REPUBLIC OF SOUTH AFRICA
IN THE HIGH COURT OF SOUTH AFRICA
WESTERN CAPE DIVISION, CAPE TOWN)
CASE NO: 19578/2024
In the matter between:
DALEEN CORNELIA BADENHORST First Applicant
CHEETAH ESTATES CC Second Applicant
And
CASPER HENDRIK BADENHORST Respondent
Heard: 08 October 2024
Delivered: Electronically on 15 October 2024
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JUDGMENT
___________________________________________________________________
LEKHULENI J
Introduction
[1] Two urgent applications served before this court on 08 October 2024. The first
is an application by the applicants seeking an order that the respondent be
interdicted and restrained pendente lite from making any transfers, withdrawals or
payments of any nature or form from the second applicant's bank account without
the first applicant's prior consent. The second is a counter application by the
respondent in which he seeks an order that pending the final determina tion of the
application for the second applicant's winding up as a solvent entity on the just and
equitable grounds under case number 20266/24, neither the applicant nor the
respondent shall be entitled to transact on the second applicant's bank account he ld
in its name with Nedbank Ltd in any manner or form without the express prior
consent of the other to do so.
The Applicants’ Application
[2] The first applicant was married to the respondent's brother. The second
applicant was established by the resp ondent and his late brother, who were 50/50
members of the second applicant. The respondent and the first applicant's late
husband were also 50/50 members of another close cooperation, Midnight Trading
106 CC ('Midnight Spark') , which conducted the filling station business Careno
Strand, Western Cape. On 23 February 2020, the first applicant's late husband
passed away, and the first applicant inherited his member's interest in Midnight
Spark and the second applicant herein.
[3] For the past four years, si nce the passing away of the first applicant's
husband, the applicant managed the second applicant by carrying on the business of
the second applicant in the ordinary course while the respondent managed the
business of Midnight's Spark. The first applicant drew a salary from the second
applicant and attended to all its day -to-day operations, while the respondent did the
same regarding Midnight Spark. The first applicant states that during 2024, it came
to her knowledge that the respondent was mismanaging the affairs of Midnight Spark
by physically removing cash from the business of Midnight Spark and running the
business from his personal bank account. Netbank threatened to call up Midnight
Spark's overdraft facility. Astron, the fuel supplier and landlord, c laimed more than
R1,1 million for utilities and R250,000 for franchise fees, which Midnight Spark could
not pay.
[4] Pursuant thereto, on 2 September 2024, the first applicant launched an
application for the liquidation of Midnight Spark in this court under case number
19124/24. Although the respondent disputed that Midnight Spark was unable to pay
its debts, he agreed to Midnight Spark’s liquidation on just and equita ble grounds.
Midnight Spark was accordingly placed in provisional liquidation by this court on
Thursday, 19 September 2024. While that application against Midnight Spark was
still pending, on 11 September 2024, the respondent made a unilateral transfer of
R70,000 from the bank account of the second applicant and paid it to the trust
account of his attorneys of record. The respondent did so without the first applicant’s
knowledge and consent.
[5] As previously stated, the first applicant asserted that they are 50/50 members
of th e second applicant . The first applicant states that except for the day -to-day
management and payments done in the ordinary course of the second applicant’s
business, which is by agreement conducted by the first applicant, neither one of
them may accordingly make decisions for and on behalf of the second applicant
without the authority of the other, and, except as aforesaid, neither the first applicant
nor the respondent may make unilateral transfers , withdrawals and or payments that
are not in the ordinary course of the second applicant 's business, from its bank
account.
[6] The first applicant states that the respondent did precisely that when he
caused a transfer of funds belonging to the second ap plicant from the bank account
of the second applicant to the trust account of the firm of attorneys acting for the
respondent personally without the first applicant's knowledge and consent. According
to the first applicant, the respondent appropriated a to tal sum of R70 000 and
presumably used the said funds for his personal legal expenses, alternatively that of
Midnight Spark Trading 106 CC, to oppose a liquidation application brought against
the latter and to instruct his attorneys to draft and institute a liquidation application
against the second respondent. The liquidation application against the second
applicant was, in fact, subsequently issued by this court under case number
20266/2024.
[7] In addition to not being authorised to withdraw funds from the second
applicant's account, the first applicant asserts that the transfer was not in the
ordinary course of the second applicant's business. When the first applicant called
upon the respondent to return the R70,000 to the second applicant, the respondent
refused to do so. The first applicant instructed her attorneys of record to immediately
address a letter of demand to the respondent and the respondent's attorneys for the
refund of the R70,000. In response, the respondent's attorneys stated that the f irst
applicant and the respondent each own a 50% member's interest in Midnight Spark
Trading 106 CC and in the second applicant. The respondent's attorneys further
asserted that both the first applicant and the respondent are entitled to 50% of the
profit and loss of each of these entities and that the respondent would not refund the
R70 000.
[8] The respondent contended that because he owns 50% of the member's
interest in the second applicant, he is entitled to 50% of the profit and loss of the
second ap plicant and that he cannot steal his own money. To this end, the first
applicant asserted that the respondent is treating the money belonging to the second
applicant as his own and considered it his money. According to the first applicant, the
respondent is intent on dipping into the funds of the second applicant as and when it
pleases him without the applicant's knowledge and consent and without having to
account to the first applicant in any way whatsoever.
[9] The first applicant contended that the respondent's stance described above is
wrong and that the second applicant and the first applicant have the right, which is at
the very least prima facie established, to protect the funds belonging to the second
applicant, and to prevent unauthorised trans fers, withdrawals and or payments from
the bank account of the second applicant by one of its members on the basis that it
is his money. The first applicant contended that prima facie, the respondent is not
within his right to act in a unilateral and unauthorised manner.
[10] Furthermore, the first applicant stated that the respondent already has a debt
loan in the second applicant amounting to R1 420 972.76 as of 29 February 2024. In
other words, the respondent owes the said amount to the second applicant. The first
applicant feared that if the interdict was not granted, the respondent would make
further transfers from the second applicant's bank account without her consent to the
prejudice of the second applicant. The first applicant implored the court to grant the
relief claimed in the notice of motion.
The Respondent’s Counter Application
[11] The respondent thoroughly explained how he worked with his brother, the first
applicant's deceased husband, from 1991 after the respondent sold his service
station in Pretoria and bo ught Camps Bay Service Station situated in Camps Bay.
The respondent stated that during the lifetime of his brother (the first applicant's
deceased husband), they agreed that his brother would take over the day -to-day
management of the Marine Drive Service Station (second applicant), and they
proceeded to purchase the Caltex Careno Service Station which was subsequently
transferred to Midnight Spark Trading 106 CC.
[12] The respondent and his brother were 50/50 members in Midnight Spark 106
CC. The respon dent stated that he and his brother considered themselves to be
equal partners in both service stations. They were both fully entitled to participate in
the management of both businesses and to share in the profit and loss of both
businesses, in accordance with section 46 of the Close Corporation Act 69 of 1984
('the Close Corporation Act'). As regards profit sharing, the respondent asserted that
the understanding between the respondent and his brother was that if there were
distributable profits available in either business, each of them could pay themselves
up to 50% thereof as and when they required the funds without seeking the other's
permission to do so.
[13] If there were insufficient profits available and they needed money, they would
similarly each withdraw funds from a loan account without seeking the other ’s
permission to do so. They trusted one another implicitly and had full confidence in
the fact that e ach of them had the best interest of the businesses at heart, as is
required by section 42 of the Close Corporation Act.
[14] The untimely passing of his brother on 23 February 2020 resulted in the first
applicant's inheritance of his brother's 50% member 's interest in both Midnight Spark
and the second applicant in this matter. As a result, the applicant became his
business partner by circumstances rather than design. According to the respondent,
the first applicant and he proved to be incompatible busine ss partners, and relations
between them soon soured to the point where it became apparent that they could not
cooperate and work together in managing either the second applicant or Midnight
Spark's affairs. This has resulted in both entities being effectiv ely paralysed by
deadlock and the institution of the applications for the winding up of both Midnight
Spark and the second applicant on just and equitable grounds.
[15] The respondent denied that the first applicant is entitled to the relief she seeks
because, as the second applicant's founding member and its current 50% member,
he has always been fully entitled to operate its bank account and to make transfers,
withdrawals and or payments therefrom as he considered appropriate. The
respondent stated that there is simply no basis in fact or in law for the first applicant
to claim that merely because she is also a salaried employee of the second
applicant, her 50% member's interest in it is somehow elevated to super status
entitling her to control its finances, business and bank account to his exclusion.
[16] Given the complete breakdown in relations between the first applicant and the
respondent, the respondent averred that he is prepared to consent to an order that
prohibits both the first applicant and the respondent from transacting on the second
applicant's bank account without the other's consent pending the final determination
of the liquidation application under case number 20266 /2024. The respondent
admitted that neither the first applicant nor the respondent may make decisions for
and on behalf of the second applicant without the authority of the other. To this end,
the respondent stated that it is accordingly surprising that the first applicant has
taken it upon herself to unilate rally decide to join the second applicant as a party to
this application and to instruct he r attorneys to represent the second applicant when
she is clearly and by her own admission not entitled to do so.
[17] The r espondent admitted that he transferred R70,000 to himself on
11 September 2024 and stated that it was a portion of his profit share. He denied
that he required the first applicant’s specific prior consent to do so, just as the first
applicant would not have required his consent to transfer a po rtion of her own profit
share to herself. The respondent denied that he unlawfully appropriated the R70 000
from the second applicant or that by paying himself what he was entitled to receive
as a member of the second applicant can somehow be considered to fall outside of
the ordinary course of business. In his view, what he has chosen to do with his own
funds is none of the first applicant's business.
[18] The respondent also denied that the first and second applicants have any
right whatsoever to preven t him from claiming and paying himself his profit share as
and when he requires it. According to the respondent, the first applicant's evidence
and conduct in this application simply betray her lack of knowledge and
understanding of the agreement between t he respondent and his late brother
regarding their joint management of the second applicant. The respondent asked the
court to dismiss the first applicant's application with costs and for the grant of the
relief sought in the counter application.
Principal Submissions by the parties
[19] Mr Engela, who appeared for the applicant, submitted that the applicants had
established a prima facie right on the papers. Counsel submitted that from the
respondent's answering affidavit, the respondent does not see anything wrong with
what he did. Mr Engela referred the court to paragraph 28.2 of the respondent's
answering affidavit wherein the responde nt stated that his share of the profit is his
money and that he is entitled to pay himself as and when he requires it, just as his
brother was entitled to do so.
[20] Counsel argued that there was no association agreement between the first
applicant and the respondent for such withdrawal. Mr Engela further submitted that
the respondent's conduct offends the provisions of section 46(f) of the Close
Corporation Act. Counsel implored the court to grant the relief sought to prevent the
respondent from making further unauthorised withdrawals from the second
respondent's account.
[21] On the other hand, Mr Coston, the respondent's Counsel, argued that the
respondent did not need the first applicant's consent to withdraw R70 000 from the
second applicant's account. According to Counsel, this has been done before by the
members of the second applicant. Counsel further asserted that in terms of the
counter application, the respondent is prepared to consent to an order that prohibits
both the first applicant and the respondent from transacting on the second
applicant's bank account without the other's consent pending the final determination
of the liquidation application under case number 20266/2024.
[22] According to Counsel, this is the best remedy in that if one of the parties
unreasonably refuses his consent, the innocent party may approach the court for a
remedy. Mr Coston implored the court to dismiss the applicants' application and to
grant the relief sought in the counter application. According to Counsel, t his is the
best remedy in that if one of the parties unreasonably refuses his consent, the
innocent party may approach the court for a remedy. Mr Coston implored the court to
dismiss the applicants' application and to grant the relief sought in the counter
application.
The Applicable Legal Principles and Discussion
[23] The applicants seek an interlocutory interdict. The granting of an interim
interdict pending an action is an extraordinary remedy within the discretion of the
Court.1 The requirements which an applicant for an interlocutory interdict must satisfy
are the following:
(a) A prima facie right;
(b) A well-grounded apprehension of irreparable harm if the interim relief is not
granted and the ultimate relief is eventually granted;
(c) A balance of convenience in favour of the granting of the interim relief; and
(d) The absence of any other satisfactory remedy.
1 Eriksen Motors (Welkom) Ltd v Protea Motors, Warrenton, and Another 1973 (3) SA 685 (A) at
691C-G.
[24] For th e sake of convenience, I will deal with the abovementioned
requirements for an interim interdict vis -à-vis the present matter in series or ad
seriatim.
(a) A prima facie right;
[25] An interim interdict will be granted if the court is satisfied that the applicant
has established a prima facie right that the respondent has invaded it or threatened
to do it. 2 In Webster v Mitc hell,3 the court stated that the right to be set up by an
applicant for a temporary interdict need not be shown by a balance of probabilities. If
it is prima facie established though open to some doubt that is enough. In my view,
this is so because the applicati on is merely interlocutory, and the effect of the
granting thereof is only temporary and not finally decisive of either party's rights.
Thus, the court will grant an interdict upon a degree of proof less exacting than that
required to grant a final interdict.
[26] In the present matter, the first applicant is a 50% holder of interest in the
second applicant. The first applicant averred that the sum of R70,000 was unlawfully
appropriated by the respondent and used to fund his personal legal expenses. When
the first applicant called upon the respondent to return the R70,000, the respondent
refused to do so. The respondent contended that because he owns 50% of the
member's interest in the second applicant, he is entitled to 50% of the profit and loss
of the second applicant and that he cannot steal his own money. In other words, the
respondent considered the money belonging to the second applicant to be his own.
[27] I must stress that each member of a closed corporation stands in a fiduciary
relationship to the corporation.4 Members of a close corporation owe the corporation
fiduciary duties and duties of care and skill. A member of a close corporation must, in
relation to the close corporation, act honestly and in good faith and must exercis e
2 Zulu v Minister of Defence 2005 (6) SA 446 (T).
3 Webster v Mitchell 1948 (1) SA 1186 (W) at 1188.
4 See section 42(1).
such powers as he may have to manage or represent the corporation in the interest
and for the benefit of the corporation.5
[28] In bringing this application, the first applicant, in my view, acted in the best
interest of the second applicant. On the re spondent's version, notwithstanding that
there is no association agreement between them as envisaged in section 44 of the
Close Corporation Act, he believes that he can transfer funds from the bank of the
second applicant at will without informing the firs t applicant of such transfer, and
without being under any obligation to repay any funds to the second applicant at all.
The respondent asserted that the first applicant's conduct displays her lack of
knowledge and understanding of the agreement between the respondent and his late
brother regarding their joint management of the second applicant. In my view, this
stance cannot be correct and should not be countenanced.
[29] After the passing of the applicant's husband, I must point out that the first
applicant and the respondent never entered into an association agreement to
regulate the sharing of profits and internal relationships . As such, the respondent, in
my view, could not unilaterally withdraw the sum of R70 000 from the second
respondent witho ut the knowledge of the first applicant. I am mindful that the first
applicant and the respondent are entitled to participate in the carrying on of the
corporation's business unless an association agreement or the Act provides
otherwise.6
[30] I am also mindful of the fact that in the absence of an association agreement,
each member has the implied power to do any act that entails the carrying on of the
second applicant's business in the ordinary course. However, the respondent's
unilateral withdrawal of the sum of R70 000 from the second applicant's bank
account, in my view, did not involve the carrying on of the second applicant's
business in the ordinary course.
5 See section 42(2)(a)(i).
6 See section 46(a) of the Act.
[31] I am of the firm opinion that the applicants have clearly established their prima
facie right to the sanctity of the second applicant's funds and to protect those funds
from unilateral appropriation by the respondent.
(b) Well-Grounded apprehension of harm
[32] The second requisite for an interlocutory interdict is a well-grounded
apprehension of irreparable harm if the interim relief is not granted .7 Irreparable
harm or loss may be defined as the loss of property in circumstances where its
recovery is impossible or improbable. The loss need not necessarily be any financial:
it may consist of an irre mediable breach of the applicant’s rights.8 In the present
matter, the first applicant asserted that the respondent has a debit loan account in
the second applicant amounting to R1 420 972. 76 as of 29 February 2024.
[33] The first applicant claimed that the respondent showed no remorse for
transferring R70,000 from the bank account of the second respondent without
consent. The respondent regards this transfer as a payment of his pr ofit share to the
second applicant. According to the respondent, his share of the profits is his money
that he is entitled to pay himself as and when he requires it. The respondent denied
that the first or the second applicant had any right to prevent him from claiming and
paying himself his profit share as and when he required it.
[34] It cannot be disputed that the first applicant and the respondent did not agree
on the payment or withdrawal of the R70,000 by the respondent. The respondent’s
stance in my view is untenable and displays a fundamental misunderstanding of the
rights and duties of members of a close corporation as contained in sections 42,
46(f) and 51. Until a dividend, if any, is agreed upon and determined in accordance
with the provisions of the Close Corporation Act, a member of a Close Corporation is
by no means at liberty to make unilateral payments from the bank account of the
Close Corporation under the guise of paying a profit share to himself or herself.
7 Tshwane City v Afriforum 2016 (6) SA 279 (CC) at 300B.
8 Braham v Wood 1956 (1) SA 651 (D) at 655.
[35] Most importantly, the allegation that the respondent does not require the first
applicant's consent for such unilateral transfers explicitly offends section 46(f) of the
Close Corporation Act, which provides:
“Payments by a corporation to its members by reason only of their
membership in terms of section 51 (1) shall be of such amounts and be
affected at such times as the members may from time to time agree upon ,
and such payments shall be made to members in proportion t o their
respective interests in the corporation.” (emphasis added)
[36] The first applicant asserts that for the past four and half years since the
passing of her husband, neither of them took a profit share from the second
applicant. On the contrary, they both owe the second applicant substantial amounts
on loan accounts. Thus, the use of profit shares by the respondent is completely
misplaced in relation to the second applicant, as the profits of a close corporation
can only be distributed b y its members by declaring a dividend. Moreover, members
of a close corporation can only declare a dividend if there was, in fact, a profit made
in any given financial period after due consideration of the close corporation's
financial positions, bearing i n mind, among others, the solvency test. To this end,
section 51(1) of the Close Corporation Act provides:
“(1) Any payment by a corporation to any member by reasons only of his
membership, may be made only-
(a) if, after such payment is made, the corporation's assets, fairly valued,
exceed all its liabilities;
(b) if the corporation is able to pay its debts as they become due in the
ordinary course of its business; and
(c) if such payment will in the partic ular circumstances not in fact render the
corporation unable to pay its debts as they become due in the ordinary course
of its business.”
[37] Evidently, no dividend has ever been declared by the first applicant and the
respondent in respect of the second applicant, at least not in the past four and half
years of the applicant's membership in the second applicant. Therefore, no profit
share was available for the respondent at any given time. The applicant's
apprehension that the respondent will make furthe r unilateral transfers, withdrawals
and/or payments from the bank account of the second applicant is accordingly more
than justified. In my view, the respondent's stance offends section 46(f) of the Close
Corporation Act and clearly shows that further harm is imminent if an interdictory
relief is not granted. A unilateral transfer of funds belonging to a corporate entity
diminishes the entity's patrimony.
(c) The Balance of Convenience
[38] The third requisite for an interlocutory interdict is a balance of convenience in
favour of the granting of the interim relief. The court must weigh the prejudice to the
applicant if the inter locutory interdict is refused against the prejudice to the
respondent if it is granted.9 This is sometimes called the balance of convenience.
[39] The balance of convenience, in this case, is overwhelmingly in the applicant's
favour. I am mindful that the second applicant is facing a liquidation application and
that the inconvenience of having funds transferred, or withdrawn or paid from its
bank acc ount is prejudicial to the applicant and even creditors of the second
applicant. For the past four years, the parties have never paid themselves any profit
share. As correctly pointed out by the first applicant, it ill behoves a member of a
close corporati on, in circumstances where there was no members meeting, no
approval of financial statements, or otherwise, to simply take it upon himself to make
a unilateral withdrawal from the bank account of the close corporation on the basis
that he is paying himself what he perceives to be entitled to.
[40] In my view, the balance of convenience weighs heavily in favour of granting
the interdict. The respondent's assertion that what he does with the second
respondent's funds is none of the first applicant's busines s is precisely why an
9 Breedenkamp v Standard Bank of South Africa Ltd 2009 (5) SA 304 (GSI at 314G.
interdict against the respondent is necessary and appropriate. In any case, the
applicants are merely seeking an order pendente lite, pending the final determination
of the liquidation application which will barely inconvenience the respondent.
(d) Absence of any other satisfactory remedy
[41] The fourth requisite for granting an interlocutory interdict is the absence of
another adequate ordinary remedy. In the present matter, the applicants have no
other satisfactory remedy other than an interim interdict. An application for the
liquidation of the second applicant has been lodged with this Court. If an interim
interdict is not granted and pursuant to the stance taken by the respondent, it is most
likely that the respondent would withdraw funds from the second applicant at whim
under the auspices that it is his profit share. This will be prejudicial to the applicants.
In my view, this requirement has been satisfied. This leads me to the respondent's
counter-application.
The Respondent’s Counter Application
[42] The r espondent contends that giv en the complete breakdown in relations
between him and the first applicant as well as the accompanying mistrust between
them, he seeks an order directing that pending the final determination of the
application for the second applicant’s winding up as a solvent entity on the just and
equitable grounds under case number 20266 /2024, neither the first applicant nor the
respondent shall be entitled to transact on the second applicant ’s bank account in
any manner or form without the express prior consent of the other to do so.
[43] This counter application, in my view, is ill -founded. The applicant did not
breach any provisions of the Close Corporation Act. The first applicant has not acted
unlawfully, and there is no indication that the applicant intends to d o so. The first
applicant has not withdrawn any funds from the second applicant without the
respondent's knowledge. The applicant has been responsible for the day -to-day
management of the second applicant for the past four years, and she has been
drawing a salary from the second applicant in return for doing so. The respondent
has done the same in respect of Midnight Spark. The respondent managed Midnight
Spark and drew the same salary.
[44] The approval of the counter application is poised to have adver se
ramifications on the operational dynamics of the second applicant. Numerous
financial disbursements necessitate daily and weekly transactions from the second
applicant's bank account to sustain the seamless functionality of the close
corporation's busin ess operations. The first applicant has been making these
payments and handling the bookkeeping of the second applicant in collaboration with
the second applicant's accountants and auditors for several years.
[45] In my view, it will be impracticable for the applicant to obtain the respondent's
prior consent for these types of transactions. If an order is granted against the
applicant without any valid reason, it will essentially stop the second applicant's
business operations , leading to an inevitable liquidation application against the
second applicant. More so, the very purpose of the applicant's application is to obtain
an order preserving the status quo until the hearing of the liquidation application.
[46] In the circumstances, the respondent’s counter application must fail.
Order
[47] Given all these considerations, the following order is granted:
47.1 The respondent's counter application is hereby dismissed.
47.2 Pending the final determination of the liquidation application under
case number 20266 /2024, the respondent is interdicted and restrained
pendente lite from making any transfers, withdrawals or payments from the
second applicant’s bank account without the first applicant’s prior consent.
47.3 The respondent shall pay the first applicant’s costs on scale C.
___________________________
LEKHULENI JD
JUDGE OF THE HIGH COURT
APPEARANCES
For the Applicant: Mr Engela
Instructed by: Morne Binedell Attorneys and Conveyancers
Suite 10B, Old Dutch Square
Bellville
For the Respondent: Mr Coston
Instructed by: Hannes Pretorius Bock & Bryant
81 Helderberg College Road
Somerset West