Stellenbosch Farmers' Winery Ltd v Distillers Corporation (SA) Ltd and Another

• Jurisdiction: South Africa
• Judge: Hoexter ACJ, Beyers JA, Van Blerk JA, Rumpff JA and Wessels AJA
• Judgment Date: 23 November 1961
• Citation: 1962 (1) SA 458 (A)
• Hearing Date: 18 September 1961
• Court: Appellate Division

H De Villiers, A.J.:

These two appeals against decisions of Liquor Licensing Boards raise identical questions of law and were argued together. I shall refer to the first as the Stellenbosch case and to the second as the George case, and shall state the facts with reference to the Stellenbosch case.

The South African Breweries Ltd. (hereinafter referred to as SA Breweries) is a holding company with controlling interests in brewer companies. During 1960 it acquired approximately 98 per cent of the issued ordinary share capital of the Stellenbosch Farmers Wine Trust Limited (hereinafter referred to as the Trust) and announced its intention of acquiring also the balance of those shares under the provisions of sec. 103 ter of the Companies Act. This would leave only preference shares - a comparatively minor

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number - in the hands of other shareholders. The Trust is a company whose only business is the holding of the shares of a wholly owned subsidiary, The Stellenbosch Farmers' Winery Ltd. The latter is a large-scale producer of wines and brandy, and for the purposes of the sale of its products it holds wholesale licences in respect of sales depots at various places in the Union, inter alia at Stellenbosch. At the 1960 meeting of the Liquor Licensing Board for the Stellenbosch area A the appellants objected to the renewal of the wholesale licence, their objections being largely founded on the contention that the acquisition by SA Breweries of the above shares in the Trust constituted a contravention of sec. 166 (v) of the Liquor Act, 30 of 1928, as amended by sec. 42 of Act 61 of 1956. The Board overruled the objections and granted the renewal, announcing in that regard inter alia that it had come to the conclusion. on the authority of the decision in Goldberg, N.O v P. J. Joubert Ltd., 1960 (1) SA 521 (T), that the B acquisition of the shares by SA Breweries did not amount to the acquisition of a 'financial interest' in a licensed business within the meaning and in contravention of sec. 166 (v). The appeal is against that ruling, and turns entirely on the true interpretation of sec. 166 (v) and the application thereof to the facts which I have stated.

Sec. 166 (v), in so far as is material, provides that an offence is committed by any person who

'being a producer or manufacturer . . . or a brewer, or a person who C has a controlling interest (as defined in sec. 114 bis) in a company who is such a producer or manufacturer or a brewer, directly or indirectly acquires . . . any financial interest in a business in respect of which a liquor licence has been issued under this Act, other than a business in respect of which a wholesale liquor licence or a brewer's licence has been so issued to himself or an hotel liquor licence has been so issued to himself or to any other person.'

It is common cause that SA Breweries is a person holding a controlling D interest as defined in companies which are brewers. The issue is whether by the acquisition of virtually all the ordinary shares in the Trust, SA Breweries acquired a 'financial interest' within the meaning of sec. 166 (v) in the licensed business or businesses of Stellenbosch Farmers' Winery, the wholly-owned subsidiary of the Trust

The expression 'financial interest' is not defined in the Liquor Act or in any of the amending statutes, and its meaning and application E therefore require construction. The word 'interest' itself is one of very wide connotation, and its application to practical situations could range over an extremely large variety of possibilities. Consequently judicial decisions in regard to the meaning and application of the word where it occurs in a particular statute or other instrument, have stressed the necessity of having regard to context, to the scope and purpose of the provision in which the word is employed and indeed to the whole of the instrument in question, with a view to true construction. All this does not involve, however, that due weight is not to be given F to the ordinary and natural meaning of the word. As in all questions of construction, a proper balance is to be struck between considerations of linguistic meaning and of context, with a view to determining the true meaning and intent of what is embodied in the instrument. And in view of the wide potentialities as to the meaning and application of the word 'interest', the purpose of careful examination of contextual considerations would mainly be to ascertain what limitations, if any, G were intended to be imposed within the prima facie large sphere.

In the present case the total concept dealt with by the Legislature is that of a 'financial interest in a business'. The expression is one of common occurrence, and I must confess that I have no real difficulty about assigning an ordinary and natural meaning thereto. In this context the word 'interest' would naturally bear the second of the main meanings given by the Oxford Dictionary. viz. 'the relation of being concerned in respect of advantage or detriment'. 'Business' in the context would H naturally mean a commercial or industrial enterprise, i.e. one directed towards profit-making, the full reference in sec. 166 (v) being to a

'business in respect of which a liquor licence has been issued under this Act'.

In its ordinary meaning a 'financial interest in a business' would in this context therefore prima facie comprise and include any relationship between the interested person and the enterprise which involves for the former pecuniary advantage or detriment consequent upon fluctuations of fortune in the profit-making activities of the latter. In the immediate context the only limitations suggested are those that are indicated by the factors firstly that the interest

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must be one 'in' the business and secondly that it must be of such a nature as to be capable of being 'acquired'. From these indications it seems clear that the interest must result from something in the nature of a right or title which links the interested party's pecuniary concern with the fortunes of the business. Consequently there are excluded certain indirect situations rendering the fortunes of the business a A matter of some concern to the party in question, i.e. where the latter is a mere creditor, landlord, employee (not sharing in profits), dependant or recipient of the bounty of the person who conducts the business. In short, the natural meaning indicated by these considerations of immediate context is that given by way of example under the first main meaning (sub-division (d)) of 'interest' in the Oxford Dictionary, viz. 'a pecuniary share or stake in or claim upon' the business. The 'business' in the context being an enterprise directed B at profit-making, the share, stake or claim need not necessarily extend to the assets employed therein, but could be confined to profits realised. Thus an employee who has no title to assets employed in a business but is by contract entitled to a share of the profits, would in the natural sense under discussion have a financial interest in that business. That this is the natural meaning and application of the expression 'interest in a business' has been recognised in several decisions. In R v McLachlan, 1915 T.P.D. 34, the Full Bench of the Transvaal Court was required to construe the above phrase as it occurred C in a provision of a Transvaal Liquor Ordinance. At p. 41 CURLEWIS, J., stated:

'In my opinion 'interest' means financial or pecuniary interest, the interest of a person who has some share or participation in either the profits or losses, or in both the profits and losses of the business, or in the takings or sales of the business.'

And at p. 38 DE VILLIERS, J.P., after referring to the case of joint owners or part owners, proceeded as follows:

D 'The magistrate seems to think there are no other instances which would apply to the words 'interested in the business.' But the obvious example is where the owner allows his manager to take a share of the profits.'

In Geo Hill & Co v Hill, 55 L.T.R. at p. 771, KEKEWICH, J., in dealing with the phrase 'interested . . . in any similar business,' said inter alia:

'. . 'Interested' meaning, in commercial language, 'entitled to profits'.'

In my view the above ordinary meaning of the expression 'financial E interest in a business', in its immediate context in sec. 166 (v), applies naturally also to a shareholder of a company as regards the business conducted by the company. The whole purpose of his becoming a shareholder would be to benefit from the profits realized by the business carried on by the company. As shareholder he would have a title to that benefit and a stake in the profits. It is true that, if he should be a minority shareholder, decisions by others within the company might affect the form in which he will enjoy the benefit or receive satisfaction of his stake. Such decisions may result in his enjoyment of F the benefit directly by way of dividend, or indirectly by way of an appreciation of the value of his shares (or of his claim on dissolution of the company) as a result of the ploughing back of profits into the assets of the company. But these considerations cannot in any realistic sense be said to prevent the shareholder's title from being described as a 'stake in' profits or as giving him a 'financial interest' in the business conducted by the company. And this must apply a fortiori in the G case of a majority or sole shareholder who has the power in his own hands not only to dictate policy as to the company business, but also to determine in what form the benefit of profits derived from that business is to be made available to himself and the other shareholders, if any. In Macaura v Northern Assurance Co. Ltd. & Others, 1925 A.C. 619 (a case very strongly relied upon by the respondent on appeal) LORD BUCKMASTER, in the course of a meticulous exposition of the...