Tsenelo Media Solutions (Pty) Ltd v Brand IQ (Pty) Ltd and Another (58132/2007) [2009] ZAGPPHC 40 (30 April 2009)

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[2009] ZAGPPHC 40
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Tsenelo Media Solutions (Pty) Ltd v Brand IQ (Pty) Ltd and Another (58132/2007) [2009] ZAGPPHC 40 (30 April 2009)

IN
THE HIGH COURT OF SOUTH AFRICA
(NORTH
GAUTENG, PRETORIA)
CASE
NO: 58132/2007
NOT
REPORTABLE DATE: 30/4/2009
In the matter between:
TSENELO
MEDIA SOLUTIONS (PROPRIETY) LIMITED
…...........
Applicant
And
BRAND
IQ (PROPRIETARY) LIMITED
…...........
First
Respondent
MORNING
TIDE INVESTMENTS 77 (PTY) LTD
…...........
Second
Respondent
JUDGMENT
LEDWABA, J
INTRODUCTION
[1] Initially
in December 2007 the applicant brought this application as an urgent
application for the liquidation of the first
respondent on the basis
that it is just and equitable as contemplated by
section
344(h) of the Company Act 61 of 1973
,
(The Act),
especially, because there was a deadlock. The application was set
down for hearing on 12
th
December 2008.
[2] The
respondents opposed the application, filed answering affidavits and
a counter-application. In the counter-application
the first
respondent sought for an order in the following terms:
“2. In
the event of the Applicant proceeding with the main application
after the filing of the Respondent’s Answering and
Founding
Affidavit, and in the event of the Applicant failing to transfer
all shareholding in the First Respondent to the Second
Respondent-
a. an order directing the
Applicant to sign all documents and do all things necessary to
transfer its shareholding in
the first Respondent to the second
Respondent; and
b. an order
directing that, should the Applicant fail to comply with the
provisions of paragraph 2a. hereof within 5 days
after the
granting of the order, that the sheriff for the district of
centurion be authorised and directed to sign all documents
and
do all things necessary to transfer the Applicant’s
shareholding in the first Respondent to the Second Respondent,
in
the place and stead of the Applicant.”
[3] On 12
th
December 2008, by agreement, proceedings were postponed
sine
die
and costs
reserved. Applicant’s replying affidavit and answering affidavit
to the counter application were filed on the 2
nd
April 2008. Applicant filed a supplementary affidavit on the 7
th
October 2008 and respondents filed a replying affidavit on 22
nd
October 2008.
[4] When
the matter was argued before me, in early December 2008, applicant’s
counsel, Mr. Korf, said the applicant is no more
pursuing the
liquidation order prayed for in the notice of motion. However, the
applicant is now seeking relief in a form of
an order in terms of
section 252 of the
Act
on the a
factual basis set out in the founding papers read together with the
replying affidavit and the supplementary affidavit.
[5] The
order now sought by the applicant is along the lines set out in the
draft order that was handed to the court which reads
as follows:
“1. That
the Applicant be ordered to sell to the Second
Respondent
its 40% shares in the first Respondent against payment of the fair
and reasonable net market value of such shares.
2. That
the purchase price in respect of the shares shall be determined by
any suitably qualified valuer to be appointed by
the
President/Chairperson of the South African Institute of chartered
Accountants (SAICA) (hereinafter referred to as the “valuer”),

which appointment is to be made by no later than 15 January 2009.
3. That
the valuer shall determine the fair and reasonable value of the
Applicant’s 40% shares.
4. That
the First Respondent be ordered to furnish to such valuer any and
all documents, financial statements, source documents
that such
valuer deems necessary within his own absolute discretion, within 7
days from being requested therefore.
5. That
the determination of the purchase price is to be made within 30
days from the date of delivery of all documents in
terms of prayer
4 hereabove.
6. That
the parties shall contribute 50/50 towards the costs of such
valuation, which is to be paid within 7 days from demand
and before
the determination is communicated to either party.
7. That
the purchase price so determined shall be paid by the Second
Respondent to the Applicant within 7 days of communication
of such
determination.
8. That
the applicant shall sign and hand to second respondent any and all
documents necessary to transfer the shares from
applicant to second
respondent.
9. ...”
RELEVANT
FACTUAL BACKGROUND
[6] The
first respondent was created in 2006 as a vehicle for the applicant
and the second respondent as shareholders to conduct
a ‘black
economic empowering’ outdoor advertising company.
[7] The
second respondent held 60% of the allotted shares of the first
respondent, and the applicants held 40% of such shares.
[8] In
terms of the shareholders agreement, the second respondent appointed
two directors to the first respondent’s board of
directors, and
the applicant appointed one director.
[9] In
about September 2007 conflicts between shareholders started.
[10] Mr.
Wagenaar SC informed the court that since the urgent application was
instituted the applicant has not been part of the
operation of the
business of the first respondent and the director appointed by the
applicant on the first respondent’s board
of directors has not
attended any meeting of the directors.
[11] Both
counsel argued lucidly and referred me to some letters forming part
of the record to convince me as to which party caused
the conflict.
However, having regard to the fact that the applicant now seeks a
new relief, viz a viz, the first respondent’s
prayer in the
counterclaim, it is, in my view, not necessary to make a finding on
the issue. I therefore deem it not necessary
to delve into who
caused the dispute.
[12] On
careful analysis of the matter as now stands it is clear that the
liquidating of the first respondent is not sought. Of
importance the
first respondent, in particular alleged that the applicant’s 40%
shareholders has been properly sold in terms
of the shareholders
agreement (the agreement) whilst on the contrary, applicant disputes
that the alleged sale complied with
in terms of the agreement.
Hence, in the draft order an order that the applicant be ordered to
sell its shareholdings is sought.
Applicant’s counsel described
first respondent alleged sale as a ‘forced buy out’. However,
applicant’s counsel submitted
that applicant had no problem with
the alleged sale but it definitely has a problem with the
calculation of the purchase price
as calculated by the respondents.
Applicant wanted an opportunity to compare first respondents
financial records and do their
own calculations. See: page 17 of the
recording of the address by counsel.
THE
AGREEMENT
[13] I
will hereunder quote and refer to certain clauses for the agreement
to the extent necessary for the conclusion that will
be reached.
Clauses 5.1-5.3 reads as follows:
“5.1
As from the moment a person becomes a Shareholder, the Company
acquires and retains a lien over the share holding of
such
Shareholder in the Company for all monies owing by such Shareholder
to the Company, in respect of any debt, obligation
or undertaking
to the Company and irrespective of whether the time for payment,
performance or execution has arrived or not.
The lien referred to
in this clause, operates also as a lien over any payment payable
by the Company to a Shareholder (other
than in its capacity as
creditor or as employee or officer of the Company. The lien will be
secondary to the obligations and
the conditions as agreed upon
between the parties, regarding the right which a party will obtain
on the shares of the other
party, if the latter party is not in a
position to contribute towards the capital requirements of the
Company.
5.2 The
company may sell, in such manner as it thinks fit, any shares over
which the Company has a lien, but the shares shall
not be sold
unless the sum in respect of which the lien exists, shall then be
payable or until the expiration of 30
(
THIRTY)
days after a Notice in writing has been given to the Shareholder
holding such shares, stating the intention to sell
the shares if
payment is not made of the amount then payable before the
expiration of the period of 30 (THIRTY) days.
5.3 The
nett proceeds of the sale of the shares after deducting reasonable
expenses, shall be applied in payments of the amount
payable. The
balance shall remain subject to a lien in respect of any further
sums owing but not yet payable and after payment
of such sums, the
balance then remaining shall be paid to the entity registered as a
Shareholder at the date of the sale,
or if not further sums remain
owing, the balance shall be paid immediately. The purchaser of the
shares shall be registered
in respect thereof, but he shall not be
under any duty to attend to the application of the purchase
consideration, nor shall
his right to the shares be affected by any
irregularity or invalidity in the proceedings relating to the
sale.”
[14] I
am mindful of the fact that the applicant is no more challenging the
sale. The nub of applicant’s case is, in my view,
how the shares
were evaluated. The respondents attached a report on the valuation
of the business prepared by auditors wherein
it has been explained
in detail how the value of R 5920 000 being the 100% shareholders
interest in Brand IQ (Pty) Limited (first
respondent) on 25
th
January 2008 was calculated.
[15] The
applicant has not criticised the report and advanced reasons why the
valuation should not be accepted. Since the applicant,
as said
earlier, has no problems with the sale, I see no reason why the
uncontested valuation by the auditors should be disregarded
and a
new valuation is to be calculated.
[16] Mr.
Wagenaar submitted that the applicant did not dispute the factual
figures financial statements, method of evaluation
and the
objectivity of Mr Van Tonder, the auditor.
[17] Even
though applicant conceded that it has no problem with the sale of
the shares, it was argued on applicant’s behalf
that there were
some irregularities with the sale having regard to the agreement. In
clause 5.2 of the agreement it is stated
that the ‘company may
sell, in such a manner as it thinks fit.’
[18] On
the facts in the papers I cannot find any justification to grant the
order sought by the applicant in terms of
section
252 of the Act.
[19] In
my view, the respondents have proved on the balance of probabilities
that the counter application should be granted.
[20]
I
therefore, make the following order:
(i) Applicant’s application is
dismissed.
(ii) Prayers
2(a) and 2(b) of the counter application are granted.
(iii) Applicant
is ordered to pay respondents costs in respect of applicant’s
application and respondents counter application,
including the
costs which were reserved on 12
th
December 2008.
_______________
A. P. LEDWABA
JUDGE
OF THE HIGH COURT
Date
of hearing: 8 December 2008
Counsel
for Applicants: Advocate C. A. C Korf
Instructed
by: Werksmans Incorporated
℅: Matloga Mabuela Inc
Counsel
for Respondent: Advocate S. D. Wagener SC
Instructed
by: Coetzer & Partners