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1990
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[1990] ZASCA 163
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Commissioner for Inland Revenue v Malcomess Properties (Isando) (Pty) Ltd. (41/89) [1990] ZASCA 163; 1991 (2) SA 27 (AD); [1991] 4 All SA 145 (AD) (30 November 1990)
IN THE SUPREME COURT OF SOUTH AFRICA (APPELLATE DIVISION)
In the
matter between:
COMMISSIONER FOR INLAND REVENUE
Appellant
and
MALCOMESS PROPERTIES (ISANDO) (PTY) LTD
Respondent
CORAM:
BOTHA, NESTADT, KUMLEBEN, JJA NICHOLAS, PREISS, AJJA
HEARD:
15 November 1990
DELIVERED:
30 November 1990
JUDGMENT NICHOLAS, AJA
2
On 27 August 1976, erf No 438 in Monteer Road in the township of Isando,
Transvaal ("the Isando property") was sold by the then owner,
Malcomess
Properties (Isando)(Pty) Ltd to the Durban Corporation Superannuation Fund . The
sale resulted in a net profit of R1 127
127, which the Commissioner for Inland
Revenue, in his determination of the liability of Malcomess (Isando) (Pty) Ltd
to normal tax
for the year of assessment ended 31 March 1977, included in its
income. An objection by the taxpayer was disallowed, and it appealed
to the
Transvaal Income Tax Special Court. That court, in which MARGO J presided,
upheld the appeal and remitted the matter to the
Commissioner for reassessment.
The present appeal is against that order. The Commissioner for Inland Revenue
will be referred to
either as "the Commissioner" or "the appellant"; Malcomess
Properties (Isando) (Pty) Ltd will be referred either as "Malcomess (Isando)"
or
"the taxpayer"; and Durban Corporation Superannuation Fund will be referred to
as "Durcor".
The Isando property had been acquired in 1963 by
3
Malcomess Limited, which was described in the evidence as a "family company".
Most of its members belonged to the Malcomess family.
The business was founded
in Kingwilliamstown in 1869, and it was incorporated as Malcomess (Pty) Ltd in
1924. On becoming a public
company in 1961 it was named Malcomess Ltd, which
became, after a reorganisation in 1968, Malcomess Holdings Ltd. (I shall refer,
loosely, to the various Malcomess interests as "the Malcomess group.") The
business of the Malcomess group was two-fold in nature:
the distribution
throughout South Africa of farming machinery and equipment; and a motor
franchise business conducted mainly in the
Eastern Province.
Over the years the Malcomess group acquired for the conduct of its business
fixed properties in various places in South Africa. For
a long time its
headquarters were in East London, but in the 1950's its centre of operations was
moved to the Transvaal. The Isando
property was acquired in 1963 to serve as
headquarters for the group. It was 2,8625 hectares in extent and was
well-situated for
the headquarters of the agricultural
4
machinery and equipment business: it had a railway siding, which provided
access to the South African railway system; it was close
to Jan Smuts airport
which was convenient for the flying in and out of spares; and its proximity to
Johannesburg facilitated its
business operations, including the discounting of
hire-purchase agreements. The Isando property, on which warehouses, sheds and an
office building were erected, became the group's central spare parts warehouse
and a significant stockholding area for farming machinery.
Plainly it was a
property of prime strategic importance in the operations of the Malcomess
group.
During the reorganisation in 1968, Malcomess Ltd sold its agricultural
machinery business to a newly incorporated, wholly-owned subsidiary
named
Malcomess Group Activities Ltd. Malcomess Ltd, being now a holding company and
also owning the Malcomess properties, changed
its name to Malcomess Holdings Ltd
("Malcomess Holdings"), upon which Malcomess Group Activities Ltd took the name
of Malcomess Ltd
in order that the goodwill of the
5
farming machinery business, which had operated under that name, should be
preserved.
In 1969 and in pursuance of a scheme of arrangement sanctioned by
the court, a merger took place between Malcomess Holdings and a
company named O
Bakke and Co (Pty) Ltd ("Bakke"). In consequence, Malcomess Holdings and Bakke
became wholly owned subsidiaries of
a company named Malcomess-Bakke Ltd (later
changed to Malbak Ltd), which obtained a primary listing on the Johannesburg
Stock Exchange
of the shares allotted and issued to the former shareholders of
Malcomess Holdings and of Bakke in terms of the scheme of arrangement.
In order to facilitate the merger, the properties (including the Isando
property) on which the business of the Malcomess group had
been conducted, were
excluded from the merger and were retained by the Malcomess family. It was
nevertheless contemplated that the
properties would be leased by the family to
the Malbak group. To this end a new company, Malcomess Properties Ltd
("Malcomess Properties")
was formed. Its shares
6
were held by the members of the Malcomess family who had previously held the
shares in Malcomess Holdings. Each property was transferred
to a separate
company, which became a wholly owned subsidiary of Malcomess Properties. It was
in thís way that the Isando
property was acquired by Malcomess (Isando),
which was incorporated on 24 March 1969. On 4 June 1969 a "master lease"
covering all
the properties was concluded between Malcomess Properties as lessor
and Malcomess-Bakke Ltd as lessee. Subsequently the various subsidiaries
concluded separate agreements of lease, one of which was between Malcomess
(Isando) and Malcomess Ltd. After an initial period of
18 months until 30
September 1975, this lease was to continue in force indefinitely, but it might
be cancelled by either party giving
to the other not less than 18 months'
written notice, which notice might not be given by the landlord to terminate the
lease prior
to 31 March 1984. The agreed rental was R74 000 per annum, which was
subject to escalation at the rate of R8 000 per annum. By 1975
the shareholders
in Malcomess Properties had
7
become disenchanted with their investment; rentals were low, and future
dividends were likely to be reduced in real terms if inflation
continued at its
then current rate. At a meeting held on 23 August 1975, the board of directors
agreed after a lengthy discussion
that the company had limited long term
prospects; furthermore, that it had no younger candidates of the Malcomess
family who could
take over control of the company after the departure of the
present management; and that it was in the best interests of the company's
shareholders to recommend voluntary liquidation of the company. Effect was given
to this recommendation on 23 September 1975 when
a special resolution was passed
that in terms of s. 349 of the
Companies Act
1973 the company be wound up
voluntarily.
Appointed as liquidator at a remuneration of R3 000 per annum was
Mr..Belcher, an East London accountant who had been an adviser to
the Malcomess
family for many years. His brief was to realise, subject to the instructions of
the shareholders, all the assets of
Malcomess Properties to best advantage.
8
The liquidator began negotiations for the sale of the properties owned by the
separate companies, or of the shares in such companies.
He approached the Mine
Officials Pension Fund ahd the Durban Corporation Superannuation Fund with a
view to a possible sale of the
Isando property. (At that time the market was
inactive and pension funds were about the only people investing in
property.)
The Malbak Group was perturbed by these developments. Some of its
companies operated from premises owned by Malcomess Properties,
including the
most important (Malcomess Ltd) which occupied the Isando property. An approach
was made to Mr. Belcher in an effort
to buy the properties which Malbak regarded
as strategic, or to secure long-term tenure of them. (It had no interest in the
properties
which it did not occupy.) However,
Mr. Belcher's attitude was that he wanted if possible to sell all
the properties in one transaction, and that he would not allow Malbak to
"pick the eyes" out of the portfolio, which would make it
difficult for him to
dispose of the properties which remained.
9
Malbak asked an expert, Mr. Harry Gottlieb, to examine the property portfolio
owned by Malcomess Properties with a view to giving
an opinion as to a fair
price for its shares. That opinion was given on 3 May 1976. Mr. Gottlieb valued
each of the properties leased
to Malbak on the basis of a percentage return on a
lease-back basis, having regard largely to the then current rentals. He valued
the Isando property at R800 000, and valued the shares in Malcomess Properties
at 82 cents per share.
In order to meet the situation a scheme was devised by
Malbak for the acquisition of Malcomess Properties. It was embodied in a report
to the board of directors of Malbak by Mr. G S Thomas, the group managing
director. It stated that the management of Malcomess Properties
valued that
company at 111 cents per share. The majority of the properties occupied by
Malbak were not subject to leases of sufficiently
long duration to attract
institutional investors without additional commítments from Malbak, and
therefore the winding up
of the company would of necessity be dragged out over a
number of years. The
10.
indications were that a bid for Malcomess Properties of the order
of 90
cents per share would be likely to succeed. By working
together with an
insurance company or pension fund, Malcomess
Properties and the Malbak group
could negotiate a sale and lease-
back of the Isando property. R1 300 000
could be realised on the
sale, amounting to a net receipt of R1 235 000. The affairs
of the Malbak
group could be structured in such a way that the
profit of R435 000 (R1 235
000 less R800 000 - as per the
Gottlieb valuation) would not be taxable. The
following appears
from the minutes of a meeting of the directors of Malcomess Bakke
Ltd held
on 3 June 1976
"1. Mr. G.S. Thomas submitted a proposal to the meeting in terms of which
Malcomess-Bakke Limited could aquire the property companies
of Malcomess
Properties Limited (in voluntary liquidation), thereby obtaining security of
tenure of certain strategic properties.
This proposal involved inter alia Malcomess-
Bakke Limited entering into a long lease on one of the properties.
It was agreed that:
11
The proposal as submitted be accepted and that Mr. G.S. Thomas be empowered
to sign all necessary documentation relating to this proposal
on behalf of the
company."
At the start of the meeting, Mr. D.L. Keys, who was the chairman
of
Malbak, "declared his interest in Malcomess Properties Ltd.,
being the holder
of 279 000 shares in that company, and excused
himself from the proceedings."
Mr. Keys gave evidence before the
Special Court, in the course of which he
said that all the
negotiations between Malbak and Malcomess Properties
were
conducted at arms' length. The former was represented by Mr.
Thomas and
the latter by Mr. Belcher, who as liquidator acted in
the best interests of the company's shareholders. Mr. Thomas's
evidence also was that although there were some common
directorsMalcomess Properties and Malbak were operating totally
at arms' length.
The negotiations which followed were brought
to
fruition in August 1976, when three
interdependent agreements
were concluded.
12
On 23 August 1976 a written contract was
concluded
between Malcomess Properties Ltd (in
voluntary liquidation) and
Rushton Properties Ltd (which was wholly owned by
Malbak). In
terms thereof Malcomess Properties sold to Rushton the entire
issued share capitals in "the companies" (which were 11 in number
and
included Malcomess (Isando)) and the seller's claims on loan
account against the companies. Provision was made in clause 4
for the calculation of the purchase price "with a view to
ensuring that the shareholders of the seller receive 90 cents per
share ...". Clauses 2.1 and 2.3 provided
"2.1. This entire agreement is subject to
the
fulfilment of the condition precedent that an
offer to purchase the property belonging to Malcomess Isando is received, such
offer
to be:-
2.1.1. from a reasonably acceptable
insurance company or pension fund;
2.1.2. irrevocable until 14th August, 1976;
and
2.1.3.
2.3. Unless the condition precedent is fulfilled by not later than 14th
August, 1976, the provisions of this agreement, ... shall
be of no force or
effect."
13
In terms of clause 3,
"3. Subject to the fulfilment of the condition precedent the seller hereby
sells to thé purchaser with effect as from the effective
date as one
indivisible transaction:-
3.1 the shares; and
3.2 the seller's claims."
(The "effective date" was defined in clause 1.1.3 as being the
1st April 1976.) It was provided in clause 6 that on or before
"the completion date" (which was defined in clause 1.1.4 as being
the 29th September 1976) the seller would deliver to the
purchaser
inter alia
-
"6.1. certificates in respect of the shares
together with transfer forms in respect thereof duly signed as to transferor
by the registered holders thereof and currently dated
and duly witnessed;
6.2.
to the extent required by
the purchaser, written resignations of those directors of the affected companies
who are nominees of the
seller;
6.3.
to the
extent required by the purchaser written resignations of the public officers,
and secretary of the affected companies;
6.4.
to the extent required by the purchaser a written undertaking of
the auditors of the affected companies agreeing to resign when requested
to do
so by the purchaser;
1 4
6.5.
a resolution of directors,
or shareholders, as the case may be, as required in terms of the articles of
association of each of the
affected companies, approving of the transfer of the
shares as aforesaid;
6.6.
a resolution of
directors of each of the affected companies appointing as directors nominees of
the purchaser in substitution for
those directors who resign pursuant to clause
6.2., and if there are no such resignations pursuant to clause 6.2. then
appointing
nominees of the purchaser in addition to the existing directors of
the affected companies."
On 27 August 1976 Malcomess
(Isando) sold the Isando property to Durcor for the sum of R1 500 000. The sale
was subject to a lease
of the property being concluded between Durcor and
Malcomess-Bakke Ltd. (It may be noted that even before the Malbak scheme was
devised,
the liquidator had on his own initiative been negotiating with Durcor
for the sale to it of the Isando property. The liquidator had
in fact received
an offer for the property which hé did not accept.)
On the same day there was executed a notarial deed of lease of the Isando
property between Durcor and Malcomess-Bakke
15
Ltd. The lease was initially for a period of 20 years and provided for a
right of pre-emption and a renewal option in favour of Malbak
upon the
termination thereof. The rental was to be calculated at the rate of 11% of the
capital cost of the leased property with
provision for escalation.
The
agreement for the sale to Durcor of the Isando property is the transaction which
is in issue in this appeal.
It is well-recognised that in considering whether
receipts on the disposal of property are capital or revenue accruals, the
intention
with which the property was acquired is important, although the
capital or revenue character of an asset can be altered by a change
of
intention. Such a change does not itself effect a change in the character of the
asset. It is trite that an owner of land, or
any other asset, is entitled to
realise such asset to best advantage, and the fact that he does so, does not
alter what is an investment
of capital into a trade or business for earning
profits. In
John Bell & Co (Pty) Ltd v. Secretary for Inland Revenue
,
1976(4) SA 415 (A), WESSELS JA said
16
at 429 C-D
"... the mere change of intention to dispose of an asset hitherto held as
capital does not
per se
subject the resultant profit to tax. Something
more is required in order to metamorphose the character of the asset and so
render
its proceeds gross income. For example, the taxpayer must already be
trading in the same or similar kinds of assets, or he then and
there starts some
trade or business or embarks on some scheme for selling such assets for profit,
and, in either case, the asset
in question is taken into or used as his
stock-in-trade."
It is common cause that when Malcomess
(Isando)
acquired the Isando property in 1969 it
intended to hold it as
a capital asset from which it would derive income by way of
rentals. That intention remained unchanged until September 1975
when the shareholders in the holding company, Isando Properties,
resolved that it be wound up and its assets (which included the
Isando property, held by its wholly-owned subsidiary Malcomess
(Isando)) be realised. The property was sold on 27 August
1976. In the interval between September 1975 and August 1976
nothing was done by Malcomess (Isando) to metamorphose the
character of the property. In
Natal Estates Ltd v. Secretary for
17
Inland Revenue
1975(4) SA 177 (A) at 202 G-H, HOLMES JA
remarked
that in deciding whether a case is one of realising a
capital
asset or of carrying on a business or embarking upon a scheme
of
selling land for profit, one must think one's way through all of
the
particular facts of the case, and then, after setting out a
number of
important considerations, said at 203 A:
"From the totality of the facts one enquires whether it can be said that the
owner had crossed the Rubicon and gone over to the business,
or embarked upon a
scheme, of selling such land for profit,
using the land as his
stock-in-trade
."
In the present case there are
no facts at all which could lead
to an affirmative answer to such an enquiry. In the interval
Malcomess
(Isando) did no more with the property than receive
rentals from it. It did not engage in a business of selling the
land, which in no wise could be regarded as its stock-in-trade.
It was not argued in this court, as it was argued,
unsuccessfully, in the Special Court, that before Malbak arrived
on the scene, the liquidator would have been content to sell the
property for R800 000, but that after Malbak arrived on the scene
18
and made its suggestions, the liquidator responded to the proposition
resulting in the taxpayer selling the property for R1 500 000;
and that this
indicated a scheme aimed at profit-making by the realisation of the property. In
rejecting that argument, Margo J said,
correctly in my respectful opinion, that
there "was not any change in the nature of the profit made by the sale of the
... property.
It would remain a capital realisation whether ... it was sold for
R800 000 or R1,5 million." (I should add that the change in the
value of the
Isando property from R800 000 on 3 May 1976, when this was Mr. Gottlieb's
valuation, to R1 500 000 which was the amount
Durcor agreed to pay for it on 27
August 1976, was not brought about byMalcomess (Isando). It was due solely to
the fact that Malbak
agreed to the termination of its existing lease with
Malcomess (Isando) and to a sale to Durcor for R1 500 000 subject to a
lease-back
which would provide Durcor with an 11% net return on the purchase
price.)
On tke face of it, therefore, the transaction was a
19
realisation of a capital asset, so that the profit was not liable to income
tax.
It appears from the judgment of Margo J in the Special Court that it was
urged for the Commissioner that the court should "take a
bird's eye view of the
whole set of circumstances which characterise the disposal of the property and
which includes the disposal
of the shares in [Malcomess(Isando)] by Malcomess
Properties Limited in voluntary liquidation to Malbak Limited". Similarly it was
argued in this court that the disposal to Durcor could not be considered in
isolation, but must be viewed as part of the whole scheme
devised by the Malbak
group which, it was submitted, was "a scheme for selling the property for a
profit": a close analysis of the
facts demonstrated that "the scheme" as it
evolved, aimed at profit-making and that Malbak had embarked upon a scheme of
selling
the property for a profit; Malbak's dominant intention was either
tó own the property, or secure a long-term lease, but obviously
it wished
to make a profit from the acquisition
20
thereof.
The taxpayer disputed that the dominant purpose of the scheme was
to make a profit: the real purpose, it was submitted, was to enable
the Malbak
Group to get security of tenure over the strategical properties.
It is not
necessary for the purposes of this appeal to resolve this dispute: I shall
assume without deciding that the intention of
the Malbak scheme was that a
profit should be made, for the benefit of Malbak,
inter alia
from the
sale of the Isando property to Durcor.
That sale was it is true one facet of the entire scheme, but Malcomess
(Isando) was not a party to that scheme. Malcomess Properties
and Malbak
operated at arms' length. AsMargo J observed in the judgment of the Special
Court, it is
a relevant factor in the appeal that Malcomess Properties and its
subsidiaries on the one hand were entirely independent of Malbak and its
subsidiaries on the other hand. Unless there was something
more, the scheme was
res inter alios acta
so far as the
21
taxpayer was concerned and could not affect its position to its prejudice;
and Malbak's intention or purpose in embarking upon it
has no bearing on the
question whether the taxpayer continued to hold the Isando property as a capital
asset.
It was argued however that Malbak's intention to make a profit was
attributable to the taxpayer because "its controlling mind at that
point in time
was in fact the Malbak Group", which "through Rushton, was in control of the
taxpayer at the time the property was
sold."
Reliance was placed on the statement in
Secretary for Inland Revenue v.
Trust Bank of Africa Ltd
1975(2) SA 652 (A) at 669 F, that the purpose for
which a transaction was entered into can, in the case of a company, be proved,
inter alia
, by evidence as to the state of mind or intention of the
persons in effective control of the affairs of the company; and on the
dictum
by CORBETT JA in
Secretary for Inland Revenue v. Rile
Investments (Pty) Ltd
1978(3) SA 732 (A) at 737 D:
"Where the taxpayer concerned is a company, which can
22
only think and act through the medium of living beings, then, depending on the
circumstances, evidence of the state of mind or intention
of the persons in
effective control of the company may provide an important indication as to the
intention of the company itself
in relation to the matters in issue
(
Secretary for Inland Revenue v Trust Bank of Africa Ltd
1975(2) SA 652
(A) at 669). Moreover, account must be taken of changes in shareholding which
cause control of the company to pass
into new hands since the advent of new
controllers may bring about a change in the intentions of the company (see eg
Elandsheuwel Farming (Edms) Bpk v Sekretaris van Binnelandse Inkomste
1978(1) SA 101 (A))."
The rationale of the principle was discussed in
Tesco
Supermarkets Ltd v Nattrass
[1971] UKHL 1
;
1972
AC 153
, where Lord Reid said at
170 E-F:
"I must first start by considering the nature of the personality which by a
fiction the law attributes to a corporation. A living
person has a mind which
can have knowledge or intention or be negligent and he has hands to carry out
his intentions. A corporation
has none of these: it must act through living
persons, though not always one or the same person. Then the person who acts is
not
speaking or acting for the company. He is acting as the company and his mind
which directs his acts is the mind of the company. There
is no question of the
company being vicariously liable. He is not acting as a servant, representative,
agent or delegate. He is an
embodiment of the company or, one could say, he
hears and speaks through the
23
persona of the company, within his appropriate sphere, and his mind is the mind
of the company."
The learned lord was echoing what
Viscount Haldane had said in
Lennard's Carrying Company Limited v. Asiatic
Petroleum Company
Limited
1915 AC 705
at 713:
"My Lords, a corporation is an abstraction. It has no mind of its own any more
than it has a body of its own; its active and directing
will must conseguently
be sought in the person of somebody who for some purposes may be cailed an
agent, but who is really the directing
mind and'will of the corporation, the
very ego and centre of the personality of the corporation. That person may be
under the direction
of the shareholders in general meeting; that person may be
the board of directors itself, or it may be, and in some companies it
is so,
that that person has an authority co-ordinate with the board of directors given
to him under the articles of association,
and is appointed by the general
meeting of the company, and can only be removed by the general meeting of the
company."
That passage was quoted and applied by
Centlivres CJ in the
judgment of this court in
Levy v. Central Mining and Investment
Corporation Ltd
1955(1) SA 141 (A) at 149-150, and cf.
Anderson
Shipping (Pty) Ltd v. Guardian National Insurancew Co Ltd
1987(3)
SA 506 (A) at 515 H-I. In
H L Bolton (Engineering). Co Ltd v. T
24
J
Graham and Sons Ltd
[1957]1 QB 159 (CA) at 172 Lord Denning
said that the position was made clear by Lord Haldane's speech
in the
Lennard's Carrying Co
case:
"A company may in many ways be likened to a human body. It has a brain and nerve
centre which controls what it does. It also has
hands which hold the tools and
act in accordance with directions from the centre. Some of the people in the
company are mere servants
and agents who are nothing more than hands to do the
work and cannot be said to represent the mind or will. Others are directors
and
managers who represent the directing mind and will of the company, and control
what it does. The state of mind of these managers
is the state of mind of the
company and is treated by the law as such."
Counsel for the appellant submitted that on 23
August
1976 Malbak acquired all the issued shares in
Malcomess (Isando)
and so acquired control of the company; and that the advent of
the new controllers brought about a change in its intentions.
He said that at the time the property was sold on 27 August 1976,
Malbak "already had executive control of the taxpayer", and it
was the intention of Malbak which determined the intention of the
taxpayer in entering into the transaction.
25
To this submission there are at least two
answers.
The first is that the entire agreement of
23 August 1976 was subject to a condition precedent which was not fulfilled
until the conclusion,
on 27 August 1976, of the agreement between Malcomess
(Isando) and Durcor for the sale of the Isando property, which agreement was
itself subject to a lease being concluded between Durcor and Malcomess-Bakke
Ltd, which was also entered into on 27 August 1976.
It was submitted on behalf
of the Commissioner that the condition was "a self-imposed one, designed to
benefit the Malbak Group."
That may be so, but it was not suggested that the
condition was waived by Malbak. It was also submitted on behalf of the
Commissioner
that because the date of 14 August 1976 had already passed when the
agreement was signed on 23 August 1976 the condition precedent
could not apply
and must be ignored. I do not agree. The sale of the Isando property was an
essential part of the scheme, and the
parties to the agreement of 23 August 1976
could not have contemplated that it should not be dependent on the conclusion of
the sale.
In my
26
view the solution to the problem is to regard as
pro non
scripto
clause 2.1.2 ("irrevocable until 14th August 1976") and
the
words "by not later than 14th August, 1976" in clause 3, and
that
otherwise the condition precedent remained.
The second answer is this. If Malbak did on 23
August
1976 acquire all the issued shares in
Malcomess (Isando), it
might be said that it then had a controlling interest
in
Malcomess (Isando). Compare the definition of "
controlling
company
" in s. 1 of the Companies Act 1973,
"
controlling company
means a company which directly or indirectly has
power enabling it to control another company
..."
Even so, it would not have been able to
exercise control until
there had been performance by Malcomess Properties on or before
the completion date of the undertakings given in clause 6 of the
earlier contract. And in any case, in the
dicta
quoted above,
"control" does not mean having the power to control the company
in the sense of holding the levers of power in the company. In
the context of ascertainment of the intention of the company, it
27
connotes the
de facto
control of what the company does, of its
day-to-day activities, exercised by the persons through whom the company acts.
That that
is so, is clear from the
dicta
quoted above. It was not
suggested to Mr. Thomas in cross-examination on behalf of the Commissioner, nor
suggested by counsel in
argument, that Malbak was in control of Malcomess
(Isando) in that sense. On the contrary, there are in the record copies of two
resolutions which show that it was not. One is a copy (certified to be correct
by the liquidator) of a resolution passed at a meeting
of the shareholders of
Malcomess (Isando) held on 27 August 1976 approving and ratifying the agreement
entered into on 27 August
1976 for the sale of the Isando property and
authorising the directors of the company to give effect to the sale. The other
is a
copy of a resolution of the
directors passed on the same date that the company pass transfer
of the Isando property to the Durban Corporation Superannuation Fund.
In my opinion, therefore, Malbak's intention in
28
devising and executing the scheme was irrelevant to the intention of
Malcomess (Isando) in regard to the Isando property. The conclusion
of the
Special Court was clearly right.
The appeal is dismissed with costs,
including the costs of two counsel.
H C NICHOLAS, AJA
BOTHA, JA NESTADT, JA KUMLEBEN, JA Concur PREISS, AJA