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[2009] ZAGPJHC 127
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Chemical, Energy, Paper, Printing, Wood And Allied Workers Union and Another v Shongwe and Others (49285/09) [2009] ZAGPJHC 127 (15 December 2009)

SOUTH
GAUTENG HIGH COURT, JOHANNESBURG
Case
No.  49285/09
In
the matter between:
THE CHEMICAL,
ENERGY, PAPER, PRINTING, WOOD
AND ALLIED WORKERS
UNION                                                                      First

Applicant
THABANI
PHIWAYINKOSI
MDLALOSE                                                      Second

Applicant
and
OUPA ISSAC
SHONGWE                                                                             First

Respondent
PILISO PASCO
DYANI                                                                             Second

Respondent
MOTLALLEPULA
KRISMIS
TSOLO                                                           Third

Respondent
KEITH RONALD
VICTOR
JACOBS                                                          Fourth

Respondent
DONALD MLINDWA
GUMEDE                                                                     Fifth

Respondent
MASTER OF THE
NORTH GAUTENG HIGH COURT                                Sixth

Respondent
CEPPWAWU
INVESTMENTS (PTY)
LTD                                               Seventh

Respondent
LETSEMA
INVESTMENTS (PTY)
LTD                                                      Eighth

Respondent
FIRSTRAND BANK
LTD                                                                              Ninth

Respondent
DEREK
THOMAS                                                                                        Tenth

Respondent
JUDGEMENT
MEYER,
J
[1]
The applicants seek an interim interdict in terms of part A of the
Notice of Motion,
which is an order interdicting certain payments
from the seventh respondent’s FNB account, pending the hearing
of part B
of the Notice of Motion, which seeks the removal of the
first respondent as a trustee of the CEPPWAWU Development Trust and
the
appointment of new trustees.  The matter is opposed by the
first, seventh, eighth, and tenth respondents (‘the
respondents’).
[2]
The urgency by which the application for interim relief was brought
is in issue.
There was, in my view, in all the
circumstances no unreasonable delay on the part of the applicants in
launching the application
on 24 November 2009 once their attorney was
advised on 25 September 2009 of the approximately R45 million payment
that had been
made to the eighth respondent on 23 September 2009.
The delay that there was is adequately explained.  I should also

mention that the present application comprises about 1 300 pages and
argument lasted more than five hours on Friday, 11 December
2009.
An injustice will result if the application for interim relief is not
presently determined.
[3]
The
locus standi
of each applicant is in issue.  It is
asserted in the answering papers that the proceedings have not been
authorised by the
first respondent.  It is not necessary for me
to decide this issue at this interim stage since the second
applicant, by virtue
of his membership of the first applicant and the
provisions of the trust deed, is a contingent beneficiary of the
trust, has a
direct and substantial interest in the proper
administration of the trust and the funds held by the seventh
respondent, and he
has a right to an account.  Compare:
Gross and Others v Pentz
[1996] ZASCA 78
;
1996 (4) SA 617
(A), at p 628, and
Doyle v Board of Executors
1999 (2) SA 805
(C), at pp 812F –
813B.  An application for the removal of a trustee may, in terms
of s 20 of the Trust Property Control
Act, be brought by someone with
an interest.  It follows, in my view, that the second applicant
has a sufficient interest
to seek the relief which is sought in this
application.
[4]
The first applicant is a trade union with about 63 000 members, who
are employees
in the paper, wood, petroleum, pharmaceutical and
chemical industries.  The first applicant is the beneficiary of
the CEPPWAWU
Development Trust (‘the trust’), which trust
is governed by its trust deed.
[5]
The primary object of the trust is to generate income from
investments and other sources
and to utilise the income to provide
financial assistance to its beneficiary, the first applicant, and to
the first applicant’s
members, their families and communities
(clause 3.1).  Its subsidiary object is to make investments in
ventures which are
likely to contribute to the empowerment and
development of the first applicant’s members, their families
and their communities
(clause 3.2).  The trust must be governed
by three trustees appointed by the first applicant, by two ‘Investco’

trustees, and by two ‘professional’ trustees (clause
5.1).  There may not be fewer than five trustees.  If
the
number of trustees in office drops to below five, then the remaining
trustees are only empowered to act in preservation of
the assets and
investments of the trust (clause 5.5).   The trustees have
the duties commonly associated with their office,
including the
preparation and maintenance of books, financial statements and the
like (clause 6).  No trustee in his personal
capacity may have
any interest in or derive any benefit from any contract which the
trustees may conclude with any trust, organisation,
company or
individual (clause 7.2.22).  The trustees must at all times
exercise their powers independently and in what they
deem to be the
best interests of the trust and in accordance with the primary and
subsidiary objects of the trust and for the benefit
of the first
applicant (clause 7.3.4).  The trustees shall ensure that not
less than twenty five percent of the income earned
on any investment
owned by the trust in any one financial year is paid to the first
applicant by no later than six months after
the end of that financial
year, unless the first applicant has, at the request of the trustees,
consented otherwise.  The
trust will be deemed to have earned
income if income has been earned by any company held by the trust
regardless of whether such
income has been declared as a dividend
(clause 10).
[6]
The trust owns all the shares in the seventh respondent, which is the
investment vehicle
of the trust.  The seventh respondent in turn
holds all of the shares in several special purpose vehicle companies,
which
SPV’s hold investments in employer companies, such as
Aspen, Barloworld and Sasol.  The employer companies have
typically
offered a significant shareholding in their companies at a
substantial discount to the market price of the shares to form black

empowerment partnerships.  The tenth respondent, in paragraph 82
of the respondents’ answering affidavit, states that
the
seventh respondent and its subsidiary SPV’s has ‘…a
cumulative investment value as of date of approximately
R400 000
000.00 to R500 000 000.00.’
[7]
The first respondent was appointed a ‘professional’
trustee of the trust
when it was formed.  For the recent past he
has been the sole
de facto
remaining trustee of the trust.
The first respondent is a director of the seventh respondent.
From 2000 onwards the
seventh respondent concluded three management
agreements with the eighth respondent, which agreements have
undoubtedly conferred
great benefits on the eighth respondent.
The last one was concluded on 12 April 2007 between the trust, the
seventh respondent,
and the eighth respondent.   This
management agreement provides for the payment of management fees to
the eighth respondent
and it gives it a 27,5% equity stake in all
investments held by the trust through the seventh respondent.
The eighth respondent
forms part of the Letsema Group of Companies
with the shares in its holding company owned by the first respondent
and the tenth
respondent, the latter being the executive officer of
the seventh respondent.
[8]
The relevant SPV’s investment in Aspen was unwound during the
first half of
2009 and the SPV was left with significant cash in the
form of dividends that it had received and the proceeds of the shares
that
had been sold.  The relevant SPV was left with cash in the
sum of about R327 million as at June 2009.  After making
allowance
for potential liabilities to SARS and fees for external
service providers, a balance of about R165 million was left.  It
was
claimed that a sum of about R45 million was owing to the eighth
respondent.
[9]
On 12 August and 1 September 2009, the first applicant’s
attorneys addressed
letters to the tenth respondent, who is the chief
executive officer of the seventh respondent.  The seventh
respondent’s
attorneys replied by letter dated 4 September
2009.  The following undertaking was given in paragraph 18.2 of
this letter:
’
18.
Having said that, our client appreciates that there is anxiety,
misplaced as it is, from certain
quarters whence your purported
instructions have come, and to allay such anxiety our client took
further steps to assure such Union
members that –
18.1
…
.
18.2
whilst our client’s
contractual obligations to Letsema Investments (Pty) Limited are of a
long standing nature, have always
been well known to and openly
discussed with the trustees of the Ceppwawu Development Trust and
with the Union leadership from
time to time, have never been in
dispute, and in terms thereof an amount of approximately R48 000
000.00 is presently due, owing
and payable to Letsema Investments
(Pty) Limited, our client assures the concerned members that payment
thereof will not be made
to Letsema Investments (Pty) Limited at this
stage, to afford the NEC a reasonable opportunity to consider the
applicable agreements
pertaining to Letsema’s contractual
entitlement thereto;’
[10]
In the midst of an exchange of correspondence that followed, the
seventh respondent’s attorneys,
who are also acting for the
first, eighth, and tenth respondents in the present proceedings,
advised the first applicant’s
attorneys in a letter dated 25
September 2009 that the seventh respondent
‘…
was
neither obliged nor entitled to delay any longer the payment of the
aforementioned amount to Letsema which was due, owing and
payable to
it, and accordingly on 23 September 2009, our client paid Letsema the
aforesaid amount.’
The
amount that was paid to the eighth respondent on 25 September 2009
was just over R45 million.
[11]
It is contended by the applicants that the payment was in breach of
the undertaking previously
given and in bad faith.  It is
further contended that if the payment was not specifically instructed
by the first respondent,
it must have occurred with his knowledge and
consent and in the circumstances constitutes a breach of his
fiduciary duties as well
as a breach of the provisions of the trust
deed.  The tenth respondent states the following in the
respondents’ answering
affidavit:
’
42.
However, it is devoid of any substance that the amount of R45 197 786
which was paid out to the
Eighth Respondent on 23 September 2009, was
a payment made in conflict with an undertaking given in writing by
Mendelow or that
the Seventh Respondent was not entitled or obliged
to do so in accordance with its long standing and well recognised
contractual
obligation to the Eighth Respondent.
43.
The circumstances pertaining to that payment are comprehensively
dealt with in Mendelow-Jacobs’
letter of 25 September 2009,
annexure “TM54” to the founding affidavit.’
[12]
The undertaking that was given in paragraph 18.2 of the seventh
respondent’s letter of
4 September 2009 is, however, clear and
unambiguous.  One would, at the very least, have expected prior
notice of the payment
to have been given to the first applicant or to
its attorneys.
[13]
The applicants seek the removal of the first respondent as a trustee
of the trust in the B part
of the notice of motion on the grounds
that he has breached his duties as a trustee, is impossibly
conflicted in respect of his
duties and his personal interests, and
that he accordingly is unable to discharge his obligations as a
trustee.  The applicants
further seek the appointment of certain
trustees in order to constitute the required complement of trustees
and to enable their
meetings to be quorate.  In support of the
grounds upon which they rely for the relief they seek in the B part
of the notice
of motion, they
inter alia
aver that no meetings
of the trustees have been held, no books of account have been kept,
and no financial statements have been
prepared.  The contention
on behalf of the applicants is that the trust, the seventh
respondent, and the eighth respondent
have at all material times been
controlled by the first respondent.  It is averred that the
first respondent, as the sole
remaining
de facto
trustee, has
allowed the trust’s investment vehicle of which he is a
director, the seventh respondent, to pay a sum of about
R45 million
to his own company, the eighth respondent, of which he is also a
director and direct or indirect shareholder.
The payment was
made in circumstances where the validity of the management agreement
in terms whereof the payment was made was
questioned and investigated
and despite an undertaking given in writing by the respondents’
attorney that the payment would
not be made until the first
applicant’s NEC had had a reasonable opportunity to consider
the applicable agreements pertaining
to the eighth respondent’s
contractual entitlement to the R45 million payment.  It is
averred that the management agreement
may be invalid or unenforceable
on a number of grounds.  It is averred that despite the primary
purpose set out in the trust
deed and the provisions thereof and
despite the large sums of money that had been received by the seventh
respondent, the trust
had not received any money other for a sum of
about R1 million that had been paid to the first applicant directly.
The production
of information is also sought in terms of part B of
the notice of motion.  The applicants aver that the first
applicant’s
requests for information in the hands of the first
respondent as trustee of the trust and as a director of the seventh
respondent
have not been complied with.
[14]
The relief sought in the B part of the notice of motion is resisted
by the respondents on several
grounds.  It is
inter alia
denied that the first respondent or the tenth respondent, who is
the chief executive officer of the seventh respondent, either jointly

or individually at any stage controlled the board of directors of the
seventh respondent.   It is averred that the first

applicant at all material times ‘has always had a majority of
representatives of the First Applicant serving on the Board
of
Directors of the Seventh Respondent.’  It is averred that
the payout to the eighth respondent arose from a longstanding
and
well recognised contractual entitlement and any further delay in the
R45 million payout would have caused an escalation in
the accrual of
mora
interest on the amount.  It is denied that the third
management agreement is invalid or unenforceable on any basis and it
is
averred that the three management agreements have been duly
authorised and approved by all the parties concerned.  The
eighth
respondent’s 27.5% equity stake in all investments held
by the trust through the seventh respondent is justified on various

grounds.  It is averred that the trust would have received
income from the seventh respondent this year had it not been for
the
interference of the applicants herein and that the payment from the
seventh respondent to the trust of the 25% net profit in
the Aspen
transaction could only be effected once the trust ‘has been
rendered quorate by the appointment of the trustees
designate.’
It is averred that the fact that the first respondent is the only
remaining
de facto
trustee is not of his making, ‘but
rather the result of infighting and discord within the Union, which
has led to its structures
being presently not duly constituted’.
It is averred that until recently there was no business of the trust
which could
be separated from the business of the seventh respondent
and accordingly no ‘practical need’ to open any bank
account
or to keep books of account or prepare financial statements
for the trust.  It is averred that there has always been a full

flow of information and full furnishing of documentation and
accounting to the first applicant in respect of the affairs of the

seventh respondent.
[15]
I have mentioned only some of the numerous issues raised on the
papers.  The brevity is
intentional and despite temptation to
the contrary in order not to prejudice any of the parties when part B
of the notice of motion
is determined.  I am mindful that the
respondents have had relatively little time in the circumstances to
prepare and file
their answering affidavits and they have co-operated
in facilitating the expeditious finalisation of part A of the notice
of motion.
The respondents for purposes of the
adjudication of the interim relief did not rely on their Rule 35(12)
notice for the inspection
of what appears to be voluminous documents
and the applicants’ alleged failure to comply therewith.
Their rights have
also been reserved to file comprehensive answering
affidavits in future in order to fully deal with part B of the notice
of motion.
[16]     Having
considered the facts as presented by the various parties in
accordance with the approach
formulated in
Webster v Mitchell
1948 (1) SA 1186
(W), at p 1189 and as qualified in
Gool v
Minister of Justice and Another
1955 (2) SA 682
(C), at p 688E,
the applicants have, in my judgment, established a
prima facie
right although open to ‘some doubt’.  See also:
Eriksen Motors (Welkom) Ltd v Protea Motors, Warrenton, and
Another
1973 (3) SA 685
(A), at p 691C-G.
[17]
The relief which the applicants seek in this part of the application
is aimed at the preservation
of the
status quo
in the
interim.  Part A of the notice of motion seeks an order
interdicting the transfer ‘of any funds’ from the
seventh
respondent’s FNB banking accounts in the interim.
[18]
The tenth respondent, in paragraph 70 of the respondents’
answering affidavit, states the
following:
‘
The
freezing of the funds will be extremely prejudicial and detrimental
to the business of the Seventh Respondent, as it would not
be able to
conclude any further transactions, not be able to pay the monthly
management fees to the Eighth Respondent, not be able
to pay its
auditors, who have just produced draft interim financial statements
for the period 1 March to 31 August 2009, not be
able to pay its
attorneys (who are working on matters other than this one), not be
able to pay income tax, Captial Gains Tax and
Secondary Tax on
Companies when these become payable early next year, apart from other
ordinary and regular operating expenses.’
[19]
The second applicant, in paras 41- 43 of the applicants’
replying affidavit, states the
following:
41.
If regard is had
inter alia
to paras. 154, 155 and 156 of the
Founding Affidavit, it is clear that the Applicants do not seek an
order “freezing”
monies which have correctly been set
aside by CI in respect of CI/CPI’s potential tax liability to
SARS or in respect of
monies that are due to external service
providers.  Similarly, the Applicants do not seek an Order
“freezing”
monies which have been allocated in respect of
the sale of shares in Business Ventures 670 (Pty) Ltd.
42.
I and the First Applicant had by now assumed that monies set aside
for SARS, external service
providers and the seller of Business
Ventures 670 (Pty) Ltd’s shares would have been paid over.
If this is not so,
these issues can be addressed by way of an
appropriate order.
43.
Part A of the Notice of Motion is directed towards preventing the
relevant Respondents from
dealing with the bulk of the funds which CI
currently hold in the Wierda branch bank account in a manner which is
at odds with
the provisions of the Trust Deed and the objectives of
theTrust.  It is not the Applicants’ case that it is
entitled
to an Order effectively freezing every last cent in that
account.’
[20]
The applicants filed a draft order prior to the hearing of this part
of the application in terms
whereof they only seek an order
interdicting the transfer of funds from the seventh respondent’s
FNB banking accounts ‘to
the eighth respondent’, ‘in
respect of new investments’, and ‘for legal fees in
respect of this application’
pending the hearing of the
application for the relief in part B of the notice of motion.
[21]
The reason why the applicants seek the interim interdict in respect
of payments to the eighth
respondent is because they fear that
further payments may happen (replying affidavit, para 48) and they
‘
maintain
that the contractual relationship between Letsema, CI and the Trust
needs to be fully investigated.  On the face of
it, the Third
Management Agreement is invalid by virtue of the fact that it was
concluded in breach of Clause 7.2.22 of the Trust
Deed.  The
trustees to be appointed will need to take legal advice on this issue
and act accordingly.  Any potential
prejudice to Letsema can be
remedied in due course by an appropriate payment of interest.’
(replying affidavit, para
46)
[22]
The tenth respondent, in paragraph 71 of the respondents’
answering affidavit, states as
follows:
‘
At
the risk of over emphasizing, I repeat that no further payments,
apart from the usual management fees, are due to the Eighth

Respondent for a considerable period of time and in any event not
before June 2010.’
This
statement does not amount to an undertaking that no further payments,
apart from the usual management fees, will be made to
the eighth
respondent pending the hearing of the application for the relief in
part B of the notice of motion.
[23]
The reason why the applicants seek the interim interdict against
payments in respect of new investments
is that the first respondent
is the sole trustee of the trust and he is bound by clause 5.5 of the
trust deed, which requires that
where the number of trustees drops
below five, the trustees must only act to preserve the assets of the
trust.  This is common
cause.  I further agree with the
submission made by adv. SF Burger SC, who appeared with adv. JC
Butler SC for the applicants,
that it is implicit in that prohibition
that no new investments be made.
[24]
The applicants also assert that it is in terms of clause 10 of the
trust deed not competent for
the first respondent to allow income
earned on any investment owned by the trust to be re-invested into a
fresh investment without
and before at least 25% of the income earned
in financial year has been passed on to the trust for the ultimate
benefit of its
beneficiaries.  They assert that the objectives
of the trust cannot be realised if the respondents are allowed to
reinvest
income earned in new investments (replying affidavit, paras
48 – 49).  This interpretation of clause 10 of the trust

deed is in issue and need not be resolved by me at this interim stage
in the light of my other findings herein.
[25]
The reason why the applicants seek the interim interdict against
funds of the trust being used
to pay legal fees in respect of this
application is based on the contention that the first respondent
opposed this application,
not the trust or the seventh respondent.
I have referred to paragraph 70 of the respondents’ answering
affidavit
wherein the tenth respondent states that ‘[t]he
freezing of the funds will be extremely prejudicial and detrimental
to the
business of the Seventh Respondent, as it would … not
be able to pay its attorneys (who are working on matters other than

this one), …’.  The objection is not aimed at an
inability to pay its attorneys in respect of this matter.

Furthermore, the tenth respondent in paragraph 15 of the respondents’
answering affidavit states that the eighth respondent

‘…certainly has no interest in the relief which the
Applicants claim in both Parts A and B of the Notice of Motion’

and in paragraph 22 thereof that his ‘…joinder in this
application constitutes a misjoinder….’.
Although
the seventh respondent opposes this part of the application, no
resolution of the seven respondent’s board of directors
has
been presented.
[26]
It is common cause that the seventh respondent is the investment
vehicle of the trust.
The tenth respondent, in para 145 of the
respondents’ answering affidavit, states that
‘…
what is abundantly
apparent from the trust deed, is that it is a delicately balanced
instrument, which is designed to ensure that
the First Applicant does
not have control over the Trust.  It has the right to appoint
three of the seven trustees, with two
of the remaining trustees being
appointed by “Investco”, and the two “professional
trustees” being replaced
when necessary, by the remaining
trustees in office.  See clause 5 of the Trust Deed.’
[27]
It is also common cause that the trust is not properly constituted
and that it is presently dysfunctional.
It can therefore at
present not control the seventh respondent effectively.  The
trust should determine who the directors
of the seventh respondent
should be.  No meeting of the trust can be quorate as long as
the number of trustees is below five,
no binding resolution can be
taken in regard to further investments by its investment vehicle or
in respect of the third management
agreement.
[28]
I am accordingly satisfied that the applicants have established that
they have no other satisfactory
remedy and their apprehension of loss
should this interim interdict not be granted is, in my view,
reasonable under all the circumstances.
[29]
I now turn to the requirement whether the balance of convenience
favours the granting of the
interim interdict.  In assessing the
balance of convenience, a court is required to weigh the prejudice
which an applicant
will suffer if the interim relief is not granted
against the prejudice which a respondent will suffer if the interim
interdict
is granted.
[30]
In a different context it was submitted by Adv. E Wessels, who
appeared on behalf of the respondents,
that there is no suggestion on
the papers that a new investment is on the horizon and that there is
a long lead time to the conclusion
of new transactions.  This
means that any prejudice to the seventh respondent in respect of new
transactions can only be remote
and minimal.
[31]
Investment transactions that have been concluded, such as the
acquisition of shares in Business
Ventures 670 (Pty) Ltd, do not fall
within the ambit of the interim relief which is presently sought and
inroads will therefore
not be made on the seventh respondent’s
existing contractual obligations.
[32]
The eighth respondent has recently received payment of R45 million
from the seventh respondent
and prejudice to it if management
payments are withheld pending a hearing of part B of the application
is also unlikely.
The relief presently claimed is aimed at
preserving about R100 million in the FNB banking accounts of the
seventh respondent pending
the hearing of the application for the
relief in part B of the notice of motion.  Any monies to which
the eighth respondent
is in due course shown to be entitled are
accordingly safely preserved.  Any potential prejudice to the
eighth respondent
can be remedied in due course by an appropriate
payment of interest.
[33]
The relief in part A of the notice of motion seeks the preservation
of the
status quo.
The first respondent, as the sole
trustee, is obliged to preserve the trust assets in terms of clause
5.5 of the trust deed
until the minimum number of trustees has been
appointed.  Adv. Burger SC on behalf of the applicants submitted
that the seventh
respondent is in a similar position to the trust.
No investments should be made and no payments should be made under a
disputed
management contract pending the appointment of trustees and
the determination of the first respondent’s position as a
trustee.
I agree with these submissions.
[34]
The balance of convenience, in my view, supports the interim relief
presently sought.
[35]
In the result the following order is made:
The
non-compliance with forms and process provided in the Uniform Rules
of Court is condoned, and the matter is determined as
one of urgency
in terms of the provisions of Rule 6(12)(a).
Pending
the hearing of the application for the relief in part B of the
notice of motion, the first, seventh and eighth respondents
are
hereby interdicted and restrained from transferring, or permitting
the transfer of any funds out of any account held in the
name of the
seventh respondent with the ninth respondent at the Wierda Valley
branch of the ninth respondent, at 50 Wierda Road
West, Sandton, to
effect any payment to the eighth respondent or in respect of new
investments or for legal fees in respect of
this application.
Part
B of the application is postponed
sine
die
.
The
costs of part A of the application are reserved for determination at
the hearing of part B of the application.
P.A. MEYER
JUDGE OF THE HIGH
COURT
15 December 2009