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[2018] ZASCA 113
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Simmonds NO v Essafrau and Others; In Re: Brankin v Essafrau and Others (934/2017) [2018] ZASCA 113 (14 September 2018)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Not
Reportable
Case No: 934/2017
In
the matter between:
EWAN
RONALD SIMMONDS N O
(in
his capacity as the executor of the estate
of
the late John Owen
Brankin)
APPELLANT
and
GRANVILLE
ESSAFRAU
FIRST
RESPONDENT
KOSTA
BABICH
SECOND
RESPONDENT
GILLIAN
LEE
THIRD
RESPONDENT
ROBERT
CAPPER
FOURTH
RESPONDENT
BURCHELLS
BUSH LODGE SHAREBLOCK LIMITED
FIFTH
RESPONDENT
IN
RE:
JOHN
OWEN
BRANKIN
APPELLANT
and
GRANVILLE
ESSAFRAU
FIRST
RESPONDENT
KOSTA
BABICH
SECOND
RESPONDENT
GILLIAN
LEE
THIRD
RESPONDENT
ROBERT
CAPPER
FOURTH
RESPONDENT
BURCHELLS
BUSH LODGE SHAREBLOCK LIMITED
FIFTH
RESPONDENT
Neutral
citation
:
Ewan
Ronald Simmonds N O v Granville Essafrau & others
(934/2017)
[2018] ZASCA 113
(14
September 2018)
Coram
:
Ponnan, Tshiqi and Swain JJA and Mothle and Nicholls AJJA
Heard
:
27 August 2018
Delivered:
14
September 2018
Summary:
Motion
proceedings – vindication of shares – no common cause
facts to establish ownership – appeal dismissed.
ORDER
On
appeal from:
Gauteng
Local Division of the High Court, Johannesburg
(Msimang
AJ, sitting as court of first instance):
1 Ewan Ronald Simmonds N
O is substituted as the appellant for John Owen Brankin in these
proceedings.
2 The name of the
appellant wherever it occurs in the appeal under case number
9334/2017 is amended to read Ewan Ronald Simmonds
N O.
3 The
appeal is dismissed with costs, such costs to include the costs of
two counsel.
JUDGMENT
Swain JA (Ponnan and
Tshiqi JJA and Mothle and Nicholls AJJA concurring):
[1]
This
appeal concerns the vindication of shares by the appellant, Mr Ewan
Simmonds N O the executor of the estate of the late Mr
John Brankin
(the deceased). The shares are held by the first respondent, Mr
Granville Essafrau, the second respondent, Mr Kosta
Babich, the third
respondent, Ms Gillian Lee and the fourth respondent, Mr Robert
Capper (hereafter collectively referred to as
the respondents), in
the fifth respondent, Burchells Bush Lodge Shareblock Ltd
(Burchells). Proceedings instituted by the deceased
before the
Gauteng Local Division of the High Court, Johannesburg were
unsuccessful, the application being dismissed with costs.
Leave
to appeal to this Court was thereafter granted by the court a quo,
but in the interim the deceased passed away. An order
was therefore
sought at the hearing of the appeal to substitute the appellant, in
his capacity as the executor of the estate of
the deceased, for the
deceased, in these proceedings.
[2]
The
relief sought before the court a quo was for an order declaring the
deceased the lawful owner of the class 'A' shares (the shares)
in
Burchells, which were registered in the names of the respondents.
Orders were also sought directing the first, second and third
respondents to transfer and deliver the shares to the deceased and
that Burchells cancel their registration in the respondents’
names and issue to the deceased a share certificate recording that
the deceased was the holder of all 5500 shares. Certain of the
relief
was not sought against the fourth respondent as he had agreed prior
to the launch of the proceedings, to transfer his shares
to the
deceased.
[3]
The
deceased alleged that he was the registered owner of the shares and
that during 2005 he transferred some of the shares to the
respondents
as directors of Burchells, for no value. Before the court a quo, the
deceased challenged the validity of his transfer
of the shares to the
respondents on a number of grounds, only one of which was persisted
in on appeal. This was that the transfer
of the shares to the
respondents in Karos Lodge Shareblock Ltd (Karos Lodge), (which had
changed its name to Burchells), which
were previously owned by Karos
Leisure (Pty) Ltd (Karos Leisure), were invalid as they had been
effected in contravention of Article
9 of the articles of association
of Karos Lodge. The relevant portion of this article states that:
'No
share may be transferred except simultaneously with and to the same
transferee as the whole of the other shares included in
the same
share block. . . .'
The
deceased therefore submitted that Article 9 required all of the
shares to be transferred simultaneously to one transferee, with
the
result that the transfers to the respondents were void and should be
set aside.
[4]
However,
a more fundamental obstacle lay in the path of the deceased. This was
whether the essential requirement that the deceased
was the owner of
the shares before he purportedly transferred them to the respondents
was established on the facts. The correct
approach to the assessment
of evidence in motion proceedings was described in
National
Director of Public Prosecutions v Zuma
[2009] ZASCA 1
;
2009 (1) SACR 361
(SCA) paras 26 and 27, by Harms JA
as follows:
'Motion
proceedings, unless concerned with interim relief, are all about the
resolution of legal issues based on common cause facts.
Unless the
circumstances are special they cannot be used to resolve factual
issues because they are not designed to determine probabilities.
It
is well established under the
Plascon-Evans
rule that where in
motion proceedings disputes of fact arise on the affidavits, a final
order can be granted only if the facts
averred in the applicant's (Mr
Zuma’s) affidavits, which have been admitted by the respondent
(the NDPP), together with the
facts alleged by the latter, justify
such order. It may be different if the respondent’s version
consists of bald or uncreditworthy
denials, raises fictitious
disputes of fact, is palpably implausible, far-fetched or so clearly
untenable that the court is justified
in rejecting them merely on the
papers. The court below did not have regard to these propositions and
instead decided the case
on probabilities without rejecting the
NDPP’S version.
.
. . In motion proceedings the question of onus does not arise and the
approach set out in the preceding paragraph governs irrespective
of
where the legal or evidential onus lies. . . .'
[5]
As
will be seen, the founding affidavit of the deceased contains
contradictory statements as to how he came to acquire ownership
of
the shares in the first place. The problem is compounded by
contradictory admissions and statements on this issue by the
respondents
in their answering affidavit.
[6]
Initially
the deceased claimed ownership of the shares, on the basis that the
liquidator of Karos Leisure had sold them to him,
in terms of a sale
agreement annexed to the founding affidavit, marked ‘FA1’.
This was despite there being no indication
in the sale agreement,
that the liquidator was a party to the agreement. The deceased
described his acquisition of the shares as
follows:
'The
"A" shares were all initially owned by Karos Leisure (Pty)
Limited, which formed part of the Karos Group. The "A"
shares entitled Karos, as the owner of the property, and as the
developer, to develop the property and build 45 timeshare chalets.
In
fact only 30 chalets were built. As Karos was placed under a
winding-up order, the ownership of all its class "A"
shares
vested in the liquidator. (The liquidator subsequently sold all the
"A" shares to me.) This was in terms of the
sale agreement
dated 13 August 2003 and which has been attached, marked "FA1".
Karos Leisure ceded its "A"
shares to International Bank of
South Africa Limited whose name was changed to Boundary Finance
("Boundary Finance").'
[7]
However,
later in his founding affidavit the deceased claimed that the shares
had been sold to him by Boundary Finance, to whom
the shares had been
pledged as security for a loan made to Karos Leisure, by Boundary
Finance. He described the way in which he
acquired the shares as
follows:
'Arising
from a bona fide and reasonable error on my part and on the part of
Boundary Financing and without due regard being had
to article 9 of
the articles of association of the Fifth Respondent, Boundary Finance
sold and transferred the 5400 issued class
"A" shares with
a par value of R1,00 per share, to myself, for a purchase price of 1
cent per share being R55,00. Attached
marked "FA2" is a
copy of the articles. I deal later with the legal implications of
article 9.
Karos
(represented by its liquidator, Mr Moses) was the owner of the "A"
shares and the remaining "B" shares
in Karos Shareblock,
which had not been sold. All these shares were pledged together to
the mortgagee, Boundary Financing Ltd ("Boundary
Financing")
(formerly known as International Bank of Southern Africa Limited) as
security for a loan which Karos had obtained
from Boundary Financing.
Karos also passed a mortgage bond over its immovable property in
favour of Boundary Financing.'
[8]
The
confusion was compounded when the deceased later in his affidavit,
reverted to his initial claim that he had acquired the shares
in
terms of clause 6.2 of the sale agreement:
'Arising
from clause 6.2 of the agreement of sale ("FA1") I acquired
and became the registered owner of all the class
"A" shares
held by Karos (in liquidation) the developer of the property. A share
certificate was issued to me, by the
then company secretary of the
Fifth Respondent, Mr Nick Wellman in respect of my 5500 shares. I do
not have a copy of the share
certificate. Mr Wellman subsequently
committed suicide and all the documents relating to my holding of the
"A" shares
which were in his possession, could not be found
and have still not been found. I had the share certificate in respect
of all the
class "A" shares. I was the registered owner of
5500 of the issued "A" shares.
As
I was the registered owner of 5500 issued "A" shares,
during 2005, I transferred, for no value, the "A" shares
to
the then directors of the Fifth Respondent. . . .'
[9]
However,
an examination of the provisions of clause 6.2 of the agreement of
sale relied upon by the deceased, only serves to increase
the
confusion. The clause provides as follows:
'6.2
Boundary, KKS and KLS shall procure the transfer to John Brankin of
all of the Karos Leisure A shares (in respect of both KKS
and KLS) at
a price of R0,01 per share and undertake to take all reasonable steps
that may be necessary to effect delivery and
transfer of such shares
within 60 (sixty) days after the signature date.'
In
other words, Boundary Finance and 'KKS', being Karos Kruger
Shareblock Ltd and 'KLS', being Karos Lodge, were to 'procure the
transfer' to the deceased of the shares in Karos Lodge, by taking
'all reasonable steps that may be necessary to effect delivery
and
transfer of such shares', within 60 days of signature of the
agreement. No explanation is furnished by the deceased to establish
the legal entitlement of these entities to transfer ownership in the
shares to him, nor does he describe the legal steps which
enabled
them to 'procure’ the transfer and delivery of the shares to
him.
[10]
The
contradictions in the founding affidavit of the manner in which the
deceased acquired ownership of the shares are manifest.
It is
uncertain whether they were purchased by the deceased from the
liquidator of Karos Leisure, or whether he purchased them
from
Boundary Finance, or whether he purchased them following procurement
by Boundary Finance, Karos Kruger Shareblock Ltd and
Karos Lodge.
[11]
The
contradictory allegations by the deceased and the resultant confusion
as to how he acquired ownership of the shares, had the
result that
the important legal consequences of the pledge of the shares to
Boundary Finance, as security for a loan which Boundary
Finance had
granted to Karos Leisure, were overlooked. The legal consequences of
a pledge of shares as security for due performance
of obligations by
the holder of such shares, is described by H S Cilliers et al,
Corporate
Law
,
3 ed (2000) at 292 para 18.23, in the following terms:
'If
cession of shares as with a
pledge
of shares is intended, the
analogy of the law of pledge is to the effect that the pledgor
remains owner of the shares while the
pledgee has to keep the share
certificate and a signed blank transfer form in his possession to
protect his real right in the rights
of action deriving from the
shares serving as security. If the pledgor defaults, the pledgee has
to obtain a court order before
he can realise his security unless
informal execution (
parate executie
) has been agreed to by the
pledgor.'
[12]
Clause
6.1 of the agreement of sale makes it clear that a pledge of the
shares was intended. It records that Boundary Finance holds
signed,
blank share-transfer forms in relation to the Karos Lodge class 'A'
shares. In this manner, the real right of Boundary
Finance in the
rights of action deriving from the shares was protected. Karos
Leisure, however, retained ownership of the shares.
As pointed out by
Brand JA in
Grobler
v Oosthuizen
[2009] ZASCA 51
;
2009 (5) SA 500
(SCA) para 20, in terms of the
pledge theory a claim ceded in
securitatem
debiti
automatically reverts to the cedent once the secured debt is
extinguished and in such event a re-cession by the cessionary is not
required. Consequently, if the loan from Boundary Finance was repaid
these rights would automatically revert to Karos Leisure.
Conversely,
if Karos Leisure defaulted in repayment of the loan, Boundary Finance
would be entitled to realise the security of
the shares by selling
them.
[13]
The
founding affidavit is however silent on the crucial issue of whether
the loan was repaid. Although the fact that Karos Leisure
was placed
in liquidation suggests it was not, this is pure speculation. It
therefore cannot be determined on the facts in the
founding affidavit
whether the liquidator of Karos Leisure, or whether Boundary Finance,
was legally entitled to sell and cede
and thereby transfer ownership
of the incorporeal rights in the shares in Karos Lodge, to the
deceased.
[14]
Consequently,
when counsel for the appellant was asked whether the issue of the
deceased’s acquisition of ownership of the
shares could be
resolved on the facts, he submitted that ownership of the shares by
the deceased was common cause. In support of
this submission he
referred to an admission in the answering affidavit, in response to
the allegations in the founding affidavit
(as set out in paragraph 7
supra), in the following terms:
'I
admit the allegation that the development shares were sold and
transferred to Applicant.'
In
the context of the allegations made in paragraph 33 of the founding
affidavit, what was admitted was that Boundary Finance had
sold and
transferred the shares to the deceased.
[15]
However,
this admission must be considered in the context of other
contradictory admissions and allegations made on this issue,
in the
answering affidavit. In contradiction to the admission that Boundary
Finance sold and transferred the shares to the deceased,
the
respondents admitted earlier in their answering affidavit that it was
the liquidator who had in fact done so, in the following
terms:
'It
is common cause that the liquidator of Karos sold all development
shares in Fifth Respondent to Applicant in terms of an agreement
of
sale dated 13 August 2003 and in this regard reference is made to the
contents of annex "FA-1" to the founding affidavit
and to
the contents of paragraph 21 of that affidavit.
It
is common cause that Applicant became the owner of the development
shares which was registered in his name and in this regard
reference
is made to the contents of founding affidavit paragraph 38.'
[16]
The
admission that it was the liquidator who sold the shares to the
deceased in terms of the sale agreement, is inconsistent with
clause
6.2 in which Boundary Finance, Karos Kruger Shareblock Ltd and Karos
Lodge undertook to 'procure’ the sale, delivery
and transfer of
the shares to the deceased. It is also inconsistent with the fact
that the liquidator was not a party to the agreement.
[17]
The
problem of determining precisely what the respondents admitted in
respect of this important issue is further complicated in
the
answering affidavit, by the following denial:
'First
– Third Respondents and I deny the following allegations
wherever they appear in the founding affidavit:
.
. .
That
Applicant is the owner of the development shares.’
[18]
Accordingly, it cannot be determined what facts, if any, are common
cause between the parties as to the manner in which the
deceased
acquired ownership of the shares in Burchells. A consideration of the
probabilities is precluded and the central legal
issue of whether the
deceased acquired ownership of the shares, cannot be determined on
the affidavits.
[19]
Counsel for the appellant also submitted that the deceased had
acquired ownership of the shares as a result of the performance
by
Boundary Finance, Karos Kruger Shareblock Ltd and Karos Lodge, of
their obligations in terms of clause 6.2 of the sale agreement,
but
that was pure speculation. In any event, for the reasons set out
above the submission is without foundation.
[20]
The appeal accordingly fails. I grant the following order:
1 Ewan Ronald Simmonds N
O is substituted as the appellant for John Owen Brankin in these
proceedings.
2 The name of the
appellant wherever it occurs in the appeal under case number
9334/2017 is amended to read Ewan Ronald Simmonds
N O.
3 The appeal is dismissed
with costs, such costs to include the costs of two counsel.
K G B Swain
Judge of Appeal
Appearances:
For
the Appellant: P Pauw and R G Cohen
Instructed
by:
Glynnis
Cohen Attorney, Johannesburg
Lovius
Block Attorneys, Bloemfontein
For
the First, Second, Third
and
Fifth Respondent: S J Du Plessis SC and F J Wilke
Instructed
by:
Manong
Badenhorst Abbott Van Tonder, Randburg
Phatshoane
Henny Attorneys, Bloemfontein