Kukama v Lobelo

• Jurisdiction: South Africa
• Judge: Tshabalala J
• Judgment Date: 12 April 2012
• Docket Number: 38587/2011
• Hearing Date: 12 April 2012
• Court: South Gauteng High Court, Johannesburg

Tshabalala J:

[1]

The applicant has launched the present application on a semi-urgent basis to declare the first respondent a delinquent director and for his removal as a director of the second and third respondents. The applicant also seeks an order for leave to bring proceedings against the first respondent on behalf of the second and third respondents for payment of the amount of R22 715 909,22 and for costs on attorney and own client scale.

[2]

The following background facts are common cause:

2.1

The first respondent and applicant are each 50% shareholders of the issued shares in the second and third respondents.

2.2

The first respondent and the applicant are both directors of the second respondent and the first respondent is the sole director of the third respondent.

2.3

During December 2010 and May 2011, SARS made two payments of R22 715 909,22 and R39 023 656,00 respectively into the banking account of the third respondent.

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Tshabalala J

2.4

These payments were rebates from SARS allegedly incurred by and due to the second respondent and not the third respondent.

2.5

The refund of R39 023 656,00 was not due by SARS to either the second or third respondents, nor had it at the time when this matter was argued before me, been refunded to SARS.

2.6

The refund of R22 715 909,22 was not utilised by the first respondent for the sole benefit and expenses of the second defendant, but also for other entities and for their benefits.

2.7

The R39 023 656,04 claimed from SARS was made up of fictitious tax invoices submitted by Royal Alliance on behalf of the second respondent to SARS.

2.7.1

This would have entailed that the 2nd respondent had spent R278 740 400 more than it actually spent on the items that attracted VAT.

2.8

The two amounts paid by SARS into the account of the third respondent, were not transferred into the correct account of the second respondent, but were dispersed to various entities.

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Tshabalala J

2.9

The first respondent acted as the sole director of the second respondent on or about the 25th November 2010 and in particular during the period material to the two payments.

2.10

Royal Alliance was engaged by the first respondent to handle the tax affairs of the second respondent which led to the payment of the two SARS "refunds".

[3]

According to the applicant, the first respondent:-

3.1

had engaged the services of Royal Alliance without his consent as both a shareholder and/or director of the second respondent. He was also not advised of the payment of the two amounts by SARS into the account of the third respondent;

3.2

had also authorised payment by SARS of a refund due to the second respondent into the third respondent's account;

3.3

had not informed the applicant of such payment;

3.4

utilised the refund from SARS for the benefit of entities other than the second respondent.

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Tshabalala J

[4]

The following sections of the New Companies Act 71 of 2008 are relevant for the determination I am called upon to make:

4.1

Section 3(1) which reads as follows:

"(1) A company is –

(a)

a subsidiary of another juristic person if that juristic person, one or more other subsidiaries of that juristic person, or one or more nominee of that juristic person or any of its subsidiaries, alone or in any combination –

(i)

is or are directly or indirectly able to exercise, or control the exercise of, a majority of the general voting rights associated with issued securities of that company, whether pursuant to a shareholder agreement or otherwise; or

(ii)

has or have the right to appoint or elect, or control the appointment or election of, directors of that company who control a majority of the votes at a meeting of the board; or

(b)

a wholly-owned subsidiary of another juristic person if all of the general voting rights associated with issued securities of the company are held or controlled, alone or in any combination, by persons contemplated in paragraph (a)."

4.2

Section 22.Reckless trading prohibited.-(1), (2) and (3) which reads as follows:

"(1) A company must not carry on its business recklessly, with gross negligence, with intent to defraud any person or for any fraudulent purpose.

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(2) If the Commission has reasonable grounds to believe that a company is engaging in conduct prohibited by subsection (1), or is unable to pay its debts as they become due and payable in the normal course of business, the Commission may issue a notice to the company to show cause why the company should be permitted to continue carrying on its business, or to trade, as the case may be.

(3) If a company to whom a notice has been issued in terms of subsection (2) fails within 20 business days to satisfy the Commission that it is not engaging in conduct prohibited by subsection (1), or that it is able to pay its debts as they become due and payable in the normal course of business, the Commission may issue a compliance notice to the company requiring it to cease carrying on its business or trading, as the case may be"

4.3

Section 76(2) reads as follows:

"(2) A director of a company must –

(a)

not use the position of director, or any information obtained while acting in the capacity of a director –

(i) to gain an advantage for the director, or for another person other than the company or a wholly-owned subsidiary of the company; or

(ii) to knowingly cause harm to the company or a subsidiary of the company; and

(b)

communicate to the board at the earliest practicable opportunity any information that comes to the director's attention, unless the director –

(i). reasonably believes that the information is –

(aa) immaterial to the company; or

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Tshabalala J

(bb) generally available to the public, or known to the other directors; or

(ii) is bound not to disclose that information by a legal or ethical obligation of confidentiality."

4.4

Section 76(3) reads:

"(3) Subject to subsections (4) and (5), a director of a company, when acting in that capacity, must exercise the powers and perform the functions of director –

(a)

in good faith and for a proper purpose;

(b)

in the best interests of the company; and

(c)

with the degree of care, skill and diligence that may reasonably be expected of a person –

(i) carrying out the same functions in relation to the company as those carried out by that director; and

(ii) having the general knowledge, skill and experience of that director."

4.5

Section 77(3) reads:

"(3) A director of a company is liable for any loss, damages or costs sustained by the company as a direct or indirect consequence of the director having –

(a)

acted in the name of the company, signed anything on behalf of the company, or purported to bind the company or authorise the taking of any action by or on behalf of

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the company, despite knowing that the director lacked the authority to do so;

(b)

acquiesced in the carrying on of the company's business despite knowing that it was being conducted in a manner prohibited by section 22(1);

(c)

been a party to an act or omission by the company despite knowing that the act or omission was calculated to defraud a creditor, employee or shareholder of the company, or had another fraudulent purpose;"

4.6

Section 162(5) reads:

"(5) A court must make an order declaring a person to be a delinquent director if the person –

(a)

…

(b)

…

(c)

while a director –

(i) grossly abused the position of director;

(ii) took personal advantage of information or an opportunity, contrary to section 76(2)(a);

(iii) intentionally, or by gross negligence, inflicted harm upon the company or a subsidiary of the company, contrary to section 76(2)(a);

(iv) acted in a manner –

(aa) that amounted to gross negligence, wilful...