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[2014] ZAWCHC 103
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Navigator Property Investments (Pty) Ltd v Silver Lakes Crossing Shopping Centre (Pty) Ltd and Others (13049/13) [2014] ZAWCHC 103; [2014] 3 All SA 591 (WCC) (30 April 2014)
IN THE HIGH COURT
OF SOUTH AFRICA
(WESTERN CAPE
DIVISION)
CASE
NO: 13049/13
DATE:
30 APRIL 2014
REPORTABLE
In the matter
between:
NAVIGATOR
PROPERTY
INVESTMENTS (PTY)
LTD
.....................................................................
Applicant
And
SILVER LAKES
CROSSING
.........................................................
1st
Respondent
SHOPPING CENTRE
(PTY) LTD
THE COMPANIES AND
INTELECTUAL
.....................................
2nd
Respondent
PROPERTY
COMMISSION
MICHAEL JOHAN VON
BACKSTROM N.O
..............................
3rd
Respondent
MICHAEL GEORGE
VON
...........................................................
4th
Respondent
BACKSTROM N.O
ALIDA-LOUISE VON
BACKSTROM
..........................................
5th
Respondent
[In their
capacities as trustees of the
MICHAEL VON
BACKSTROM
FAMILY TRUSTReg.
no. IT6582/1994
ANNE
–MARGARET
....................................................................
6th
Respondent
VON BACKSTROM N.O
ALIDA MARLYN
HESTER
...........................................................
7th
Respondent
VON BACKSTROM N.O
[In their
capacities as trusteesof the
GEORGE VON
BACKSTROM FAMILY TRUST
Reg. no. IT
1209/1994]
Date of hearing:
30 October 2013
Date of judgment:
30 April 2014
JUDGMENT
NDITA, J:
[1] This is an
application for the winding up of the first respondent, a solvent
company, in terms of the section 81(1) (d) (i)
and (iii) of the
Companies Act 71 of 2008 (“the Act”) on the basis that
the directors of the first respondent are deadlocked
in the
management of the company and the shareholders are unable to break
the deadlock as a result of which the company’s
business cannot
be conducted in the interest of creditors. Accordingly, the applicant
contends that it is just and equitable that
the first respondent be
wound up. Alternatively, the applicant seeks an order placing the
company under supervision and the commencement
of business rescue
proceedings in terms of section 131(7) of the Act. As a further
alternative, the applicant applies, on account
of alleged prejudicial
conduct , for a receiver to be appointed to the company in terms of s
163 of the Act, to continue any part
of the business of the company
which may be necessary for its beneficial winding up. The relief is
sought as a result of a deadlock
between the directors of the company
and the overall breakdown of their relationship inter se. The
application is not opposed by
the company, the first respondent. The
second respondent, The Companies and Intellectual Property Commission
also does not oppose
the application. No relief is sought against it.
The rest of the respondents are the intervening parties and for ease
of reference,
they are for the purpose of this judgment, referred to
as the respondents.
[2] The applicant is
Navigator Property Investments (Pty) Limited, a company duly
incorporated in accordance with the laws of the
Republic of South
Africa, with its registered place of business at Mazars House, Rialto
Road, Grand Moorings Precinct, Cape Town.
The applicant holds 50% of
the issued share capital in the first respondent. The applicant is a
subsidiary of Catalyst House Fund
(Pty) Ltd which is part of the
overall Catalyst Group of Companies (“the Catalyst Group”).
The Catalyst Group consists
of a number of companies whose operations
encompass virtually every aspect of the property industry and was
formed in 1998.
[3] The first
respondent is Silver Lakes Crossing Shopping Centre (Pty) Limited, a
company duly registered in accordance with the
company laws of the
Republic of South Africa with its registered office at Mazars House,
Rialto Road, Grand Moorings Precinct,
Century City, Cape Town. It
carries on business as a property development and investment company
and is the registered owner of
an immovable property which comprises
the Silver Oaks Shopping Centre, Life Healthcare Centre (“Phase
1”), Northern
Lofts (“Phase 2”), McCarthy VW
(“Phase 3”), Tiger Wheel and Tyre (“Tiger Wheel”)
as well as
approximately 67132m2 of vacant land situated in Willow
Acres, Gauteng. The directors of the applicant are Heather Wallace,
Jonathan
David Broll, Royden David du Plooy, Jason Keith De Wilde,
Hannchen Elizabeth Louw and the deponent to the founding affidavit,
Ian
Charle Halle. The shareholding in the first respondent is held as
follows:
1. The George von
Backstrom Familie Trust – 25%. The sixth and seventh
respondents are the trustees for the time being.
2. The Michael von
Backstrom Familie Trust – 25%. The trustees are the third,
fourth and fifth respondents.
According to the
Shereholder’s agreement concluded between the first
respondent’s shareholders, the trusts are entitled
to appoint
one director each to the first respondent’s board and the
applicant is entitled to appoint two directors to the
said board. The
applicant appointed as directors Edward Alan Wallace and Roux Petrus
Johannes Gerber. The trust appointed the third
respondent and George
von Backstrom who, after his death was replaced by the sixth
respondent. The current directors of the first
respondent are the
third respondent, the sixth respondent, Louw and Halle.
[4] The first
respondent is a joint venture between the trust and the applicant and
was formed in order to acquire and develop the
land on which the
shopping complex centre is situated. On 10 June 2005, the trust and
the applicant concluded the shareholder’s
agreement. The
shareholder’s agreement reflects that it was the intention of
the applicant and the trusts that the first
respondent would acquire
ERF 677, Extension 13, Willow Acres and Erven 679 and 680, Extension
14, Willow Acres (“the land”)
from a company known as MJW
Ontwikkelings (Pty) Ltd (“MJW”). To this end, Clause 4 of
the Shareholder’s agreement
reads thus:
“4.
Development of the Immovable Property
4.1 The Shareholders
shall procure that the Company carries out the development of the
Immovable Property substantially in accordance
with the Baseline
Document.
4.2 There shall be
no material deviation from the Baseline Document without the written
consent of the Shareholders holding not
less than 75% (Seventy Five
percent) of all issued shares in the capital of the company which
consent shall not be unreasonably
withheld or delayed.
4.3 The company
shall appoint Syfin as the development manager of this Development
and Syfin shall act as the lead party in regard
to the Development,
but the management and control shall vest exclusively with the
company.”
According to the
shareholder’s agreement, the development was to be financed by
way of a loan from a financial institution,
but if the amount loaned
proved to be insufficient, the shareholders were entitled to lend the
shortfall funds to the respondent
at Nedbank’s prime overdraft
rate plus 2%. The supplementary funds were provided by Rowmoor
Investments 567 (Pty) Ltd, a
wholly owned subsidiary of the
applicant. Clause 21 of the shareholders’ agreement regulates
the relationship between the
shareholders and provides as follows:
“21
Quasi-partnership
Shareholders shall
owe to each other a duty of good faith at all times. Their
relationship shall be construed as that of quasi_partners
provided,
however, that this agreement shall not constitute a partnership
between the parties in any shape or form, nor shall any
party be
entitled to incur any liability or obligation on behalf of any other
party save as expressly provided in this agreement.”
[5] It is common
cause that after the conclusion of the shareholder’s agreement,
the first respondent acquired land from MJW
for an amount of R10
million. The acquisition and proposed development of the land was
financed through a loan finance of R72
million obtained from ABSA
bank. ABSA granted the first respondent a R22 million loan facility
for the development of phase 3
and in April 2008, a further R6.1
million for the development of Tiger Wheel developments. The overall
amount procured from Absa
for development was R149,8 million. Taking
the aforegoing into account, it stands to reason that the meeting of
the shareholders
and directors was pivotal for the administration of
the first respondent.
[6] In terms of the
shareholder’s agreement, a quorum for any meeting of the first
respondent’s directors shall be three
directors, provided that
one director appointed by either one of the trusts and one director
appointed by the applicant are to
be part of the quorum. Halle avers
in the founding affidavit that for some considerable period, the
holding of directors’
meeting was problematic to such an extent
that from September 2010 to August 2012, board meetings could not be
held. Due to a dispute
between the deceased George von Backstrom and
the third respondent, the third respondent refused to attend board
meetings. Nevertheless,
the first respondent continued operating the
business of the shopping centre. During the aforementioned period,
the applicant’s
directors and the managing agent, Broll
Property Group (“BPG”) held eight meetings (termed ‘Manco
meetings’)
to which the third respondent and George were
invited. The third respondent attended only one of those meetings.
Although operational
decisions were taken at the Manco meetings, no
strategic or policy decisions could be taken regarding the first
respondent. This
is so because the Manco meetings could not replace
properly constituted board meetings. After the death of George van
Backstrom
and the appointment of his daughter, the sixth respondent
in his stead, a board meeting was held on 9 October 2012. However,
subsequent
to that meeting, both the third and sixth respondent
refused to attend any further meetings. Halle alleges that the
non-attendance
by the third and sixth respondents yielded negative
consequences for the first respondent.
[7] In April 2006,
the first respondent had purchased further immovable property from
MJW, being Portions 130, 135, 136 and 133
of the farm Zwartkoppies
364 Willow Acres for an amount of R21 053 250.00 for the purpose of
development. During 2008, the third
respondent and George von
Backstrom began to express dissatisfaction with the fact that the
vacant land had not been fully developed.
The third respondent as
averred by Halle, was of the view that the failure to develop the
land amounted to a breach of the “baseline
document”
referred to in the shareholder’s agreement. According to Halle,
although there is reference to such a document,
a diligent search of
the records was unsuccessful. Neither did the third respondent
produce it. What Halle did find was a feasibility
document setting
out the different stages for the development of the land. It seems
that the third respondent’s main complaint
with regard to the
undeveloped land is that the purchase price paid by the respondent to
MJW for the vacant land was too low as
there had been no ‘value
add’ by Syfin as originally envisaged. Put differently, the
third respondent seeks what is
referred to as the ‘agterskot’
(top-up) for the undeveloped land. Halle states that various meetings
were held between
the shareholders in an attempt to find harmony
between them as the agterskot issue had caused discontent, but no
avail.
[8] On 26 June 2012,
and at the request of the third respondent, a meeting was held. In
attendance were Halle, two representatives
of BMG as well as one
representative of the applicant. Various issues pertaining to the
running of the first respondent were discussed.
Amongst the issues
raised by the third respondent was the agterskot. At this meeting,
the third respondent made it known that he
would neither vote nor
co-operate in regard to the sale of vacant land and future
developments until such time that the agterskot
issue had been
resolved. At a subsequent meeting, the third respondent levelled
accusations of fraud and embezzlement on BPG and
called for its
replacement as manager of the first respondent. He proposed that BGP
be replaced by J\HI Property Management but
the proposal was
rejected. Several meetings were thereafter held wherein the sale of
the shopping complex was raised and discussed.
The third respondent
was adamant that the trust would not agree to a sale until the
‘agterskot’ dispute had been settled
to his satisfaction.
On 15 April 2013, an informal meeting of shareholders was again held
and Broll presented an offer from the
South African Corporate Real
Estate Fund for the purchase of the Silver Oaks Shopping Centre and
the Life Care Centre portions
of development for an amount of R156
million. The third respondent once again refused to co-operate in
the light of lack of resolution
regarding the ‘agterskot’
dispute. Accordingly to Halle, the third respondent threatened that
the first respondent
would be placed in liquidation. The minutes of
the meeting show that the third respondent stated that:
“Our tolerance
with all your stalling has now reached the zero level. Be forwarned
that we will place the Company in provisional
liquidation by the snap
of a finger if further provoked by any further Co issues.”
“The
consequential financial damage suffered by us due to your stalling
tactics on above matter has cost us dearly. Since
the beginning of
June 2012 till now 11 months have lapsed. Thus 30 flats @R5 500.00 pm
x 11 months lack of revenue equals R1, 518
000.00 to date. All of
this just because you are attempting to inflict pain due to our
persistence of the Forensic audit against
your company due to fraud
and embezzlement brought onto yourselves. You have been withholding
your signature representing only
1% additional shareholding so dearly
needed by us in order to commence the launching of our project. All
of that whilst you remain
in breach of the Vacant Land Agreement.
“This very
same financial loss will be discounted by us and recovered in
whatever negotiation we might enter into in order
for reaching a
divide, justifiable or not. Whatever, I promise you there will be a
rebound. That one can make such an issue of
something so minute
though so easily resolvable is really despicable reflection of your
character.”
. . .
Halle avers that in
consequence of the threats and accusations, the relationship between
the applicant and the trust has completely
broken down. On 2 May
2013, Broll was telephonically advised by attorneys E W Serfontein &
Associates, (who he believed were
acting for the third and sixth
respondents) to the effect that they had received instructions to
wind up the first respondent.
[9] A further notice
of a proposed meeting of the first respondent’s board of
directors to be held on 19 July 2013 was circulated.
The sixth
respondent declined the invitation to attend the meeting as she had
heard of it from the third respondent having not
received any
invitation. The third respondent in a letter dated 19 July 2013,
stated that he would not be attending the meeting.
He stated that:
“. . .
I hereby record
that, since both Ann and myself will not attend the meeting, there
will be no required quorum of directors present
at the meeting,
either in terms of the Articles of Association of the company or the
Shareholders Agreement. As you know, the Shareholders
Agreement
requires three directors to be present at any director’s
meeting, of which at least one should be appointed either
by MVB
Trust of the GBV Trust, which director must at all times be part of
the quorum. Since you will not have the quorum, the
meeting will not
be able to proceed and cannot be held at all.
Apart from the
aforementioned issues we have with the proposed directors meeting, I
have on numerous occasions made it clear that
I refuse to attend any
director’s meetings, since meetings held in the past have all
culminated in a deadlock situation,
due to the fact that Ann and
myself differ from you and the other directors on material issues in
regard to the company’s
affairs.
In fact, the impasse
reached between Ann and myself on the one hand, and the directors
appointed by Catalyst on the other hand has
the management of the
company impossible. Catalyst’s directors apparently only have
the interests of Catalyst at heart, with
scant regard for that of the
company in general. As far as I am concerned, the directors appointed
by Catalyst are pawns controlled
by Catalyst, who are manipulated to
serve only the interests of Catalyst. I wish to record my disgust
with the subjective, one
sided and blatantly unfair manner in which
meetings have been conducted in the past by Catalyst’s
directors (even the minutes
have been fabricated to suite Catalyst!).
I do not see my way
clear in continuing working with the directors and there is
absolutely no point in holding meetings. I have
lost all faith and
trust in my co-directors and as far as I am concerned, you have acted
in breach of your fiduciary duties towards
the company and there is
quite clearly a conflict of interests since, as I have stated, you
apparently consider the interests of
Catalyst to be paramount to that
of the Company.
. . .
Finally, I advise
you that I have instructed my attorneys to proceed with the
Liquidation of the company, or refer the matter to
arbitration in
terms of the Shareholder’s agreement, in view of the clear
deadlock in the management of the company as well
the conflicts of
interests to which I have referred above.”
The sixth respondent
addressed an email to the applicant on 29 July 2013 stating that:
“. . . As for
your comment pertaining to director’s meetings, clearly you are
fully aware of the total existing “deadlock”
as well the
reasons for such. You have been informed, on numerous occasions of
our refusal to attend any further director’s
meetings, as Mr
Halle,always makes sure, that our meetings are fruitless and
ultimately, a waste of everybody’s time. Our
view has not
changed on this, and I hereby implore you, not to call Director’s
meetings again. We will only be attending
Shareholder’s
meetings.”
[10] Halle avers
that the impasse has affected the first respondent detrimentally in
several ways. For example, the directors are
unable to approve the
annual financial statements for 2011 to 2012 of the first respondent.
Similarly, there is a deadlock with
regard to the appointment of
auditors. The board is split evenly between the directors nominated
by the applicant, on the one hand,
and the directors appointed by the
von Backstrom trust on the other. All of these factors result in the
first respondent’s
business not being conducted to the
advantage of its shareholders. In addition, the deadlock pertaining
to the holding of the meetings
renders it virtually impossible to
effectively attend to the affairs of the first respondent. For all
these reasons, according
to Halle, it is therefore just and
equitable that the first respondent be wound up due to the deadlock.
If the winding up is not
the proper course of action, it is equally
just and equitable that an order be granted placing the first
respondent under business
rescue proceedings.
The Respondent’s
answering affidavit
[11] In opposing the
application, the third to seventh respondents raise three points in
limine. Firstly, the third respondent alleges
that this court has no
jurisdiction to adjudicate this matter as the first respondent’s
principal place of business is situated
at Willow Acres, Gauteng
Province. In the answering affidavit, the deponent, Michael von
Backstrom states that:
“[A] company
must continuously maintain at least one office in the Republic of
South Africa and must register the address
of its office or its
principal office.”
He further alleges
that:
“At all
relevant times the status quo was maintained:
11.1 The company’s
principal place of business and principal asset was the Silver Oaks
Shopping Centre at Willow Acres, Gauteng.
11.2 All board
meetings for the company was [sic] held in Pretoria.
[11.3 All
administrative and management functions of the first respondent was
[sic] conducted at Pretoria, firstly, at the office
of the centre
administrator at the shopping centre and thereafter, at an office
block adjacent to the property of the first respondent
in von
Backstrom Boulevard, Silverlakes, Pretoria and thereafter, at the
offices of the Broll Property Group.”
Secondly, the
respondents aver that the deadlock existing between the directors of
the company is not a ground for winding up in
terms of s 81(1)(d) of
the Act. In advancing this contention, the respondents rely on clause
13 of the Shareholders agreement which
provided as follows:
“13 DEADLOCK
13.1 If in terms of
the aforegoing provisions, if the required majority for the passing
of a director’s resolution cannot
be obtained, such particular
resolution only shall cease ipso facto to be within the directors’
domain and shall be put to
the shareholders.
13.2 If in terms of
the aforementioned provisions, there is a deadlock between the
shareholders, a dispute shall be deemed to exist
between the
shareholders which shall be dealt with as contemplated in clause 25.
Any such deadlock shall not constitute a ground
for the winding-up of
the company.
13.3 Any dispute
between the shareholders shall be subject to the same mediation and
arbitration procedures under clause 25 hereunder.”
Furthermore, the
applicant launched the present application without invoking the
deadlock-braking mechanisms provided for in the
shareholder’s
agreement. Thirdly, the alternative relief sought by the applicant,
namely, that the first respondent be placed
under business rescue is
inappropriate as the first respondent is not in financial distress.
Fourthly, the further alternative
relief requiring the appointment of
a receiver in terms of the provisions of s 163 (1) of the is not
appropriate as the said provisions
are not applicable because the
section primarily protects the interests of minority shareholders and
the applicant is not.
[12] The main
reason advanced by the respondents for opposing this application is
that the winding up of the first respondent on
the basis of deadlock
on the part of the directors is unjustified. According to the
respondents, notwithstanding the deadlock between
the directors, the
first respondent functions normally and profitably on a day-to-day
basis. This is the case even without any
intervention by the
auditors, as is provided in the shareholder’s agreement. At
this point, I divest, to deal with the allegation
made by the
respondents in paragraph 35 of the answering affidavit to the effect
that the allegations made by Halle fall outside
the scope of his
personal knowledge and ought to be struck out and be disregarded as
they are irrelevant and unfounded and constitute
no more than
inadmissible hearsay evidence. It must be stated from the outset that
no formal application was brought to strike
out those paragraphs
alleged to constitute hearsay evidence. Furthermore, the averment
relating to the striking out lacks sufficient
particularity to enable
this court to discern with precision the aspects of Halle’s
evidence which falls outside the scope
of his knowledge.
[13] At the heart of
this application is the dispute between the shareholders with regard
to the undeveloped vacant land and the
‘agterskot’. The
development of the land was, according to the respondents, supposed
to have been completed by December
2007 but the undeveloped land to
date totals +- 67 133 square metres. The respondents aver that in the
prospectus for the development
of the Silverlake Crossing Shopping
Centre (Pty) Ltd, it was specifically recorded that clause 1.2.9 of
the shareholder’s
agreement would be amended by the deletion of
the existing clause and replacement thereof with the following:
“1.2.9 Baseline
document means any document or documents prepared by the development
manager from time to time detailing the
concept and feasibility of a
development in respect of one or more of the immovable properties,
and approved in writing by all
shareholders.”
The respondents aver
that the above is proof of the existence of the baseline document.
They suggest that the applicant is in possession
of the said baseline
document, and in order to restore normalcy in the relationship
between the parties, the applicant must produce
it. In addition, once
the issue of the regarding the development of land is squarely
addressed and resolved, the relationship between
the directors should
improve. Besides, the fact that no further development was done
placed the first respondent at a disadvantage.
[14] The respondents
concede that the director’s meetings have been problematic for
quite some time. The third respondent
alleges that this is largely
due to the directors appointed by the applicant, who made it
impossible for fruitful director’s
meetings to be held. One of
the problems giving rise to the deadlock according to the applicants
is the appointment of the BPG,
‘a related company to the
applicant’, as the management agent of the first applicant. The
respondents allege that it
has been proved that BGP has been
overcharging the applicant. Even though BGP has made repayment for
its overcharging to an amount
of R886, 180.92 to the first
respondent, a further amount of R849, 594.41 is, according to the
third respondent’s calculation,
due.
[15] Responding to
the threats of liquidation allegedly made by the third respondent, he
stated that:
“I am of the
view that the breakdown does not really lie between the shareholders,
but rather between the present directors
of the first respondent. I
was very upset as certain issues had been dragging on for a long time
and had not been resolved. The
directors appointed by the applicant
to the board of the first respondent do not have any real mandate and
not contribute meaningfully
to directors’ meeting.”
. . .
“At the time I
was extremely upset. I have changed my mind. I have, in fact, always
attempted to advance the interests of
the first respondent and will
in future continue to do so.”
The tone of the
respondents’ averments is simply that although there are
numerous issues causing discontent within the management
of the first
respondent, and these have not been resolved, but that does not
justify the liquidation of the first respondent.
The Replying
Affidavit
[16] In reply, the
applicant assailed the respondent’s reliance on the
shareholders’ agreement provision stating that
deadlock shall
not constitute a ground for winding up. According to the applicant,
the provision cannot override the statutory
relief the applicant is
entitled to. The applicant further reiterated that the first
respondent cannot operate without a functional
and effective board.
The applicant attached to the replying affidavit certain documents
indicating ongoing communication between
the parties’ attorneys
relating to the sale of the shopping centre, the undeveloped land,
the baseline document and the request
by the third respondent for
certain documentation in terms of the Promotion of Access to
Information Act whilst these proceedings
were still pending. For the
purpose of this judgment, I do not intend to make much reference to
these documents as the issue before
this court is crystal clear, it
is whether or not the relationship between the parties at the time of
the hearing was deadlocked
to the extent that the winding up of the
first respondent is justified.
[17] The applicants
deny that there has been any attempt by the intervening party to
resolve the dispute that resulted in the deadlock
amicably and states
that despite the allegations of an existing dispute, no formal claim
against the applicant has ever been made
which would be capable of
resolution by way of the provisions of the shareholder’s
agreement. Regarding the ‘agterskot’
claim, the applicant
stresses that this claim would lie in the hands of MJW, the seller of
the land, not the respondents. In similar
vein, any such claim would
lie against the first respondent as the purchaser of the land, not
against the applicant. In any event,
so avers the applicant, the
dispute falls outside the dispute resolution mechanisms contained in
the shareholder’s agreement.
Even if it did, numerous
shareholders’ meetings were held but did not result in the
resolution of the situation. Furthermore,
that the first respondent
trades profitably does not form the basis of the present application.
The applicant denies that
Broll advances the
interests of the applicant.
The points in limine
[18] I have
indicated in this judgment that the respondents raised several points
in limine. I deem it prudent to first deal with
the first one
relating to this court’s lack of jurisdiction because if this
court finds that it is well-taken, it is dispositive
of this
application. The main thrust of this contention is that in terms of s
23(3) of the Act, a company must continuously maintain
one office in
the Republic of South Africa and must register the address of its
offices or its principal office if it has more
than one office. To
this end, it was argued that the first respondent’s principal
place of business and principal asset is
the Silver Oaks Shopping
Centre situated at Willow Acres, Gauteng. In addition, all its
administrative and management functions
were conducted in Pretoria.
For this reason, the principal office is in Gauteng.
Section 23(3)
provides that:
‘(3) Each
company or external company must –
(a) continuously
maintain at least one office in the Republic; and
(b) register the
address of its office, or its principal office if it has more than
one office-
(i) Initially in the
case of-
(aa) a company, by
providing the required information on its Notice of Incorporation; or
(bb) and external
company, by providing the required information when filing its
registration in terms of subsection (1); and
(ii) subsequently,
by filing a notice of change of registered office, together with the
prescribed fee.’
[19] The Act does
not define the term ‘principal office’. Binns-Ward J in
Sibakhulu Construction (Pty) Ltd v Wedgewood
Village Golf Country
Estate (Pty) Ltd (Nedbank Ltd Intervening)
2013 (1) SA 191
(WCC) para
18 considered the meaning of the term and held that:
“Section 23(3)
of the 2008 Act makes it clear that the registered office must be an
office maintained by the company, and
not the office of a third party
used for convenience as a registered office.”
Both the applicant
and the respondents allege that their respective offices are the
principal offices. In the founding affidavit,
the applicant makes the
following averments:
“The first
respondent’s centre of administration and principal office is
at the Catalyst head office situated at 4th
Floor, Protea Place,
corner Protea Road and Dreyer Street, Claremont Cape Town. All of the
audit field work in respect of the first
respondent, the drawing up
of the first respondent’s accounts, and its company secretarial
work takes place in Cape Town.
The first respondent prepares VAT and
Income Tax returns for submission to SARS In Cape Town. The
respondent’s bank account
is managed and administered at the
ABSA Capital division in Cape Town. All negotiations with the first
respondent’s bankers
in regard to the financing of the
development and all annual reviews also take place in Cape Town.”
The applicant admits
that the first respondent carries on business as a property
development and investment company and is the owner
of immovable
property, including the first respondent, in Gauteng. A Companies and
Intellectual Property Commission report reflects
that the company’s
registered office is at Mazars House, Rialto Road, Grand Mooring
Precinct, Century City, 7441. It therefore
is not in dispute that in
terms of s 1 of the Act, Cape Town is the office registered by the
company in terms of s 23 as its ‘registered
office’. It
is however similarly not in dispute that there are functions
performed by the company’s managing agent,
BPG, which are
conducted on-site in Gauteng. The Act requires that the registered
office must be the company’s only office.
In casu, it is clear
that the registered office is not the company’s only office.
Section 23(3)(b) provides that if a company
has more than one office,
it must register its principal office.
It must therefore be
determined on these papers where the principal office of the
respondent is. In Sibakhulu, supra, para 21,
the court stated thus:
“The
determination of where a company’s principal place of business
or principal office is situated is a question of
fact (cf, for
example, Payslip Investment Holdings CC v Y2K TEC Ltd
2001 (4) SA 781
(C) at 782 A-H). It is thus possible to approach the interpretation
of s 23 of the 2008
Companies Act holding
that its requirement that a
company’s registered office be at the place of its principal
office does not exclude the possibility
as a matter of fact that a
company may, in breach of the requirement register as its registered
office an address which is not
the address of its principal office;
and that it would follow in such a case that that the conclusions in
Dairy Board and Bissonboard
would still hold true: the company would
be legally and factually resident at two places, notwithstanding the
evident intention
of the legislature that a company’s legally
chosen place of residence should be the same as its factual place of
residence
for jurisdictional purposes. It is, however, also
possible to reason that to so hold would defeat the apparent object
of the
provision, which appear s to be to end the potential of a
company to have more than one place of residence for jurisdictional
purposes,
and that the statute should not be interpreted in a manner
that would defeat its evident objects. Construed in the latter manner
s 23 of the 2008
Companies Act provides
a materially different
statutory backdrop to that which applied when Daily Board and
Bissonboard were decided.”
A company therefore
can reside only at the place of its registered office, which must
also be the place of its principal office.
Counsel for the applicant
relying on the Sibakhulu judgment, submitted that should the
company’s registered address not be
at its principal office,
this falls to be corrected administratively by the second respondent
and not by a court hearing a liquidation
application. The court in
Sibakhulu para 26 surmised as follows:
“[T]he effect
of the statutory provisions, construed in the manner in which I hold
that the legislature intended, is directed
at minimising the prospect
of courts having to determine factual disputes on points of
jurisdiction concerning companies. The place
of a company’s
registered office is objectively ascertainable. Any dispute as to
whether the registered office should be
at a different address, by
reason of an argument that the actual location of the company’s
principal office is elsewhere,
is matter that is not –
primarily at least – intended to be one to concern the courts;
being a matter, if it arises,
falling instead to be determined and
corrected administratively by the Companies and Intellectual Property
Commission under the
provisions of
Part D
of ch 7 of the 2008 Act. It
is hoped that the prospect of administrative fines and criminal
sanctions in respect of failures by
companies or their directors to
comply with the provisions of the Act, and any compliance notices
issued thereunder by the Commis
sion will encourage
companies to comply faithfully with the provisions of s 23 (3) of the
Act.”
It follows from the
above passage that the respondents were obliged to correct
administratively the Cape Town address reflected
in the second
respondent’s records. The respondents must bear the
consequences of their omission. The point in limine must
in the
result fail.
[20] The second
point in limine raised by the respondents as earlier alluded to in
this judgment, is premised on the fact that clause
13 of the
shareholder’s agreement concluded between the trust and the
applicant specifically provides that deadlock shall
not constitute a
ground for winding up. Clause 13 reads thus:
“13.2 If in
terms of the aforegoing provisions there is a deadlock between the
Shareholders, a dispute shall be deemed to
exist between the
Shareholders which shall be dealt with as contemplated in clause 25.
Any such deadlock shall not constitute a
ground for winding up of the
company.”
Clause 25 contains
mediation and arbitration steps to be followed by the shareholders in
the event of a dispute arising. It reads
as follows:
“Mediation
25.1 Any challenge
of the auditor’s decision in terms of this agreement and any
other dispute between any of the parties and/or
the shareholders of
the Company in regard to the carrying into effect of any of the
parties’ rights and obligations arising
from this agreement or
the interpretation thereof, on termination or purported termination
thereof, the parties agree to negotiate
with each other in good faith
in an effort to resolve such dispute after any party has given notice
in writing to the other parties
to invoke the provisions of this
clause.
25.2 If such
negotiations fail or do not occur within 7 (Seven) days after the
dispute arises, the dispute shall not become the
subject of
litigation or arbitration until it has been heard by a mediator.
25.3 Such disputes
shall be referred to mediation before a mediator within 7(Seven) days
after the dispute arises. The mediators
shall be appointed by the
parties or failing agreement by them as to the mediator shall be
nominated by the chairperson for the
time being of Alternative
Dispute Resolution Association of South Africa.”
[21] The respondents
allege that the clause is applicable to the dispute between the
parties. The applicant on the other hand contends
that the provisions
of the shareholder’s agreement must, to the extent that they
are in conflict with the provisions of the
Act, be regarded as pro
non scripto. Counsel for the applicant relied for this contention on
the provisions of s 15(7) of the
Act which state that:
“The
shareholders of a company may enter into any agreement with one
another concerning any matter relating to the company,
but any such
agreement must be consistent with this Act and the company’s
Memorandum of Incorporation, and any provision
of such an agreement
that is inconsistent with this Act or the company’s Memorandum
of Incorporation is void to the extent
of the inconsistency.”
[22] This provision
gives effect to what has been long recognized in our law, namely,
that parties are free to contract as they
will, subject to limits
which may be imposed by common and statutory law. In assessing
whether the provision in the shareholder’s
agreement relating
the statutory provision must be examined in the context of s
81(1)(d)(i) of the Act which specifically lists
unbreakable deadlock
in the management of the company, and shareholders as a ground for
winding up of a solvent company. Although
the Act does not
outrightly prevent this particular form of agreement, it is clear
that the deadlock provision effectively negates
the provisions of s
81(1) (d). Even in the absence of a prohibition, to my mind, the
legislature could not have intended the parties
to contract contrary
to a statutory provision. It stands to reason that clause must be
declared pro non scripto. On this basis
alone, the point in limine
must fail. That said, it must be mentioned that Meskin et al,
Henochsberg on the
Companies Act 71 of 2008
, Vol 1, 248 state that a
shareholder’s agreement may provide that a deadlock at a
meeting of directors or shareholders will
not constitute grounds for
the winding up of a company, however, such a provision does not
preclude a shareholder from applying
for the winding-up of the
company where he is able to make out a case that is nevertheless just
and equitable that the company
be wound up, eg, that the deadlock is
of such a nature that there is no longer any reasonable possibility
of running the company
consistently with the basic arrangement
between the shareholders, and there is no other mechanism (in the
shareholder’s agreement
or otherwise) whereby, notwithstanding
the deadlock, the company is still able to function and achieve its
objectives.
[23] The second leg
requires a determination of whether the jurisdiction of the court has
been ousted by the clauses 13 and 25 of
the shareholder’s
agreement. The respondents argued that it does, whereas the
applicant, relying on Peel and Others v Hamon
J&C Engineering
(Pty) Ltd and Others
2013 (2) SA 331
(GSJ) submitted that it does
not. In Peel the court in holding that an arbitration agreement
applicable to a dispute between the
parties cannot oust the
jurisdiction of the court said at para 68:
“The present
application is brought under the provisions of
s 163
of the new
Companies Act. The
entity that is supposed to conduct the arbitration
process, namely, AFSA, clearly does not have the powers to grant the
relief
as envisaged in
s 163
of the new Companies Act, only a court
does. . . . Section 166 (3) defines the term ‘accredited
entity’. AFSA is not
such an accredited entity.”
[24] It is well
established that although parties may expressly agree that any
dispute arising from their contract be determined
by arbitration,
they may not by so doing oust the jurisdiction of the court, and
neither is any party precluded from initiating
proceedings to have
the dispute adjudicated by a court. Courts enjoy a discretion,
taking into account all relevant factors, whether
or not to enforce
an arbitration clause. A court may, in the exercise of its
discretion, stay the proceedings pending the outcome
of arbitration.
In Foize Africa (Pty) Ltd v Foize Beheer BV and Others
2013 (3) SA
91
SCA, the court succinctly reaffirmed this position by stating at
para 21:
“It can now be
regarded as settled that a foreign jurisdiction or arbitration clause
does not exclude the court’s jurisdiction.
Parties to a
contract cannot exclude the jurisdiction of a court by their own
agreement, and where a party wishes to invoke the
protection of a
foreign jurisdiction or arbitration clause, it should do so by way of
a special or dilatory plea seeking a stay
of the proceedings. That
having been done, the court will then be called on to exercise its
discretion whether or not to enforce
the clause in question.”
In the present
matter, the dispute involves a question of law rather than of fact.
The applicant seeks a winding-up of the first
respondent based on
substantial statutory grounds. I am not of the view that dispute is
readily capable of being dealt with by
way of arbitration. It is
plain therefore that the second leg of the point in limine must also
fail.
[25] The respondents
raised in limine two more other issues but because they are
inextricably linked to the merits of this application,
I deem it
prudent to first consider the winding-up application. The next
question for determination is whether the deadlock between
the
directors of the first respondent is of such a nature that it
prejudices the company (irreparable harm as a result of the deadlock)
and that it is just and equitable that a winding-up order be granted.
The Winding-up
[26] The applicant
seeks the winding up of the company on the basis of s 81(1)(d)(i) or
s 81(1)(d)(iii) which provide as follows:
“(1) A court
may order a solvent company to be wound up if-
. . .
(d) the company, or
one or more directors or one or more shareholders have applied to the
court for an order to wind up the company
on the grounds that-
(i) the directors
are deadlocked in the management of the company, and the shareholders
are unable to speak to the deadlock, and-
(aa) irreparable
injury to the company is resulting, or may result, from the deadlock;
or
(bb) the company’s
business cannot be conducted to the advantage of shareholders
generally, as a result of the deadlock;
. . .
(ii) it is otherwise
just and equitable that it be wound up.
It is common cause
that the respondent is a solvent company and that the applicant, as a
shareholder has locus standi to bring this
application. The gravamen
of the applicant’s winding-up application is that due to the
deadlock between the board of directors,
the first respondent, the
company is unable to function or conduct its affairs in several ways,
beyond the day-to-day operations.
[27] In analysing
the application of the provisions of s 81(1), it is prudent to first
consider s 344 (h) of the old Companies Act
61 of 1973 and the
jurisprudence that developed . In terms of section, a company could
be wound up by the court if it appeared
to it to be just and
equitable that it be wound up regardless of whether it was solvent or
insolvent.
[28] The
respondents, whilst acknowledging that there is a strained
relationship between the applicant as a 50% shareholder and
the two
intervening trusts, each being a 25% shareholder, contend that the
relationship can be normalised by the implementation
of dispute
resolution mechanisms provided for in the shareholder’s
agreement. When I dismissed the second point in limine,
I dealt fully
with the effect of the arbitration clause on these proceedings.
During argument, a different angle on this issue
was presented.
Counsel for the respondent sought to persuade the court that the
deadlock was not unbreakable, and that an alternative
dispute
resolution mechanism would facilitate a better return for the
creditors and or shareholders of the company. Furthermore,
the
injury to the company is not irreparable in that the company was
being managed profitably. To this end, a statement of intent
and
request for the referral of the matter to arbitration to resolve all
disputes between the shareholders and or directors of
the first
respondent, duly signed by the third and sixth respondents as
directors of the first respondent as well authorized representatives
of the two trusts that are shareholders thereof, was handed up to
court. In the statement, the third and sixth respondents undertook
to
sign the annual financial statements for 2011 and 2012.
[29] The parties in
these proceedings elected to conduct their joint venture through a
company. In terms of s 66(1) of the Act,
the business and affairs of
a company must be managed by or under the direction of its board,
which has the authority to exercise
all of the powers and perform any
of the functions of the company, except to the extent that the Act of
the Company’s Memorandum
of Incorporation provides otherwise.
For this reason, an effective board is pivotal to the business of the
company. The applicant
and the trust undertook that they would owe
each other a duty of good faith at all times and that their
relationship would be construed
as that of quasi partners. In line
with the averments of the applicant, clause 21 of the shareholder’s
agreement enjoins
the parties to exercise good faith in dealing with
each in the furtherance of the objectives of the first respondent.
The relationship
of the parties which is alleged to be irreparable
broken must therefore be assessed against the provisions of clause
21. In Apco
Africa (Pty) Ltd and Another v Apco Worldwide Inc
[2008] ZASCA 64
;
2008
(5) SA 615
SCA para 19, the court in applying the provisions of s 344
(h) of the 1973 Act, examined the principles which must guide a court
in exercising its discretion to wind up a domestic company which is
in the nature of a partnership and stated thus:
“There are two
distinct principles that guide a court in exercising its discretion
to wind up a domestic company which is
in the nature of a
partnership. The first, enunciated in Lock v John Blackwood Ltd
[1924] AC 783
at 788, is that it may be just and equitable for a
company to be wound up where there is a justifiable lack of
confidence in the
conduct and management of the company’s
affairs grounded on conduct of the directors, not in regard to their
private life
or affairs, but in regard to the company’s
business. That lack of confidence is not justifiable if it springs
merely from
dissatisfaction at being outvoted on the business affairs
or on what is called the domestic policy of the company, but is
justifiable
if in addition there is lack of probity in the director’s
conduct of those affairs. The second, usually called the deadlock
principle, is derived from the Yenidje Tobacco Company case. It is
founded on the analogy of partnership and is strictly confined
to
those small domestic companies in which, because of some arrangement,
express, tacit or implied, there exists between the members
in regard
to the company’s affairs a particular personal relationship of
confidence and trust similar to that existing between
partners in
regard to the partnership business. If by conduct which is either
wrongful or not as contemplated by the arrangement,
one or more of
the members destroys that the relationship, the other member or
members are entitled to claim that it is just and
equitable that the
company should be wound up.”
. . .
“[21] Actual
deadlock is not an essential to the dissolution of a partnership. All
that is necessary is to satisfy the court
that it is impossible for
the partners to place confidence in each other which each has a right
to expect and that such impossibility
has not been caused by the
person seeking to take advantage of it.”
[30] As earlier
alluded to in this judgment, this application is brought in terms of
s 81(1)(d)(iii) of the Act. Section 81(1)(d)(iii),
as correctly
observed by Counsel for the applicant, postulates a broad conclusion
of law, justice and equity as a ground for winding-up.
In Scania
Scania Finance Southern Africa (Pty) Ltd v Thomi-Gee Road Carries CC
and Another Case 2013 (2) 439 (FB) at para 22 interpreted
the ground
of just and equitable as envisaged in s 81(1)(d)(iii) and held:
“[T]he ground
of just and equitable as used in s 81 must be interpreted more widely
than was the case in the previous disposition.
The legislature has
specifically included grounds which were traditionally considered
grounds that made it just and equitable to
grant a winding-up order,
as substantial grounds that made it just and equitable to grant a
winding-up order, as substantial grounds
on which a court may
liquidate a solvent company. Section 81(1)(d) now specifically caters
for the directors who are deadlocked
to apply for the winding-up of a
solvent company. Section 81(1)(d)(iii), however, provides, in
addition to the director’s
deadlock that prejudices the company
(irreparable harm as a result of the deadlock), that the court may
grant a winding-up if it
is otherwise just and equitable for the
company to be wound-up.”
Similarly, in Knipe
and Others v Kameelhoek (Pty) Ltd and Another
2014 (1) SA 52
(FB) at
para held:
“A domestic
company or quasi-partnership, or a company akin to a partnership
maybe liquidated due to a complete breakdown
in the relationship, of
reasonableness, good faith, trust, honesty and mutual confidence
which should exist between the directors
and/or shareholders thereof.
. . . Recently the Supreme Court of Appeal considered the
just-and-equitable ground . . . [and] the
court found that if one of
two partners threatens civil and criminal action, including
prosecution for fraud, it will not be possible
for them to work
together as they ought to do. The court found in para 30 that, on
analogy of partnership law, that the company
was in a state which
could not have been contemplated by the parties when it was formed,
and that it ought to be terminated as
soon as possible.”
[31] Counsel for the
applicant submitted that the conduct complained of satisfies the
requirements for the relief sought under either
the current or
previous dispensation. It is necessary to reiterate that the
directors of companies are empowered by s66 of the
Act, as well as by
their company’s articles to manage the company’s
business, to transact on its behalf and to delegate
their powers and
functions. They exercise their powers collectively, by majority vote,
as a board. In terms of the Act, the ultimate
power in a company is
now with the board of directors, and not with the shareholders. A
company with a non-functioning board is
non-functioning company. (See
Meskin et al Henochsberg on the
Companies Act, 71 of 2008
Vol 1 248).
[32] The above
exposition of the law must be applied to the facts of this matter as
borne out by the papers. I have summarised the
averments made by the
parties in the papers. It is clear that there is no dispute of facts
with regard to the status of the company
and its functioning. It will
be recalled that the respondents’ main contention is that the
relationship can still be restored
and that the first respondent has
been operating profitably on a day-to-day basis. It is equally plain
that one of the biggest
issues which have caused the parties to lock
horns is the ‘agterskot’. I turn to examine the impact it
has had on the
relationship between the parties.
[33] It is well to
recall that the ‘agterskot’ was tabled for discussion by
the representatives of the first respondent,
at the instance of the
third respondent on 26 June 2012. It related to two agreements for
the sale and development of land in 2005.
According to the third and
sixth respondents, in terms of the sale agreements, the immovable
property was sold at below the market
rate in breach of the ‘baseline
document’. It is not befitting these proceedings to determine
whether or not the third
and sixth respondents are entitled to an
‘agterskot’ or that there has been a breach of the
baseline document. Suffice
to point out that the parties are miles
apart with regard to the said entitlement. The applicant’s
stance is that neither
the trust nor the applicant were party to the
sale agreements and for that reason, the third and sixth respondents
have no entitlement
to the ‘agterskot’. What is relevant
for the purpose of this application is that the third and sixth
respondents flatly
refused to attend the company’s director’s
meetings, in the result that the board could not effectively
discharge its
function. Notably, the ‘agterskot’ issue
has for several years been a bone of contention between the parties
without
any resolution.
[34] I have
emphasised the importance and need for properly constituted board
meetings to address the business of the company. The
effect of the
third and sixth respondents’ refusal to attend board meetings
has impacted negatively on the business of the
first respondent. For
example, at a meeting which took place on 18 February 2013, the
directors agreed that the property on which
the development is
situated would be subdivided in order to facilitate the sale thereof,
and that the managing agent, Broll, would
seek offers for the
Shopping Centre [and Life Health Care] portion. When Broll presented
what the applicant perceived to be a reasonable
offer, the third
respondent refused to agree to the sale until the ‘agterskot’
issue was resolved to the satisfaction
of the trust. This was
followed by intemperate remarks and threats to liquidate the company.
Due to the impasse, the offer to purchase
could not be considered,
notwithstanding the fact that the applicant and the trusts, as well
as their respective directors were
in broad agreement that the
property should be sold. Shortly after the threats of liquidation,
the third respondent and later the
sixth respondent unequivocally
stated that the applicant should not call any director’s
meetings as they will not attend
them. Put in context, the first
respondent’s board is made up of two directors nominated by the
applicant and two nominated
by the trust. The split over whether the
director’s meetings will take place is even. It is between
those directors nominated
by the applicant on the one hand and those
nominated by the trust on the other. Clearly if the board cannot
meet, the board cannot
vote. Consequently, it is unable to conduct
the company’s affairs.
[35] It is not in
dispute that as a result of the third and sixth respondents’
non-attendance of meetings and the averment
by the third respondent
that he has lost all trust and faith in his co-directors, the
company’s financial statements from
2012 could not be signed.
In addition, the third and sixth respondents have specifically stated
that they would not do so as the
statements do not reflect their
claim for the ‘agterskot’. The non-signing of financial
statements has caused the first
respondent to be in breach of its
obligations towards ABSA bank. The first respondent is in terms of
the loan agreement with ABSA
obliged to produce financial statements.
I now turn to consider the impact of the third respondents’
emotive outbursts on
the relationship between the members of the
board.
[36] I have
summarised the contents of the applicant’s founding papers. It
bears mention that even if there were problems
between the directors
of the first respondent, one could still form an impression that the
relationship could still be repaired
or salvaged. In this matter, I
hold a different view. An examination of the correspondence from the
third respondent, as well
as the minutes of the meetings confirms
that the third respondent has lost trust, confidence and respect for
his co-directors.
The third respondents as far back as July 2013
alleged that Broll had made itself guilty of misappropriation of
funds on a large
scale as well as other irregularities during the
course of their duties as property managers of the shopping centre.
In addition,
he stated that he and the sixth respondent believe that
the director’s meetings culminated in a deadlock situation. Of
note
are the following remarks:
“Our tolerance
with all your stalling has now reached zero level. Be forwarned that
we will place the Company in provisional
liquidation by the snap of a
finger if further provoked by and further Co issues.”
“The
consequential financial damage suffered by us due to your stall
tactics on above matter has cost us dearly.”
“Did you
really expect his [that is] Mike von Backstrom’s] pants to
shiver? This was a declaration of war.”
And on 2 May 2013,
Broll was telephonically advised by the trust’s attorney, Mr
Serfontein that he had received instructions
to wind up the company.
These assertions were coupled with the non-attendance of director’s
meetings on the part of the third
and sixth respondents for a
considerable period. To my mind, the conduct and the utterances show
without a doubt that the third
and sixth respondents have no faith,
trust and confidence in their co-directors. Bearing in mind that the
directors had in clause
21 of the shareholder’s agreement
agreed that their relationship is akin to a partnership, which by its
nature necessitates
that there exist mutual confidence, honesty and
trust, I am of the view that the disagreements abundantly represent
the destruction
of mutual faith and trust to the extent that it will
not be possible for them to work together as they ought to.
Furthermore, that
the directors cannot agree to the property
management company as well the threats of liquidation by the third
respondent demonstrates
a deadlock that cannot be resolved by the
shareholders.
[37] The
respondents’ contention that the company is being managed
profitably on a day to day basis such that it is not necessary
to
wind it up must also be considered.
Section 81(1)
(d) (iii) provides
for the winding up of a solvent company on the ground of deadlock.
That the company’s daily operatives
are unaffected by the
deadlock must be assessed in the context of
s 66(1).
The business
affairs of a company are not limited to its day to day operations.
The legal requirement is that such business affairs
must be managed
by its directors. The applicant has amply demonstrated that due to
the deadlock, the sale of the shopping complex
could not be
concluded, financial statements had not been filed and director’s
meetings were not being held. The relationship
between the directors
is integral to the management of the company. The very fact that the
first respondent is solvent is indicative
of the fact that its day to
day operations are functional, but it cannot, in my view, be elevated
to the point of rendering the
deadlock relating to the conduct of the
affairs of the first respondent inconsequential. It follows that I
view this contention
as unmeritorious.
[38] The
respondents persisted with their request for the stay of the
proceedings and referral of the matter to an alternative
dispute
resolution mechanism such as arbitration. It is necessary when
considering this submission to again recap some of the facts
of this
case. The founding affidavit reveals that after the death of George
von Backstrom, followed by the appointment of the sixth
respondent as
his replacement after the meeting of 9 October 2012, there were
problems with the attendance of the first respondent’s
board
meetings. The acrimony escalated to the point where the third
respondent threatened on more than one occasion to bring winding-up
proceedings against the first respondent. Yet, none of the parties
had throughout this period, and despite the obvious problems
besetting the management of the first respondent, invoked the
arbitration clause. I consider it ingenuous of the third respondent
to give instructions to his attorneys to move an application for the
winding-up of the first respondent, and when presented with
the same
application at the instance of the applicant, it suddenly dawns on
him that there is shareholder’s agreement providing
that
deadlock shall not constitute a ground for winding up. Given the
irreparable breakdown of the relations between the parties,
as
explained in this judgment, no purpose will be served by the referral
of the deadlock to arbitration.
CONCLUSION
[39] I have in this
judgment held that the deadlock in the company’s board is
unbreakable and cannot be resolved by the shareholders.
As a
conclusion of law, justice, and equity, I am satisfied that it is
just and equitable that the first respondent falls to be
wound up in
terms of s 81(1)(d)(iii) of the Act. In the result, the following
order is issued.
ORDER
[40] It is
therefore ordered that:
1. The first
respondent be placed under provisional liquidation.
2. That a rule nisi
be issued calling upon all persons interested to show cause, if any,
to this court on 10 June 2014:
2.1 why the first
respondent should not be placed under final liquidation; and
2.2 why the costs of
this application should not be costs in the liquidation.
3. That service of
the order be effected:-
3.1 by one
publication in each of the Cape Times and Die Burger newspaper;
3.2 by service on
the registered office of the first respondent at Mazars House, Rialto
Road, Grand Moorings Precinct, Cape Town;
3.3 by service on
the South African Revenue Services at 22 Hans Strijdom Avenue, Cape
Town, Western Cape.
T.C NDITA
JUDGE: HIGH COURT
OF SOUTH AFRICA