Francis George Hill Family Trust v South African Reserve Bank and Others

• Jurisdiction: South Africa
• Citation: 1992 (3) SA 91 (A)

Francis George Hill Family Trust v South African Reserve Bank and Others
1992 (3) SA 91 (A)

1992 (3) SA p91

Citation	1992 (3) SA 91 (A)
Court	Appellate Division
Judge	Hoexter JA, Hefer JA, Kumleben JA, Nicholas AJA and Harms AJA
Heard	February 21, 1992
Judgment	March 30, 1992

Flynote : Sleutelwoorde

Company — Proceedings by and against — Derivative action by shareholder — Derivative action exception to rule that, when wrong done to company, C company itself to sue wrongdoer — Exception arising when (1) wrong involving fraudulent or ultra vires action and (2) wrong perpetrated by directors and shareholders in control — Where 'wrongdoer' not insider in control of company, but Reserve Bank, Court holding that shareholder not entitled to proceed by way of derivative action.

Company — Shares — Shareholder — Whether shareholder 'person aggrieved' D within meaning of reg 22D of Exchange Control Regulations (promulgated under Currency and Exchanges Act 9 of 1933) by attachment of company assets by Reserve Bank — 'Person aggrieved' signifying someone whose legal rights infringed — Notion of company as distinct legal personality E a matter of substance — Shareholder having no right to any item of property owned by company — Attachment of company assets thus not invasion of shareholder's legal rights — Shareholder accordingly not 'person aggrieved' within meaning of reg 22D — Shareholder thus having no locus standi to challenge attachment.

Headnote : Kopnota

F The appellant and third respondent, both family trusts, each owned half of the issued shares in the second respondent, a private company (the company). By written notice of attachment the first respondent, acting in terms of the Exchange Control Regulations promulgated under the Currency and Exchanges Act 9 of 1983, attached 50% of the moneys deposited by the company in various bank accounts. In terms of reg 22D of the regulations, 'any person who feels himself aggrieved by the attachment of money . . . G may bring an application in a competent Court for the review of such attachment'. After inferring that the directors appointed to the company by the third respondent would not 'permit' the company to take steps to set the attachment aside, the appellant sought an order in a Provincial Division (1) granting it leave to bring the application 'by derivative action' on behalf of the company and (2) reviewing and setting aside the notice of attachment. The application was dismissed. In an appeal it was argued by the appellant as to its locus standi that, as a 50% shareholder H in the company, it was a 'person who (felt) himself aggrieved' by the attachment within the meaning of reg 22D. It was argued, in the alternative, that the appellant was entitled to proceed on behalf of the company by way of a derivative action.

Held (per Hoexter JA; Hefer JA, Kumleben JA, Nicholas AJA and Harms AJA concurring), as to the appellant's alternative argument, that it had I failed to establish that the company's board of directors had decided, at any time before the application had been launched in the Court a quo, that the company itself would not take legal action to have the attachment of its assets set aside.

Held, further, given that the derivative action was the exception to the rule that when a wrong was alleged to have been done to a company the proper plaintiff to sue the wrongdoer was the company itself and given that the exception was recognised when (1) the wrong complained of had involved conduct which was either fraudulent or ultra vires and (2) had J been perpetrated by directors and shareholders who were

1992 (3) SA p92

A in the majority and so in control of the company, that, even assuming for the purposes of argument that there had been an improper refusal by the third respondent or the directors nominated by it to authorise legal action against the first respondent by the company, it was apparent that neither the shareholders nor the directors of the company could be said to fit the role of the 'wrongdoer' postulated by the exception: on the case put up by the appellant the 'wrongdoer' contemplated by the exception had been, not an insider who might control the company, but the first B respondent.

Held, accordingly, that the appellant could not proceed by way of derivative action.

Held, further (per Hoexter JA; Nicholas AJA and Harms AJA concurring, Hefer JA and Kumleben JA dissenting), as to whether the appellant was a 'person aggrieved' by the attachment of the moneys in the company's bank accounts, that the tenor of decided cases in South Africa pointed to the general conclusion that the words 'person aggrieved' signified someone C whose legal rights had been infringed - a person harbouring a legal grievance; and that, viewed against the background of the regulations as a whole, that was the proper meaning to be assigned to the words in reg 22D.

Held, further, as to whether the attachment of the assets of the company represented an invasion of the appellant's legal rights, that the notion of a company as a distinct legal personality was a matter of substance and D no mere technicality: a shareholder, by virtue of his entitlement to a share in the distribution of surplus assets when a company was wound up, had a financial interest in the success or failure of the company, but had no right or title to any assets of the company.

The dictum in Stellenbosch Farmers' Winery Ltd v Distillers Corporation (SA) Ltd and Another 1962 (1) SA 458 (A) at 472A applied.

Held, further, since no single shareholder had any right to any item of property owned by a company, that the precise extent of the appellant's E shareholding in the second respondent company was irrelevant to the inquiry.

Held, accordingly, that the appellant was not a 'person aggrieved' within the meaning of reg 22D and, as such, had no locus standi to challenge the attachment.

The decision in Francis George Hill Family Trust v South African Reserve Bank and Others 1990 (3) SA 704 (T) confirmed, but for different reasons.

Case Information F

Appeal from a decision in the Transvaal Provincial Division, reported at 1990 (3) SA 704 (McCreath J). The facts appear from the judgment of Hoexter JA.

B E Doctor SC (with him A C Thompson) for the appellant referred to the following authorities: Bellairs v Hodnett and Another 1978 (1) SA 1109 (A) at 1150F-H. As to the meaning of the words 'a person who feels himself G aggrieved', see Attorney-General of the Gambia v N'Jie [1961] 2 All ER 504 (PC) at 510H-511B; Concorde Leasing Corporation (Rhodesia) Ltd v Pringle-Wood NO and Another 1975 (4) SA 231 (R) at 234B; Ritz Hotel Ltd v Charles of the Ritz Ltd and Another 1988 (3) SA 290 (A) at 307I-J; Ex H Parte McClung and Others 1983 (3) SA 446 (O) at 450F; Van Rensburg v Van Rensburg en Andere 1963 (1) SA 505 (A) at 510A; Minister van Wet en Orde v Matshoba 1990 (1) SA 280 (A) at 285F-H; Stellenbosch Farmers' Winery Ltd v Distillers Corporation (SA) Ltd and Another 1962 (1) SA 458 (A) at 485F-486A; McLelland v Hulett and Others 1992 (1) SA 456 (D) at 466E-467A. As to whether a Treasury function may be delegated, see Citimakers (Pty) Ltd v Sandton Town Council 1977 (4) SA 959 (W) at I 962A-B, 963A-C; SA Airways Pilots' Association v Minister of Transport Affairs 1988 (1) SA 362 (W) at 372A-C; Mungoni v Attorney-General of Northern Rhodesia [1960] AC 356 ([1960] 1 All ER 446 (PC)) is distinguishable; see, also, Shidiack v Union Government 1912 AD 642. As to the onus of showing that reasonable grounds had existed for attaching the J assets, see During NO v Boesak and Another 1990 (3) SA 661 (A) at

1992 (3) SA p93

A 672D-673H, 677A-I, 678A-C, 680B-C; Newman v Prinsloo 1973 (1) SA 125 (W) at 127; Inland Revenue Commissioner and Another v Rossminster Ltd and Others [1980] AC 952 (HL) at 1011; Nakkuda Ali v Jayaratne [1951] AC 66 (PC) at 76-77; compare South African Textile and Allied Workers' Union and Others v Skipper International (Pty) Ltd 1990 (4) SA 842 (A) at 847A-C; Minister of Finance and Another v Law Society, Transvaal 1991 (4) SA 544 (A) B at 557E-F. As to the consequences of a failure to object timeously to the non-annexation of a document or the failure to call timeously for its production, see Standard Merchant Bank Ltd v Rowe and Others 1982 (4) SA 671 (W) at 673G-677H; Hoffmann and Zeffertt The South African Law of Evidence 4th ed at 390-9; R v Nhlanhla 1960 (3) SA 568 (T) C at 570H-571A; S v Makoba 1980 (1) SA 99 (N) at 102E-F. As to whether a power conferred for one purpose may be used for another, see Mathebe v Regering van die Republiek van Suid-Afrika en Andere 1988 (3) SA 667 (A) at 700B-D. As to whether the appellant was entitled to bring a derivative action, see Foss v Harbottle (1843) 2 Hare 461 (67 ER 189) at 492; Prudential Assurance Co Ltd v Newman Industries Ltd and Others (No 2) D [1980] 2 All ER 841 (Ch) at 869, 877; Russell v Wakefield Waterworks Co (1872) LR 20 Eq 474 at 482; Heyting v Du Pont [1964] 1 WLR 843 (CA) at 851, 854; Hodgson and Others v National and Local Government Officers Association and Others [1971] ChD 130 ([1972] 1 All ER 15 (Ch)); East Pant Du Lead Mining Co v Merriweather (1864) 2 H&M 254 (13 WR 216; (1867) LR 5 E Eq 464); Daniels v Daniels [1978] Ch 406 ([1978] 2 All ER 89); Moti v Moti and Hassim Moti Ltd 1934 TPD 428 at 443. And see, further, Meyer v Meyer Sons & Co Ltd and Others 1926 CPD 109 at 121-2; Gower's Principles of Modern Company Law 4th ed at 650; Hogg v Cramphorn Ltd and Others [1966] 3 All ER 420 (Ch) at 430; McLelland v Hulett and Others (supra at 467B-I). F

B R Southwood SC (with him H R Laubscher) for the first respondent referred to the following authorities: Arenstein v Durban Corporation 1952 (1) SA 279 (A) at 297A-C; Burland and Others v Earle and Others [1902] AC 83 (PC) at 93; Cilliers and Benade...