Peel and Others v Hamon J&C Engineering (Pty) Ltd and Others

• Jurisdiction: South Africa
• Judge: Moshidi J
• Judgment Date: 16 November 2012
• Citation: 2013 (2) SA 331 (GSJ)
• Docket Number: 2012/00994
• Hearing Date: 08 June 2012
• Counsel: AC Botha for the applicants. S Budlender for the respondents.
• Court: South Gauteng High Court, Johannesburg

Moshidi J: E

Introduction

[1] This is a novel matter in that it requires the determination of the issue whether the relief sought by the applicants correctly and properly falls within the ambit of the provisions of s 163 of the F Companies Act 71 of 2008. The application is also unique in that the basis thereof is not about what traditionally would occur in a company in which the applicants are involved as shareholders or directors.

[2] In the notice of motion the applicants seek relief in the following terms: G

'1.

Directing that the second respondent transfer its shares held in the first respondent to the applicants or their nominee with effect from 31 December 2011;

2.

That the second applicant, alternatively the applicants, further alternatively anyone or more of the applicants, pay to the second H respondent the sum of R7 000 000 less the wasted expenditure in the sum of R2 465 394,86 within seven days of the granting of this order;

3.

In the alternative to para 2 above:

3.1

That the second applicant, alternatively the applicants, further alternatively, anyone or more of the applicants, pay to the second respondent the sum of R7 000 000 less the I wasted expenditure to be determined by the court by way of trial action;

3.2

That the applicants deliver their declaration in regard to such action within 20 days of the granting of this order;

3.3

That the rules regarding trial actions further apply to the conduct of the matter; J

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4.

A That all licence agreements between the first respondent and the second and the third respondents be declared cancelled;

5.

That the shareholders' agreement between the applicants and the first and the second respondents be declared cancelled;

6.

The applicants are ordered to forthwith take the necessary steps to change the name of the first respondent from Hamon J&C B Engineering (Pty) Ltd to J&C Engineering (Pty) Ltd;

7.

The second respondent is ordered to ensure that all directors appointed to it to the board of the first respondent resign, and in the absence of them doing so within seven days, the applicants are authorised to take such steps as may be necessary in the offices of the Companies and Intellectual Property Commission to reflect C such directors as having been removed;

8.

That the second and the third respondents pay the costs of this application, jointly and severally, the one paying the other to be absolved.'

An amendment has been effected by the applicants to correct paras 2 and 3.1 of the notice of motion by deleting the word 'applicant' and D substituting it with the words 'second respondent'.

The parties

[3] The first applicant is a director and shareholder of the first respondent. The second applicant, the father of the first applicant, is a retired E businessman and a former shareholder of the first respondent. The third and fourth applicants are a director and shareholder, respectively, of the first respondent.

[4] The first respondent is Hamon J&C Engineering (Pty) Ltd (hereinafter Hamon J&C), a company duly incorporated, having its registered F office at Bedfordview, Johannesburg. The second respondent is Hamon South Africa (Pty) Ltd (hereinafter Hamon SA), a company duly incorporated with its registered address at Corner Rigger Road and Kelvin Street, Spartan. The third respondent is Hamon & Cie (International SA) (hereinafter Hamon & Cie), a company duly incorporated G and registered in Belgium. The third respondent has consented to the jurisdiction of this court. The fourth, fifth and the sixth respondents are directors of the first respondent.

[5] On the papers a reference to 'the Hamon respondents' is a reference to the second and third respondents, namely Hamon SA and Hamon & H Cie, respectively, while a reference to 'the joint venture company' is a reference to Hamon J&C.

[6] In terms of the provisions of s 3(1)(a) of the Companies Act 71 of 2008 (the new Companies Act), Hamon J&C is a subsidiary of Hamon SA; Hamon SA is a subsidiary of Hamon & Cie; and Hamon J&C is thus I also a subsidiary of Hamon & Cie. By virtue of the provisions of s 2 of the Companies Act the respondents are all related persons. All of the above are common cause.

The brief nature of relief sought

[7] In the founding papers, and relying on s 163 of the new Companies J Act, the applicants in the main contended that an act or omission of

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Hamon SA and/or Hamon & Cie has had a result that is oppressive and A unfairly prejudicial to, or that unfairly disregards the interests of the applicants and/or the business of Hamon J&C and/or Hamon SA, is being or has been carried out or conducted in a manner that is oppressive or unfairly prejudicial to, or that unfairly disregards the interests of the applicants, and/or the powers of a/the director/s or prescribed officer of B Hamon SA and/or Hamon & Cie, are being or have been exercised in a manner that is oppressive or unfairly prejudicial to, or that unfairly disregards the interests of the applicants.

Brief background

[8] Some background is indispensable. The papers are rather bulky and C contained voluminous correspondence exchanged between the parties. In summarised form it was common cause that:

[8.1]

During or about 2009 the applicants, in particular the first and second applicants, representing themselves and J&C Engineering CC (which later became, for the purposes of the D undermentioned transaction J&C (Pty) Ltd (J&C)), commenced negotiations with Hamon SA. The last-mentioned was represented by Francis Lambilliotte (Lambilliotte), the chairman of Hamon SA's board of directors, and the fourth respondent, the president of the business unit and environmental manager of Hamon & Cie. E

[8.2]

The negotiations were aimed at exploring how Hamon SA and J&C could form a joint venture company or otherwise work together to the mutual benefit of both parties.

[8.3]

At the time J&C, which was still registered as a close corporation, was active in the business of air pollution control (APC), in F particular electrostatic precipitators (ESPs). It had remained largely a family-owned business, which was started by the second applicant and his wife. The first applicant, his sister, and the fourth applicant and her husband, were all employed by and worked daily in the business of J&C.

[8.4]

On the other hand, Hamon SA was at the time active in APC G activities and other business activities, including cooling systems. The activities undertaken by Hamon & Cie and the other companies in its group included, in addition to APC and ESPs, fabric filters, gas scrubbers, etc on a worldwide basis. Hamon SA was a subsidiary of the multinational company Hamon & H Cie, which was much larger than J&C and conducted business around the world through its group of companies.

[8.5]

Over the years, and in compliance with the South African Black Economic Empowerment legislation (the Broad-Based Black Economic Empowerment Act 53 of 2003), J&C had offered one I of its highly rated employees, ie the third applicant, an opportunity to take up a member's interest. She performed the task of purchasing and the human resources function in J&C. She was paid a member's distribution like all other members of J&C.

[8.6]

The main purpose of the applicants' desire to enter into the joint venture was the belief that by J&C aligning itself with Hamon J

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A SA, it would benefit J&C and its members in the long run as the business would be afforded the opportunity to increase significantly in size and derive the benefits of substantial management, administrative, financial, marketing and budgeting expertise. On the applicants' version, Hamon SA particularly represented that they anticipated substantial workflow for the new joint venture B company arising out of, amongst others, the good name of Hamon.

[9] As a result of the protracted and various negotiations, the parties during October 2010 concluded a sale and transfer agreement and a C shareholders' agreement. The main basis and objective of the transaction were summarised in the recital in clause 2 of the sale and transfer agreement in the following terms:

'2.1

Hamon SA is engaged in the business of air pollution control activities with the use of electrostatic precipitators, precipitators, fabric filters and gas scrubbers.

2.2

D J&C is likewise engaged in the business of air pollution control activities.

2.3

Hamon SA and J&C wish to combine their respective resources, abilities, skills, know-how and intellectual property for the purposes of jointly conducting the business of air pollution control activities in RSA for their mutual benefit, and for this purpose propose E incorporating a limited company (the joint venture company).

2.4

To achieve their objective, the following transactions are to be implemented and the following documents signed:

2.4.1

The incorporation of the joint venture company, whose name will be Hamon J&C Engineering (Pty) Ltd (or such F other name as may be agreed by the parties or approved by the Registrar of Companies in RSA);

2.4.2

The conversion of J&C from a close corporation to a limited liability company in accordance with the Companies Act;

2.4.3

The sale and transfer by Hamon SA of the Hamon Assets to the joint venture company in return for the issue and G allotment to Hamon SA of 3500 (three thousand five hundred) ordinary shares in the joint venture company;

2.4.4

The transfer by Peel Snr and Peel Jnr of the issued shares in J&C to the joint venture company in exchange for 14 000 (fourteen thousand) ordinary shares in the joint venture company;

2.4.5

The purchase by Hamon SA of 7000 (seven thousand) H ordinary shares in the joint venture company issued and allotted to Peel Snr;

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