Grancy Property Ltd v Manala and Others

• Jurisdiction: South Africa
• Citation: 2015 (3) SA 313 (SCA)

Grancy Property Ltd v Manala and Others
2015 (3) SA 313 (SCA)

2015 (3) SA p313

Citation	2015 (3) SA 313 (SCA)
Case No	665/12; [2013] ZASCA 57
Court	Supreme Court of Appeal
Judge	Mthiyane DP, Nugent JA, Lewis JA, Tshiqi JA and Petse JA
Heard	March 18, 2013
Judgment	May 10, 2013
Counsel	P Hodes SC (with J McNally SC) for the appellant.; B Slon for the first respondent.; S Kirk-Cohen SC for the third to seventh respondents.

Flynote : Sleutelwoorde B

Company — Oppressive conduct — Relief — Courts to interpret section to advance remedy rather than narrow it — Orders listed in section are non-exhaustive — Companies Act 71 of 2008, s 163. C

Headnote : Kopnota

Grancy Property Ltd, Manala and the Dines Gihwala Family Trust were, respectively, the minority shareholder and the latter pair the majority shareholders in Seena Marena Investments (Pty) Ltd (SMI), a company which channelled moneys to Spearhead Property Holdings Ltd for it to invest. Spearhead in turn returned the proceeds of those investments to D SMI, which paid them out to its shareholders as dividends. The matter began with an application by Grancy to the Western Cape High Court for relief under s 163 of the Companies Act 71 of 2008. Grancy alleged that Manala and Gihwala in their personal capacities, while directors of Seena Marena, had perpetrated a range of irregularities, including diverting funds to themselves, where these ought to have been paid to the shareholders. E These actions comprised the oppressive and unfairly prejudicial conduct that Grancy complained of. The relief it sought was the appointment of two independent directors in terms of s 163(2)(f). The High Court dismissed the application and Grancy appealed to the Supreme Court of Appeal.

Held, that s 163 provided an extensive remedy, and it had to be interpreted to advance the remedy rather than limit it. As for the list of orders that ss (2) F permitted a court to make, it was non-exhaustive and open-ended. (Paragraphs [26] and [31] at 323H – 324A and 324I – 325B.)

Held, further, upholding the appeal, that Grancy had established oppressive and prejudicial conduct, and that the directors should be appointed. (Paragraphs [35] – [36] and [39] – [40] at 326B – G and 327E – 328E.) G

2015 (3) SA p314

Cases Considered

Annotations A

Case law

Southern Africa

Aspek Pipe Co (Pty) Ltd and Another v Mauerberger and Others 1968 (1) SA 517 (C): referred to

Bader and Another v Weston and Another 1967 (1) SA 134 (C): referred to B

Breetveldt and Others v Van Zyl and Others 1972 (1) SA 304 (T): referred to

Commissioner, South African Revenue Service v Hawker Air Services (Pty) Ltd; Commissioner, South African Revenue Service v Hawker Aviation Partnership and Others 2006 (4) SA 292 (SCA) ([2006] 2 All SA 565; [2006] ZASCA 51): dictum in paras [9] – [11] applied

Garden Province Investment and Others v Aleph (Pty) Ltd and Others 1979 (2) SA 525 (D): referred to C

Livanos v Swartzberg and Others 1962 (4) SA 395 (W): referred to

Lourenco and Others v Ferela (Pty) Ltd and Others (No 1) 1998 (3) SA 281 (T): referred to

Louw and Others v Nel 2011 (2) SA 172 (SCA) ([2010] ZASCA 161): referred to D

Plascon-Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd 1984 (3) SA 623 (A): applied

Sammel and Others v President Brand Gold Mining Co Ltd 1969 (3) SA 629 (A): referred to

Utopia Vakansie-Oorde Bpk v Du Plessis 1974 (3) SA 148 (A): referred to

Wightman t/a JW Construction v Headfour (Pty) Ltd and Another 2008 (3) SA 371 (SCA) ([2008] 2 All SA 512): dictum in para [13] applied. E

Australia

Parker v National Roads and Motorists' Association (1993) 11 ACSR 370 CA (NSW): referred to.

Canada F

Re Marco (Ipswich) Ltd [1994] 2 BCLR 354: referred to.

England

Scottish Co-operative Wholesale Society Ltd v Meyer [1959] AC 324 ([1958] 3 All ER 66 (HL)): referred to.

Statutes Considered

Statutes G

The Companies Act 71 of 2008, s 163: see Juta's Statutes of South Africa 2013/14 vol 2 at 1-380.

Case Information

P Hodes SC (with J McNally SC) for the appellant.

B Slon for the first respondent. H

S Kirk-Cohen SC for the third to seventh respondents.

An appeal from the Western Cape High Court (Henney J).

Order

1.

I The appeal is upheld with costs, including the costs of two counsel.

2.

The order of the court below is set aside and in its stead is substituted the following:

'1.

It is ordered in terms of s 163(2)(f)(i) of the Companies Act 71 of 2008 that:

1.1

Mr BJ Manca SC, a senior advocate practising at the J Cape Bar, and Mr Louis Strydom, a senior chartered

2015 (3) SA p315

accountant (SA) of Pricewaterhouse Coopers Inc, are A appointed independent directors of Seena Marena Investments (Pty) Ltd.

2.

The independent directors appointed in terms of para 1.1 of this order shall have the sole right, in their absolute discretion, to the exclusion of any other directors nominated by the B shareholders of Seena Marena Investments (Pty) Ltd, to determine whether an investigation into the affairs of Seena Marena Investments (Pty) Ltd, in the light of the complaints made on behalf of Grancy Property Ltd, is necessary and if so to conduct such an investigation.

3.

The said independent directors may not be removed as C directors, save by a unanimous vote of the shareholders of Seena Marena Investments (Pty) Ltd or an order of the High Court having jurisdiction.

4.

The independent directors shall constitute the board of directors of Seena Marena Investments (Pty) Ltd, together D with such directors as each of the shareholders may appoint to the board, save that each shareholder shall be entitled to appoint only one director.

5.

The directors are to receive such reasonable remuneration as determined by the head of the legal department at Deloitte & Touche at Woodlands Drive, Woodmead, South Africa. E

6.

This order shall operate pending the finalisation of the action proceedings pending in the Western Cape High Court under case No 12193/11 in the matter of Grancy Property Ltd and Another v Dines Chandra Manilal Gihwala and Others unless the Western Cape High Court determines otherwise. F

7.

The first and third to seventh respondents are ordered to pay the costs of this application jointly and severally, the one paying the others to be absolved, including the costs of two counsel.'

Judgment

Petse JA (Mthiyane DP, Nugent JA, Lewis JA and Tshiqi JA concurring): G

[1] This appeal is concerned with one of several legal wrangles which have occurred during what appears to be the somewhat tortuous journey of the litigation involving the same parties in the court below. It H emanates from one of a number of interlocutory applications in interrelated proceedings instituted in the court below. The pending main action, to which the application now on appeal in this court is said to be incidental, was instituted by the appellant, Grancy Property Ltd (Grancy), as the first plaintiff, against the respondents on 17 June 2011 in which wide-ranging relief is claimed. I

[2] The principal issue on appeal is whether Grancy had made out a case — on the facts presented by it in the court below against the respondents — entitling it to relief under s 163(2)(f)(i) of the Companies Act 71 of 2008. More particularly the appellant made multiple allegations of malfeasance and moral turpitude against the first respondent, J

2015 (3) SA p316

Petse JA (Mthiyane DP, Nugent JA, Lewis JA and Tshiqi JA concurring)

A Lancelot Lenono Manala, and the third respondent, Dines Chandra Manilal Gihwala, in their capacities as directors of Seena Marena Investments (Pty) Ltd (SMI).

[3] It is necessary to set out a brief narrative of certain facts and circumstances giving rise to the litigation, which bear on the questions to B be decided in this appeal, as they emerge from the record.

[4] On 28 September 2011 Grancy brought an urgent interlocutory application under rules 6(11) and (12) of the Uniform Rules of Court in the Western Cape High Court seeking an order for, inter alia, the C appointment of what it described as 'objective and independent' directors for SMI. The one director was to be appointed by the chairperson of the Cape Bar Council from the ranks of senior advocates practising in the field of corporate law. The other director, a senior chartered accountant and registered auditor, was to be appointed by the chief executive officer of the Independent Regulatory Board for Auditors.

D [5] The relief sought — which was characterised as interim [1] in nature — was intended to operate until either confirmed or discharged at the trial of the action proceedings instituted by Grancy against the respondents which are pending in the court below. We were informed at the hearing of this appeal that the trial is imminent.

E [6] In its application Grancy essentially sought an order compelling Manala and Gihwala who are majority shareholders in SMI to undertake certain defined acts to appoint two independent directors who would constitute the board of directors of SMI. Once appointed, these directors would, over and above their routine responsibilities, also investigate the F affairs of SMI from 2005 (which is when Grancy became a minority shareholder of SMI) to date. Grancy predicated its case upon allegations of misconduct against Manala and Gihwala which, inter alia, entailed alleged breaches of fiduciary obligations, misappropriation and misuse of assets, misrepresentations, fraud, unauthorised use of company funds G and denying Grancy its entitlements as a shareholder of SMI.

[7] Both Manala and Gihwala were appointed directors of SMI in June 2003 until they resigned from their directorships on 28 February 2011 and 18 September 2011, respectively. SMI was incorporated as a H special-purpose...