THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Reportable
Case no: 511/2023

In the matter between:
BOUDEWYN HOMBURG DE VRIES SMUTS APPELLANT
and
KROMELBOOG CONSERVATION
SERVICES (PTY) LTD FIRST RESPONDENT
COMPANIES AND INTELLECTUAL
PROPERTY COMMISSION SECOND RESPONDENT

Neutral citation: Smuts v Kromelboog Conservation Services (Pty) Ltd and
Another (511/2023) 2024 ZASCA 156 (14 November 2024)
Coram: DAMBUZA, MABINDLA -BOQWANA and MOLEFE JJA and
HENDRICKS and BAARTMAN AJJA
Heard: 21 August 2024
Delivered: 14 November 2024
Summary: Company law – s 16 2(5)(c) of the Companies Act 71 of 2008 –
whether conduct of a director justified declaration of delinquency.

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ORDER

On appeal from: Western Cape Division of the High Court, Cape Town (Henney
J, sitting as court of first instance):
The appeal is dismissed with costs, including the costs of two counsel, where so
employed.

JUDGMENT

Mabindla-Boqwana JA ( Dambuza and Molefe JJA and Hendricks and
Baartman AJJA concurring):
Introduction
[1] The issue in this appeal is whether an order declaring the appellant,
Dr Boudewyn Homburg De Vries Smuts, a delinquent director in terms of s 162
of the Companies Act 71 of 2008 (the Act), by the Western Cape Division of the
High Court, Cape Town (the high court) , was justified. The order was made
pursuant to an application brought in the high court by the first respondent,
Kromelboog Conservation Services Pty (Ltd) (Kromelboog) against Dr Smuts .
The appeal is with the leave of that court.

Background
[2] In 2015, Dr Smuts , who is a nature conservationist, was appointed as
Kromelboog’s sole director until his removal on 7 July 2021. Kromelboog is a
company that engages in livestock farming. It is solely owned by a trust named
Tamarisk Trust (Tamarisk). At relevant times Mr Timothy Allsop was its trustee.

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[3] In 2015 , Tamarisk purchased four adjacent farms in Beaufort West,
Western Cape, commonly known as ‘Little England’, ‘Welge vonden’,
‘Nooitgedacht’ and ‘De Hoop’ (the properties). This was followed by conclusion
of a lease agreement , on 16 July 2015 , between Tamarisk and Kromelboog in
terms of which Tamarisk would lease the properties to Kromelboog for farming
purposes. The lease was for a renewa ble period of five years , at a rental of
R600 000 per annum. Dr Smuts signed the lease on behalf of Kromelboog and
Mr Allsop, on Tamarisk’s behalf.

[4] Dr Smuts was also a trustee and a n ‘executive officer’ of a not-for-profit
charitable trust, the Landmark Foundation Trust (Landmark), which he founded
in 2004. Landmark conducted a research project known as Shepherding Back
Bio-diversity Project (SBBP). The aim of the project was to reintroduce
traditional herding or human shepherding as a conservation initiative in semi-arid
rangeland livestock agricultural areas.

[5] On 2 7 May 2016, Tamarisk, Landmark and Kromelboog concluded a
written management agreement in terms of which Landmark was appointed as a
manager of the properties in order:
‘. . . to demonstrate the effectiveness of holistic farming methods in the livestock farming
sector, including the use of non -lethal predator controls and reintroduction of shepherding to
enable enhanced grassland/pasture management through better grazing rotation.’1

[6] In terms of clause 4.1 of the management agreement, any and all expenses
incurred by Landmark in carrying out its duties would be refunded by
Kromelboog. Landmark would improve the housing facilities of farmworkers,
adopt industry standard remuneration levels , improve water points and water
distribution, improve farm fences, roads and machinery, establish alternative

1 Clause 2.2 of the written management agreement.

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and/or renewable and/or sustainable energy solutions for the properties , and
improve the veld and quality grazing.

[7] Given that Landmark was a not-for-profit charitable trust, and had specific
tax requirements, Kromelboog was incorporated as the management and
operations arm of the farming activities in the properties. It is averred on behalf
of Kromelboog that it was responsible for all commercial farming activity on the
properties. Dr Smuts , however, disputes this. He asserts that Kromelboog was
established because Landmark could not trade. According to him, Landmark
managed the properties and the farming operations while Kromelboog was
merely the financial vehicle to address the constraint of Landmark not being
permitted to trade as a not-for-profit organisation.

[8] As indicated in the annual financial statements for the financial year ending
on 28 February 2020 , which were signed by Dr Smuts on 4 May 2020,
Kromelboog opened and manage d a business bank account at Nedbank . It
purchased and maintained farming equipment and livestock; it employed and paid
staff; it administered all tax benefits and obligations for the employees; it paid all
utilities and taxes due in respect of the properties ; and purchased and sold
livestock. According to Kromelboog, this was indicative of the fact that it traded
in farming operations.

[9] The mentioned annual financial statements also reveal that Kromelboog
operated at a loss of R2 537 860 for the 2020 tax year and suffered a net operating
loss of R3 845 005 before taxation. The accumulated losses were more than R16
million for the first six years of SBBP being carried out on the properties. The
losses were funded by Tamarisk through shareholder loan funding, which
increased to approximately R27 million. Dr Smuts asserts that the R27 million

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loan account included the purchase of all livestock, game animals, implements,
equipment, vehicles and tractors, among other things.

[10] Kromelboog also purchased Kambro , another farm, using Tamarisk ’s
money. Dr Smuts states that in December 2020 he had raised with Mr Allsop the
fact that the financial losses of Kromelboog were not so much due to the SBBP,
but rather because of Mr Allsop’s appetite for buying multilayered farms, the
carrying out of capital improvements on the properties, as well as purchase of
new vehicles and renovation of the gardens and homesteads for his own private
use.

[11] Mr Francois Gerber , Kromelboog’s current director , avers on behalf of
Kromelboog, that Mr Allsop donated some contributions in support of the
furtherance of the SBBP. In response to this, Dr Smuts asserts that an undertaking
to make donations was made by Mr Allsop and Tamarisk, and Landmark accepted
it.

[12] It is important to mention that the foundation of Dr Smuts’ defence is based
on a Joint Venture oral agreement (JV), which he says he concluded in 2013, with
Mr Allsop and Tamarisk , while on a trip from Plettenberg Bay. He avers that
during that trip, he shared with Mr Allsop the biggest challenge Landmark had in
implementing the SBBP. It related to the acquisition of the right to utilise and
operate farmland for a generational period of 25 years. Mr Allsop agreed to solve
this problem by acquiring suitable farm property on which Landmark could have
generational tenure of 25 years. The only condition Mr Allsop had was that any
increase in the value of the farms would accrue to him as the owner or to one of
the trusts he controlled.

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[13] In an email dated 28 December 2020, Dr Smuts wrote to Mr Allsop who
was still a trustee of Tamarisk stating:
‘You asked that I put together a synopsis of the farm efforts. It is important that. . . you make a
decision which direction you want to take this.
. . .
We set out to do this in an establishment period of 5 years. I obtained resources to assist with
this conversion but with the project creep into 5 farms (LE, Welgevonden, Nooitgedacht, De
Hoop and Kambro ), a massive built infrastructure rehabilitation effort, it put an inordinate
burden on you and us. We have achieved a great deal, but ultimately did not have enough
resources to fly this Cessna to the moon. I gave it a good go. The reality is that the Karoo needs
a generation to effect the benefits of this method of land management , not that the extreme
drought, that is ongoing, helped.
I would suggest you make a decision around how to proceed as things look a bit glum from my
perspective. . . ’ (Emphasis added.)

[14] The email presented Mr Allsop with various options including the ‘selling
of the lot’. Dr Smuts says that, at that stage, he also reminded Mr Allsop that the
donor funding would come to an end on 31 December 2020 and thereafter
alternative funding would be required , if the project was unable to fund itself
fully.

[15] Dr Smuts says he was surprised when on the morning of 5 January 2021,
Mr Allsop repudiated the JV. According to him, Mr Allsop did so by instructing
him and Landmark to vacate the farms , both in his personal capacity and as a
trustee of Tamarisk. Dr Smuts and Landmark accepted such repudiation in May
2021. He also states that at the time of the JV’s repudiation and its acceptance by
Landmark, the lease had already reached its expiration on 15 July 2020 . The
management agreement, however, continued until its repudiation by Kromelboog
under its new management which he and Landmark accepted.

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[16] Dr Smuts requested Kromelboog to purchase certain farming assets from
Landmark. The purchase price of approximately R1.9 million was agreed to
between Kromelboog and Landmark for the said assets. By January 2021, it was
clear that a dispute had arisen between Landmark, Kromelboog and Tamarisk. As
a result, the parties engaged in protracted settlement negotiations, which fell apart
in June 2021.

[17] On 22 June 2021, Dr Smuts was given Tamarisk’s notice of intention to
remove him as a director in terms of s 71 of the Act . The reasons stated for his
removal included a breakdown in trust between himself and Tamarisk ; the
insolvency position of Kromelboog ; his alleged disparaging remarks about
Tamarisk; and a clear conflict of interest that had arisen as a result of the two
positions he held, as a director of Kromelboog and as a trustee of Landmark.

[18] On 7 July 2021, Dr Smuts attended a s 71 meeting at which he was legally
represented. He regarded this meeting as a ruse, because, according to him, it had
already been mentioned that he would be removed , regardless of the
representations he had made. After making representations , Dr Smuts was
removed as a director of Kromelboog . He did not challenge this removal.
Nevertheless, in a letter dated 7 July 2021, BDLS Attorneys Inc, acting for Dr
Smuts, asserted a lien on Landmark’s behalf stating, inter alia, that:
‘Dr Smuts remains an employee of the company, notwithstanding his removal as a director,
and he will continue to protect the interests of the company and those of [Landmark] and its
donors by furthering the aims of the Shepherding Back Biodiversity Project until [Landmark’s]
enrichment claim is paid in full by the Tamarisk Trust.

Any interference with our clients’ peaceful possession of the properties or any attempts to deny
our clients access to any of the properties will be met with an urgent spoliation application. . . .’

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[19] On 16 July 2021, Dr Smuts incorporated Shepherding Back Co (Pty) Ltd
(Shepherding Back Co), which according to Kromelboog, was formed for the sole
purpose of replacing and usurping Kromelboog’s entire commercial and farming
operations. Dr Smuts denies that Shepherding Back Co was an operational entity.
He asserts that i t had no bank account and was never registered for V AT. He
maintains that Kromelboog was never involved in any farming operations.

[20] Several court applications ensued between the parties. Amongst those were
spoliation proceedings brought by Landmark against Kromelboog o n 26 July
2021, for alleged dispossession of the farms and farming operations by
Kromelboog’s new director, Mr Gerber.

[21] On 5 October 2021, Kromelboog obtained a final order interdicting Dr
Smuts and Landmark from carrying out farming operations or a ny form of
commercial enterprise on the properties. Parties had brought applications against
each other which were heard by Nuku J, who observed:
‘. . . The facts also demonstrate that Dr Smuts, through L andmark and Shepherding Back
interfered with Kromelboog’s right by hijacking Kromelboog’s commercial operations on the
properties. The facts also demonstrate a determination by Dr Smuts, through the
instrumentality of Landmark and Shepherding Back to persist in interference with
Kromelboog’s commercial operations of the properties.’2

Leave to appeal Nuku J’s judgment was refused and, we are told, was not pursued
any further. Dr Smuts and Landmark finally vacated the properties on 22
December 2021, following a further application by Kromelboog.


2 Boudewyn Hamburg De Vries Smuts N.O. & Others v Kromelboog Conservation Services (Pty) Ltd & Others ;
Case no: (12565/2021) (14 April 2022). Kromelboog Conservation Services (Pty) Ltd & Others v Boudewyn
Hamburg De Vries Smuts N.O. & Others ; Case no: (14350/2021) (14 April 2024) (unreported judgment)
(Boudewyn) para 25.

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[22] Mr Gerbert avers for Kromelboog that, shortly before and following his
removal as a director, Dr Smuts embarked on a personal crusade to strip
Kromelboog of its business. He conducted himself in a manner that caused harm
to the company as its director and abused his position as a sole director, placing
his own interest above those of Kromelboog. He did this by:
(a) rendering invoices to Kromelboog for his personal benefit, while the
company was in a state of insolvency;
(b) causing legal fees to be paid by Kromelboog for personal litigation to the
detriment of the company;
(c) clearing Kromelboog’s funds from its bank account, minutes before the
shareholders’ meeting set to consider his removal as a director;
(d) causing Kromelboog to pay a donation to Landmark without the approval of
the shareholders; and
(e) usurping Kromelboog’s business by claiming possession of the farming
properties, requesting registration documents pertaining to vehicles owned by
Kromelboog and enticing employees to leave Kromelboog and join Landmark
and/or his newly formed entity Shepherding Back Co.

[23] Kromelboog brought an application in the high court, to declare Dr Smuts
a delinquent director in terms of s 162(5) of the Act. The application served before
Henney J, who analysed each complaint against the principles applicable when a
court determines such a declaration. While the high court dismissed two of the
complaints relied upon by Kromelboog , it found the grounds for declaration of
delinquency in terms of s 162(5) to have been met based on the remaining
complaints.

[24] The high court came to the following conclusion:
‘The court found that Smuts by authorizing payments to himself which he as sole director were
not entitled to do, he breached the provisions of Section 75(3) of the Act. Secondly, by doing

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so he clearly breached the standards of conduct of a director as contemplated in section 76 of
the Act and in particular, section 76(3) thereof. This conduct clearly constitutes a gross abuse
of his position as director in terms of section 162(5)(c)(i). His conduct was clearly intentional
or at the very least grossly negligent, which resulted in him inflicting harm on Kromelboog
when he acted contrary to section 76(2)(c)(a) of the Act. This also clearly amounts to conduct
as contemplated in section 162(5)(c)(iii). This court also find[s] that the payments he authorized
after he incurred legal fees, and the donation he made to Landmark was in breach of s 78(4)(a)
and section 75(3) of the Act. This once again was improper and a breach of the standard of
conduct of a director which also amounted to Smuts having grossly abused his position as
director in terms of section 162(5)(c)(i). Such conduct was also intentional or at the very least
grossly negligent or wilful which inflicted harm on Kromelboog.’

Issue on appeal
[25] Counsel for Dr Smuts submitted that the high co urt erred in how it
approached the facts (disputed and admitted), in an application for final relief,
which resulted in it making factual findings that it should not have made.
According to counsel, had the correct approach been followed, it would have been
found that facts had not been established to support an order of delinquency in
terms of s 162 of the Act.

[26] In terms of s 162(5) of the Act:
‘A court must make an order declaring a person to be a delinquent director if the person –
. . .
(c) while a director –
(i) grossly abused the position of director;
(ii) took personal advantage of information or an opportunity, contrary to section 76(2)(a);
(iii) intentionally, or by gross negligence, inflicted harm upon the company or a subsidiary of
the company, contrary to section 76(2)(a);
(iv) acted in a manner –
(aa) that amounted to gross negligence, wilful misconduct or breach of trust in relation to the

performance of the director’s functions within, and duties to, the company; or
(bb) contemplated in section 77(3)(a),(b) or (c).’ (Emphasis added.)

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[27] Section 76(2) stipulates that:
‘A director of a company must –
(a) not use the position of a director, or any information obtained while acting in the capacity
of a director –
(i) to gain an advantage for the director, or for another person other than the company or a
wholly - owned subsidiary of the company. . .’

[28] Section 77(3)(a),(b) or (c) makes a director liable for loss or damage
sustained by the company in consequence of the director having:
‘(a) acted in the name of the company, signed anything on behalf of the company, or purported
to bind the company or authorise the taking of any action by or on behalf of the company,
despite knowing that the director lacked the authority to do so;
(b) acquiesced in the carrying on of the company’s business despite knowing that it was being
conducted in a manner prohibited by section 22 (1);
(c) been a party to an act or omission by the company despite knowing that the act or omission
was calculated to defraud a creditor, employee or shareholder of the company, or had another
fraudulent purpose. . .’

[29] The purpose of s 162 is to protect the public from directors who engage in
serious misconduct contemplated in that section. Individuals who are unworthy
of the trust bestowed on them as directors or commit misconduct of a kind
described in s 162(5) must be declared as delinquents. Section 162 seeks to
protect the public who may be dealing with companies run by people who are not
suitable to manage those companies. 3 The applicable provisions also seek to
promote acceptable standards of corporate governance.4


3 Gihwala and Others v Grancy Property Ltd and Others [2016] ZASCA 35; [2016] 2 All SA 649 (SCA); 2017
(2) SA 337 (SCA) (Gihwala) para 144.
4 Ibid paras 142 and 144. The court in Gihwala also referencing with approval: Re Gold Coast Holdings Pty Ltd
(In Liq); Australian Securities & Investments Commission v Papotto [2000] WASC 201 para 22.

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[30] In Gihwala and Others v Grancy Property Ltd and Others (Gihwala),5 this
Court described the type of conduct that would justify an order in terms of
s 162(5)(c). The Court pointed out that the section is not conce rned with some
‘trivial misdemeanour or an unfortunate fall from grace’.6 In terms of s 162(5)(c):
‘Only gross abuses of the position of director qualify. Next is taking personal advantage of
information or opportunity available because of the person’s position as a director. This hits
two types of conduct. The first, in one of its common forms, is insider trading, whereby a
director makes use of information, known only because of their position as a director, for
personal advantage or the advantage of others. The second is where a director appropriates a
business opportunity that should have accrued to the company. Our law has deprecated that for
over a century. The third case is where the director has intentionally or by gross negligence
inflicted harm upon the company or its subsidiary. The fourth is where the director has been
guilty of gross negligence, wilful misconduct or breach of trust in relation to the performance
of the functions of director or acted in breach of s 77(3)(a) to (c).’7 (Emphasis added.)

[31] Dr Smuts’ counsel submits that, because of the far-reaching and potentially
disastrous consequences of the finding of delinquency, conduct must be
‘sufficiently egregious’ to justify an order in terms of s 162(5). In the present case,
so he contends, the standard of sufficiency had been not met. In other words, the
factual matrix is significantly less egregious . It does not support the conclusion
that Dr Smuts grossly abused his position as a director in terms of s 162(5) (c)(i)
or intentionally or gross negligently inflicted harm sufficient to sustain a finding
in terms of s 162(5)(c)(iii).

[32] I have difficul ty with this proposition. The term ‘e gregious misconduct’

[32] I have difficul ty with this proposition. The term ‘e gregious misconduct’
entails serious misconduct. Conduct is either trivial or egregious. In this regard,
once a court finds a misconduct serious, as described in Gihwala,8 it has no

5 Gihwala fn 3 above.
6 Ibid para 143.
7 Ibid.
8 Ibid para 149.

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discretion but to declare a person to be a delinquent director. There are no degrees
of egregiousness that the court is required to consider.

[33] As to the approach to be followed in assessing the complaints, b oth
counsel for the parties agreed that a holistic rather than a piecemeal approach is
to be followed. I agree. With that in mind, two questions arise, the first one being
whether the high court approached the facts properly , given the fact that it was
dealing with motion proceedings. The second, whether the complaints against Dr
Smuts, warranted the declarator in terms of s 162(5)(c) of the Act.

[34] As it shall become apparent, Dr Smuts admitted the occurrence of various
transactions or events. He, however, gave explanations or justifications as to why
his conduct was not wrongful or ‘sufficiently egregious’ to warrant a declaration
of delinquency . Considering that these were motion proceedings, Dr Smuts’
version that there was a JV in place, must be accepted. That brings me to the
analysis of the complaints.

Clearing of funds from Kromelboog’s bank account
[35] It is common cause that minutes before the start of the shareholders’
meeting to consider Dr Smuts’ removal as director on 7 July 2021, he instructed
Ms Vicky Notley who was Kromelboog and Landmark’s accountant at the time,
in an email to:
‘. . . transfer all the cash resources, except for R10 000, from the Kromelboog account into the
second account of Landmark Foundation. . .’

[36] Following this instruction, Ms Notley transferred R367 071.42 from
Kromelboog’s account to Landmark’s account. Effectively, Kromelboog’s entire
cash reserves were cleared out at the time when it operated at a loss . This was
done while Dr Smuts was still the sole director of Kromelboog.

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[37] According to Dr Smuts, the shareholders’ meeting was a ruse, as there were
no shareholders present , but a Mr McPherson of STBB attorneys (Tamarisk’s
attorneys). Mr McPherson claimed to act for the shareholder representatives as a
proxy. Mr McPherson had, according to Dr Smuts, apparently mentioned that Dr
Smuts would be removed as a director, the following morning. This necessitated
that he:
‘. . . transfer the monies to a ringfenced account wherefrom all project expenses and income
would be accounted for until the conflict was to be resolved.’
Dr Smuts avers that he did this based on legal advice.

[38] The high court found this conduct to be contrary to the provisions of s 75(3)
of the Act, which provides as follows:
‘If a person is the only director of a company, but does not hold all of the beneficial interests
of all the issued securities of the company, that person may not –
(a) approve or enter into any agreement in which the person, or a related person has a personal
financial interest; or
(b) as a director, determine any other matter in which the person, or a related person has a
personal financial interest,
unless the agreement or determination is approved by an ordinary resolution of the
shareholders after the director has disclose d the nature and extent of that interest to the
shareholders.’ (Emphasis added.)

[39] Having found this transgression, the high court , nevertheless, concluded
that on this ground, a case for declaration of delinquency had not been
established. This was because the explanation given by Dr Smuts , made it
difficult for the court to find him to have acted wilfully or recklessly. In this
regard, the court relied on Lewis Group Limited v Woollam and Others 9 to
conclude that Dr Smuts’ conduct seemed to be based on ‘misguided reliance by a

9 Lewis Group Limited v Woollam and Others [2016] ZAWCHC 130; [2017] 1 All SA 192 (WCC); 2017 (2) SA
547 (WCC) para 18.

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director on incorrect professional advice [that] will not be enough. . . to constitute
serious misconduct’.

[40] I take a different view on this issue . The provisions of s 76(3) of the Act
imposed a duty on Dr Smuts to act in Kromelboog ’s best interests. Secondly, as
the sole director he ought to have disclosed his personal financial interest to the
shareholder. Even if the aim was to ring-fence the funds, as he explained, he was
not exempt from the legal requirement of seeking the ‘shareholders’
authorisation. Furthermore, Landmark’s bank account was not neutral, it was an
account in which Dr Smuts had personal financial interest. Dr Smuts solicited
advice from a conflicted position. That he must have known as a director or ought
to have reasonably known . It is most concerning that he neither see s this as
problematic nor does he acknowledge the conflict.

Freezing of Kromelboog’s bank account
[41] After his removal as a director of Kromelboog, Dr Smuts caused
Kromelboog’s Nedbank account to be frozen. Dr Smuts saw the halting of the
bank account, while no longer a company representative, as a perfectly correct
thing to have done. His explanation is that he was not willing to countenance
allegations propagated in public that he was stealing money. The fact is, while he
was still the sole signatory to the account, he was no longer its director. On what
authority did he have to make this decision? His conduct left Kromelboog with
no access to its account for weeks.

Use of Kromelboog’s funds for legal fees
[42] During January 2021 until his removal, Dr Smuts caused Kromelboog to
incur approximately R241 136.60 in legal fees. It will be recalled that this is the
period during which the dispute had arisen between the parties. On 31 January

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2021, BDLS attorneys addressed an invoice to Kromelboog for, inter alia, ‘taking
instructions to assist with repudiation of Joint Venture Agreement’.

[43] On 24 June 2021, two days after receiving a notice of removal as a director,
Dr Smuts caused Kromelboog to pay an amount of R190 536.60 to his attorneys.
The parties agreed that invoices relating to the spoliation dispute with a Mr David
Diaz should not be included amongst the invoices complained of.

[44] We were referred to a series of invoices, the subject of which was fees
relating to Dr Smuts’ removal as a director or repudiation of the JV. One of these
was counsel’s invoice dated 27 July 2021 in the amount of R61 180, which refers
to a telephonic conversation with Dr Smuts in relation to a ‘Notice of Removal
of Director’. Dr Smuts’ answer to this invoice is:
‘As the sole director I needed to be advised on this and consultation with legal advisors is
entirely appropriate.’

[45] On 31 June 2021, an invoice was rendered to Kromelboog by BDLS ‘to
taking instructions with respect to proposed repudiation ’. In response to this Dr
Smuts, states:
‘The repudiation of the JV, to which Kromelboog had become a party and the risk of significant
damages claims was an aspect that had to be considered and I needed to take advice in the
interests of Kromelboog.’

[46] It is not clear how this could be of interest to Kromelboog as the claim for
repudiation of the JV was made by Dr Smuts on behalf of Landmark against
Kromelboog. This once more reveals that Dr Smuts was acting in a conflict-of-
interest position. The alleged repudiation of the JV formed the basis of
Landmark’s spoliation application against Kromelboog launched on 26 July
2021.

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[47] On 6 July 2021, another invoice was rendered to Kromelboog by BDLS in
the amount of R86 336.25, recording consultation with client to discuss way
forward and to brief counsel, and two consultations with counsel. Counsel’s
invoice dated 7 July 2021, which was in the sum of R58 075 records, inter alia:
‘On appearance with Bool Smuts at meeting of shareholder at STBB in terms of section 71 of
the Companies Act: on discussion with instructing attorney regarding further conduct of the
matter and settling letter to STBB informing lien for improvement and other issues (half day
fee)’
Dr Smuts admits the rendering of these invoices and simply states that the details
of these attendances are as set out above.

[48] Kromelboog paid amounts of R50 600 and R190 536.60, respectively, in
respect of the invoices which were incurred while Kromelboog was insolvent.
The payment was not for Kromelboog’s benefit. BDLS was requested to
withdraw as Kromelboog’s attorneys due to a conflict of interest, which they did.

[49] Dr Smuts maintains that he acted to protect Kromelboog’s interests. He
states that Kromelboog was a beneficiary of massive financial investments from
Landmark to which it had obligations as part of the JV . While he does not deny
that his actions were also in the interest of Landmark, he states that instructions
to attorneys were given to protect Kromelboog’s interests.

[50] Even excluding the invoices mentioning spoliation, rendered prior to the
proceedings that Landmark launched on 26 July 2021, the evidence is
overwhelming that Dr Smuts sought legal advice for his removal as the director
and the alleged repudiation of the JV. He caused Kromelboog to pay for it.

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Donation from Kromelboog to Landmark
[51] Mr Gerber alleged, on behalf of Kromelboog , that Dr Smuts caused
Kromelboog to donate R108 000 to Landmark. This was made in circumstances
where Dr Smuts , being a trustee of Landmark , would have personal financial
interest and where shareholder approval would have been necessary. No
resolution was taken by the trustees of Tamarisk in this regard.

[52] Dr Smuts ’ counsel argues that the donation could not be considered
because it was not raised in the founding papers. I disagree. The donation came
to be an issue by virtue of Dr Smuts presenting Landmark’s audited annual
financial statements for the year 2022 , in his supplementary affidavit . In that
affidavit, the following is stated:
‘The annual financial statements have been independently audited and the transfer of the funds
is referred to, specifically in the report of Landmark’s auditors.
As a result, the contents of the annual financial statements and the account transaction report
reflecting the individual account entries, are directly relevant to the matters at hand .’
(Emphasis added.)

[53] Counsel further contends that the ‘Note’ made in the financial statements
under the heading ‘Donations Received’ to an amount of R108 000, described as
‘Kromelboog – Rehabilitation Cost’, was too vague to conclude that it was a
donation. And that, Dr Smuts had not made any averments about this in his
supplementary affidavit. Thus, suppositions could not be made on behalf of
Kromelboog, without any personal knowledge by Mr Gerber of what the
transaction was all about.

[54] In my judgement, nothing prevented Dr Smuts from seeking leave to file a
response to this issue, especially because it was serious and squarely raised as

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emanating from Landmark’s annual financial statements. Counsel’s submission
on this ground must be rejected.

Invoicing for alleged services
[55] Another complaint is that Dr Smuts invoiced Kromelboog for what he
referred to as consultation fees. On 28 April 2021, while negotiations were
ongoing, Dr Smuts sent an email to Ms Notley attaching an invoice dated 23
February 2021 and addressed to Kromelboog, for an amount of R3 098 000 for
services allegedly rendered during his directorship. The invoice recorded:
‘In view of Tamarisk trust inten[t]ion to renege on the 25 [year] lease agreement and partnership
and value set by Tim Allsop on David Daitz remuneration of R50,000 pm, the management
money for the CEO function I provided on the understanding of the 25 years lease is thus the
following. . .
This amount is payable in the event that a settlement agreement is not reached in which case
the fees are payable within 7 days.’

[56] In addition, o n 2 9 April 2021, Dr Smuts invoiced Kromelboog in the
amount of R48 940 for consultancy services that he alleged ly provided to
Kromelboog with the following narration:
‘Consulting work to negotiate the attempt by Tim Allsop and Tamarisk Trust to
repudiate/cancel the access contract and operations of Kromelboog as management entity for
the Shepherding Back Biodiversity projects of Landmark Foundation on the original 25 year
access, occupation, and partnership agreement.’

[57] This invoice was paid by Kromelboog on Dr Smuts’ authorisation on 30
April 2021. On 3 June 2021, Dr Smuts invoiced Kromelboog in the amount of
R25 150 for alleged consultancy services recording similar terms as the 29 April
invoice. This invoice was paid by Kromelboog on Dr Smuts’ authorisation on 4
June 2020. On 22 June 2021, Dr Smuts invoiced Kromelboog in the amount of
R15 200 repeating the same terms, and the amount was paid on 22 June 2021.

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[58] On 6 July 2021, which was the day before Dr Smuts would appear at the
shareholders’ meeting convened to consider his removal, he invoiced
Kromelboog for an amount of R70 120, for consulting fees which he narrated to
be for:
‘Preparation for 7 July attempt to remove me as Director . . . Consulting with lawyers and
advocates, accountants and documents
. . .
accommodation and subsistence.’

[59] This invoice was paid by Kromelboog on Dr Smuts’ authorisation on 6 July
2020. According to Kromelboog, these alleged services had nothing to do with
Kromelboog. They were for Dr Smuts’ personal or Landmark’s benefit.

[60] Dr Smuts contends that the invoices for consultancy services, ‘lay outside’
his role as a director . He states that he approved th ose services as a director
because they were in Kromelboog’s interest, and he stood by this decision. At the
same time, i n an email to Ms Nortley seeking payment, Dr Smuts, states that
Kromelboog had never paid him for the services he provided as ‘Chief Executive
Officer’. He further states in his answering affidavit:
‘I was required to spend hundreds of hours dealing with legal issues and contract negotiations
as the director of Kromelboog.’ (Emphasis added.)

[61] Dr Smuts raised an invoice for remuneration as the ‘executive officer’, for
the work dating back to when Kromelboog started operating. He asserts that i n
terms of the JV , it was agreed, he would provide services for free as a ‘co-funding
contribution’, in return for the 25-year tenure on the land he would be given. He,
accordingly, donated his time in terms of the JV , but there was no genuine
intention to try and resolve the dispute by Mr Allsop and Tamarisk.

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[62] The content of the invoices contradicts any assertion of work having been
done by Dr Smuts for Kromelboog as a consultant. The invoice dated 6 July 2021
is remarkable. In it, Dr Smuts charged Kromelboog for ‘consulting fees’ ‘[in]
[p]reparation for 7 July attempt to remove [him] as Director’.

[63] In terms of s 66(9) read with s 66(8) of the Act, a company may pay
remuneration to its directors only in accordance with a special resolution
approved by the shareholders within the previous two years. Dr Smuts never
obtained such a resolution.

[64] To get around these difficulties, Dr Smuts sought to rely on s 78(4)(a) of
the Act which provides that:
‘(4) Except to the extent that a company’s Memorandum of Incorporation provides otherwise,
the company —
(a) may advance expenses to a director to defend litigation in any proceedings arising out of
the director’s services to the company. . .’ (Emphasis added.)

[65] Reliance on this provision is misplaced because legal advice sought in
preparation for a shareholders ’ meeting convened for a director’s removal , can
hardly be considered as litigation for the purposes of s 78(4). Neither can payment
or advancement of fees for ‘consultancy services’. It also cannot be c orrect to
suggest that s 75(2) renders the strictures in s 75(3)10 inapplicable by virtue of a
proposal to remove Dr Smuts as a director in terms of s 71. Section 75(2)
stipulates:
‘This section does not apply—
(a) to director of a company –
. . .

10 Which provides that a single director who does not hold all of the beneficial interest of all the issued securities
of the company may not approve or enter into any agreement in which that director has a personal financial interest
unless he or she receives or there is approval by ordinary resolution of the shareholders, after having disclosed the
nature and extent of the interest to shareholders.

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(ii) in respect of a proposal to remove that director from office as contemplated in section
71. . .’ (Emphasis added.)

[66] The exclusion in s 75(2 ), from the requirement to disclose personal
financial interest, is in respect of the proposal to remove a person as a director. It
does not entitle a director to incur expenses and conclude agreements, in instances
where he or she has a personal financial interest, without any regard to the
provisions of s 75 of the Act.

[67] Dr Smuts’ construction of the provision would defeat the whole object of
s 75. It potentially may result in abuse of a position of a director, where a person
sought to be removed, secretly approves or concludes agreements with financial
implications for the company and in which they personally benefit. That person
would act with impunity by hiding behind s 75(2). Invoices clearly obtained for
personal financial interest and where no shareholders’ resolution was obtained in
terms of s 75(3) were, in this case, clearly unlawful.

Seeking to obtain possession of Kromelboog’s operations
[68] A further complaint is that Dr Smuts sought to usurp Kr omelboog’s
business. On 6 July 2021, Dr Smuts sent a voice note to Ms Notley requesting her
to provide him with all the registration documents pertaining to the vehicles
owned by Kromel boog, for him to obtain possession thereof on behalf of
Landmark, prior to the shareholders’ meeting convened for the following day. At
the time of this request, Dr Smuts was still the sole director of Kromelboog.

[69] In response to this complaint, Dr Smuts says that the intention was always
to sell the vehicles (in respect of which the registration documents were
requested), as early as February 2021, as agreed between him and Mr Allsop. He
denies that there was some sort of nefarious ‘stratagem’ as alleged on behalf of

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Kromelboog. Dr Smuts asserts that he merely acted with due diligence and
obligation to undertakings and agreements which he entered into as
Kromelboog’s director.

[70] The high court found the explanation given by Dr Smuts on this aspect,
unassailable. In my view, the court erred by determining this issue in isolation
from others. It ought to have considered Dr Smuts’ actions in the context of his
conduct entirely, given the timing and what he said he needed the documents for.
The evidence supports the contention that in his voice to Ms Nortley, there was
an attempt by Dr Smuts to use his position to benefit Landmark.

[71] On 15 July 2021, after his removal as a director, Dr Smuts held a meeting
with Kromelboog’s employees and enticed them to leave their employment and
join Landmark. He then sent a voice note to an employee recording that he would
‘help’ the employee if he promised to stay loyal to Landmark and not with ‘the
new people’, ie Kromelboog’s new directors.

[72] Dr Smuts ’ response to this is that, when he met the farmworkers and
herders, h e no longer was the director of Kromelboog. He advised them that
‘Landmark had asserted its pos session and would hono ur the payment
commitments and salaries and that [he and Landmark] would continue to manage
the farming as per their possession’.

[73] While Dr Smuts dismisses this co nduct as being irrelevant to the
application on the basis that he was no longer a director, given the apparent
scheme to transfer the operations from Kromelboog to Landmark or Shepherding
Back Co, after the alleged ‘repudiation of the JV’, his approach to the employees
should be seen in that light.

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[74] As was found by Nuku J, Dr Smuts’ conduct could ‘only be described as
“hijacking” Kromelboog’s business, which he transferred first to Landmark and
thereafter to Shepherding’.11

Conduct in relation to s 162(5) of the Act
[75] The facts outlined above overwhelmingly show that Dr Smuts conducted
himself delinquently. His counsel seeks to suggest that Dr Smu ts found himself
in a predicament, because being the sole director of Kromelboog was inextricably
linked to his implementation of the SBBP. This cannot be used as an excuse. The
position of the director is that of trust. The director owes fiduciary duties to the
company. The conduct of the director in relation to the affairs of the company is
strictly regulated by the Act. If a person commits serious misconduct of the sort
described in Gihwala, that person must be declared a delinquent director. The
court has no discretion in that regard.

[76] Dr Smuts was clearly in a conflicted position. He was a sole director but
rendered to Kromelboog invoices for his personal financial interest without
obtaining authorisation from its shareholder. He demanded documents as part of
the scheme to accept possession of the properties belonging to Kromelboog
shortly before he was removed as a director. He caused Kromelboog’s bank
account to be frozen; used its funds to be paid for legal fees, while the company
was in a dire financial position; he caused a donation to be paid to Landmark
(where he had a personal financial interest) without the shareholder’s
authorisation; and transferred funds belonging to Kromelboog to Landmark. That
conduct clearly amounts to gross abuse of the position of a director and infliction
of harm on Kromelboog as contemplated in ss 162(5)(c)(i) and (iii) of the Act.


11 Boudewyn fn 2 para 24.

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[77] In addition, Dr Smuts ’ actions also amount to gross negligence, wilful
misconduct, and breach of trust within the contemplation of s 162(5) (c)(iv). He
made it clear, at one point, that he stood by the decision he had made . He also
admitted other events but justified them. He was intent on protecting the SBBP
project at all costs to the detriment of Kromelboog whose interests he ought to
have protected as a director. He acted as if he was entitled to treat Kromelboog as
merely a vehicle to pursue his project (something he asserts), instead of a separate
juristic entity, the interests of which he had a statutory duty to protect.

[78] Even after receiving the notice on 22 June 2021, indicating that he was
acting in a conflict of interest, objectivity escaped Dr Smuts, he continued with
his actions regardless. No matter how disconcerted he might have been about the
JV fallout, he was not released from the fiduciary duties he owed Kromelboog.

[79] For these reasons, the high court’s order declaring Dr Smuts a delinquent
director within the contemplation of s 162(5) of the Act , was correct. It must,
accordingly, stand. As to costs, they should follow the result. The high court left
the costs for the application for leave to appeal for later determination. Those
costs shall form part of the order made in relation to the costs of the appeal.

[80] In the result, the appeal is dismissed with costs, including the costs of two
counsel, where so employed.

__________________________
NP MABINDLA-BOQWANA
JUDGE OF APPEAL

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Appearances
For the appellant: J A Newdigate SC
Heads of argument prepared with R A J Acton
Instructed by: Brett Carnegie Attorneys, Cape Town
Lovius Block Attorneys, Bloemfontein

For the first respondent: B J Manca SC with D M Robertson
Instructed by: Smith Tabata Buchanan Boyes Inc, Claremont
EG Cooper Majiedt, Bloemfontein.