Pienaar v Thusano Foundation and Another

• Jurisdiction: South Africa
• Judge: Friedman AJP
• Judgment Date: 21 February 1991
• Citation: 1992 (2) SA 552 (BG)
• Court: Bophuthatswana High Court

Friedman AJP:

This is the extended return day of a provisional order of liquidation granted against the first respondent (hereinafter referred to as the company) on 16 October 1990. The order was granted at the instance of the applicant. The Court granting the order found him to be a member of the company since 7 February 1989, and consequently he had J locus

Friedman AJP

standi to bring the application. The Court further ordered that the register of members of the company be rectified in terms of s 115 of the Companies Act 61 of 1973, as amended (hereinafter referred to as the Act), to reflect the name of the applicant as a member of the said company. A

The rule was served and published as directed, but one Colin Griffith Campion was joined as the second respondent and he is referred to as B such. He has vigorously opposed and contested the confirmation of the rule.

Before deciding whether the rule should be confirmed or not, it is necessary and propitious to give a short historical outline of the events which led to the establishment of the company and the respective positions of the applicant and the second respondent therein.

C This appears from the founding affidavit of the second respondent in an application in this Court, being case No M235/90, in which he, as applicant, sought certain relief against the President of the Republic of Bophuthatswana, and he also joined as respondents one Hendrik van der Walt, who had been appointed as chairman of a commission to investigate the affairs of the first respondent, the Minister of Finance, Leslie D Young, as well as Agricor.

In that application the second respondent claimed, inter alia, that the purported dismissal of him by the Minister of Finance on 3 May 1990 be of no force and effect, and also prayed for his reinstatement as managing director of the company. He claimed other relief which is not germane to this application. However, and what is significant, reference E was made to affidavits filed in the application under case No M235/90 by the second respondent, as well as by the Minister of Finance, and the applicant in the instant matter. In his founding affidavit the applicant requests that the same may be incorporated therein. The affidavits in case No M235/90 have consequently been incorporated into the papers in F the instant matter and form part thereof.

A. Historical background

In order to understand the formation and mode of operation of the company, it is necessary to give a brief historical background relating G thereto as follows:

(i)

It had its origins in 1983 when the Government formed an ad hoc committee to assist farmers in Bophuthatswana to feed their cattle during the drought, which had denuded the countryside of grazing for the cattle.

(ii)

At the end of 1983 it was considered that there was no H prospect of the drought being broken, and proposals were put forward to form a drought relief secretariat which would be guided and controlled by Brigadier Riekert, the Minister of Defence, and working groups, for agriculture and human relief.

(iii)

The secretariat consisted of five persons, including the second respondent and all were seconded from Agricor. Offices I were set up in the Imperial Reserve during or about February 1984. With the passage of time other departments seconded individuals to strengthen the secretariat. Staff members were also recruited in the open market on a temporary basis. This J operation became known as 'Drought Relief'.

Friedman AJP

(iv)

A 'Drought Relief' set about the task of assisting and feeding destitute families in the rural areas. This task was performed with the assistance of workers from the Department of Health. The Department of Health also formulated a supplementary ration designed to curb malnutrition.

(v)

With the passage of time 'Drought Relief' operated 75 depots B in Bophuthatswana, distributing rations to approximately 12 500 families. It also established and provided water to families where water supplies were required. The 'Drought Relief' project was all-embracing and rendered substantial service to families in need of the same.

(vi)

C The finance that 'Drought Relief' required to carry out its vast programmes was obtained both from the Government of Bophuthatswana and from the Department of Foreign Affairs of the Republic of South Africa, in roughly equal proportions.

(vii)

At the end of 1984 the Department of Foreign Affairs of the Republic of South Africa, who were impressed with the work of D the said 'Drought Relief' project, offered a considerable sum of money to 'Drought Relief' to set up a 'Special Employment Action Programme' (hereinafter referred to as 'SEAP').

(viii)

Originally the finance for 'SEAP' was donated by the Government of the Republic of South Africa, but eventually E the Government of this country made a substantial contribution which equalled that made by the Government of South Africa.

(ix)

According to the second respondent, in or during 1985 he made a proposal containing a novel approach to create employment in the rural areas. He stated that he had obtained this experience as an agriculturist in Zimbabwe after the bush F war. This involved the 'Drought Relief' secretariat working directly with the tribal authorities who made a free choice of the project they desired and nominated the people to work on the project, together with 'SEAP' foreman and artisans.

(x)

According to the second respondent, other organisations such G as the University of Bophuthatswana became involved with 'SEAP' and it was regarded as a major success by this Government and the Government of South Africa, as well as by certain foreign visitors. He states that the television coverage of the project was extensive and praiseworthy.

(xi)

H On or about 7 February 1989 the company was incorporated in terms of s 21 of the Companies Act 61 of 1973, and after its incorporation the company took over the functions of the 'Drought Relief' secretariat and 'SEAP' and the Minister of Finance, Mr L G Young, was appointed as the company's chairman and the second respondent as its managing director.

I Commenting on the history of the company as set out by the second respondent, the Minister of Finance, Mr L G Young, in his affidavit incorporated into the present application, states:

(a)

That the company was initiated by the Government of Bophuthatswana. This Government assisted at all times, both in respect of finances and the provision of advice, staff and J skills from various

Friedman AJP

A departments of Government, and parastatal bodies such as the Department of Agriculture, the Department of Health, the Department of Public Works and Water Affairs, the Department of Defence and bodies such as Agricor.

(b)

Financial assistance was provided by both the Government of B Bophuthatswana and the Department of Foreign Affairs of the Republic of South Africa. He states that without this financial assistance from the respective Governments, Thusano would not have been conceived, nor would it have survived or progressed.

(c)

It was as a result of his efforts that the company was incorporated as a company in terms of s 21 of the Companies Act. The purpose of establishing this company was not to divorce C 'Drought Relief' from the interest or assistance of the Government and bodies such as Agricor. He gives out that the reasons for the incorporation of the company was that he had become concerned that 'Drought Relief' was not properly structured, organised or administered and at the time he D believed that the problems relating to management would be addressed by the structure of the company, as a company subject to audits and the other provisions contained in the Act.

(d)

Certain complaints concerning the company arose in that certain problems were not resolved, precisely because of the fact that the internal audit practices, accounting system and other procedures of management usually applied by a company were not E applied in the case of Thusano under the management of the second respondent. This failure was a matter of concern to the Government and its departments involved in providing financial and other assistance to the company for the benefit of the public. F

B. The factual issues

The applicant is the managing director of the Agricultural Development Corporation of Bophuthatswana (hereinafter referred to as Agricor), and was also a subscriber of the memorandum of the company, together with others referred to in annexure D to the founding affidavit. Furthermore, G as managing director of Agricor he was well aware of the affairs of the company because of the substantial investment of Agricor in the company. He states that he was also appointed as a non-executive director of the company, and attended nearly all its meetings of directors, and he had a reasonable knowledge of the functioning of the company, although he was H not involved in the daily administration thereof.

According to the applicant, and it appears to be common cause, the company was incorporated and registered to consolidate, administer and finance the 'Drought Relief' schemes.

It is acknowledged that the company was registered on or about 7 I February 1989, and was incorporated under s 21 of the said Act and is an association not for gain, and a company limited by guarantee. In its memorandum of association the liability of its members is limited and the extent of their liability to contribute is not to exceed an amount of R1. The company, it is clear, was also funded by subventions from the Governments of Bophuthatswana, and the Republic of South Africa. It is J beyond question that substantial sums of money were invested in this

Friedman AJP

A company by the said Governments. Therefore, pragmatically and practically, the company was a...