Mabale and others v Verey and others

• Jurisdiction: http://justis.com/jurisdiction/166,South Africa
• Judge: Reddy AJ
• Judgment Date: 22 August 2023
• Citation: 2023 JDR 3170 (NWM)
• Hearing Date: 28 April 2023
• Docket Number: UM214/20
• Court: North West Division, Mahikeng

Reddy AJ:

Introduction

[1]

At first brush, the application which would appear to engage this Court’s attention, would be the determination of whether a referee’s report, by Ms Anusha Teeruth (Teeruth), appointed in terms of section 38(1) (b) alternatively 38(1) (c) of the Superior Court Act 10 of 2013 prepared pursuant to an order of Court should be adopted without modification.

[2]

Further thereto, the applicants pursue an order against the first and second respondents, constituting the majority shareholders of the fourth respondent, to pay the applicants an amount of R15 000 000, 00 together with interest, proportional to the equity the applicants hold in the fourth respondent. The full relief as per the Notice of Motion:

1.

The report of the referee Ms. Anusha Teeruth, appointed in terms of section 38(1)(b) or alternatively section 38(1)(c) of the Superior Court Act 10 of 2013 to investigate the financial affairs of the fourth respondent, for the purpose of determining a reasonable market value of the shares held by the applicants as at 31 March 2020, is adopted without modification.

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Reddy AJ

2.

The first and second respondents, constituting shareholders of the fourth respondent are ordered to pay the applicants an amount of R15 000 000.00 (fifteen million rands), together with interest thereon a tempore more calculated from 1 October 2021 to date of payment, proportional to the equity they each hold in the fourth respondent, as a basis for the allocation to such parties in proportional share to their present holdings, the equity held by each such party in the fourth respondent.

3.

Alternative to the relief claimed at paragraph 2, the fourth respondent is directed to execute a buyback of the shares held by the applicants in the sum of R15 000 000.00 (“fifteen million rands”), together with interests thereon a tempore calculated from 1 October 2021

4.

The respondents are ordered to both jointly and/or severally pay the costs of the application.

Description of Parties

[3]

Before a conceptualization of the background facts is embarked upon, a proper description of the parties, would make for ease of reading.

[4]

The first applicant, is Mr Reuben Lebogang Mabale, an adult male person residing at Plot 114, Donkerhoek Road, Rietvlei, Rustenburg, North West Province and a director in the fourth respondent. The first applicant is further a trustee of the R&P Family Trust. The trust holds thirty(30) fully paid-up shares in the fourth respondent, being a single class of common shares with no nominal or par value.

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Reddy AJ

[5]

The second applicant, is Reuben Lebogang Mabale NO, who in this capacity, notwithstanding being a natural person, is cited in his official capacity as one of the duly appointed joint trustees of the R&P Family Trust, a trust duly registered in terms of the provisions of the Trust Property Control Act.

[6]

The third applicant is Paula Thandiwe Mabale NO, an adult, cited in her official capacity as one of the duly appointed trustees.

[7]

The fourth applicant, is Standford Abram Mohase, an adult, cited in his official capacity as one of the duly appointed trustees.

[8]

The fifth applicant is Tshediso Abram Mohase, who holds 10(ten) fully paid-up shares in the fourth respondent, being a single class of common shares with no nominal or par value.

[9]

The first respondent is Wessel Verwey, an adult male businessperson.

[10]

The second respondent is Joc Machinery.

[11]

The third respondent is Steven van Staden, an adult male, residing at 1 Rina Avenue, Flamwood, Klerksdorp, North West Province.

[12]

The fourth respondent is Reng Gopro, a private company incorporated and registered in accordance with the Company Laws of the Republic of South Africa.

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Reddy AJ

Background facts

[13]

The legal interaction amongst the parties is of a protracted nature. To have full appreciation of the proposed relief that is now being sought, a background of the relevant facts would be indispensable.

[14]

On 3 July 2020, the applicants on an urgent basis pursued interdictory relief prohibiting the first and second respondents from orchestrating the removal of the first applicant as a director of the fourth respondent. Subsumed, within this relief, the applicants sought court authorization permitting access to various documents relating to transactions in the bank accounts operated by the fourth respondent.

[15]

The interdictory relief formed Part A of that application, pending Part B, which was to bring about a buy-out of the shareholdings of the applicants in the fourth respondent as may be determined by independently appointed valuers, or alternatively, a winding up of the Company on the basis that it was just and equitable to do so. These proceedings were opposed. Notwithstanding this, the parties ultimately agreed to an order by consent.

[16]

The order granted by agreement before Djaje J (as she then was) in its entirety provides as follows:

1.

THAT: Pending the finalization of Part B of this application, the First and third Respondents are interdicted from putting to a vote at a general meeting of the shareholders of the Fourth Respondent, the removal of the First Applicant as a director of the Fourth Respondent

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Reddy AJ

2.

THAT: The First and Third Respondents are ordered to provide the First Applicant with financial documents (including the right to make copies thereof) relating to transactions on Standard Bank accounts numbers: 030726913 and 030726973, belonging to the Fourth Respondent and covering the period from handover of these accounts to the Fourth Respondent, which documentation shall include:

2.1

documents reflecting the account balance of these accounts at the time of handover by Torre Industries Limited.

2.2

Documents reflecting the full narration of all third party and related third party payments made from these accounts from takeover till date, including the cashbooks from the Pastel system and bank reconciliation thereof.

2.3

Identities of the present signatories of the aforesaid accounts and;

2.4

a copy of the board resolution authorizing the appointment of such signatories

3.

THAT: The Applicants are directed to supplement their founding affidavit within 14 calendar days from the date of this order for the purposes of a determination of Part B of this application.

4.

THAT: The cost of Part A of this application will be determined at hearing of Part B thereof.

[17]

On 27 October 2020, the applicants launched a second urgent application (Case number UM 214/2014). This application was predicated upon an agreement reached amongst the parties, to forestall the need to proceed with Part B. The agreement reached

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Reddy AJ

provided for the appointment of a referee in terms of section 38 of the Superior Courts Act 10 of 2013, to conduct a valuation of the equity held in the fourth respondent. The valuation was to serve the substratum upon which the value of the applicant’s minority stake in the fourth respondent would be determined, to facilitate a buy-out. This agreement gained the imprimatur of the court on 6 November 2022.

[18]

To this end, the South African Institute of Chartered Accounts (SAICA) sanctioned the appointment of Ms. Anusha Teeruth (Teeruth) of Stark Consulting Services. A financial enquiry into the fourth respondent followed, which culminated in a valuation report being issued on 1 October 2021. Teeruth found that the ideal valuation of the equity within the fourth respondent to range between R21 500 424.00 and R38 295 090.00. The difference in the values is based on the assumptions Teeruth utilized to gauge the perpetual growth rate of the fourth respondent and the fourth respondent’s short term operational efficiency. No objections to the methodology employed or the values reached by Teeruth were voiced.

[19]

Accordingly, the applicants approached the respondents with a proposal that a buy-out be arranged in line with the valuation of equity as found by Teeruth. The applicants showed a predisposition to accept an offer in the sum of R15 000 000, for the buy-out of their collective forty per cent (40%) stake in the Company.

[20]

The applicants based the calculation of the R15 000 000, equity as follows:

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34.1.

firstly, the applicants calculated 40% of the average valuation of the equity of the Company and arrived at the sum of R11 959 103.20

34.2.

secondly the applicants factored in compensation for various irregular payments, which the audit subsequent to the order under Part A of case no: UM 116/2020 exposed. A summary of the audit outcomes which reflected unaccounted monies belonging to the Company of approximately R10 500 000 was factored in. I annex a excel spreadsheet reflecting such matters marked “SA9.”

[21]

The applicants proceed on an exposition of how the proposed amount has been arrived at, concluding that the suggested amount is reasonable as supported by the objective facts, with the primary aim being the attainment of a clean break. The failure of the...