Couve and Another v Reddot International (Pty) Ltd and Others

• Jurisdiction: South Africa
• Judge: Jajbhay AJ
• Judgment Date: 12 March 2002
• Citation: 2004 (6) SA 425 (W)
• Docket Number: 21308/2001
• Hearing Date: 07 February 2002
• Counsel: B M Maselle for the plaintiffs. K W Lüderitz for the defendants.
• Court: Witwatersrand Local Division

Jajbhay AJ:

[1] Introduction

[1.1] This matter has been dealt with by way of exception. I express my gratitude to adv Luderitz (counsel on behalf of G excipients) and adv Maselle (plaintiffs' counsel) for the competent manner in which they dealt with the issues at hand. The first and second plaintiffs (the plaintiffs) seek, inter alia, the following orders against the first, second and third defendants (the defendants): H

'1.1.1

an order declaring the written agreement (annexure A to the plaintiffs' particulars of claim) (the written agreement) to be valid and binding amongst the signatories thereto;

1.1.2

an order compelling the first defendant to take all steps necessary to ensure that the shareholding in the first defendant will be as reflected and agreed in terms of the written I agreement;

1.1.3

an order compelling the third defendant to cede, transfer and assign to the first defendant patent applications 2000/4323 and 2000/7475 (the patent applications), alternatively, all of the third defendant's right, title and interest J

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in and to the patent applications; A

1.1.4

an order interdicting and restraining the first defendant from breaching the terms of clause 7 of the written agreement; and

1.1.5

certain further ancillary relief in terms of the written agreement.'

[1.2] The defendants excepted to the plaintiffs' particulars of claim on the grounds that: B

1.2.1

the written agreement is void ab initio and unenforceable because it contravenes the provisions of reg 10(1)(c) of the Exchange Control Regulations (the regulations) promulgated in terms of s 9 of the Currency and Exchanges Act 9 of 1993 (the Act); C

1.2.2

clause 7 of the written agreement is unenforceable because it -

1.2.2.1

constitutes an unenforceable pactum de contrahendo; and D

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is void for vagueness; and

1.2.3

insofar as the plaintiffs claim damages from the first defendant, the damages are not set out in such a manner so as to reasonably enable the defendants to assess the quantum thereof.

Plaintiff's cause of action E

[1.3] The plaintiffs' cause of action is based upon an agreement concluded between the parties in and during May, alternatively, June 2001.

[1.4] The first plaintiff also relied upon a subsequent oral agreement concluded between the first plaintiff and the first F defendant in and during 2001.

[1.5] The plaintiffs alleged that they performed their obligations in terms of the written agreement and the first to third defendants have breached the terms of such written agreement. G

[2] The test on exception

In order to succeed, an excipient has the duty to persuade a Court that, upon every interpretation which the pleading in question and, in particular, the document on which it is based, can reasonably bear, no cause of action or defence is disclosed; failing this, the exception ought not to be upheld. Pete's Warehousing and Sales H CC v Bowsink Investments CC 2000 (3) SA 833 (E) at 839G - H.

[3] Regulation 10(1)(c) of the regulations

[3.1] Contravention of reg 10(1)(c) I

3.1.1

Regulation 10(1)(c) of the regulations provides as follows:

'Restriction on export of capital

10(1) No person shall, except with permission granted by the Treasury and in accordance with such conditions as the Treasury may impose -

(a)

. . . J

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(b)

. . . A

(c)

enter into, any transaction whereby capital or any right to capital is directly or indirectly exported from the Republic.'

3.1.2

Regulation 10(1)(c) of the regulations prohibits a person, except with the permission granted by the Treasury, or by an authorised dealer, from entering into an agreement whereby B capital or any right to capital is exported from the Republic, notwithstanding that capital is, in fact, exported from the Republic as a consequence thereof.

3.1.3

The prohibition is aimed at an arrangement agreement. This is evident from the following passage in the judgment of Viljoen AJA (as he then was) in S v De Castro 1979 (2) SA 1 (A) at C 21H - 22E:

'The further inquiry is whether, on the facts proved by the State, the appellant should be convicted of a contravention of reg 10(1)(c). It was pointed out on behalf of the appellant that the regulation only prohibits a person, except with the permission D granted by the Treasury or by an authorised dealer, from entering into a transaction whereby capital or any right to capital is exported from the Republic. It was contended that the money (capital) was never exported from the Republic because, before this could be done, Bosman and Esterhuizen clamped down on the little group in the bank. It was submitted that what was done were mere acts of E preparation and that the appellant cannot be convicted of even an attempt. There was no attempt until the appellant in fact made or was a party to the making of a request that funds be transferred, counsel contended.

It can reasonably be assumed that the state of mind of the appellant was that, although it was an illegal transaction, he expected F to be required to complete and sign certain documents and possibly to endorse the cheque for collection. All the parties concerned had, however, finally agreed (ostensibly, as far as Rodrigues was concerned) that the money would, by using the administrative machinery of the bank, be sent overseas by Rodrigues and his minion, the corrupt clerk. All that remained to be done, as far as the appellant was concerned, G was for effect to be given to the agreement by completing the necessary formalities to give it the semblance of a regular bank transaction. The word ''transaction'' has various meanings. One meaning is ''an arrangement, agreement, covenant''. See The Oxford Dictionary sv ''transaction''. ''Whereby'' may, according to The Oxford Dictionary, mean ''in consequence of, as a H result of''. The words ''transaction whereby'' may therefore mean ''an arrangement or agreement in consequence whereof''. That this is the meaning which the legislator intended appears from the Afrikaans wording of the regulation which reads ''. . . enige transaksie aangegaan wat tot gevolg sal hê dat kapitaal . . . vanuit die Republiek uitgevoer word''. I

In my view, therefore, the State has proved a contravention of regulation 10(1)(c).'

(My emphasis.) S v African Bank of South Africa Ltd and Others 1990 (2) SACR 585 (W) at 645H - J; S v Runds J

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1978 (4) SA 304 (A); A N Oelofse, Suid-Afrikaanse A Valutabeheerwetgewing 1st ed (1991) at 63 - 70.

3.1.4

In the circumstances before me, the written agreement is an agreement whereby (ie 'in consequence or as a result of') -

3.1.4.1

the third defendant assigns his rights in and to the B patent applications to the first defendant;

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the issued share capital of the first defendant is increased to two thousand shares of R1 each;

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the following issue and allotment of shares in the first defendant is made:

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to the second defendant, three hundred and sixty C shares;

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to the third defendant, three hundred and sixty shares;

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to the first plaintiff, forty shares;

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to the second plaintiff, forty shares; and D

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to the fourth defendant - a company incorporated in the British Virgin Islands - 1 200 shares (ie 60% of the issued share capital).

3.1.5

The word 'capital' is not defined in the Regulations or in the Act. Oelofse (supra at E 68 - 9) remarks that:

'Regulasie 10(1)(c) is baie wyd bewoord. Dit verbied die aanvang van enige transaksie (sonder die tesourie se toestemming) wat tot gevolg sal hê dat kapitaal of enige reg op kapitaal regstreeks of onregstreeks vanuit die Republiek uitgevoer word. Die woord ''kapitaal'' word nêrens in die regulasies F omskryf nie, en die regsspraak bied ook nie eintlik hulp in hierdie verband nie. Al wat reeds uitdruklik in hierdie verband beslis is, is dat geld wel ''kapitaal'' is (sien S v De Castro 1979 (2) SA 1 (A) 21H, en vergelyk S v Runds 1978 (4) SA 304 (A)). In hierdie beslissings word nie onderskei tussen geld wat van 'n kapitaal aard of nie van kapitale aard is nie, soos bedoel in die G omskrywing van ''bruto inkomste'' in die Inkomstebelastingwet 58 van 1962. Die welbekende betekenis van die woord ''kapitaal'' vir doeleindes van die Inkomstebelastingwet help 'n mens dus nie by die uitleg van regulasie 10(1)(c) nie. Beskou teen die agtergrond van die algemene doel van die Valutabeheerregulasies blyk dit dus of ''kapitaal'' op enige iets met 'n geldelike waarde H betrekking het.'

(Emphasis added.)

3.1.6

Shares in a company have a monetary value. The rights in and to patent applications also have a monetary value.

3.1.7

Section 1 of the Companies Act 61 of 1973 defines a 'share' as follows: I

'''Share'', in relation to a company, means a share in the share capital of that company and includes stock; and in relation to an offer of shares for subscription or sale, includes a share and a debenture of a company, whether a company within the meaning of this Act or not, and any rights or interests (by whatever name J

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called) in a company or in or to any such share or debenture.' A

3.1.8

The definition of a share which is perhaps the most widely quoted is that of Farwell J in Borland's Trustee v Steel Bros & Co Ltd [1901] 1 Ch 279:

'A share is the interest of a shareholder in the company measured by a sum of money, for the purpose of liability in the first place, and of interest in the second, but also consisting of a series B of mutual covenants entered into by all the shareholders inter se in. . . . The contract contained in the articles of association is one of the original incidents of the share. A share is not a sum of money . . . but is an...