Novick and Another v Comair Holdings Ltd and Others

• Jurisdiction: South Africa
• Judge: Colman J
• Judgment Date: 05 June 1978
• Court: Witwatersrand Local Division

Colman J:

The litigation with which I am concerned began as an urgent application. That application was opposed, and on 22 August 1977 the Court directed that pleadings be filed, and certain other procedural directions be complied with, after which oral evidence should be heard.

A The oral hearing began before me on 14 November 1977. It took up 13 days in November, and was then adjourned until 1 February 1978. I heard evidence on 20 days in February, 17 days in March and 8 days in April. That was followed by 16 or 17 days of argument. Although there were only B 15 or 16 witnesses, nearly all of them were examined and cross-examined at great length: and about 250 exhibits were put in. It is not easy to count the number of issues raised by the pleadings; the result depends upon how one combines or sub-divides them. I think, however, that I am right in saying that (apart from questions of credibility) over 40 distinct issues were raised for determination. The evidence which bears on most of those C issues is widely scattered over the record and the exhibits.

That being the magnitude and complexity of the material laid before me, I have been faced with unusual difficulties in deciding how to formulate this judgment. To deal with every material item of evidence and every point raised in argument will not be practicable. In addition to the more D obvious reasons for that, there is this one: undue prolixity in a judgment can defeat the primary purpose for which it is written, namely to present with reasonable clarity the grounds for the conclusions reached and the orders made.

I have therefore had to deal, among other problems, with one of selection. Though I have sought to discuss what seemed to me of greatest importance, E there is much that was relevant which I shall not refer to. It is, of course, at least possible that I have overlooked matters of importance, despite the assistance which I have received from the lengthy and helpful arguments presented to me.

It should not be inferred, however, from a mere failure, on my part, to F refer specifically to any item of evidence, or any relevant approach or contention, that I have been unaware of it, or have ignored it.

The disputes, of which there are many, relate to the validity or otherwise of a transaction, referred to during the hearing as "the letter agreement" which was entered into on 26 January 1977 between the applicant Moritz G (acting on his own behalf and on behalf of his co-applicant Novick) and one Pickard acting on behalf of two of three respondents, being companies which belong to what has been referred to as "the Picbel Group".

To render my discussion of the issues intelligible it is necessary that I begin with a description of that group of companies, and say something about the positions held therein by some of the witnesses in this case.

H The group consists of something between 150 and 250 companies (its chairman was unable to be more specific than that) and its total assets in 1976 were of the order of 140 million rands.

At the top of the pyramid one finds the holding company Picardi Beleggings Bpk, to which I shall refer as "Picbel". The chairman and managing director of that company (and the dominant figure, as I judge him, in the Picbel Group) was and is Mr J A J Pickard. Other directors of Picbel included a Mr Rood, an attorney, a Mr Wotherspoon, an accountant

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and a business man of considerable experience, and a Mr Prins, who was also an attorney.

Among other interests, Picbel has, at all material times, been the A beneficial holder of all the shares in the company called Sagit Ltd (which I shall refer to as "Sagit"). Sagit is the second respondent in the application before me and here, again, Mr Pickard, at all material times, held the office of chairman. Mr Wotherspoon was the deputy-chairman and managing director; Messrs Rood and Prins were the other two of Sagit's four directors.

B Sagit was, at material times, the holding company of a number of subsidiary and sub-subsidiary companies. Those included Comair Holdings Ltd, the first respondent in these proceedings, of whose issued share capital 70 per cent was held by Sagit. It will be convenient to refer to C Comair Holdings Ltd simply as "Comair". The board of Comair during and for several months prior to January 1977 included among its members Rood (as chairman), Wotherspoon (as deputy-chairman) and Pickard. Its managing director was Novick, the first applicant in this litigation, and its general manager was Moritz, the second applicant.

Comair, in turn, had control of many subsidiary and sub-subsidiary D companies. Some of those, which traded in domestic appliances, were collectively referred to as "the Katz group" or "the Katz companies": they were wholly-owned subsidiaries of Comair. Another set of subsidiaries, engaged in the furniture business, was known as "the Chunkies group". Then there were some companies referred to as "the Rubenstein companies" which manufactured and dealt in plastic products, and of whose share capital 75 per cent was held by Comair.

E It has been necessary to mention those Comair subsidiaries because they (among others) featured in the evidence and the arguments. But more directly involved in the present case are the four subsidiaries of Comair which I am now about to refer to: the most important of those is F Commercial Air Services (Pty) Ltd, a wholly-owned subsidiary of Comair which can conveniently be referred to here (or as was during the hearing) by the acronym "Cas". Cas is the leading company in a group which is active in the field of aviation; it deals in aircraft and spare parts for aircraft; it holds franchises from important manufacturers of aircraft; it G operates scheduled and unscheduled passenger, mail and freight services, and it has other activities related to aviation. Cas has 18 or 20 subsidiaries and the group, I was told, has about 300 employees engaged in aviation and matters related thereto. Its head office is in Germiston, but it has branches in Pretoria, Natal, the Orange Free State and the Cape Province. Its customers for aircraft and spares were mainly private H individuals and firms. Cas, together with its subsidiaries and its associated company, Comair Management Services (Pty) Ltd (and at times also the associated company Donne Avenue (Pty) Ltd), has been referred to, and will when it is convenient be referred to in this judgment, as "the Aviation group", "the Aviation division" or "the Cas group". I should add that very frequently an action or a transaction has been loosely but conveniently, referred to as that of Cas when in truth it was the action or transaction of one of the subsidiaries of Cas, or of its associated company. The nickname "Cas" in the evidence, or in this judgment, can therefore refer to Com-

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mercial Air Services (Pty) Ltd (the third respondent), or to the group headed by that company, or to one or more of the companies in that group.

A In and prior to January 1977 Novick was the managing director of Cas, and Moritz was its general manager. Among its directors were Rood and Wotherspoon. The secretary to the Cas group was Mr Johnson, and working under Johnson were the accountant Bailey and his assistant Gardner.

The board of directors of Comair Management Services (Pty) Ltd, which, B like Cas, was the wholly-owned subsidiary of Comair, consisted of Novick, Moritz and Johnson. That company rendered clerical and administrative services to the aviation group of which it was a part.

Two more companies which require brief mention at this stage are Kes Television Services (Pty) Ltd (which I shall refer to as "Kes") and Donne C Avenue (Pty) Ltd (which I shall refer to as "Donne"). Kes, of whose issued share capital Comair held 55 per cent in January 1977, had been engaged in the retail television business; but it had disposed of its business in October 1976. It was insolvent, and it owed money to one of the Cas subsidiaries. Among its directors were Novick and Wotherspoon. Donne, a wholly-owned subsidiary of Comair, owned the dwelling house in which D Novick was living at all material times, but does not appear to have had any other interests. It was, at times, regarded and referred to as part of the Aviation group, possibly for some historical reason not covered by the evidence; possibly because it was a company which provided a dwelling house for the managing director of Cas.

During and before January 1977 Novick and Moritz had been interested in E acquiring, from Comair, control of the Aviation group. I shall have to say more at a later stage about the negotiations in that regard, but in this introductory part of my judgment it will suffice to say that on 26 January 1977 there was a meeting at Johannesburg between Moritz, Pickard and Wotherspoon which culminated in the execution, on that date, of the F document which I have referred to as "the letter agreement" and which is exh X5.

That document, which was addressed to "the chairman, Comair Holdings Ltd (the 'vendor')" reads as follows:

"Sir,

I, Martin Darryl Moritz, on behalf of Donald Novick and myself (the 'purchasers') hereby offer to purchase the entire issued share capital G of Commercial Air Services (Pty) Ltd, Comair Management Services (Pty) Ltd, KES Television Services (Pty) Ltd and Donne Avenue (Pty) Ltd (the 'companies') together with the loan accounts owing by the companies, subject to the following terms and conditions:

1.

The effective date of the purchase is 31 December 1976.

2.

The purchase price shall be R2 450 000 payable as to 50 per cent by H not later than 31 March 1977 and the remaining 50 per cent by not later than 31 July 1977.

3.

The companies shall declare a dividend of R650 000 on or before the effective date which dividend shall be credited to the vendor's loan account in the...