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[2020] ZASCA 134
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Pepkor Holdings Ltd and Others v AJVH Holdings (Pty) Ltd and Others; Steinhoff International Holdings NV and Another v AJVH Holdings (Pty) Ltd and Others (205/2020) [2020] ZASCA 134; [2021] 1 All SA 42 (SCA); 2021 (5) SA 115 (SCA) (21 October 2020)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
No: 205/2020
In
the matter between:
PEPKOR
HOLDINGS LTD
FIRST
APPELLANT
PEPKOR
SPECIALITY (PTY) LTD
SECOND APPELLANT
TEKKIE
TOWN (PTY) LTD
THIRD
APPELLANT
and
AJVH
HOLDINGS (PTY) LTD
FIRST
RESPONDENT
FULL
TEAM SURE TRADE (PTY) LTD
SECOND
RESPONDENT
AQUILAM
HOLDINGS (PTY) LTD
THIRD
RESPONDENT
LIBER
DECIMUS (PTY) LTD
FOURTH
RESPONDENT
XANADO
TRADE AND INVESTMENTS 327
FIFTH RESPONDENT
STEINHOFF
INTERNATIONAL
HOLDINGS
NV
SIXTH RESPONDENT
TOWN
INVESTMENTS (PTY) LTD
SEVENTH
RESPONDENT
Case
no: 217/2020
In
the matter between:
STEINHOFF
INTERNATIONAL
HOLDINGS
NV
FIRST APPELLANT
TOWN
INVESTMENTS (PTY) LTD
SECOND APPELLANT
and
AJVH
HOLDINGS (PTY) LTD
FIRST
RESPONDENT
FULL
TEAM SURE TRADE (PTY) LTD
SECOND RESPONDENT
AQUILAM
HOLDINGS (PTY) LTD
THIRD
RESPONDENT
LIBER
DECIMUS (PTY) LTD
FOURTH
RESPONDENT
XANADO
TRADE AND INVESTMENTS 327
FIFTH RESPONDENT
PEPKOR
HOLDINGS LTD
SIXTH
RESPONDENT
PEPKOR
SPECIALITY (PTY) LTD
SEVENTH RESPONDENT
TEKKIE
TOWN (PTY) LTD
EIGHTH
RESPONDENT
Neutral
citation:
Pepkor
Holdings Ltd and Others v AJVH Holdings (Pty) Ltd and Others; and
Steinhoff International Holdings NV and Another v AJVH
Holdings (Pty)
Ltd and Others
(205/2020
and 217/2020)
[2020] ZASCA 134
(21 October 2020)
Coram:
CACHALIA,
ZONDI, MOCUMIE and SCHIPPERS JJA and GOOSEN AJA
Heard:
24
August 2020
Delivered:
This
judgment was handed down electronically by circulation to the
parties' representatives by email. It has been published on the
Supreme Court of Appeal website and released to SAFLII. The date and
time for hand-down is deemed to be 09h45 on 21 October 2020.
Summary:
Interim
interdict – preserving property
pendente
lite
– based on
res
litigiosa
– requirements not met – fraud – inappropriate to
make findings on motion – company law – companies
in a
group of companies are separate legal entities even if wholly-owned –
no case made out for order restraining company
holding majority
shares in subsidiary from freely dealing with shares – nor
directing company to exercise control in a particular
manner.
ORDER
On
appeal from:
Western
Cape Division of the High Court, Cape Town (Erasmus J sitting as
court of first instance):
1
The
application to adduce further evidence on appeal is dismissed with
costs, including the costs of two counsel.
2
The
appeals under case numbers 205/2020 and 217/2020 are upheld with
costs, including the costs of two counsel.
3
The
order of the high court is set aside and replaced with the following:
‘
The
application is dismissed with costs, including the costs of two
counsel.’
JUDGMENT
Schippers
JA: (Cachalia, Zondi, Mocumie JJA and Goosen AJA concurring):
[1]
These
are two appeals, with the leave of this Court, against an urgent
interim interdict issued by the Western Cape Division of
the High
Court, Cape Town (the high court). The interdict restrained the
appellant companies from dealing freely with their property,
pending
the determination of an action which was instituted in the high court
under case number 8276/2018 by the first to fifth
respondents,
namely, AJVH Holdings (Pty) Ltd, Full Team Sure Trade (Pty) Ltd,
Aquilam
Holdings (Pty) Ltd,
Liber Decimus (Pty) Ltd, and Xanado Trade and Investments 327 (the
respondents). The appellants in the first appeal (case no 205/2020),
namely Pepkor Holdings Ltd (Pepkor), Pepkor Speciality (Pty) Ltd
(Speciality), Tekkie Town (Pty) Ltd (Tekkie Town), where appropriate,
are collectively referred to as ‘the Pepkor entities’.
The appellants in the second appeal (case no 217/2020) are Steinhoff
International Holdings NV (Steinhoff NV) and Town Investments (Pty)
Ltd (Town Investments).
Facts
[1]
The
basic facts can be shortly stated. Tekkie Town formerly conducted a
footwear retail chain store business with 230 stores countrywide
(the
Tekkie Town business), and stores in Namibia and Lesotho. In 2015 Mr
Markus Jooste, the former CEO of Steinhoff NV, approached
Mr Abraham
van Huyssteen, the founder of the Tekkie Town business, for the
acquisition of that business by Steinhoff NV. Following
negotiations,
by April 2016 an agreement was concluded in terms of which Steinhoff
NV agreed to pay the then existing shareholders
of Tekkie Town an
earn-out bonus, based on the financial results of Speciality (the
bonus scheme agreement). It was anticipated
that the Tekkie Town
business would be included in Speciality’s footwear business.
The bonus scheme agreement was subject
to the conclusion of a sale
agreement of the Tekkie Town shares, the business and other assets.
[2]
On
29 August 2016 the respondents and Steinhoff NV entered into a
written agreement, entitled ‘Sale of Shares and Claims
Agreement’ in terms of which they sold in aggregate, 56.94% of
their shares in, and ceded their claims against, Tekkie Town
(collectively, ‘the Tekkie Town shares’) to Steinhoff NV,
for a purchase price of R3 257 250 000 (the sale
agreement). On 17 January 2017 the purchase price was discharged by
the issue of consideration shares in Steinhoff NV to each of
the
respondents, in proportion to its aliquot share as defined in the
sale agreement.
[3]
Following
the sale agreement, Steinhoff NV transferred the Tekkie Town shares
it had acquired from the respondents to Steinhoff
Investments
Holdings Ltd (SIH) for a consideration equal to R2 983 856 000.
On the same day, SIH transferred the
Tekkie Town shares to Steinhoff
Africa Holdings (Pty) Ltd (Steinhoff Africa) for a consideration
equal to R2 983 856 000.
On 1 July 2017 Pepkor bought
the Tekkie Town shares from Steinhoff Africa for a purchase price of
R3 391 974 152.
Pepkor listed on the Johannesburg
Securities Exchange (the JSE) in September 2017. On 1 October 2017
Speciality purchased the Tekkie
Town business. Thus, through a series
of transactions, the Tekkie Town shares were ultimately transferred
to Pepkor which has held
the shares with effect from 1 July 2017. The
Tekkie Town business has been integrated with Speciality’s own
retail business
and conducted as such since October 2017.
[4]
By
March 2018 the respondents claimed that the value of the
consideration shares had been overstated and were but a fraction of
their value when the sale agreement was concluded. They alleged that
Mr Jooste had fraudulently misrepresented and concealed Steinhoff
NV’s true financial position, to induce them to enter into the
sale agreement. On 28 March 2018 they proposed the return
of the
consideration shares to Steinhoff NV in exchange for shares in
Steinhoff Africa Retail Ltd (STAR), to the value of the consideration
shares at the time of implementation of the sale agreement. Steinhoff
NV was the controlling majority shareholder in STAR. The
proposal was
declined.
[5]
On
11 May 2018 the respondents instituted the action under case number
8276/2018 against Steinhoff NV and Town Investments in the
high
court, in which they claim redelivery of the equity, defined in the
sale agreement as ‘the Sale Shares and the Sale
Claims’,
according to the respondents’ purchase price aliquot shares ‘in
the condition and with their values,
rights and exigibility as the
Sale Shares and Sale Claims had’ at the date of the conclusion
of the agreement (the main action).
The alternative claim is one for
damages in a cumulative amount of R1 854 678 150. The
claims in the main action
are founded on an alleged fraudulent
misrepresentation by Mr Jooste concerning Steinhoff NV’s
financial position, which induced
the respondents to enter into the
sale agreement. They allege in the particulars of claim that they
have resiled from the agreement.
[6]
Pepkor
(the present owner of the Tekkie Town shares) and Speciality (the
present owner of the Tekkie Town business), were not parties
to the
main action when the high court issued the interdict. This, despite
the fact that the respondents were at all times aware
that Steinhoff
NV no longer owns the Tekkie Town shares, the return of which they
seek as the principal form of relief in the main
action. The Pepkor
entities were joined as parties in the main action after the high
court granted the interdict.
[7]
In
June 2018 the respondents instituted a separate action in the high
court against STAR in which they seek a declaratory order
that it is
bound by the bonus scheme agreement and liable for the payment of
bonuses to the respondents, based inter alia on Speciality’s
financial results (the bonus scheme action).
[8]
In
April 2019, almost a year after they had instituted the main action,
the respondents launched an urgent application in which
they sought
the following relief:
‘
2 Pending the
final determination of the action instituted in the Western High
Court under case number 8276/2018
2.1 interdicting and
restraining the second respondent [Pepkor] from alienating,
transferring, ceding, assigning, and/or otherwise
encumbering its
shareholding in the fourth respondent [Tekkie Town], or any part
thereof;
2.2 interdicting and
restraining the fourth respondent [Tekkie Town] from allotting and/or
issuing any further shares in the fourth
respondent;
2.3 interdicting and
restraining the third respondent [Speciality] from alienating,
ceding, assigning, or otherwise encumbering
the business trading
under the name and style
Tekkie Town
(including the assets
thereof), acquired in terms of the sale agreement entered into by the
parties with the effective date 1 October
2017 (as amended in
addendum No 1), otherwise than as reasonably required in the normal
course of operating a retail business;
2.4 interdicting and
restraining the first respondent [Steinhoff NV] from dealing with its
shares in the second respondent [Pepkor]
in any manner which would
result in loss of control of second respondent or prevent it from
giving effect to the relief sought
in prayer A in case number
8276/2018.’
[9]
The
purpose and grounds of the application for the interdict were stated
as follows in the founding affidavit:
‘
This
application seeks to preserve the aforesaid property in the ownership
of the current owners and free of any hindrance, encumbrance
or
alteration which would serve to diminish their value or prevent or
delay their return to the applicants as plaintiffs, should
the . . .
Court in due course so order. The pleadings in the said action having
closed, both the shares and the other assets, the
restoration of
which are sought in the action, are
res
litigiosa
until the final determination of the action by the . . . Court. . .
.’
The
first respondent [Steinhoff NV] holds 71% of the shares in the second
respondent [Pepkor] which, through a series of wholly-owned
subsidiaries, owns and controls all of the shares in the third
respondent [Specialty]. In fact, the first respondent controls and
directs all of the corporate actions and activities within the
Steinhoff Group. There can be no disposal of the shares in or held
by
any company within the Group, or the disposal of any business or
business unit, without the approval of the board of directors
of the
first respondent. Similarly, the first respondent is able to require
that any of the shares in or held by any of the companies
within the
Steinhoff Group, and any of those companies’ businesses or
business units, be disposed of.’
[10]
The
appellants opposed the application, principally on the following
grounds. The
res
litigiosa
doctrine was inapplicable. The companies within the Steinhoff Group
are all separate corporate entities, each with their own board
of
directors which manages their business and affairs. Steinhoff NV does
not control Pepkor. The former is listed on the Frankfurt
Stock
Exchange and the latter, on the JSE. Pepkor purchased the Tekkie Town
shares bona fide and for value (some R3.4 billion).
Speciality
acquired the Tekkie Town business in good faith and for value. It was
factually impossible to restore the Tekkie Town
business which had
materially changed in the intervening period. The number of stores
had grown from 230 to 398 and numerous members
of staff had left the
business, which had been integrated into the much larger business of
Speciality.
[11]
The
application came before Erasmus J on 25 April 2019. The judge said
that he would hand down an order the following morning. After
the
court had adjourned, the judge invited the parties to send him a
proposed draft order in the terms sought by them, via email.
The
respondents sent a draft order to Erasmus J at 23h22 on 25 April
2019. It was materially different from the order sought in
the notice
of motion. The next morning, without granting the appellants an
opportunity to be heard or to make written submissions,
the judge
issued an order in terms of the draft. I revert to these aspects
below. The relevant part of the order reads as follows:
‘
2 Pending the
final determination of the action instituted in the Western Cape High
Court under case number 8276/2018:
2.1 the first
respondent [Steinhoff NV] is interdicted and restrained from dealing
with the shares it holds directly or indirectly
in any of its
subsidiaries or any juristic persons related to it, or permitting
them to be dealt with, in any manner which would
result in it being
unable to give effect to the relief in para 2.2 below, and that
sought in prayer A in case number 8276/2018;
2.2 the first
respondent [Steinhoff NV] is directed to exercise the control it has
over the second [Pepkor], third [Speciality]
and fourth [Tekkie Town]
respondents respectively, in such a manner that:
2.2.1 the
shareholding of the second respondent [Pepkor] in the fourth
respondent [Tekkie Town] is preserved and prevented from
being
alienated, and/or encumbered in whole or in part;
2.2.2 the fourth
respondent [Tekkie Town] is prevented from issuing any further shares
in itself;
2.2.3 the business
trading under the name and style of
Tekkie Town
acquired in
terms of the sale agreement entered into by the first respondent
[Steinhoff NV] and the third respondent [Speciality]
with effective
date 1 October 2017 (as amended in addendum No 1), is preserved, and
third respondent [Speciality] is prevented
from alienating or
encumbering the said business or its assets otherwise than as
reasonably required in the normal course of operating
the retail
business of
Tekkie Town
.
2.2 should –
2.3.1 the second
respondent [Pepkor] intend to alienate, and/or encumber in whole or
in part the shares it holds in the fourth respondent
[Tekkie Town],
and/or
2.3.2 the third
respondent [Speciality] intend to alienate and/or encumber in whole
or in part the business trading under the aforesaid
name and style of
Tekkie Town
,
the second and/or
the third respondent be directed to notify in writing all parties to
the intended transaction that the aforesaid
shares and/or business,
as the case may be, are the subject-matter of claims by the present
applicants in case number 8276/2018
in this Court, and to furnish a
copy of such notification to the applicants’ attorneys of
record not later than 10 days prior
to the conclusion of any
agreement having such effect.
3. Costs to stand
over for later determination.’
[12]
The
order issued by Erasmus J came to the attention of the appellants via
an email sent by the judge’s registrar on 29 April
2019, and
the parties were requested to indicate within five days whether they
required ‘full reasons’ for the order.
On 30 April 2019
the appellants requested the reasons for the order. These reasons had
not been given by 10 May 2019 when the appellants
had filed their
applications for leave to appeal.
[13]
The
reasons for the order were given orally by Erasmus J – more
than three months later, on 20 August 2019. The reason given
for this
delay was simply that for ‘some or other reason there were
crossed lines’. The judge granted the parties permission
to
record the reasons given in court. This recording was transcribed and
given to the judge to assist him in providing the reasons
in written
form, in accordance with rule 49 of the Uniform Rules of Court.
However, the judge’s registrar enquired of the
attorney
representing the Pepkor entities whether the unedited transcript of
the reasons could be circulated, to which they consented.
Erasmus J
did not furnish written reasons and the unedited transcript of the
oral reasons, utilised in the application for leave
to appeal,
constitutes the reasons for the order issued on 26 April 2019 (the
transcript). According to the transcript, the draft
order tendered by
the respondents was made an order of court ‘overnight’.
[14]
At
this point it is convenient to deal with the submission by counsel
for the Pepkor entities that the failure by Erasmus J to grant
the
appellants an opportunity to make written or oral submissions on the
draft order, which was very different from the relief
sought in the
notice of motion, was inappropriate and likely to bring the
administration of justice into disrepute. The submission
has merit.
It is axiomatic that a hearing should be fair. This lies at the heart
of our system, is common sense and is enshrined
in the
Constitution.
[1]
As the litigants, the appellants should have been given an
opportunity to raise with the court, any concerns they might have had
in relation to the draft order. Secondly, as part of the
decision-making process, their legal representatives were entitled to
make written or oral submissions regarding the draft order. This may
well have obviated the need for an appeal. The issuance of
the order
in the circumstances is regrettable.
[15]
The
application for leave to appeal was heard on 13 September 2019 and
the judgment in that application delivered on 16 September
2019. The
high court concluded that there was no reasonable prospect that
another court would come to a different conclusion on
the facts, and
that the order was not final in effect.
Is
the order appealable?
[16]
The
respondents submitted, on the authority of
Zweni
v Minister of Law and Order
,
[2]
that the order is not appealable because it is not final in effect,
does not dispose of any relief claimed in the main action,
and is not
definitive of the rights of the parties. However, these traditional
requirements have now been subsumed under the broader
constitutional
‘interests of justice’ standard.
[3]
This standard applies both to appealability and the grant of leave to
appeal, regardless of the existence of pre-constitutional
common law
impediments.
[4]
[17]
In
my view, it is in the interests of justice that the order granted
against the appellants is appealable, not least because it
is final
in effect and not susceptible to alteration by the high court or the
court hearing the main application.
[5]
The issues upon which final pronouncements have been made are not
matters that will arise for determination in the main action,
on the
pleadings as they stood at the time, in particular: the application
of the
res
litigiosa
doctrine; Steinhoff NV’s alleged control of the Pepkor
appellants; fraud in relation to the transactions following the sale
agreement; and whether Pepkor bought the Tekkie Town shares in good
faith and for value. Likewise, the order restraining
Steinhoff
NV from dealing with its shares at will, and directing it to exercise
the control it has over the Pepkor entities in
a particular manner,
will also not be revisited in the main action, on the pleadings as
they stood at the time.
[18]
After
the interdict was issued, the respondents joined the Pepkor entities
as parties in the main action, and delivered amended
particulars of
claim on 9 June 2020, in which they allege the abuse of corporate
personality by the defendants in that action.
These subsequent events
are however irrelevant, since this Court must decide ‘whether
the judgment appealed from is right
or wrong, according to the facts
in existence at the time it was given and not according to new
circumstances which came into existence
afterwards’.
[6]
Res
litigiosa
[19]
Res
litigiosa
is
property which is the subject of litigation. A plaintiff may in
principle apply to preserve
res
litigiosa
,
pendente
lite
.
[7]
The requirements are those for an ordinary interim interdict. As a
general principle, there are two additional inherent features:
the
first is that the property which is the subject of the interim
interdict is the subject of the action; and the second, that
the
action and the interim application are between the same parties.
[20]
In
Knox
D’Arcy
Ltd
and
Others
v
Jamieson and Others
E M Grosskopf JA referred to a same-parties same-property type
interdict as ‘the usual case where its purpose is to preserve
an asset which is in issue between the parties’.
[8]
Since the applicants in that case did not apply to preserve property
‘in issue between the parties’ and laid no claim
to the
respondent’s assets in the anticipated action, the judge said
that ‘(t)he interdict sought was therefore of
an unusual
nature’.
[9]
[21]
In
this case the order issued by the high court does not preserve the
property in issue in the main action, but affects Steinhoff
NV’s
right to deal with
different
property, ie the shares which Steinhoff NV holds directly and
indirectly in any of its subsidiaries, or any juristic persons
related
to it. The order was granted against the Pepkor entities
despite the fact that they were not parties to the main action.
Although
the respondents asserted that Steinhoff NV was disposing of
non-core assets, which would frustrate their chances of obtaining
redress
in due course, they stated that ‘the application is not
one for an anti-dissipation order’. Their case, instead, was
that the Tekkie Town shares and business became
res
litigiosa
,
which entitled them to an interdict pending the final determination
of the main action.
[22]
The
stage at which property becomes
res
litigiosa
,
is stated in
Silberberg
and Schoeman’s
The
Law of Property
,
[10]
as follows:
‘
In
Roman law, broadly speaking, a
res
became
litigiosa
at the stage of
litis
contestatio
,
which in our law arises upon the closing of pleadings. In Roman-Dutch
law a distinction was drawn between real actions (
in
rem
)
and personal actions (
in
personam
).
Where a real action with regard to the thing was instituted, the
thing became
litigiosa
when the defendant was informed of the summons issued against him or
her. In the case of a personal action the thing became
litigiosa
at the close of pleadings.’
[23]
The
high court concluded that it would defeat the relief granted against
Steinhoff NV (in the main action), if no relief was granted
against
the Pepkor entities, since they were ‘the possessors and/or
current owners’ of the Tekkie Town shares and business.
The
transcript is however opaque as to the reasons for reaching this
conclusion. The judge appears to have concluded, without any
factual
basis, that when one has regard to ‘the nature of the
relationship
inter
se
in the Steinhoff Group’, the transfer of the Tekkie Town shares
and business was ‘clearly plotted’; some decisions
were
made the day before a transaction took place; and it was stated on
behalf of the Pepkor entities that the sale of the shares
and
business was part of an internal restructuring. This reasoning
however bears no relation to the
res
litigiosa
doctrine
.
[24]
Before
us, counsel for the respondents submitted that the property claimed
in the main action is one
in
rem
,
since the respondents are seeking restoration of their ownership and
possession of the equity. The property thus became
res
litigiosa
upon the service of the summons in the main action.
[11]
Alternatively, if this Court regards the main action as being one
in
personam
,
the equity would nevertheless have become
res
litigiosa
by virtue of
litis
contestatio
having been reached. Further alternatively, it was submitted that
‘the doctrine of
res
litigiosa
in modern South African law should be revisited in the light of the
alteration in status of contracts induced by fraud from being
void
ab
initio
to merely voidable’.
[25]
In
my view these submissions do not withstand scrutiny. The doctrine of
res
litigiosa
is inapplicable for three reasons. First, the doctrine could not
apply to Pepkor and Speciality as the current owners of the Tekkie
Town shares and business respectively, since the
res
described in the particulars of claim in the main action was not
litigiosa
in relation to them. They were not parties to the main action. There
was no
lis
between the respondents and Pepkor and Speciality, the subject matter
of which was the Tekkie Town shares which the respondents
sold to
Steinhoff NV. The doctrine of
res
litigiosa
only applies where there is a
lis
between the plaintiff enforcing a right to or ownership of property
and the possessor thereof.
[12]
Further, there was no question of property subject to litigation in
the main action being transferred to the Pepkor entities while
those
proceedings were pending. It is common ground that the Tekkie Town
shares and business were transferred to Pepkor and Speciality
respectively, well before the main action was instituted, and thus
before the Tekkie Town shares or the Tekkie Town business could
become
res
litigiosa
in the main action.
[26]
Second,
the high court’s order restrains the appellants from dealing
with property that is self-evidently not the subject
matter of the
main action. In this regard the court referred to
Van
Heerden v Sentrale Kunsmis Korporasie
,
[13]
on which the respondents had relied, but gave no reasons for
apparently following this decision, as is clear from the transcript.
Erasmus J said:
‘
The
Applicants relied on the dicta of Rumpff JA, as well as another
matter of Holmes JA, in the matter of
van
Heerden v Sentrale Kunsmis Korporasie
at paragraph 31H and further in the old style of reporting under
1973
(1) SA 17
AD. I do not deem it necessary to repeat the quotations
from these cases that were contained in the heads of argument and
presented
to me. I mention this because when counsel prepare their
leave to appeal application they can read it at their own time and
see
what it says.’
[27]
This
statement is both unusual and unfortunate, particularly in the light
of the judge’s observation that one of the litigants
was
present in court when it was made. The duty to give reasons for a
decision, in my opinion, is a function of due process, embodied
in
the right to a fair hearing enshrined in s 34 of the
Constitution. Fairness requires that the parties – especially
the losing party – should be left in no doubt as to the reasons
for an order and consequently, why they have won or lost.
The
explanation by Buckley LJ in
Capital
and Suburban Properties Ltd v Swycher and Others
,
[14]
concerning the appropriateness of reasons in a case such as the
present, is instructive:
‘
There
are some sorts of interlocutory applications, mainly of a purely
procedural kind, on which a judge exercising his discretion
on some
such question as whether a matter should be expedited or adjourned or
extra time should be allowed for a party to take
some procedural
step, or possibly whether relief by way of injunction should have
been granted or refused, can properly make an
order without giving
reasons. This, being an application involving questions of law, is in
my opinion clearly not such a case.
Litigants are entitled to know on
what grounds their cases are decided. It is of importance that the
legal profession should know
on what grounds cases are decided,
particularly when questions of law are involved. And this court is
entitled to the assistance
of the judge of first instance by an
explicit statement of his reasons for deciding as he did.’
[28]
We
were informed by counsel for the appellants that the respondents had
relied on
Van
Heerden
in support of an argument that they were entitled to claim the return
of the Tekkie Town shares and business wherever they were
then
housed.
Van
Heerden
arose from the sale of a going concern, effected by transfer of 100%
of the issued share capital of a company. The purchaser reclaimed
the
purchase price and tendered return of the sale shares. The question
was whether the tender was sufficient. Rumpff JA explained
that the
purpose of restitution was to place the parties in the same position
as they would have been had the contract not been
concluded. The
judge said that in a case where the sale of shares was simply a
formal means of effecting the sale of a business
as a going concern,
and the purchaser was responsible for the diminution in value or
destruction of the business assets, a tender
to return the shares
would not suffice as restitution.
[15]
[29]
Van
Heerden
does
not support the argument that the respondents were entitled to claim
the return of the Tekkie Town shares and business wherever
they were
located. The respondents did not make this claim in the main action.
The argument could not assist them to preserve assets
in advance of a
claim they did not make.
[16]
Apart from this, the respondents did not sell 100% of the shares in
Tekkie Town: they sold only 56,94% and there is no basis in
law for a
restitution claim for more than what was in fact delivered by them.
There was consequently no entitlement to preserve
that which never
served as the
res
vendita
in terms of the sale agreement.
[30]
The
third reason why the
res
litigiosa
doctrine finds no application is that on the pleadings before the
high court, the main action was not one
in
rem
,
but an action
in
personam
,
and pleadings had not closed when the interdict was granted. As
stated earlier, the cause of action is an alleged fraudulent
misrepresentation by Mr Jooste that induced the respondents to
enter into the sale agreement. This was confirmed in the founding
affidavit in the interdict application. The relief claimed is
rescission of the sale agreement and
restitutio
in integrum
;
alternatively, damages in the event that Steinhoff NV is unable to
make restitution. The source of the right asserted is a legal
relationship between the plaintiffs and the defendants in the main
action – not a legal relationship between the plaintiffs
and
the property itself.
[17]
The claim for rescission and restitution is one in contract: the
remedy of rescission to an aggrieved contracting party is a
contractual
remedy.
[18]
This is reinforced by the alternative claim for damages: the
respondents recognise that Steinhoff NV may not be able to make
restitution.
[31]
Given
that the respondents’ claim in the main action is one
in
personam
against Steinhoff NV, the relevant property would have become
res
litigiosa
only after
litis
contestatio
.
[19]
Pleadings in the main action had not closed when the interdict was
granted, as the respondents had delivered a notice of intention
to
amend their particulars of claim.
[20]
[32]
Finally,
on this aspect of the case, the principle that a contract induced by
improper means, such as a fraudulent misrepresentation,
is valid
until it is set aside and not void but voidable at the election of
the innocent contracting party, is well-settled.
[21]
There is accordingly, in my view, no reason for the law in this
regard to be extended so as to enable a defrauded former owner
to
reclaim, in a vindicatory action, things lost as a result of a
contract induced by fraud.
Fraud
and the issue of control
[33]
In
the founding affidavit the respondents’ main deponent, Mr
Bernard Mostert, a director of the first and fifth respondents,
alleged that the sales and transfers of the shares in Tekkie Town
were ‘simulated transactions’ forming part of a
‘labyrinthine fraud’, perpetrated by those in charge of
Steinhoff NV and its controlled subsidiaries.
[34]
The
allegation of fraud was based on submissions by Steinhoff NV’s
representatives before parliamentary committees concerning
accounting
irregularities by directors and officers of Steinhoff NV. The
committees were informed that owing to these irregularities,
Steinhoff NV’s annual financial statements for the 2015 and
2016 financial years had to be restated. The respondents also
relied
on a report by Pricewaterhouse Coopers Advisory Service Proprietary
Ltd (PwC) dated 15 March 2019, concerning an investigation
into
accounting irregularities and non-compliance with laws and
regulations made against various Steinhoff entities and former
executives, in South Africa and other jurisdictions.
[35]
The
PwC report states that a small group of Steinhoff NV’s
executives and other non-executives had structured and implemented
various fictitious and irregular transactions over a number of years,
which resulted in false profits and asset values of the Steinhoff
Group of some €4.5 billion over an extended period, whilst
simultaneously diminishing the Group’s liabilities. The main
transactions in which this was done – of which no details are
given in the report – relate to fictitious profit and
asset
creation; asset overstatement and reclassification; false asset and
entity support; and mitigating losses through sham contributions
by
companies in the Steinhoff Group. The PwC report concludes with
remedial actions that were required to be taken. These included
ensuring that the findings in the report were treated appropriately
in the preparation of the Steinhoff Group’s financial
statements for the 2017 and 2018 financial years; and recovery of the
losses incurred and damages suffered by the Group.
[36]
The
appellants denied the allegation of a web of fraud. It was not
pleaded in the main action in which the respondents relied only
on
the alleged fraud by Mr Jooste, representing Steinhoff NV, that
induced the sale agreement. The appellants’ answer to
the
alleged fraud was this. The very transactions which the respondents
say are fraudulent, form the basis of their claims to an
earn-out
bonus in the bonus scheme action. Mr Mostert and Mr Van Huyssteen
were directly involved in the pre-listing statement
of Pepkor and its
listing on the JSE in September 2017. They knew the rationale for the
listing and the context in which it occurred.
Mr Mostert had informed
Mr Van Huyssteen in an email on 10 January 2018 that the latter had
no claim against STAR to recover his
losses or the Tekkie Town
business, because ‘STAR is an independent company that bought
TT at exactly the same price from
SHNV [as] what you were paid’.
The respondents were thus aware of the integrity of the transactions
in terms of which the
Tekkie Town shares were transferred to Pepkor,
and the Tekkie Town business, to Speciality. These were transactions
in good faith
and for value.
[37]
Regarding
the appellants’ defence that they had obtained the Tekkie Town
shares for value and had grown the business substantially
since the
time of takeover, the high court concluded that ‘(t)hese
assertions lose sight of the nature of the relationship
inter
se
in the Steinhoff Group. That, it seems, might also not be always what
it [is] portrayed to be at first sight’. There is however
no
factual basis for this conclusion. Erasmus J stated that the ‘flow
of this transaction’ was set out in the papers
and annexures.
The judge went on to say:
‘
The
transfer passed of the Tekkie Town business and its shares was
clearly plotted, having regard to the timeline before the first
transfer took place. These timelines are common cause.
Some
of the decisions were made the day before the transaction would take
place and on the same day the flow would go from one subsidiary
to
another at either the same price and/or an inflated price, and there
is still an issue of the missing millions on the first
transfer’
.
[38]
This
conclusion at an interim stage of the proceedings and the reasons for
it – that suggest some sort of preconceived, co-ordinated
and
deceitful conduct by entities involved in transactions resulting in
‘missing millions’ of Rands – are however
at odds
with the following statement by the judge in the transcript:
‘
I
do not deem it necessary nor prudent to delve into the details of the
transactions that led to the business of Tekkie Town ultimately
being
placed in the third respondent, that’s Pepkor Speciality (Pty)
Limited, nor the issues of control and/or the placement
of the shares
in the second respondent [Pepkor] by the first respondent [Steinhoff
NV] or any of its subsidiaries, as I am aware
that these matters
might be the subject of further litigation before this and
potentially other courts.’
[39]
Despite
this, paragraph 2 of the order, which restrains Steinhoff NV from
dealing freely with its shares in any of its subsidiaries
or related
companies, and directs Steinhoff NV ‘to exercise the control it
has’ over the Pepkor entities in a particular
manner, is based
entirely on the alleged control by Steinhoff NV of the corporate
actions within the Steinhoff Group. And the cases
make it clear that
it is inappropriate and unwise for findings of fraud or deceit to be
made on the basis of untested allegations
on motion, which are denied
on grounds that cannot be described as far-fetched or untenable. This
is based not only on common sense,
but also on ‘many years of
collective judicial experience’.
[22]
[40]
The
high court erred. To begin with, the respondents produced no evidence
to substantiate fraud in the application for the interdict,
other
than the fact of the transactions subsequent to the sale agreement
themselves, and the accounting irregularities in relation
to the
Steinhoff Group. Instead, the respondents merely referred to
submissions before parliamentary committees by company officers
of
Steinhoff NV; liquidation proceedings and other claims instituted
against it in South Africa and foreign jurisdictions; and
the PwC
report. Then Mr Mostert made the sweeping allegation that it ‘would
appear to be self-evident’ that the sales
and transfers of the
Tekkie Town shares were simulated transactions; and ‘entirely
in accordance with the scheme’ of
the PWC report. In this
regard, the respondents failed to identify in the founding affidavit,
the parts of the PwC report on which
they relied, nor the case they
sought to make out on the strength thereof. This is
impermissible.
[23]
[41]
On
the papers in the interdict application, the allegation in the
founding affidavit that Steinhoff NV controls and directs all
corporate actions and activities within the Steinhoff group, is wrong
both in fact and in law. The facts before the high court
were these.
Pepkor is a listed company. Steinhoff NV owns 71% of its shares. The
remaining 29% of the shares, valued at some R19.5
billion, are
listed, publicly tradable shares held by independent investors.
Pepkor’s interests are not synonymous with those
of Steinhoff
NV and it is not wholly-owned by the latter.
[42]
The
answering affidavit states that the parties are all separate
corporate entities, each with their own board of directors who
have
discrete obligations and fiduciary duties to the companies on which
boards they serve. These allegations were not contradicted.
Further,
Pepkor, as an entity listed on the JSE, is obliged to comply with the
King IV Code on Corporate Governance, in terms of
which the board of
a company must act in the best interests of the company as a separate
entity, taking into account the interests
of various stakeholders and
not merely those of its shareholders. Pepkor would thus breach the
Code were Steinhoff NV to control
all of Pepkor’s corporate
actions.
[43]
More
fundamentally, it is an established principle that a company is a
legal entity distinct from its shareholders and that property
owned
by a company is not that of its shareholders. This principle was
recently affirmed by this Court in
Hlumisa
Investment Holdings (RF) Ltd and Another v Kirkinis and Others.
[24]
The principle applies equally where the company is a subsidiary or
even a wholly-owned subsidiary of another company.
[25]
The principle that each company in a group has a separate legal
existence of its own was stated in
Adams
v Cape Industries PLC
,
[26]
as follows:
‘
Our
law, for better or worse, recognises the creation of subsidiary
companies, which though in one sense the creatures of their
parent
companies, nevertheless under the general law fall to be treated as
separate legal entities with all the rights and liabilities
which
would normally attach to separate legal entities.’
[44]
The
board of a holding company is thus not able to dictate the decisions
of the board of a subsidiary, even if that subsidiary is
a direct,
wholly-owned subsidiary. In terms of
s 66(1)
of the
Companies Act 71
of 2008
, the board of a subsidiary must independently manage and
direct the business and affairs of the subsidiary company.
[27]
[45]
In
Shipping
Corporation of India Ltd v Evdomon Corporation and Another
,
[28]
Corbett CJ affirmed the principle that a company has a separate
juristic personality, and said that the only permissible deviation
from this rule known to our law occurs in those rare cases (in
practice) where the circumstances justify piercing or lifting the
corporate veil. Those circumstances generally must include an element
of fraud or other improper conduct in the establishment or
use of the
company, or the conduct of its affairs.
[29]
No such case was made out in the founding affidavit in the
application for the interdict.
[46]
The
respondents’ allegations that the sales and transfers of the
shares in Tekkie Town were simulated transactions and that
Steinhoff
NV controlled all corporate actions within the Steinhoff Group, were
simply not established on the papers in the interdict
application.
Neither did they make out a case on those papers for the high court
to disregard the separate corporate personalities
of the appellants.
It follows that the high court’s order must be set aside.
[47]
I
expressly refrain from deciding the validity or otherwise of the
appellants’ defences to the alleged fraud referred to in
paragraph 37 above, for two reasons. First, the appellants’
defences, and the alleged abuse of corporate personality by Steinhoff
NV, Tekkie Town and the Pepkor entities, are triable issues in the
main action according to the respondents’ amended particulars
of claim. Second, it is unnecessary to decide the defences by reason
of the conclusion to which I have come.
The
application to adduce evidence on appeal
[48]
At
the inception of the hearing of this appeal the respondents applied
to adduce further evidence on affidavit. The new evidence
sought to
be introduced was the respondents’ notice of intention to amend
their particulars of claim in the main action;
the amended
particulars of claim dated 9 June 2020; and the exception to the
latter pleading by Pepkor and Speciality, following
their joinder as
parties in the main action. The application was refused and we
indicated that reasons would be given in
this judgment. These are the
reasons.
[49]
In
terms of
s 19
(b)
of the
Superior Courts Act 10 of 2013
, this Court is empowered to
receive further evidence on appeal.
[30]
According to the cases, the following criteria must be met. The
general principle, as stated earlier, is that an appellate court
does
not decide an appeal according to new circumstances that came into
existence after the judgment appealed against.
[31]
There may be exceptional circumstances where an appellate court might
be able to take cognisance of subsequent events.
[32]
The power to admit evidence on appeal should be exercised
sparingly.
[33]
There must be a reasonably sufficient explanation why the evidence
was not tendered earlier in the proceedings.
[34]
The evidence ‘must be weighty and material and presumably to be
believed’.
[35]
These criteria were confirmed by the Constitutional Court in
Rail
Commuters Action Group v Transnet Ltd t/a Metrorail
,
[36]
concerning the power of an appellate court to admit evidence on
appeal under s 22
(a)
of the Supreme Courts Act 59 of 1959, the precursor to
s 19
(b)
of the
Superior Courts Act.
>
[50]
The
new evidence sought to be introduced by the respondents is neither
weighty nor material to the case that served before the high
court.
It comprises court process delivered after the high court issued the
order restraining the appellants from dealing with
their property;
and is entirely irrelevant to that order. Quite apart from this,
there is no explanation for the delay in launching
the application to
adduce the new evidence. The respondents delivered their amended
particulars of claim on 10 June 2020. The application
to adduce
further evidence was launched only on 13 August 2020. For these
reasons the application was refused and there is no reason
why costs
should not follow the result.
[51]
The
following order is issued:
1
The
application to adduce further evidence on appeal is dismissed with
costs, including the costs of two counsel.
2
The
appeals under case numbers 205/2020 and 217/2020 are upheld with
costs, including the costs of two counsel.
3
The
order of the high court is set aside and replaced with the following:
‘
The
application is dismissed with costs, including the costs of two
counsel.’
_______________
A
SCHIPPERS
JUDGE
OF APPEAL
APPEARANCES
For Appellants (case
no 205/2020) A Sholto-Douglas SC and B J Vaughan
Instructed
by Bowman Gilfillan Inc,
Cape
Town
Matsepes
Inc, Bloemfontein
For Appellants (case
no 217/2020) A M Smalberger SC and
R Patrick
Instructed by
Werksmans Attorneys, Cape Town
Lovius Block,
Bloemfontein
For First to Fifth
Respondents
(case no 217/2020) D
F Irish SC, W Duminy SC and D M Lubbe
Instructed by C&A
Friedlander, Cape Town
Symington De Kok
Attorneys, Bloemfontein.
[1]
Section
34 of the Constitution provides:
‘
Everyone
has the right to any dispute that can be resolved by the application
of law decided in a fair public hearing before a
court, or where
appropriate, another independent and impartial tribunal or forum.’
[2]
Zweni
v Minister of Law and Order
[1993] 1 All SA 365
(A);
1993 (1) SA 523
(A) at 536A-C.
[3]
Philani-Ma-Afrika
and Others v Mailula and Others
[2009] ZASCA 115
;
2010 (2) SA 573
(SCA);
[2010] 1 All SA 459
(SCA)
para 20;
City
of Tshwane Metropolitan Municipality v Afriforum and Another
[2016] ZACC 19
;
2016 (9) BCLR 1133
(CC);
2016 (6) SA 279
(CC) para
40.
[4]
City
of Tshwane City
fn 3 para 41.
[5]
Cipla
Agrimed (Pty) Ltd v Merck Sharp Dohne Corporation and Others
[2017]
ZASCA 134
;
[2017] 4 All SA 605
(SCA);
2018 (6) SA 440
(SCA) para 47.
[6]
Weber-Stephen
Products Co v Alrite Engineering (Pty) Ltd and Others
[1992] ZASCA 2
;
[1992] 4 All SA 453
(AD);
1992 (2) SA 489
(A) at 507D-E.
[7]
Opera
House (Grand Parade) Restaurant (Pty) Ltd v Cape Town City Council
[1986] 4 All SA 120
(C);
1986 (2) SA 656
(C) at 656C;
Knox
D’Arcy Ltd and Others v Jamieson and Others
[1996] ZASCA 58
;
[1996]
3 All SA 669
(A);
1996 (4) SA 348
(A) at 371H.
[8]
Knox
D’Arcy
fn 7 at 371H.
[9]
Knox
D’Arcy
fn 7 at 371H-I.
[10]
P
J Badenhorst, J Pienaar and H Mostert
Silberberg
and Schoeman’s
The
Law of Property
5
ed (2006) at 268, footnotes omitted.
[11]
Blue-Cliff
Investments (Pty) Ltd and Another v Griessel and Others
[1971] 2 All SA 523
(C);
1971 (3) SA 93
(C) at 96C-F;
Opera
House
fn 7 at 659G-660B.
[12]
Opera
House
fn
7 at 661C.
[13]
Van
Heerden en Andere v Sentrale Kunsmis Korporasie (Edms) Bpk
[1973]
1 All SA 150 (A); 1973 (1) SA 17 (A).
[14]
[1976]
1 All ER 881
at 884,
[1976] Ch 319
at 325-326.
[15]
Van
Heerden
fn 13 at 32H-33A.
[16]
In
an attempt to align their case with the approach in
Van
Heerden
,
the respondents served a notice of intention to amend their
particulars of claim shortly before the hearing of the application
and well after it was launched. According to the amendment, ‘the
subject matter of the contract was the whole of Tekkie
Town,
including its business as a going concern’. However, the
amendment had not been effected when the application was
heard. In
any event, the amendment did not alter the relief claimed –
restitution of the applicable proportion of the sale
shares and sale
claims as defined in the sale agreement; alternatively, damages.
[17]
Examples
of an action
in
rem
are claims of ownership, of
usus
,
usufruct or a servitude. See in this regard G B Bradfield
Christie's
Law of Contract in South Africa
7 ed (2016) at 4.
[18]
Baker
v Probert
[1985] ZASCA 22
;
[1985] 2 All SA 263
(A); 1985 (3) SA (A) at 439A-B;
S
W J van der Merwe
et
al
Contract:
General Principles
4 ed (2012) at 354.
[19]
Blue
Cliff Investments
fn
11 at 94B- 95C.
[20]
Natal
Joint Municipal Pension Fund v Endumeni Municipality
[2012] ZASCA 13
;
[2012] 2 All SA 262
(SCA);
2012 (4) SA 593
(SCA)
paras 14-16.
[21]
Preller
v Jordaan
1956 (1) SA 483
(A) at 494H;
North
West Provincial Government and Another v Tswaing Consulting CC and
Others
[2006] ZASCA 108
;
[2007] 2 All SA 365
(SCA);
2007 (4) SA 452
(SCA)
paras 11-12.
[22]
Prinsloo
NO and Others v Goldex 15 (Pty) Ltd and Another
[2012] ZASCA 28
;
2014 (5) SA 297
(SCA) paras 19-20.
[23]
Van
Zyl and Others v Government of the Republic of South Africa and
Others
[2007] ZASCA 109
;
[2008] 1 All SA 102
(SCA);
2008 (3) SA 294
(SCA)
para 40, approving
Swissbourgh
Diamond Mines (Pty) Ltd v Government of the RSA and Others
1999 (2) SA 279
(T) at 323F-325C.
[24]
Hlumisa
Investment Holdings (RF) Ltd and Another v Kirkinis and Others
[2020] ZASCA 83
;
[2020] 3 All SA 650
(SCA) paras 17 and 24.
[25]
Wambach
v Maizecor Industries (Edms) Bpk
[1993] ZASCA 28
;
[1993] 2 All SA 158
(A);
1993 (2) SA 669
(A) at 674H- 675C.
[26]
Adams
v Cape Industries PLC
[1991] 1 All ER 929
(Ch D) at 1019.
[27]
Section 66(1)
of
the
Companies Act 71 of 2008
provides:
‘
66
Board, directors and prescribed officers
(1)
The
business and affairs of a company must be managed by or under the
direction of its board, which has the authority to exercise
all of
the powers and perform any of the functions of the company, except
to the extent that this Act or the company's Memorandum
of
Incorporation provides otherwise.’
[28]
Shipping
Corporation of India Ltd v Evdomon Corporation and Another
[1994] 2 All SA 11 (A); 1994 (1) SA 550 (A).
[29]
Shipping
Corporation of India
fn 27 at 565I-566F.
[30]
Section
19
of the
Superior Courts Act provides
in the relevant part:
‘
The
Supreme Court of Appeal or a Division exercising appeal jurisdiction
may, in addition to any power as may specifically be
provided for in
any other law–
(b)
receive
further evidence. . . .’
[31]
Weber-Stephen
Products
fn
6 at 507C-D.
[32]
Goodrich
v Botha and Others
[1954] 3 All SA 40
(A);
1954 (2) SA 540
(A) at 545G-546C;
S
v Louw
[1990] ZASCA 43
;
[1990] 4 All SA 703
(AD);
1990 (3) SA 116
(A) at 123H.
[33]
Van
Eeden v Van Eeden
1999 (2) SA 448
(C) at 450J-451A.
[34]
S
v Louw
fn
31 at 123-124.
[35]
Colman
v Dunbar
1933 AD 141
at 161-163.
[36]
Rail
Commuters Action Group v Transnet Ltd t/a Metrorail
[2004] ZACC 20
;
2005
(4) BCLR 301
(CC);
2005 (2) SA 359
(CC) paras 42 and 43. See also
Moor
and Another v Tongaat-Hulett Pension Fund and Others
[2018] ZASCA 83
;
[2018] 3 All SA 326
(SCA);
2019 (3) SA 465
(SCA)
para 36.