Taylor v Welkom Theatres (Pty) Ltd and Others

• Jurisdiction: South Africa
• Judge: Horwitz J
• Judgment Date: 15 April 1954
• Citation: 1954 (3) SA 339 (O)
• Hearing Date: 25 March 1954
• Court: Orange Free State Provincial Division

Horwitz, J.:

Paras. 19 and 20 of the petition herein may fairly be F regarded as containing a summary of the averments made in the paragraphs of the petition preceding them. They are:

'Your petitioner is advised and respectfully submits that it is just and equitable that the first respondent company should be liquidated on the grounds hereinbefore set forth. There has been a complete failure of the partnership understanding between your petitioner and the second and third respondents, it is no longer possible for them to work together and there is a deadlock as between them in the affairs of the company. G However, your petitioner has no wish to see the first respondent company destroyed unless that is absolutely necessary, as it has been your petitioner's creature. Your petitioner is anxious to be allowed, if possible, to continue to develop it. Your petitioner respectfully submits that the company's affairs are presently being conducted in a manner most oppressive to himself, but that to wind up the company would unfairly prejudice him because the whole of his enterprise and energies over the past few years would be lost, and in liquidation, although the H company is solvent, it is almost certain that the shareholders will not get back what they paid for their shares.

Your petitioner is advised and respectfully submits that, in terms of sec. 111 bis of the Companies Act, 46 of 1926 as amended, he is entitled to pray that this Honourable Court may, with a view to bringing an end to the disputes and deadlock hereinbefore set forth, make such order as it thinks fit whether for regulating the conduct of the company's affairs in future, or for the purchase of the shares of any members of the company by other members of the company or by the company itself.'

Horwitz J

On the grounds set forth in the petition the applicant seeks an order from this Court as follows:

'1. (a)

Directing the second and third respondents to sell to your petitioner their shares in the company at a price of £2 0s. 0d. (two pounds) per share, payable in cash against transfer;

(b)

A Alternatively, directing all the shareholders in the first respondent (other than your petitioner) to sell their shares to your petitioner at a price of 30s. (thirty shillings) per share payable cash against transfer;

(c)

Alternatively, directing the second and third respondents to purchase your petitioner's shares at a price of 30s. (thirty shillings) per share payable cash against transfer and further directing that your petitioner be released from all further obligations under his service contract with the first respondent.

(d)

B In the further alternative, giving such directions for regulating the conduct of the first respondent's affairs in future, as to this Honourable Court may seem just;

(e)

In the further alternative, placing the first respondent under a winding up order.

2.

.....

3.

Directing the second and third respondents to pay the costs of these proceedings jointly and severally, the one paying the other C to be absolved Your petitioner does not ask for any order for costs against the first respondent unless it should oppose these proceedings.'

For a proper understanding of the grounds relied upon in the petition as the basis for the order set out above, it is necessary to refer briefly to the rather lengthy averments made by the applicant.

D The petitioner, who claims extensive experience over a considerable period in the production, exhibition and distribution of films in various countries, including South Africa, evolved a scheme for developing a cinema organisation to exhibit films in this country 'outside the control of the existing large group of exhibitors'. During E 1950 he started on a project to build and operate a cinema at Welkom, to run it by himself 'with his wife running the tea-room and refreshment facilities'. An agreement was come to with those in control, and thereafter with the Welkom Township owner, in terms whereof he obtained the right to acquire a selected site for a theatre on certain terms. F Inter alia, the township owner agreed not to sell any other cinema site to any other person before the 1st January, 1956, and to give applicant the first refusal to purchase a second cinema site if and when such site was to be disposed. In addition, certain further sole rights were conferred on the applicant under the terms of this agreement. With a view to obtaining the necessary finance for the scheme, applicant G explained the project to the third respondent who was then employed in the accounting branch of a firm of which the applicant was the general manager. The object was to get the third respondent to interest members of his family in the scheme. The third respondent introduced the second respondent, a stock broker, to the applicant and eventually it was agreed that the three parties

H 'were to embark together as partners and joint venturers in implementing the said scheme and were to promote a company',

the applicant to be the manager of the proposed theatre and his wife to be accorded the tea-room and refreshment privileges. Later a company was formed with a capital of £30,000 divided into 30,000 shares of £1 each. Applicant received 6,000 shares as vendor consideration, but he later parted with 2,000 of these shares for reasons

Horwitz J

not material hereto. 'The third respondent was to contribute what he could.' He contributed £3,600, but now 98 shares are registered in his name. Second respondent, who now holds 400 shares, was to raise the balance of the capital himself and from his clients and friends to whom shares were to be allotted at par by the company on his recommendation. The three parties were to be appointed directors of the company and were A to control the company. It was further agreed that the company would enter into a service contract with the applicant for a minimum period of five years at a stated weekly salary, applicant to be the managing director in charge of the whole of the company's business. He was also to be appointed manager of the theatre while his wife was to be given a B lease for a minimum of ten years of the tea-room. The second respondent was to be the chairman of the company and the third respondent a director and the secretary of the company.

The company was duly incorporated. Applicant and the third respondent C were the original subscribers. The theatre building was completed and at the first meeting of the directors, shares were allotted to each of them and to persons nominated by them. All the shares were eventually issued and at the date of the petition there were some 45 shareholders in all. By various resolutions of the board of directors, the agreements D entered into by applicant as trustee for a company to be formed were adopted, a five-year service contract was entered into with the applicant who was appointed managing director of the company and manager of the theatre, but it was provided that applicant was to be 'under the direction and control of the board of directors in the discharge of his duties'. In April, 1952, the third respondent resigned as a director but E continued to serve the company as its secretary and public officer. During August of that year and at the applicant's suggestion the third respondent was offered full-time employment by the directors and by resolution dated the 24th September, 1952, he was re-appointed to the board of directors. The third respondent then came to reside at Welkom.

F Prior to this time the affairs of the company had been running very smoothly under applicant's management, so much so, that by letter dated the 27th August, 1952, second respondent informed applicant that he had been

'impressed . . . at what you have accomplished and I think the way you have run the whole show almost entirely by yourself is wonderful'.

G After the third respondent had taken up residence at Welkom, a strained feeling developed between applicant and his wife on the one hand and the third respondent on the other. I deem it neither necessary nor desirable to detail the incidents set out in para. 13 of the petition. Eventually, applicant by letter dated the 26th June, 1953, addressed to the third H respondent, endeavoured to define the limits of the latter's rights and duties. This letter was placed before the directors at a meeting on the 13th July, 1953, and the chairman, the second respondent, informed the applicant that the latter had no right to write such a letter on behalf of the company. The chairman then took it upon himself to propose the following resolution:

Horwitz J

'(a)

That Mr. Taylor's duties as managing director shall be the investigation of the expansion possibilities of the company and the direction of questions of policy affecting the administration of the company's theatre or theatres, including the securing of modification of franchises from film distributors; subject however to consultation with the board from time to time and any directions to be given by the board in that connection.

(b)

A That Mr. Dacombe be appointed manager of the Alpha Theatre and it shall be his responsibility to undertake the day-to-day management of that Theatre and to maintain the records in relation to the said Theatre. He shall be responsible to the board for the due discharge of his duties in the above connection.'

Applicant opposed the resolution while the third respondent refrained...