Ally and Others NNO v Courtesy Wholesalers (Pty) Ltd and Others

• Jurisdiction: South Africa
• Judge: Magid J
• Judgment Date: 05 May 1994
• Citation: 1996 (3) SA 134 (N)
• Docket Number: 2113/93
• Hearing Date: 25 March 1994
• Counsel: C J Hartzenberg SC (with him Y N Moodley) for the applicants. M J D Wallis SC (with him A K Kissoon Singh) for the first, second, third, fifth, sixth and seventh respondents. No appearance for the fourth respondent.
• Court: Natal Provincial Division

Magid J:

Background to the application H

Various members of the Ally family have, intermittently, been at loggerheads since approximately 1966. In that year the Ally brothers, Suleman Ismail Ally ('Suleman'), Ebrahim Ismail Ally ('Ebrahim'), Hoosen Ismail Ally ('the deceased'), Essop Ismail Ally ('Essop') and Cassim Ismail Ally ('Cassim') concluded a written agreement. That I agreement was annexure AHA1 in these proceedings and I shall henceforth refer to it by that title.

Annexure AHA1 recited that the five brothers were sons of one Ismail Essop Ally and that they had carried on business and purchased immovable property in pursuance of a universal partnership which had subsisted between them after the death of their father. The brothers J

Magid J

A agreed that with effect from 28 February 1967 (which was described as 'the effective date') the universal partnership which had existed and would continue up to the effective date to exist between them was to be dissolved. Annexure AHA1 recorded the method whereby the liquidation of the partnership assets was to be managed.

The winding-up of the partnership was to include the registration of a company which B would take over two businesses which had hitherto belonged to the partnership. That company was duly formed and registered and is the first respondent in these proceedings. The applicants are the sons of the deceased, and the executors and administrators of his estate. Essop and Cassim are the second and third respondents C and I shall hereinafter refer to them collectively as 'the respondents'.

In the launching affidavit the applicants have chosen to describe annexure AHA1 as 'an Agreement of Universal Partnership'. It was in fact not an agreement of partnership but, on the contrary, an agreement which provided for the terms upon which the partnership would be dissolved.

D On 30 October 1966 Suleman, Ebrahim, the deceased and the respondents concluded a further agreement, which was described as a 'Supplementary agreement', in terms of which Suleman was

'to be entitled to one-fourth of the total nett assets of the partnership as at the effective date together with a one-fourth share of the goodwill . . . of the businesses . . . as his share of the partnership and of the assets thereof'. E

The first respondent was incorporated in or about 1973. The delay between the effective date of annexure AHA1 and such incorporation is not explained in the papers. Moreover, Ebrahim, for reasons which are also unexplained, elected to abandon any further association with his brothers. Accordingly, once the first F respondent was incorporated, the deceased and the respondents became equal shareholders therein and were the sole directors thereof.

Subsequently, and the precise date is not clear on the papers, the deceased evinced some discontent with the management of the affairs of the first respondent and various G other assets which had been owned jointly by the parties pursuant to the universal partnership but which had not been distributed among them. From about 1987 the deceased refused to sign the audited financial statements of the first respondent.

There is considerable dispute between the parties as to the precise nature and cause of the differences of opinion between the deceased on the one hand and the respondents H on the other, but fortunately it is not necessary to determine that dispute or any other of the many factual disputes between the parties.

Finally, on 11 December 1990 an agreement (to which I shall refer as 'the agreement') was concluded to which the deceased, the respondents, the applicants, the first I respondent and the wives of the applicants were parties. The agreement purported to regulate the manner in which the properties and assets which had formerly been held by the universal partnership were finally to be distributed.

In the agreement the deceased was described as 'the seller' and the respondents as 'the purchasers'. The word 'companies' was used to describe the fifth, sixth and seventh respondents collectively and I shall J

Magid J

A describe them similarly. The deceased and the respondents were, as in the case of the first respondent, equal shareholders in and the sole directors of the companies.

The following portion of its preamble recites the intentions with which the parties concluded the agreement:

'2.1

The seller contends that - B

2.1.1

a universal partnership existed between, inter alia, the seller and the purchasers which was dissolved with effect from 28 February 1967;

2.1.2

the partnership owned various assets including the properties;

2.1.3

the seller and the purchasers own -

2.1.3.1

the properties jointly in equal undivided shares;

2.1.3.2

the shares in the companies in equal proportions; C

2.1.4

the partnership has not been liquidated pursuant to the dissolution thereof.

2.2

The contentions in 2.1.1 and 2.1.2 are disputed by the purchasers.

2.3

Without prejudice to the contentions of each of them, the seller and the purchasers have now reached agreement on an equal distribution of the properties between themselves.' D

It was agreed that the deceased would sell his shares in and claims against the first respondent to the respondents at the valuation placed thereon by the first respondent's auditors and that the properties would be divided equally between the three brothers. The agreement provided for arbitration to settle any disputes that might arise in relation E to the valuation of the deceased's interest in the first respondent and for the appointment of a receiver if the parties were unable to agree upon an equitable division of the properties. The fourth respondent is the receiver appointed in terms of the agreement to effect such division.

The provisions of the agreement have not been carried out, although the fourth F respondent has valued and allocated the properties as between the deceased and the respondents.

The application

The applicants, who contend that the agreement is void or has been validly cancelled by them, seek this relief:

1.

G An order in terms of s 258(1) of the Companies Act 61 of 1973, as amended ('the Companies Act') that the affairs of the first respondent be investigated in relation to certain enumerated aspects of its activities, and certain further relief in the nature of an interdict pending the receipt of the report of the inspectors; alternatively, H

2.1

an order in terms of s 252 of the Companies Act that the first respondent purchase from the estate of the deceased his shares in the first respondent for R6 million and that the issued share capital of the first respondent be reduced by the number of shares so purchased; alternatively,

2.2

I that each of the respondents purchase one-half of such shares for R3 million rand; alternatively,

3.

an interdict restraining the fourth respondent from proceeding with the distribution of the properties in terms of clause 4 of the agreement and the first, second and third respondents from J

Magid J

A disposing of or encumbering any of such properties pending an action to be instituted by the applicants.

The affidavits and the annexures thereto are bulky, not to say prolix (1 617 pages long) and contain innumerable disputes of fact. The parties were, however, agreed that I was able on the papers before me to determine whether the agreement was void or had B been validly cancelled.

Mr Wallis, who appeared with Mr Kissoon Singh for all the respondents other than the fourth respondent, submitted that, if I were to find against the applicants on both these issues, the application must inevitably fail. Mr Hartzenberg, who appeared with C Mr Moodley for the applicants, contended on the other hand that, even if I were to hold, contrary to the applicants' contentions, that the agreement was not void and had not been validly cancelled, the applicants, as members of the first respondent, retained sufficient locus standi to move for the appointment of an inspector in terms of s 258 of the Companies Act.

D I shall deal with this issue later in this judgment if it becomes necessary to do so.

Is the agreement void?

On the papers the applicants at one time appeared to be contending that the agreement was void on the ground that the deceased lacked contractual capacity when it was E executed. The facts on which this contention was based were hotly contested on the papers and the contention was expressly abandoned by Mr Hartzenberg in his heads of agreement and such abandonment was confirmed, in my judgment wisely, in argument before me.

F Mr Hartzenberg submitted that the agreement was void for one or more of the following reasons:

(a)

the companies are saddled with obligations in terms of the agreement but were not made parties thereto;

(b)

it does not comply with the provisions of s 2(1) of the Alienation of Land Act 68 of 1981 ('the Act');

(c)

G it does not comply with the provisions of s 228 of the Companies Act.

The fact that the companies were not parties to the agreement

Schedule A to the agreement contains details of all the properties to be dealt with in H terms thereof. This reveals that each of the deceased, the respondents and the companies was the registered owner of one or more of the properties in question.

Mr Hartzenberg argued that as the companies were not parties to the agreement the agreement itself was inchoate in the sense that a number of questions might arise for I determination later and if no agreement could then be reached the whole agreement would be rendered nugatory.

Clause 4.3 of the agreement provided that the deceased and the respondents would 'endeavour . . . to agree upon the manner of distribution' of the properties. In doing so they were to take...