Louw and Others v Nel

• Jurisdiction: South Africa
• Judgment Date: 01 December 2010
• Citation: 2011 (2) SA 172 (SCA)

Louw and Others v Nel
2011 (2) SA 172 (SCA)

2011 (2) SA p172

Citation	2011 (2) SA 172 (SCA)
Case No	45/10
Court	Supreme Court of Appeal
Judge	Lewis JA, Ponnan JA, Mhlantla JA, Shongwe JA and Bertelsmann AJA
Heard	November 18, 2010
Judgment	December 1, 2010
Counsel	C van der Westhuizen SC (with DB du Preez and AR Venter) for the appellants.; JR Peter SC for the respondent.

Flynote : Sleutelwoorde B

Company — Shares and shareholders — Shareholders — Oppression — Relief in event of oppressive conduct by company — Criterion for granting of relief that of fairness — Applicant to establish (1) that particular act or omission committed, or that affairs of company conducted in manner alleged, and C that such act or omission or conduct of company's affairs unfairly prejudicial, unjust or inequitable to him or some part of members of company; (2) nature of relief to be granted to end matters complained of; and (3) that just and equitable to grant such relief — Court's jurisdiction to make order not arising until specified statutory criteria satisfied — Companies Act 61 of 1973, s 252.

Headnote : Kopnota

D The instant appeal dealt with the requirements for a successful application by a member of a company for relief from oppressive conduct by the company, as intended in s 252 of the Companies Act 61 of 1973. The Supreme Court of appeal —

Held, that the wording of s 252 indicated the conferral of a very wide discretion E on the court, which accordingly had the power to do what it considered fair and equitable in the circumstances, to put right and cure the unfair prejudice which a minority shareholder had suffered at the hands of the majority of the company. (Paragraph [21] at 184F.)

Held, further, as to the concept of unfairness encompassed by s 252, that fairness was the criterion by which a court had to decide whether it had jurisdiction F to grant relief. Generally speaking an application of this kind, based upon the partnership analogy, could not succeed if what was complained of was merely a valid exercise of the powers conferred on the majority. (Paragraph [22] at 185H – I.)

Held, further, that the combined effect of ss (1) and (3) of s 252 was to empower G the court to make such order as it thought fit for the giving of relief, if it were satisfied that the affairs of the company were being conducted in a manner that was unfairly prejudicial to the interests of a dissident minority. An applicant for relief under s 252 could not content himself or herself with a number of vague and rather general allegations, but had to establish the following: (1) that the particular act or omission had been committed, or H that the affairs of the company were being conducted in the manner alleged, and that such act or omission or conduct of the company's affairs was unfairly prejudicial, unjust or inequitable to him or some part of the members of the company; (2) the nature of the relief that must be granted to bring to an end the matters complained of; and (3) that it was just and equitable that such relief be granted. Thus, the court's jurisdiction to make I an order did not arise until the specified statutory criteria had been satisfied. (Paragraph [23] at 186C – F.)

Held, further, that the nature of the remedy fixed by a court will depend upon its conclusion on the type of oppression. There was no rule of universal application as to what was fair. The fairness envisaged was fairness to both sides. The matter could never be conclusively determined until all of the J facts of a particular case were known. Notwithstanding the wide discretion

2011 (2) SA p173

conferred on the court, it was essential that an applicant should formulate A the relief that was sought. (Paragraphs [31] and [32] at 190D – G and 190H.)

Held, accordingly, that the affidavits revealed disputes of fact which could only have been decided after oral evidence had been heard. It was impossible, on the disputed material, to arrive at any reasonable or fair determination under the section. (Paragraph [35] at 193C – D.) Both the appeal and B cross-appeal dismissed.

Cases Considered

Annotations:

Reported cases

Southern Africa C

APCO Africa (Pty) Ltd and Another v APCO Worldwide Inc 2008 (5) SA 615 (SCA) ([2008] 4 All SA 1): referred to

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

Benjamin v Elysium Investments (Pty) Ltd and Another 1960 (3) SA 467 (E): dictum at 478D – E applied

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

Donaldson Investments (Pty) Ltd and Others v Anglo-Transvaal Collieries Ltd and Others 1983 (3) SA 96 (A): referred to

Gordon v Tarnow 1947 (3) SA 525 (A): dictum at 531 applied

Irvin and Johnson Ltd v Oelofse Fisheries Ltd; Oelofse v Irvin and Johnson Ltd and Another 1954 (1) SA 231 (E): dictum at 241A – B considered

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

National Director of Public Prosecutions v Phillips and Others 2002 (4) SA 60 (W) (2001 (2) SACR 542; 2002 (1) BCLR 41): dictum in para [36] applied

Rennie NO v Gordon and Another NNO 1988 (1) SA 1 (A): dictum at 21J – 22F applied F

Sackstein NO v Proudfoot SA (Pty) Ltd 2003 (4) SA 348 (SCA): dictum in para [22] applied

Sammel and Others v President Brand Gold Mining Co Ltd 1969 (3) SA 629 (A): dictum at 678G – H applied

Water Renovation (Pty) Ltd v Gold Fields of SA Ltd 1994 (2) SA 588 (A): dictum at 605H – J applied. G

England

Ebrahimi v Westbourne Galleries Ltd and Others [1973] AC 360 (HL) ([1972] 2 All ER 492): dictum at 379b – 380b applied

Re a company (No 00709 of 1992) O'Neill and Another v Phillips and Others [1999] UKHL 24 ([1999] 1 WLR 1092 (HL); [1999] 2 All ER 961): dictum at 966 applied H

Re Five Minute Car Wash Service Ltd [1966] 1 All ER 242 (Ch): dictum at 246 applied

Re London School of Electronics Ltd [1986] 1 Ch 211: referred to

Scottish Co-Operative Wholesale Society Ltd v Meyer and Another [1958] 3 All ER 66 (HL): dicta at 86 and 89 applied. I

Statutes Considered

Statutes

The Companies Act 61 of 1973, s 252: see Juta's Statutes of South Africa 2009/10 vol 2 at 1-256.

Case Information

Appeal against a decision in the North Gauteng High Court, Pretoria (Mavundla J). The facts appear from the judgment of Ponnan JA. J

2011 (2) SA p174

C van der Westhuizen SC (with DB du Preez and AR Venter) for the appellants. A

JR Peter SC for the respondent.

Cur adv vult.

Postea (December 1). B

Judgment

Ponnan JA (Lewis JA, Mhlantla JA, Shongwe JA and Bertelsmann AJA concurring):

C [1] This is a case that is by no means easy for an appellate court satisfactorily to deal with, not least because of the rather voluminous and sometimes conflicting affidavits, but also, as importantly, because events intervened as the matter progressed, rendering the principal relief that was originally sought obsolete. Much of the difficulty in this matter arises as well from the manner in which the founding papers were cast and the D paucity of the information that they contained in respect of certain crucial aspects of the case. Whether those should prove to be an insuperable obstacle to a decision in the matter is what calls for consideration.

[2] The respondent, Christiaan Nel (Nel), the first appellant, Johannes E Louw (Louw) and the second appellant, Willem du Preez (Du Preez), formed a partnership known as EPI-USE Financials Partnership (the partnership), which commenced business on 1 November 2002. The partnership conducted business in the implementation and continuous operation, including training and problem-solving, of a computer program used by big business, known as SAP. During early 2003 the F partnership became involved in certain projects, together with the third appellant, Lukas Lejara Mothupi (Mothupi).

[3] By that stage the appreciation had dawned on the three partners that, if the partnership was to secure State contracts, it was necessary for it to implement a black economic empowerment policy. Mothupi appeared G well suited to achieve that strategic vision of the partnership. After negotiations between the three partners and Mothupi it was decided that the future business of the partnership should be conducted through a company, and to that end a shelf company, which was registered and incorporated on 10 January 2003, was acquired. The name of the shelf company was changed first to Lejara Business Intelligence (Pty) Ltd and H thereafter to Lejara Consulting (Pty) Ltd (the company). Each of Nel, Louw and Du Preez held 16% of the shares in the company. Mothupi held 52% of the shares. Of his 52% shareholding Mothupi explains:

'I was, however, only the owner of 16% of the shares and not 52% because I held the balance of the shares, namely 36%, as nominee I for previously disadvantaged individuals which we intended to become shareholders and directors of [the company] in order to comply with the Black Economic Empowerment legislation. It was the understanding that if no suitable candidates were available to take up the 36% shares held by me, the shares would be divided equally amongst the applicant, the first respondent, the second respondent, the third J respondent and myself.'

2011 (2) SA p175

Ponnan JA (Lewis JA, Mhlantla JA, Shongwe JA and Bertelsmann AJA concurring)

He continues: A

'The four of us were the sole directors of the company and the four of us each brought the following skills to the [company]:

[Nel]: SAP management accounting (controlling) skills and SAP business planning skills; B

[Louw]: SAP management accounting (controlling) skills and SAP business planning skills;

[Du Preez]: SAP financial accounting skills and SAP business planning skills;

Myself: SAP logistic skills. C

. . .

I was not entitled to rely on the...