IN THE HIGH COURT OF SOUTH AFRICA
(WESTERN CAPE DIVISION, CAPE TOWN)
In the matter between:
PAUL DAVID HARDING
and
SWEET SENSATIONS 210 PTY LTD
t/a MOORGAS & SONS
AIRBORNE PROPERTIES CC
Date of Hearing: 25 March 2024
Date of Judgment: 11 April 2025 Case number: 1849/2024
Applicant/First Defendant
First Respondent/Plaintiff
Second Respondent/Second Defendant
JUDGMENT
PARKERAJ
Introduction
[11 This is an interlocutory application pertaining to that where discovery notices
were already delivered. The applicant sought documents as set out in his Rule 35 (12)
notice. Pertinently, the issues are whether the applicant (who is the defendant in the
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main action), who is also a director and a shareholder, is able to receive supporting
information, and, as well as under section 31 (1)(b) of the Companies Act No 71 of 2008
(the "Act").
[2] Despite requests by the applicant for certain documentary information (detailed
further below), under a Part A as well as in terms of Part B, to enforce shareholder
rights conferred upon him in terms of section 31 ( 1) (b) of the Act.
[3] The background to this application sterns from an annexure A to first
respondent's particulars of claim in the main action, which contained information in
respect of a calculation. In order for the applicant to agree to the calculation it requires
the documentation from respondent, to assess how the final amount is calculated, and,
to conduct an independent analysis whether the amount set out in the said annexure
was correctly calculated. It is this information which applicant is seeking.
[4] The applicant was of the view that the purpose of the rule is to determine the
truth and to assist a party in such a determination of the truth the source document/s
are therefore relevant. This was opposed by the respondent.
[5] The opposition also extended to Part B, that being of the beneficial interest.
Furthermore, the applicant owes money to the business, he is a debtor, and first
respondent avers an applicant cannot through an interlocutory application enforce
statutory rights.
[6] First respondent contended that applicant should have utilized the provisions
provided for in terms of rule 35(3) for further and better discovery and therefore the
application sought in terms of rule 35( 12) is premature.
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[7] In the relief, which was sought under Part B, applicant seeks first respondent
to provide him with its annual financial statements from 2017 to date of the application
which relief is in terms of the Act, as applicant is a 50 percent shareholder and director
of first respondent.
[8] First respondent 's claim in the main action against the applicant is for payment
of monies allegedly due to the first respondent in respect of loans made by it to
applicant. In terms of first respondent's particulars of claim the calculation of the claim
amount was made by first respondent's auditors which was contained in the annexure
A to its particulars of claim. It is these documents which applicant now seeks from the
first respondent in terms of applicant's notice in terms of rule 35(12).
[9] The provisions of rule 30A (1) allows the applicant to bring an application to
apply for an order that such a rule, notice, request, order or direction be complied with
or that the claim or defence be struck out.1
[1 0] What the respondent fails to provide are the requested documents, bearing in
mind that the first respondent's entire calculation of its claim was done by referring to
annexure A. The documentation sought by the applicant were access to various
financial documents inter alia.
10.1 approved financial statements of the first respondent
10.2 current accounting records of the first respondent
10.3 draft financial statements of the first respondent
10.4 management accounts of the first respondent
10.5 bank statements of the first respondent
1 Rule 30 A (1} (a)-(b)
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10.6 summary of (alleged) advances to first defendant by the first respondent
10. 7 schedules summarizing (alleged) payments to second defendant by the
first respondent
10.8 related schedules and additional supporting documentation of first
respondent
[11] The reason advanced by the first respondent for the failure to provide the
documentation is on the basis that the documentation is irrelevant. Further it is argued
that the application is fundamentally misconceived as it relies on rule 35(12), which in
its view is not the appropriate mechanism to obtain the type of discovery sought as the
rule is narrowly focused on documents specifically referred to in pleadings or affidavits,
not broad categories of documents that might be relevant to the case generally. It is
suggested that if applicant wish to obtain broader discovery the appropriate
mechanism would have been rule 35 (3).
[12] A further ground for the opposition is attributed to the first respondent's
management accounts, bank statements and financial records, which it avers contain
proprietary information of a confidential nature which cannot be shared with the
applicant, particularly, as rt contends that the applicant is merely a shareholder in
name only and not an active participant in the business of the first respondent.
[13] In this regard the first respondent relied on Lutzen v Knysna Municipality,2
where the court held that claims of commercial sensitivity or confidentiality must be
balanced against the requirement for relevant discovery. This balancing excludes
documents that are not directly related to the matters in dispute. Therefore, the items
called for were refused.
2 (695/2020) [2023) ZAWCHC 100 {8 May 2023)
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[14] In respect of the beneficial interest argument this was challenged by the
applicant. On interpretation and when it applied the definition of "beneficial interest"
and the meaning of "securities" and "share" as defined in s1(a), (b) and (c) of the Act,
it is clear that applicant, as a shareholder has a beneficial interest in the company and
because of his 50 percent shareholding , has rights which can be exercised supporting
applicant's right to compel the discovery.
ANALYSIS
[15] It is necessary for me to spell out the rules relating to discovery specifically the
sections necessary which will serve as a basis for the determination. The provisions
of 35(1), (3), (6) and (12) are:
"35. Discovery, inspection and production of documents
(1) Any party to any action may require any other party thereto, by notice in
writing, to make discovery on oath within 20 days of all documents and tape
recordings relating to any matter in question in such action (whether such matter
is one arising between the party requiring discovery and the party required to
make discovery or not) which are or have at any time been in the possession or
control of such other party. Such notice shall not, save with the leave of a judge,
be given before the close of pleadings.
(3) If anv party believes that there are; in addition to documents or tape
recordings disclosed as aforesaid other documents (including copies thereof)
or tape recordings which may be relevant to any matter in question in the
possession of any party thereto, the former may give notice to the latter requiring
such party to make the same available for inspection in accordance with subrule
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(6), or to state on oath within 10 days that such documents or tape recordings
are not in such party's possess;on, in which event the party making the
disclosure shall state their whereabouts , if known.
(6) Any party may at any time by notice in accordance with Form 13 of the First
Schedule require any party who has made discovery to make available for
inspection any documents or tape recordings disclosed in terms of subrules (2)
and (3). Such notice shall require the party to whom notice is given to deliver
within five days, to the party requesting discovery , a notice in accordance with
Form 14 of the First Schedule, stating a time within five days from the delivery
of such latter notice when documents or tape recordings may be inspected at
the office of such party's attorney or, if such party is not represented by an
attorney, at some convenient place mentioned in the notice, or in the case of
bankers' books or other books of account or books in constant use for the
purposes of any trade, business or undertaking , at their usual place of custody.
The party receiving such last-named notice shall be entitled at the time therein
stated, and for a period of five days thereafter, during normal business hours
and on any one or more of such days, to inspect such documents or tape
recordings and to take copies or transcriptions thereof. A party's failure to
produce any such document or tape recording for inspection shall preclude such
party from using it at the trial, save where the court on good cause shown allows
otherwise.
(12) (a) Any party to any proceeding mav at anv time before the hearing thereof
deliver a notice in accordance with Form 15 in the First Schedule to any other
party in whose pleadings or affidavits reference is made to any document or tape
recording to-
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(i) produce such document or tape recording for inspection and to permit
the party requesting production to make a copy or transcription thereof;
or
(ii) state in writing within 10 days whether the party receiving the notice
objects to the production of the document or tape recording and the
grounds therefor; or
(iii) state on oath, within 10 days, that such document or tape recording
is not in such party's possession and in such event to state its
whereabouts, if known.
(b) Any party failing to comply with the notice refeffed to in paragraph (a) shall
not, save with the leave of the court, use such document or tape recording in
such proceeding provided that any other party may use such document or tape
recording. " (underlined -own emphasis)
[16] The underline portions of the rules quoted above is simple and straightforward.
The applicant enjoys the right to utilise (12) (a) ''whose pleadings or affidavits
reference is made to any document." Applicant was of the view that an annexure to a
particulars of claim is part of a pleading because it is relied upon by the plaintiff, else
what purpose does an annexure serve if the converse is true. This is not the same as
calling for better discovery in terms of rule 35 (3) which is distinctive to "If any party
believes that there are, in addition to documents or tape recordings disclosed as
aforesaid, other documents." The question remains, are other documents as
purported by the rule being requested? if one reads the wording of subrule (12), it is
apparent that it differs from subrule (3). Other documents are not what are being
requested and rather it is such document as described where "whose pleadings or
affidavits reference is made to any document."
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(17] Furthermore, Erasmus puts it succinctly. The object of discovery is "that before
trial both parties are made fully aware of all the documentary evidence that is available.
By this means the issues are narrowed and the debate of points which are
incontrovertible is eliminated.'f.3 In respect of rule 35 (12) the author explains the
purpose of discovery "to assist the parties and the court in discovering the truth and to
promote a just and expeditious detennination of the case. "4
[18] The argument that the items were not provided as the applicant is only a
shareholder and not involved in the day-to-day running of the business, and therefore
not entitled to it, is without substance. Nor does the fishing expedition complained of
by the first respondent, hold any water because the defence is an empty vessel and
the arguments are barren. Particularly since the annexure emanated from the first
respondent particulars of claim and as such forms part of the pleading. It is their source
document and therefore first respondent cannot escape the full disclosure.
[19] I say so as s1 shows us that as a shareholder, applicant is entitled to the
information and the provisions of rule 35(12) allows for such avenue. It is common
cause that the applicant is a 50 percent shareholder of the respondent and therefore
the refusal to deliver the company information on the basis of its confidentiality, is also
an empty defence. The applicant's statutory right to call for the enforcement of a
shareholder's right to have insight into the company's statutory requirements enjoys
protection in terms of the Act.
3 See Uniform Rules of Court volume 11: Erasmus Superior Court Practice and the reference to Durbach v
Fairway Hotel Ltd 1949 (3) SA 1081 (SR) at 1081 and further authorities quoted Including Logicrose Ltd v South
End United Football Club Ltd (1988) 1 WLR 1256
4 Erasmus, Superior Court Practice RS23 2024, D1
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[20] Applicant relied on Nova Property Group Holdings Ltd and Another v Cobbett 5
in which case Moneyweb brought a Part B application to give it access to a shareholder
registry. On appeal, Nova was dismissed, and it was found that "when a company fails
or refuses to provide access, that person is entitled, as of right, to an order compelling
access. The question of the motive or purpose is simply irrelevanf'6. Further, "s 26 (2)
of the Companies Act provides an unqualified right of access to securities registers. 'fl
[21] Staying with the Nova case, it also highlighted the role that companies play in
our society and the need for transparency including the right of access to information
in s32 of the Constitution of the Republic of South Africa, "is central to the interpretation
of section 26 (2) of the Companies Act. Both this court and the Constitutional Court
have recognized that the manner in which companies operate and conduct their affairs
is not a private matter''8
{22] Nova, in referring to Bernstein v Bester9 where the Constitutional Court made
the position plain that "The establishment of a company as a vehicle for conducting
business on the basis of a limited liability is not a private matter. It draws on a legal
framework endorsed by the community and operates through the mobilization of funds
belonging to members of that community. Any person engaging in these activities
should expect that the benefits inherent in this creature of statute will have concomitant
responsibilities. These include amongst others the statutory obligations of proper
disclosure and accountability to shareholders."10
s 2016 (4) SA 317 (SCA)
6 Supra para (36)
7 Supra para (47)
8 Supra para (16)
9 Bernstein and Others v Best NO and Others 1996 (2) SA 751 (CC}; 1996 (4) BC LR 449; 1996 ZACC 2; pat at 98
with the constitutional court made it plain
10 Ibid para (85)
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[23] The first respondent belatedly (as it has costs consequences) and only at the
hearing tendered the delivery of items 8.6 to 8.8. However, respondent did not accede
to items 8.1 to 8.5. In terms of s 31 (b) there is no question what a shareholder is
entitled to. Respondent has not presented a cogent opposition save for stating that the
information is confidential, irrelevant or that the applicant is not involved with the day
to day running of the business, that together with the argument that the applicant is
only a shareholder and not involved in the day-to-day running of the business is
dismissed for reasons stated above.
[24] The applicant was perfectly entitled to compel in terms of rule 35 (12). Clearly this
is not about better or broader discovery and therefor rule 35 (3) does not apply. First
respondent has not raised any valid objection to the documentation that is requested
by the applicant. First Respondent conceded that applicant is a 50% shareholder and
director of the first respondents. Accordingly , the applicant is entitled to its relief.
COSTS
[25] The applicant is not seeking a punitive cost order against first respondent and
rather, a party and party costs order.
[26] Since a tender was made at the hearing by the first respondent, therefore
applicant on the whole has succeeded in its application. It follows that there are no
reasons to depart from the norm that costs follow the result. In so far as the remainder
of the non-tendered items are concerned costs follow the result, based on the
reasoning set out above resulting in this order.
[27] Accordingly it is ordered:
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(a) First respondent is to comply with the applicant's notice in terms of Rule
35(12) dated 10 June 2024 within 10 days from service of the order.
(b) In the event of first respondent failing and/or neglecting and/or refusing
to comply with paragraph (a) above, applicant is granted leave to apply
on the same papers, duly supplemented, if necessary , for an order
striking out first respondent/Plaintiffs claim in the main action, and for
judgment to be granted in favour of applicant as prayed for in his Plea.
(c) In terms of Section 31(1)(b), first respondent is to deliver to applicant its
annual financial statements for the financial years from 2017 to date of
this application within 10 days from date of service of the order.
(d) First respondent pays applicant's costs for the bringing of this application
on a party and party scale A.
Appearances
Counsel for the Applicant: Adv Daniel Rabie
Instructed by: Madeleine Wohler Attorneys
Attorney representing Resoondents: Mr. B Varkel
Instructed bV' Barry Varkel Consulting
This judgment was handed down electronically by circulation to the parties'
representatives by email.