and special
circumstances needed to be shown, i.e. real and substantial grounds
for opposing
and that the opposition assisted the court in coming to
a decision.
In casu
no special circumstances have been shown
to exist and consequently the costs of the opposition shall not be
costs in the liquidation.
To the contrary, an unnecessary paper war
of great magnitude was created.
[52] Wherefore the
following orders do issue:
The rules
nisi
in
both applications 1936/2011 and 1937/2011 are confirmed and final
winding-up orders are granted.
14
th
Applicant’s costs in both applications, on an opposed basis,
exclusive of the costs of the unsuccessful applicants, are
to be
costs in the liquidations.
The costs of opposition,
i.e. in opposing the provisional orders for winding-up, as well as
the costs of Johnny, André
and Jackie in opposing the final
winding-up orders in both applications, are excluded from the
liquidation costs.
The applications of
Robert Petrus Jansen Knipe to intervene in applications 1936/2011
and 1937/2011 are dismissed with costs.
_____________
J.P. DAFFUE, J
On
behalf of applicants: Adv H.F. Geyer
Instructed
by:
Symington
& De Kok
BLOEMFONTEIN
On
behalf of respondents: Adv J.W. Steyn
Instructed
by:
Christo
Dippenaar Attorneys
BLOEMFONTEIN
On
behalf of Jackie Vigne
(interested
party): Adv N. Snellenberg
Instructed
by:
Rossouws
BLOEMFONTEIN
On
behalf of R.P.J. Knipe: Adv J.G. Gilliland
Instructed
by:
Quinton
Grimbeek Attorneys
/spieterse