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[2011] ZAKZDHC 19
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Nicolosi v Vulindlela Logistics (Pty) Ltd, Laister v Vulindlela Logistics (Pty) Ltd (4112/2010, 4114/2010) [2011] ZAKZDHC 19 (3 February 2011)
IN THE HIGH COURT OF SOUTH AFRICA
KWAZULU – NATAL, DURBAN
CASE: 4112/2010
In the matters between:
ALESSANDRO NICOLA ANTONIO NICOLOSI
…........................................
PLAINTIFF
vs
VULINDLELA LOGISTICS (PTY) LIMITED
…...........................................
DEFENDANT
and CASE: 4114/2010
JOHN ROBERT LAISTER
….........................................................................
PLAINTIFF
vs
VULINDLELA LOGISTICS (PTY) LIMITED
…..........................................
DEFENDANT
________________________________________________________________
JUDGMENT
Delivered on 3 February 2011
Ntshangase J:
[1] The plaintiffs Alessandro Nicola
Antonio Nicolosi (“Alessandro”) and John Robert Laister
(“Laister”)
claim provisional sentence in cases 4112/2010
and 4114/2010 for payment of the amounts of R229 990.39 and R202
163.10 respectively.
The claims are founded on acknowledgements of
debt executed in their favour purportedly by the defendant.
[2] The circumstances in which
Nicolosi and Laister brought the present proceedings against the
defendant are the same. The affidavits
deposed to by Wayne Diner
(“Wayne”) opposing provisional sentence are in essence
identical in both cases. The cases
were set down to be heard
together. By agreement between both parties the affidavit of Wayne
serves in both cases; the affidavit
of Laister also serves as the
plaintiffs’ replies in both cases. On that basis the matters
were argued before me on the basis
of case 4114/2010.
[3] The following encapsulates the
basis upon which the authority of the plaintiffs to execute the
acknowledgements of debt is placed
in dispute:
“
Both such
acknowledgements of debt are contrived and the defendant disputes
that they are either authorised or genuinely intended
… (T)he
plaintiff and Alessandro were in effect entering into agreements with
the defendant which they purported to represent
at the time, in
circumstances where there was a clear conflict of interest and in
breach of fiduciary duties owed by them to the
defendant at the
time.”
The authority of the plaintiffs is
also challenged on the grounds that they were virtually concluding
agreements with themselves
and that when they concluded the
agreements with regard to their retrenchment they had already been
summarily dismissed.
[4] What appears to
have precipitated matters into the present state was the purported
summary dismissal of the plaintiffs as employees
and their removal as
directors of the defendant company on 18 February 2010. Shorn of
acrimony alleged in the version of Laister,
on that date Wayne served
him with a letter
1
which conveyed the
release of both plaintiffs from their duties, which required them to
remove themselves from the defendant’s
property and to return
all property owned by the defendant in their possession and control.
Alessandro who had been absent when
Wayne came, later arrived and was
also informed of their dismissal and removal.
[5] In the opposing affidavit Wayne
states that the plaintiffs’ employment was terminated by
himself and the defendant’s
ultimate controlling holding
companies of which he is a director, known as M & W Diner
Investments (Pty) Limited (“M
& W”) and its
subsidiary Ben Jacobs Iron & Steel (Pty) Limited (“Ben
Jacobs”). This is incorrect. The
letter Wayne served to dismiss
the plaintiffs was signed by him –
“
for
and on behalf of Ben Jacobs Iron & Steel (Pty) Limited
”
It bears letter heads of Ben Jacobs
and makes no reference to M & W.
[6] I do not find
it necessary to delve in detail into the hierarchical relationship of
M & W and Ben Jacobs with the defendant
and other companies in
the structure of the group of companies depicted on the organogram,
2
to determine their
competence to dismiss and remove the plaintiffs as the process of the
purported dismissal was flawed by reason
of its defiance of the
provisions s 220 of the Companies Act 61 of 1973 (“the Act”).
[7] The organogram shows Metaltrade
(Pty) Ltd (“Metaltrade”) at the pinnacle of the group,
Metvul Holdings (Pty) Ltd
(“Metvul”) as its 100 per cent
subsidiary, Vulindlela Maritime (Pty) Ltd (“Maritime”) as
a subsidiary of
Metvul to 91 per cent of the shares with 9 per cent
of the shares held by “others”. Further down is
Vulindlela Logistics
(Pty) Ltd (“the defendant”), a
wholly owned subsidiary of Maritime. I fail to see how Ben Jacobs, a
subsidiary of M
& W which owned 100 per cent shares in it would
have had authority to remove directors of a company at the
hierarchical position
of the defendant in the group of companies. Ben
Jacobs owned no shares in any of the companies in the group, I may
mention that
Metaltrade was, with effect from 14 December 2009, in
provisional liquidation. The effect thereof was that its shareholders
no
longer had the power to act through Metaltrade.
[8] Wayne describes the dismissal
simply as follows:
“
On
the same day, ie 18 February 2010, I travelled to Durban to summarily
dismiss plaintiff and Alessandro as employees of defendant
and to
hand them Annexure “WD26” hereto
”.
He then effected the purported
dismissal:
“
I
… arrived at the premises of the defendant. Laister was there.
I handed him a copy of the letter, told him he was summarily
dismissed and asked him to remove himself form the defendant’s
premises; this he agreed to do
.”
He states that when Alessandro arrived
and was handed the letter he said he was aware of his dismissal and
had come to collect his
things and
“
(h)e
too accepted his summary dismissal …
”
This implies that he too, as did
Laister, accepted his dismissal.
[9] As will appear
from what follows, the purport of the dismissal “as employees”
was intended to extend and in fact
extended to their removal as
directors of the defendant. They were barred from the assets and
business of the defendant and from
exercising any powers as
directors. In terms of the defied provisions of s 220 of the Act
earlier referred to, the process towards
removal of the plaintiffs as
directors should have commenced by lodgement of a special notice with
the company for delivery to
the plaintiffs who were entitled to be
heard at the meeting for the proposed resolution for their removal.
Fluxmans who represented
Ben Jacobs was alive to this. In his e–mail
of 12 February 2010
3
he alludes to s 220
as provisions under which a process would be initiated to remove the
plaintiffs as directors of the defendant
should they refuse to
resign. There was never a resolution to remove the plaintiffs as
directors of the defendant.
[10] The assertion that the plaintiffs
accepted their dismissal is belied by what occurred at the time of
the purported dismissal
and thereafter. Wayne was flanked by security
guards when he “told (Laister) he was summarily dismissed.”
Rather than
having accepted dismissal, the plaintiffs appear to have
been cowed into submission by the perceived futility of any attempt
to
resist the order to remove themselves. This must have been born of
apprehension. Even in terms of Wayne’s account, the plaintiffs
were given neither an option nor an opportunity to be heard. The
first encounter was with Laister. The encounter with Alessandro
was
just as abrupt. What also belies the assertion that the plaintiffs
accepted their dismissal is the fact that on the very day
of the
purported dismissal, Mr V O’Connell, acting on instructions of
the plaintiffs, wrote to Fluxmans to protest against
the purported
dismissals, an action he described as “completely unlawful and
(which) may even constitute a criminal offence”.
The letter
called upon Fluxmans to prevail upon their client to immediately
restore the plaintiffs’ possession of the property
of the
defendant. It is improbable that a dismissal process in a climate
conducive to an acceptance of dismissal and consensual
departure
would have called for the protective presence of the Police which
attended at the plaintiffs’ instance.
[11] The plaintiffs
were not legally divested of control as directors; nor did they
divest themselves of such control. The fact
that they took
retrenchment cannot be held to be acquiescence to their dismissal and
removal. As explained by the plaintiffs, while
they were barred from
physical control over the assets and business of the defendant, they
would have remained a liability by reason
of the continued escalation
of claims for remuneration as employees and directors who brought no
value to the company. Far from
a situation of a conflict of interest,
it was to the benefit of the defendant that they terminated their
employment and directorship.
They acted
bona
fide
in
the interest of the company. It would have been foolhardy to say, as
was suggested by Mr Subel for the defendant, “I am
staying, I
am not going to leave, it is unlawful …” in a situation
clearly pregnant with a potential for disturbance
of the peace.
[12] Much has been
made of the fact that Michael, Wayne and Chait took
de
facto
control
of the business. This does not assist the defendant as the Court is
only concerned with the legal position in this matter
in terms
whereof the plaintiffs, notwithstanding the purported dismissal and
removal, legally remained employees and directors
of the defendant.
[13] A circular on
defendant’s letterhead dated 19 February 2010
4
on which the names
of the plaintiffs as directors had been deleted, untruthfully
proclaims:
“
Our
director is now Wayne Diner
”
For their part,
Fluxmans, on 6 April 2010, proclaimed, also untruthfully, Michael
Diner (“Michael”) and Wayne as “the
two new
directors at Vulindlela (the defendant) and Vulindlela Maritime (Pty)
Limited”.
5
Fluxmans
backtracked later when they, on 26 April 2010, requested Posemann,
for the plaintiffs, to confirm the appointments of Wayne,
Michael and
Anthony Chait (“Chait”) as directors of the defendant and
Maritime.
6
On the same date
Norman Klein, the joint liquidator of Metaltrade requested Mr
Posemann to arrange for the appointment of Wayne,
Michael and Chait
as directors of the defendant and that the plaintiffs resign as
directors of Maritime for Wayne, Michael and
Chait to be appointed as
its directors.
7
Wayne, by letter on
Metvul letterhead dated 18 May 2010
8
lodged notice of a
proposed resolution to remove the plaintiffs as directors of Maritime
and to appoint, in their stead, himself,
Michael and Chait and, for
that purpose, for a special general meeting to be convened.
[14] A curious feature in the defence
case is that while it asserts that the plaintiffs had been summarily
dismissed as employees
and removed as directors of the defendant and
thus had no authority to conclude agreements with regard to
retrenchment, it, in
the same breath charges that the plaintiffs
entered into agreements with the defendant in circumstances where
there was a conflict
of interest and in breach of fiduciary duties
owed by them to the defendant at the time. It is a charge which
acknowledges the
continued directorship of the plaintiffs.
[15] There is no material dispute in
regard to the facts of this matter. The defence on the premise that
the plaintiffs lacked authority
to conclude agreements on their
retrenchments on the proposition that they had, at the time, already
been dismissed as employees
and removed as directors of the defendant
must fail. In all the circumstances, there is no support for the
assertion that the plaintiffs
had been (effectively) summarily
dismissed as employees and removed as directors of the defendant.
[16] The plaintiffs
as directors discussed with the shareholder the intention of the
directors of the defendant to terminate their
employment on
operational grounds and in accordance with the provisions of the
Labour Relations Act and to furnish acknowledgements
of debt in
respect of the amounts owing and, on 9 March 2010, resolved to ratify
and approve such course of action.
9
[17] On the same
date, having discussed the situation confronting the defendant
company, the plaintiffs, as the only directors of
the defendant
resolved to terminate their employment on operational grounds and in
accordance with the provisions of the Labour
Relations Act and to
conclude acknowledgements of debt in respect of the amounts owing.
10
[18] On the same
day, the defendant issued notices of retrenchment to each plaintiff,
one to Laister signed by Allessandro and the
other to Allessandro
signed by Laister
11
to which were
annexed calculations of the retrenchment packages. An acknowledgement
of debt in favour of Laister in respect of which
he now sues, signed
by Alessandro was issued on the same day, ie 9 March 2010. Another,
in favour of Alessandro in respect of which
he also now sues, signed
by Laister was issued on no recorded date in March 2010.
12
Both were signed by
them in their capacities as directors. This was followed by letters
of resignation by the plaintiffs as directors
of the defendant, their
employment having been terminated on retrenchment.
[19] It is now necessary to view the
occurrences of 9 March in the light of the defence that when the
plaintiffs entered into agreements
with the defendant they did so in
circumstances where there was a conflict of interest and in breach of
fiduciary duties owed by
them to the defendant at the time.
[20] It is
contended that the plaintiffs concluded agreements with themselves on
the one hand and on the other, the defendant, as
represented by
themselves, and that a conflict of interest prevailed even at the
level of Maritime. The correct position is that
the agreements were
concluded by the directors of Maritime with Maritime, the shareholder
of the defendant. The source of authority
for the execution of
acknowledgements of debt was the shareholder of the defendant and not
the defendant. The plaintiffs discussed
as representatives of the
shareholder of the defendant and not as directors of the defendant,
the intention of the directors of
the defendant to terminate their
employment and to furnish acknowledgements of debt in respect of the
amounts owing. Incidentally
Wayne also contemplated “payments
in terms of salary and accrued dues being effected to (plaintiffs)”
in the purported
dismissal and removal communication.
13
[22] There was, in my view, no legal
bar to the directors in Maritime dealing with any issue with regard
to the management of its
subsidiary within its (Maritime’s)
province of duties and responsibilities. There is no identifiable
conflict of interest
with Maritime. Even if I be wrong in this
conclusion, the position is that, without steps taken to avoid the
resolution, its binding
force prevails.
[23] The act
decried by the defence, akin though it may be to concluding
agreements with oneself, is no unknown legal phenomenon.
Commenting
on
Gutman
NO v Standard General Insurance Co Ltd
14
Harms JA in Vaal
Reefs exploration and Mining Co Ltd v Burger
15
stated:
“
Die
bevinding in Gutman dat vanweë die feit dat die eienaar ook
namens sy maatskappy opgetree het die kontrak nietig is, is
onrealisties. Die behoeftes van die regsverkeer is nie in ag geneem
nie.
”
The Court raised questions which would
arise in practical situations:
“
Hoe
leen ‘n alleen-aandeelhouer en enkeldirekteur geld aan sy
maatskappy of omgekeerd? Hoe word bates tussen sulke partye
vervreem?
Hoe geskied transaksies tussen verwante maatskappye? Dis immers ‘n
alledaagse verskynsel dat ‘n persoon in
twee hoedanighede
optree
”
In
regard to acts in representative capacity he stated:
“
Die
wil van die verteenwoordiger is, van regsweë, die wil van die sg
prinsipaal en nie sy eie nie.
”
[24] The plaintiffs have overcome the
hurdle of authority of the signatories to execute the
acknowledgements of debt. The defendant
has failed to demonstrate on
a balance of probabilities that it will succeed in the principal
case.
[25] Accordingly, judgment is granted
as follows:
In
case no. 4112/2010:
Provisional
sentence in the sum of R229,990.39 plus interest thereon at the rate
of 15.5 % per annum from 19 March 2010 to date
of payment;
the
costs of suit including the costs of senior counsel.
25.2 In case no. 4114/2010:
Provisional
sentence in the sum of R202,163.10 plus interest thereon at the rate
of 15.5 % per annum from 19 March 2010 to date
of payment;
the
costs of suit including the costs of senior counsel.
APPEARANCES
For Plaintiffs: Adv A M Stewart SC
Instructed by Cox Yeats,
c/o Messenger King, Durban.
For
Defendant: Adv A Subel SC
Instructed by Fluxmans Incorporated,
c/o Legator McKenna Incorporated,
Durban.
1
Annexure
“WD26”
2
Annexure
“JL1”
3
Annexure
“WD 21”
4
Annexure
“JL3”
5
Annexure
“WD 37”
6
Annexure
“WD 43”
7
Annexure
“WD 45”
8
Annexure
“JL4”
9
Annexure
“WD 32(a)”
10
Annexure
“WD 32(b)”
11
Annexure
“WD 32 (c)” and “WD 32 (d)”
12
Annexure
“WD 32(e)” and “WD 32 (f)”
13
Annexure
“WD26” para 7
14
1981
(4) SA 114
(C)
15
1999
(4) SA 1161
(SCA) para 8