REPUBLIC OF SOUTH AFRICA
IN THE HIGH COURT OF SOUTH AFRICA
GAUTENG DIVISION, PRETORIA
CASE NO .:31250/2022
In the matter between:
HERCULES PHILLIP BYE APPLICANT
and
CONSTANTIA METERING SERVICES (PTY) LTD FIRST RESPONDENT
ANDRÉ CHARLES BUCKLE SECOND RESPONDENT
JUAN BUC KLE THIRD RESPONDENT
STANLEY BUCKLE FOURTH RESPONDENT
JUDGMENT
Van der Schyff J
Introduction
(1) REPORTABLE: NO
(2) OF INTEREST TO OTHER JUDGES: NO
(3) REVISED: Yes
Date: 31January 2025 / E van der Schyff
6 February 2025
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[1] The applicant, Mr. Hercules Phillip Bye (“Mr. Bye”), approached the court for relief
in terms of section 163 of the Companies Act 71 of 2008 (“the Companies Act”). He
wants the court to declare that the actions of the second, third, and fourth
respondents (collectively referred to as the Buckle respondents”) were, or have had
a result that is oppressive or unfairly prejudicial to and that unfairly disregards his
interests , and seeks ancillary rel ief. If the court finds that section 163 of the
Companies Act does not apply, Mr. Bye seeks an interdict in the same terms as the
ancillary relief sought.
[2] Three main issues potentially stand to be determined. The first is whether Mr. Bye
made a case under section 163 of the Companies Act. If he succeeds, the second
issue that needs to be determined is the remedy that should follow the declaration.
Only if the court is convinced that his shares are to be bought out does the issue of
the va lue and valuation of shares come into play. If the court finds that Mr. Bye did
not make out a case for relief in terms of section 163 of the Companies Act, the
question is whether he succeeded in making out a case in terms of the common law
and met the re quirements for an interdict.
Section 163 of the Companies Act
[3] Section 163 is aimed at providing protection against oppress ion or unfair prejud ice
in any one of three described categories . A shareholder or a director of a company
may apply to court for relief under this section in one of three situations , namely , if:
i. any act or omission of the company, or a related person, has had a result that
is oppressive or unfairly prejudicial to, or that unfairly disregards the interests
of, the applicant;
ii. the business of the company, or a related person, is being or has been carried
on or conducted in a manner that is oppressive or unfairly prejudicial to, or
that unfairl y disregards the interests of the applicant; or
iii. the powers of a director or prescribed officer of the company, or a person
related to the company, are being or have been exercised in a manner that is
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oppressive or unfairly prejudicial to, or that unfairly disregards the interests of
the applicant.
[4] In each of these categories provided for in the respective sub -sections of section
163(1) a different facet is highlighted. In section 163(1)( a) the focus falls on the
consequences of the impugned conduct of a company or related person (collectively
referred to in this paragraph as ‘the company’). Not only the consequences of the
impugned act or omission, but also the performer of the act sets th is category aside.
In section 163(1)( b) the manner or way in which the business of the company is
conducted is the gateway to seek relief under this section. In section 163(1)( c) the
emphasis is on the manner in which the director or prescribed officer of a company
exercises their powers as director or prescribed officer. In all three categories the
effect or result of the identified actor’s acts must be oppressive or unfairly prejudicial,
alternatively unfairly disregards the interests of the applicant.
[5] In a recent judgment, Technology Corporate Management (Pty) Ltd and Others v De
Sousa and Another ,1 the Supreme Court of Appeal comprehensively unpacked the
scope of section 252 of the Companies Act 61 of 1973, the predecessor of section
163 of the Companie s Act 71 of 2008. The decision and ratio remain highly relevant
to this matter. As Wallis JA pointed out, decisions on section 252 are of assistance
in relation to cases arising under section 163(1) , which substantially re -enacted it.2
[6] Although trite, it is necessary to highlight the following principles enunciated in TCM:
i. The relationship between a company and its members, and the members
inter se , is contractual and based primarily on the memorandum of
incorporation . As a result, the views of the majority will ordinarily prevail on
any disputed issue;3
ii. The legislature, however, vested courts with statutory power to override the
majority’s exercise of its contractual powers to remedy oppression or unfair
prejudice caused to minority shareholders even if the majority shareholders
1 2024 (5) SA 57 (SCA), hereafter referred to as TCM .
2 TCM, supra, at para [29].
3 TCM, supra , at para [75].
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acted strictly in accordan ce with the contractual terms governing the
shareholder relationship;4
iii. There is a tension between the principle of majority rule and the power
ascribed to courts to intervene in a company’s affairs on equitable grounds;5
iv. The enquiry is objective, and although motive is not always irrelevant, proof
is not required of a lack of bona fides or an intention to cause prejudice .6 An
applicant cannot simply make a number of vague and generali sed allegations
of unfairness or oppression . An applicant has to establish the particular act
or omission that has been committed or that the affairs of the company have
been conducted in the manner so alleged.7
v. When reliance is placed on actions causing unfair prejudice , mere prejudi ce
is insufficient to invoke the remedy. The remedy is only available where unfair
prejudice was caused, and the unfairness and the prejudice must affect the
shareholder;8
vi. Dissatisfaction and disagreement or disapproval of the conduct of the
business of a company does not in itself mean that the member has suffered
unfair prejudice. While the fact that there are irreconcilable differences
between shareholders may, in some circumstances, justify an order for the
winding -up of a company, it is not, without mo re unfair prejudice;9
vii. Courts should be wary not to confer rights on minority shareholders that are
greater than, or differ from, the rights for which they have bargained and
impose burdens on the majority that it did not undertake to bear;10
viii. A shareholder might find itself locked -in even where there is no exclusion
from participation in the affairs of the company, or where the exclusion was
not unfair. It is not enough merely to show that the relationship between the
parties has irretrievably broken down. T he legislature did not intend to provide
a remedy to enable a ‘locked -in’ minority shareholder , without more, to
4 TCM , supra , at para [76].
5 TCM , supra , at para [82].
6 TCM , supra , at para [80].
7 TCM , supra , at para [113].
8 TCM , supra , at para [80].
9 TCM , supra , at para [81].
10 TCM , supra , at para [94].
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require the company to buy him out at a price that he considers adequately
reflects the value of his shares;11
ix. The mere fact that a minority sha reholder wishes to exit the company and
claims to have lost trust and respect for the majority shareholders does not
on its own mean that it has suffered unfair prejudice within the ambit of s 163 .
One of the risks of conducting business with others in a s mall private
company is that leaving the business and disposing of one’s interest in it may
be difficult ‘or practically impossible’.12 The Companies Act does not provide
for a ‘general unilateral right of withdrawal at the instance of a minority or
dissent ient shareholder.’13
x. A loss of faith, trust, and confidence in the majority shareholders occasioned
by the affairs of the company being mismanaged , and a lack of probity in the
conduct of the company’s affairs may constitute unfair prejudice .14
[7] In each matter where relief is sought under section 163, the factual context of that
specific matter will dictate the outcome.
Factual context
Common cause facts
[8] The common cause facts preceding the litigation are reasonably simple. Constantia
Metering Services (Pty) Ltd (“the company” or “Constantia Metering”) had its humble
origins in Constantia Metering CC. The only members of the closed corporation, Mr.
Bye (snr.) and Mr. A. Buckle, each held a 50% membership interest. The closed
corporation was later convert ed to a company, and Mr. Bye (snr.) and Mr. A. Buckle
likewise held 50% of the shares in the company.
[9] Mr. Bye (snr.) and Mr. A. Buckle agreed at some point after their respective sons
attained majority to divest themselves of their respective shares. The shareholding
11 TCM , supra , at para [95].
12 TCM , supra , at para [97].
13 TCM , supra , at para [100].
14 TCM , supra , at para [111].
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was divided as follows during 2018 , with the share certificates ostensibly issued in
February 2019 :
i. Mr. J. Buckle, the third respondent, acquired a 40% shareholding;
ii. Mr. S. Buc kle, the fourth respondent, acquired a 20% shareholding; and
iii. Mr. Bye, the applicant, acquired a 40% shareholding.
[10] Different reasons are proffered by the respective parties for the diminishing of the
Bye family’s shareholding in the company and the Buckle family obtaining control of
the company through a collective majority shareholding. The reason for the status
quo is neither here nor there. The reality is that Mr. Bye currently holds 40% of the
shares in Constantia Metering, with the Buckle brothers collectively holding 60% of
the shares.
[11] Mr. Bye (snr.) and Mr. A. Buckle were the company's directors. Mr. Bye, the
applicant, and Mr. Bye (snr.) were employed by the company, as was Mr. J. Buckle.
Mr. Bye (snr.) unfortunately passed away in December 2021 , leaving Mr. A. Buckle
the sole remaining director. After his father passed away, Mr. Bye approached Mr.
A. Buckle, the director of Constantia Metering. Mr. Bye’s expectation was that he
would step into his father’s shoes, both as far as his father’s employment with
Constantia Metering and his directorship of the company were concerned.
[12] Mr. A. Buckle, Constantia Metering’s senior management, and the other
shareholders did not share Mr. Bye’s future plans . The discord that flared up resulted
in the termination of Mr. Bye’s employment with Constantia Metering. Again, whether
Mr. Bye resigned or was dismissed is neither here nor there because a settlement
was reached between Mr. Bye and the company that allo wed for the severance of
the employment relationship.
[13] Mr. Bye ultimately indicated that h e and Constantia Metering should part ways . Mr.
A. Buckle agreed. To enable him to ascertain the value of his shares, Mr. Bye
requested the company’s financial statements. Mr. Bye was provided with two
different sets of financial statements for what he regards to be corresponding periods
of time . The existence of these two sets of financial statements seems to be the
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catalyst fo r this application. The application primarily turns on the question of
whether the issuing and provision of two sets of financial statements fall within any
or all the categories provided in section 163(1).
[14] To understand the finer nuances of the factual context, it is necessary to consider
the respective parties’ perspectives on the events that preceded the litigation.
Mr. Bye’s contentions
[15] Mr. Bye portrays Constantia Metering as a typical domestic company run by two
families. He clearly seems to have been under the impression that he was his
father’s heir, so to speak, as far as Constantia Metering is concerned. His father
allegedly told him he wou ld take his position as director and shareholder upon the
former’s retirement. Mr. Bye was also employed by Constantia Metering since 2014
and trained by his father to take over his position in Constantia Metering eventually .
[16] Mr. Bye avers that Mr. A. Buc kle, the company’s sole director, controls the affairs of
the first respondent in conjunction and with the assistance of his sons, the third and
fourth respondents.
[17] After his father passed away, Mr. Bye started making enquir ies with Mr. A. Buckle
regarding his future participation in the company, but it became apparent to him that
the Buckles had no intention of allowing him to participate further in the company’s
affairs and that they were on a mission to exclude him from being involved,
participa ting or becoming a director of Constantia Metering. I pause to mention at
this juncture that Mr. Bye’s subjective impression is not supported by the objective
evidence presented in the papers. There is, likewise, no evidence supporting Mr.
Bye’s perception that the Buckle respondents ‘vehemently opposed and have done
everything in their power to prevent [him] from being involved in the affairs of
Constantia, especially with respect to the financial affairs …’.
[18] During this time of discord, Mr. Bye’s employme nt relationship with Constantia
Metering was severed. He alleges he was dismissed while the Buckle respondents
aver that he resigned. Be that as it may, a severance agreement was reached, and
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neither party provided sufficient detailed evidence to allow a f actual finding on this
point. At best, it can be said that a factual dispute exists regarding this issue.
[19] Due to Mr. Bye’s impression that he was being excluded and victimi sed, and
because his view that it was merely a formality for him to step in his fat her’s shoes
was not shared by the director and other shareholders, he requested Constantia
Metering’s financial statements to enable him to assess the value of his shares.
[20] Mr. Bye regards Mr. A Buckle as an authoritative, almost dictatorial, director who
reigns his sons, the remaining shareholders, with an iron fist.
[21] Mr. Bye submits that issuing two different sets of financial statements for
corresponding periods constitutes breac hes of specific provisions of the Companies
Act and the Income Tax Act. This, he contends, illustrates a ‘ modus operandi ’ he
cannot associate himself with as a future director and shareholder in fulfilling his
fiduciary duty towards the company. Mr. Bye states later, in reply, that he has no
fiduciary duty towards the company in his capacity as shareholder.
[22] As a result of what Mr. Bye perceived to be the irregularities appearing from the two
sets of financial statements, he concluded that the only expla nation for the two sets
of financial statements was that SARS was being defrauded, and he no longer
wanted to pursue obtaining a directorship in the company and being promoted to
fulfill his father’s position in the company. He subsequently denied invitati ons to
attend shareholders’ meetings and explained his decisions as follows:
‘Having experienced the oppressive and prejudicial manner in which
the First Respondent under the control of the Second Respondent
had treated me since the passing of my late father, I had no doubt
that my attendance at any shareholders meeting would simply be
another opportunity for me to be abused.’
[23] Mr. Bye states in his founding affidavit that he appointed Mr. J Ferreira as auditor to
investigate the irregularities that app ear in the company’s financial statements. Mr.
Ferreira responded in a letter, later confirmed under oath, stating that he requires
various additional documentation and information in order to prepare a final
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valuation report. He did not express any view r egarding any perceived irregularity,
save for stating that no meaningful information can be extracted from the documents
supplied to him, among others, because the general ledger for the 2021 financial
period does not correspond to the financial statements provided. Mr. Ferreira
provided an extensive list of documents he required.
[24] In reply, Mr. Bye provided further expert evidence by including a report from Mr. A.
Prakke, a forensic auditor. Mr. Prakke confirmed the objectives of the report were,
among others, to establish the integrity of the two sets of annual financial statements
for the accounting period ending 28 February 2021 and to establish whether the
directors were diligent in the execution of their duties when preparing the financial
statements. He stated that he was not mandated to investigate whether the directors
complied with the prescripts of the Companies Act.
[25] Mr. Prakke concluded, without providing any basis whatsoever for his finding that
the appro val of the two sets of financial statements was –
‘done to mislead the actual financial state of CMS’s financial status,
including having a further effect that SARS could not determine the
correct obligations and, therefore, the fiscus.’
[26] Mr. Prakke states that further investigation, particularly the Accounting Officer report,
would reveal the factual extent of such discrepancy. He then reflects on what he
coins ‘misrepresentations’ and explains, among others, that the financial statements
are solely based on the ‘accrual basis’.
The Buckle respondents’ submissions
[27] The Buckle respondents’ answering affidavit contains a significant portion of
irrelevant information. I deal only with the aspect s therein that I regard of significance
to this application .
[28] Mr. A. Bucke vehemently denies that Constantia Metering is a domestic company
resembling a partnership. He claims the respective shareholding belies such a
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contention. The shareholding is indicative of the control exerted by the Buckle
shareholders.
[29] The second highly relevant portion of the answering affidavit is the explanation
proffered for the existence and purpose of the impugned sets of financial statements.
Mr. A. Buckle informs that ABSA and First Rand Bank informed Constantia Metering
that the banks changed their respective accounting policies and methodologies and
required financial statements drawn in accordance with those methodologies. Both
financial institutions were provided w ith statements drawn in accordance with this
methodology and with the statements destined for SARS. Mr. A. Buckle denied that
SARS was being defrauded.
[30] The Buckle respondents submitted the confirmatory affidavit of Mr. Van Dyk,
Constantia Metering’s accou ntant. He confirmed that the existence of a second set
of financials is simply a requirement of the relevant bankers. He explained that
Constantia Metering’s accounting records were initially done using the ‘cash basis’
accounting method . Therefore, it did not recognise trading debtors and creditors, but
only income and expenses when the cash is reali sed. The banks, however, required
that debtors and creditors be accounted for , and a new set of statements was
prepared for the banks using the ‘accrual basis ’ of accounting.
Discussion
[31] That Mr. Bye and, at least, Mr. A Buckle do not see eye to eye is evident from the
voluminous answering, replying , and conditional supplementary affidavits. As
indicated above in the discussion regarding section 163, the mere existence of
acrimony between a director of a company and a shareholder is not, in itself, enough
to invoke the relief provided by the section.
[32] The underlying tension that existed between the Bye and Buckle role players,
expressed to some extent by Mr. A. Buckle, came to a head when Mr. Bye
approached Mr. A. Buckle, demanding what he regarded as his ‘rightful place’ in the
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company. Mr. Bye did no t complain of any behavior or incidents that preceded his
father’s passing.
[33] I fail to find any objective evidence indicating any acts or omissions that resulted in
Mr. Bye being oppressed or unfairly prejudiced or that his interests were unfairly
disregar ded when Mr. A Buckle dismissed the succession plan proposed by him.
Not only did Mr. Bye not call for the matter to be discussed at a shareholders’
meeting, but the company, its director, and shareholders also were not bound to
realise Mr. Bye’s subjectiv e expectations. His view that it was a mere formality that
he would succeed his father as director, is not supported by the terms of the
company’s memorandum of incorporation that provides for the election of directors.
The dismissal of his proposal by the company’s director cannot be the basis for a
finding that the respondents did not want Mr. Bye involved as a shareholder.
[34] Mr. Bye cannot complain of being excluded from the company’s business as
shareholder when he elected, for whatever reason, not to participate in
shareholders’ meetings.
[35] Having regard to the non -existent basis for invoking section 163(1) based on the
interaction between Mr. Bye and the company, its director , and his fellow
shareholders, it is understandable that counsel representing Mr. Bye focused his
address almost solely on the ostensible effect, and impact of the existence of two
sets of financial statements for corresponding time periods on Mr. Bye’s future
involvement in Constantia Metering.
[36] Although it is evident that the sets of financial statements are not identical and that
certain discrepancies exist, no case is made out that the company’s affairs are
mismanaged or that there is a lack of probity on behalf of the director. Mr. Prakke
states that more information is needed to establish the factual extent of the
discrepancies. The respondents provided a cogent explanation, supported by their
expert witness, for the existence not only of the two sets of financial statements but
also for the e xisting discrepancies. On the papers filed of record, no finding is
justified on this aspect. In light of this evidence provided in answer by the
respondents, I cannot find that the existence of the two sets of financial statements ,
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without more, is indicative of dishonesty or a failure to act ethically. For the same
reasons, I cannot find, as a fact, that sections of the Companies Act or Income Tax
Act were contravened.
[37] I can, likewise, not find, as urged to do in the head s of the argument, tha t Mr. A.
Buckle is a delinquent director. I pause to note that this relief is not sought in the
notice of motion.
[38] As for the contention that Constantia Metering is a domestic company, there is no
indication on the papers that any personal relationship of trust existed between the
shareholders and directors, even before Mr. Bye (snr.)’s passing , similar to that
existing between partners in regard to the partnership business. Mr. Bye failed to
establish that Constantia Metering (Pty) Ltd is a company akin to a partnership. The
shareholding is not held equally, and there is no evidence that the respective families
would be treated equally. A friendly relationship between the respective is not a
prerequisite to the running of the company’s affairs, and the d estruction of the trust
relationship between Mr. Bye and Mr. A. Buckle will not result in a deadlock, nor that
there is no longer a reasonable possibility of running the company consistently with
the basic arrangement between the members.
Interdict ory rel ief
[39] The applicant’s failure to make out a case that the existence of two sets of financial
statements is evidence of irregular and unlawful conduct is also fatal to the
application for interdictory relief. Mr. Bye, additionally , did not make out a case that
he, as a shareholder, is likely to suffer irreparable harm if the relief sought is not
granted.
Miscellaneous
[40] The parties agreed inter partes that the late filing of the answering and replying
affidavits be condoned, and that the conditional supplem entary affidavit filed by the
respondents be accepted into evidence.
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Costs
[41] The principle that costs follow success applies. Having regard to the nature of the
application and the complexity thereof, it is fair and just if costs are awarded on
Scale B.
ORDER
In the result, the following order is granted:
1. The application is dismissed.
2. The applicant is to pay the costs of the first to fourth respondents on Scale B.
____________________________
E van der Sc hyff
Judge of t he High Court
Delivered: This judgment is handed down electronically by uploading it to the electronic file of
this matter on CaseLines.
For the applicant : Adv. S.D. Wagener SC
Instructed by: Geyser Van Rooyen Attorneys
For the first to fourth respondent s: Adv. S. W. Davies
Instructed by: JW Wessels & Partners Inc.
Date of the hearing: 21 January 2025
Date of judgment: 31 January 2025
Revised: 6 February 2025