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[2020] ZASCA 184
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Gent and Another v Du Plessis (1029/2019) [2020] ZASCA 184 (24 December 2020)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case no: 1029/2019
In
the matter between:
ANITA
JULIA GENT
FIRST APPELLANT
BONNOX
(PTY) LIMITED
SECOND APPELLANT
and
PETER
DANIËL JACOBS DU PLESSIS
RESPONDENT
Neutral
citation:
Gent
and Another v Du Plessis
(1029/2019)
[2020] ZASCA 184
(24 December 2020)
Bench:
MBHA,
VAN DER MERWE and MAKGOKA JJA and WEINER and SUTHERLAND AJJA
Heard:
13
November 2020
Delivered:
This
judgment was handed down electronically by circulation to the
parties' representatives via email, publication on the Supreme
Court
of Appeal website and release to SAFLII. The date and time for
hand-down is deemed to be 10:00 am on 24 December 2020.
Summary:
Civil
procedure – in the absence of a cross-appeal respondent not
entitled to variation of the order of the court below.
Company law –
section 163 of
Companies Act 71 of 2008
– where no case made
out under
s 163(1)
, court not empowered to grant relief in terms
of
s 163(2)
– oppressive or unfairly prejudicial conduct not
proved.
ORDER
On
appeal from
:
Gauteng Division of the High Court, Pretoria (Mavundla and Mali JJ
and Botes AJ, sitting as court of appeal): judgment reported
sub
nom Du Plessis v Bonnox Proprietary Limited and Another
[2019]
ZAGPPHC 515
(a)
The appeal is upheld with costs, including the costs of two counsel.
(b)
The order of the full court is set aside and replaced by the
following order:
‘
The
appeal is dismissed with costs.’
JUDGMENT
Mbha JA (Van der
Merwe and Makgoka JJA and Weiner and Sutherland AJJA concurring)
[1]
This appeal concerns a decision of the Full Court of the Gauteng
Division of the High Court, Pretoria
(Botes AJ, Mavundla and Mali JJ
concurring) (the full court). It ordered the appellant, Anita Julia
Gent (Ms Gent),
[1]
to sell her
majority shareholding in Bonnox (Pty) Ltd (the company) to the
respondent, Pieter Daniël Jacobs du Plessis (Mr
du Plessis),
notwithstanding its conclusion that the respondent had not shown the
requirements of s 163(1) of the Companies
Act 71 of 2008 (the
Act).
[2]
[2]
This court granted Ms Gent special leave to appeal against the order
of the full court. It, however,
dismissed Mr du Plessis’
application for special leave to cross-appeal against the full
court’s order refusing the
winding-up of the company and
directing Ms Gent to sell her shares to him. In this court, Mr du
Plessis conceded from the outset
that the full court had erred in
making the buy-out order and made it clear that he did not support
it. In my view, the concession
was made fairly and properly. When the
full court found that the grounds relied upon by Mr du Plessis did
not fall within the ambit
of s 163(1) of the Act, that should
have been the end of the matter. Indeed, absent the statutory
criteria being fulfilled,
the full court did not have jurisdiction to
order Ms Gent to purchase Mr du Plessis’ minority shareholding.
An applicant
is only entitled to relief under s 163(1) upon
satisfying the criteria set out therein. And only then is a court
empowered
to grant appropriate relief in terms of s 163(2) of
the Act, upon the proper exercise of its discretion. There was no
'duty'
on the full court whatsoever to craft a 'clean break' between
the parties, purportedly in terms of s 163(2) of the Act.
[3]
[3]
Mr du Plessis’ argument in this court was that the full court
should have held that he had established
oppressive or unfairly
prejudicial conduct under s 163(1); and, on that basis, should
have directed Ms Gent to purchase his
shares in the company. A draft
order was prepared and attached to the respondent’s heads of
argument, in which it was proposed
that Ms Gent be directed to
purchase the respondent's shares in the company at fair value,
calculated pro rata to the total
issued share capital of the company.
After setting out the background of the matter, I shall first
consider the impact of the refusal
of leave to cross-appeal on this
argument and thereafter whether the requirements of s 163(1) of
the Act had been proved.
[4]
The company was established by Ms Gent’s father, Mr Volker
Herman Schadewaldt (Mr Schadewaldt),
in 1957 and in due course became
a highly profitable company. Its business is the manufacturing of
fencing. Mr Schadewaldt was
for the better part of his life the
majority shareholder of the company and also its managing director,
until he retired in 2010.
During 1994 Mr Schadewaldt transferred 15
shares in the company to Mr du Plessis. In 1998 he transferred the
rest of his shares
in the company as follows: 80 shares to Ms Gent; a
further 45 shares to Mr du Plessis; and 10 shares to the company’s
accountant,
Mr Smith. As a result of her majority shareholding, Ms
Gent became the company’s sole director until she resigned of
her
own accord on 18 January 2012. During 2012 Mr du Plessis also
acquired the shares of Mr Smith. In the result, Mr du Plessis and
Ms
Gent became the sole shareholders in the company. Ms Gent holds 53.33
percent of the issued share capital in the company while
Mr du
Plessis holds the remaining 46.67 percent. Ms Gent was re appointed
as a director of the company on 18 January 2013.
[5]
Mr du Plessis was employed by the company from 1986, where he started
as a fitter and turner. He was
promoted to general manager during
2010 and, ultimately, was appointed as a director during 2012, when
Ms Gent resigned as such.
He was, however, removed as a director at a
meeting of the shareholders on 6 March 2013. Mr du Plessis was
subsequently suspended
and, after being found guilty on four counts
of gross misconduct (one of which involved dishonesty) at a
disciplinary hearing,
dismissed as an employee during August 2014.
[6]
The charges against Mr du Plessis arose after Ms Gent’s
uncovering, upon her return to the company
in 2013, of a number of
irregularities committed by Mr du Plessis. These included that Mr du
Plessis, who occupied a position of
trust in the company at the time,
conducted his own private business, ‘Blumnet’, whose
business was producing a woven
mesh fence similar to the one
manufactured by the company, by making use of the resources of the
company. In the process, Blumnet
was also used by Mr du Plessis to
commit a fraud against the fiscus. In this regard, Mr du Plessis
engineered a simulated transaction
in which an invoice, in the sum of
R641 293, was issued in the books of Blumnet and addressed to
the company as if to reflect
an honest exchange of services for
money. Significantly, Mr du Plessis admitted to this misconduct.
[7]
Even more serious was when, on 5 March 2013, the day before the
shareholders’ meeting where a
resolution for his removal as a
director was to be tabled, Mr du Plessis maliciously and
surreptitiously obtained an order placing
the company in business
rescue. This was an attempt to prevent a majority resolution to
remove him as director. He abused his position
of trust and
manipulated two employees to bring the application for business
rescue in their names. The business rescue order was
subsequently set
aside at the instance of Ms Gent in an urgent application on 2 April
2013, despite the application being
vigorously opposed by Mr du
Plessis. In rescinding the order, the court made a punitive costs
order, on the attorney and own client
scale, against the employees
who had brought the application. As I have said, these employees were
merely Mr du Plessis' proxies.
Ultimately, and as a gesture of
goodwill in an attempt to reconcile with Mr du Plessis, Ms Gent paid
71 percent of these costs
from her own funds. Significantly, Mr du
Plessis conceded that the manner in which the application for
business rescue was launched,
ie without Ms Gent's knowledge, as
obviously an interested party, was ill-advised and ultimately fatal
to that application.
[8]
On 30 June 2014, Mr du Plessis brought an application in the Gauteng
Division of the High Court for
an order that the company be wound up
on the basis that it was just and equitable to do so, as envisaged in
s 344
(h)
of the Companies Act 61 of 1973 (the old
Companies Act), read together with item 9 of Schedule 5 of the Act.
In the alternative,
he sought an order directing Ms Gent to purchase
his shareholding in the company, at a price to be determined by an
independent
expert. He further sought an order that certain machinery
be returned to him, but this aspect was disputed and was accordingly
referred to trial. However, nothing turns on this issue in the
present appeal and it need not detain us further.
[9]
Mr du Plessis’ grounds for seeking to liquidate the company
were, briefly: that it was a ‘private
domestic company’
whose affairs had been conducted in a manner akin to that of a
partnership; that his relationship with
Ms Gent as co shareholders
of the company had broken down irretrievably; that Ms Gent had
excluded him from the management
of the company and from its board of
directors; that a ‘deadlock’ had arisen between the
shareholders of the company
which was not capable of resolution; and
that Ms Gent’s conduct was oppressive in nature in that it
undermined his rights
as the minority shareholder of the company.
[10] In
pursuance of the alternative relief that Ms Gent be directed to
purchase his shares in the company, Mr du Plessis
sought to invoke
the provisions of s 163 of the Act. He alleged that Ms Gent, in
her capacity as the majority shareholder
and director of the company,
had acted in an unfairly prejudicial and oppressive manner towards
him.
[11]
The application came before Hughes J on 30 March 2016. The learned
Judge held that although the company was akin
to a partnership, it
was a solvent domestic company whose substratum remained intact.
Although the relationship between the two
shareholders had broken
down irretrievably, and was not capable of being resolved, the court
a quo found that there was no deadlock
that rendered it just and
equitable to wind up the company. Applying the so-called 'clean
hands' principle the court further found
that, as Mr du Plessis had
through his own conduct caused the breakdown in the shareholders’
relationship, he was not entitled
to apply for the winding up of the
company on the just and equitable ground.
[4]
[12] In
respect of the s 163 relief, Hughes J found that Mr du Plessis
had not established the requisites for that
section to be invoked.
The court found, in particular, that neither Mr du Plessis’
alleged loss of confidence in the manner
in which the company’s
affairs were being conducted, nor his resentment at having been
outvoted, fell within the purview
of s 163 of the Act. The court
accordingly dismissed the winding up application with costs.
[13]
With the leave of this court,
[5]
Mr du Plessis appealed to the full court which, on 18 April 2019,
dismissed his appeal against the refusal of the court a quo to
order
the winding up of the company. It rejected the submission that the
relationship between the parties resembled a partnership
between
shareholders. It held that it could not be said that the company was,
in substance, a partnership in the guise of a private
company.
[14]
The full court also upheld the court a quo’s finding that Mr du
Plessis had failed to prove the requisites
of s 163(1) of the
Act. As I have indicated, the full court nevertheless went on to
grant relief in terms of s 163(2)
of the Act, holding that it
was duty-bound to design or craft a mechanism which would result in a
'clean break' between the parties.
It justified this approach on the
ground that the relationship between the parties had broken down
irretrievably and that it was
not in their best interests to remain
‘in the same bed’.
[6]
The full court thus directed Mr du Plessis to purchase Ms Gent’s
shares at a fair and reasonable value.
[15]
As mentioned above, Mr du Plessis' application for special leave to
cross appeal was refused by this court.
This had a significant
impact on the matter. In
Shatz
Investments (Pty) Ltd v Kalovyrnas
[7]
this court was confronted with the question whether, without any
cross-appeal, it could correct an order of a trial court by making
a
prayer for interest, which that court had not granted. Trollip JA
said the following:
‘…
The
court a quo did not award it, possibly because it was not claimed in
the pleadings. But, be that as it may, in the absence of
any
cross-appeal to correct the order of the court a quo to plaintiff’s
advantage and defendant’s detriment by including
an award of
such interest, we cannot deal with it…’
[8]
[16]
This dictum reaffirmed trite principles. These are that a respondent
in an appeal may support the order appealed
against on any ground
that properly appears from the record. In order to obtain a variation
of the order, however, a respondent
must cross-appeal with the
necessary leave, save perhaps in exceptional circumstances where
there is no prejudice to the appellant.
[17] The
application of these principles to the present matter has the
following consequences. In the first instance,
the option to
liquidate the company is no longer available. Importantly, what Mr du
Plessis seeks is that instead of him buying
Ms Gent’s
shares, which is what the full court ordered, she in fact be ordered
to buy his shares. It is clear from the
record that the purchase
price would be in the range of R20 million to R35 million,
an amount Ms Gent has clearly stated
she could not afford. Such a
variation will, without a doubt, be to her detriment. Therefore, Mr
du Plessis was precluded from
seeking an order that Ms Gent be
directed to purchase his shares. And, as I have said, Mr du Plessis
expressly disavowed reliance
on the order that obliges him to
purchase Ms Gent’s shares. It follows that, for this reason
alone, the appeal should succeed
and the order of Hughes J should be
reinstated. In any event, for the reasons that follow, Mr du Plessis
did not show oppressive
or unfairly prejudicial conduct on the part
of Ms Gent.
[18] As
stated already, Mr du Plessis relied in this court on the following
grounds in support for the relief he applied
for as provided in s 163
of the Act:
(a)
Ms Gent had excluded him from the management of the company and
refused to provide him with management
and financial information
relating to the company;
(b)
Ms Gent excluded him from any decision making within the company;
(c)
Ms Gent removed him as a director of the company and replaced him
with her husband and brother-in-law,
and also unlawfully and unfairly
dismissed him from employment with the company.
[19] The
full court upheld the finding of the court a quo that Mr du Plessis
had failed to demonstrate that
Ms Gent's conduct towards him was
oppressive or unfairly prejudicial, or that his interests had been
unfairly disregarded. It found
that the grounds relied upon by Mr du
Plessis did not fall within the ambit of s 163(1) of the Act.
[20] In
my view, this finding by the full court cannot be faulted. It is
bolstered by the following objective facts:
(a)
Mr du Plessis was validly removed as a director of the company at a
properly constituted shareholders'
meeting, and as provided in s 71
of the Act.
(b)
As a shareholder, Mr du Plessis is at liberty and entitled to the
management and financial information
pertaining to the company as
provided in s 26 of the Act.
(c)
Mr du Plessis is entitled to dispose of his shares in the company in
accordance with the provisions
of paragraph 11
(d)
of the Company's Articles of Association.
[9]
(d)
Mr du Plessis was dismissed after being found guilty of misconduct in
a disciplinary hearing. Clearly,
the dismissal as general manager did
not constitute conduct that fell within the ambit of s 163(1).
(e)
In respect of the removal of Mr du Plessis as a director of the
company, the starting point is
that the mere exercise of majority
shareholding voting rights does not amount to oppression. Counsel for
Mr du Plessis fairly recognised
that for the removal as director to
fall under s 163(1), Mr du Plessis had to prove some agreement
or understanding that he
would be entitled to directorship of the
company. There was no proof of such agreement or understanding. The
objective facts indicated
the converse. Mr du Plessis made no capital
contribution that could entitle him a seat on the board of the
company. Even though
Mr du Plessis had received the bulk of his
shares during 1998, he was only appointed a director during 2012. Ms
Gent nominated
him as director when she resigned as the sole director
of the company. Within a year, however, Ms Gent was reappointed and
proceeded
to take steps to remove Mr du Plessis. Thus, he was
permitted to be a director only for the period of approximately a
year.
[21]
Viewed in the light of the above considerations, the full court
clearly misdirected itself in making the order
that Ms Gent be
ordered to sell her majority shareholding to Mr du Plessis. It ought
simply to have dismissed Mr du Plessis’
appeal. It follows,
accordingly, that Ms Gent’s appeal must succeed.
[22] In
the circumstances the following order is made:
(a)
The appeal is upheld with costs, including the costs of two counsel.
(b)
The order of the full court is set aside and substituted with the
following:
‘
The
appeal is dismissed with costs.’
B H Mbha
Judge of Appeal
APPEARANCES
For
First Appellant: M P van der
Merwe SC (with him N Komar)
Instructed
by:
Waldick
Jansen van Rensburg Inc., Centurion
Symington
De Kok Attorneys, Bloemfontein
For
Respondent:
B H Swart SC (with him R Oosthuizen)
Instructed
by:
Jarvis
Jacobs Raubenheimer Inc., Pretoria
Rossouw
Attorneys, Bloemfontein
[1]
Although the heading to the
present appeal refers to both the first appellant (Anita Julia Gent)
and the second appellant (Bonnox
(Pty) Ltd), it is only Ms Gent who
is appealing the order of the full court.
[2]
Section 163
of the Act provides as follows:
'Relief
from oppressive or prejudicial conduct or from abuse of separate
juristic personality of company
(1)
A shareholder or a director of a company may apply to a court for
relief if—
(a)
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;
(b)
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 unfairly disregards the interests of, the applicant; or
(c)
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 oppressive or unfairly prejudicial to, or that
unfairly disregards the interests of, the applicant.
(2)
Upon considering an application in terms of subsection (1), the
court may make any
interim or final order it considers fit,
including—
(a)
an order
restraining the conduct complained of;
(b)
an order appointing
a liquidator, if the company appears to be insolvent;
(c)
an
order placing the company under supervision and commencing business
rescue proceedings in terms of Chapter 6, if the court
is satisfied
that the circumstances set out in section 131(4)
(a)
apply;
(d)
an order to
regulate the company's affairs by directing the company to amend its
Memorandum of Incorporation or to create or amend
a unanimous
shareholder agreement;
(e)
an order directing
an issue or exchange of shares;
(f)
an order—
(i)
appointing directors in place of or in addition to all or any of the
directors
then in office; or
(ii)
declaring any person delinquent or under probation, as contemplated
in section
162;
(g)
an order directing
the company or any other person to restore to a shareholder any part
of the consideration that the shareholder
paid for shares, or pay
the equivalent value, with or without conditions;
(h)
an order varying or
setting aside a transaction or an agreement to which the company is
a party and compensating the company or
any other party to the
transaction or agreement;
(i)
an order requiring
the company, within a time specified by the court, to produce to the
court or an interested person financial
statements in a form
required by this Act, or an accounting in any other form the court
may determine;
(j)
an order to pay
compensation to an aggrieved person, subject to any other law
entitling that person to compensation;
(k)
an
order directing rectification of the registers or other records of a
company; or
(l)
an order for the
trial of any issue as determined by the court.
(3)
If an order made under this section directs the amendment of the
company's Memorandum
of Incorporation—
(a)
the directors must
promptly file a notice of amendment to give effect to that order, in
accordance with section 16(4); and
(b)
no further
amendment altering, limiting or negating the effect of the court
order may be made to the Memorandum of Incorporation,
until a court
orders otherwise.’
[3]
Du Plessis v Bonnox
Proprietary Limited and Another
[2019]
ZAGPPHC 515 para 67.
[4]
Emphy and Another v Pacer
Properties (Pty) Ltd
1979
(3) SA 363
(D) at 368E-H.
[5]
Mr du Plessis’ application
for leave to appeal was dismissed by the court a quo on 27 May 2016.
He thereafter applied to
this court for leave to appeal in terms of
s 17(2)
(b)
of
the
Superior Courts Act 10 of 2013
, which application was granted on
13 September 2016.
[6]
See
Du
Plessis
(above fn 3)
para 67.
[7]
Shatz Investments (Pty) Ltd v
Kalovyrnas
1976 (2)
SA 545 (A).
[8]
Ibid at 560G-H.
[9]
Paragraph 11
(d)
provides that a shareholder, desirous of selling his or her own
shares to any person other than a member of his or her family,
must:
'…
first offer such shares in writing to any of the other shareholders
of the company at a price to be agreed upon between
the shareholder
desiring to sell and the other shareholder, but failing such
agreement then at the same price as may be bona
fide obtained
elsewhere by the shareholder proposing to sell. The price so
obtainable elsewhere shall be evidenced in writing
by the
prospective purchaser.'