Zentland Holdings (Pty) Ltd v Saambou Nasionale Bouvereniging

• Jurisdiction: South Africa
• Judge: Van Winsen J, Vos J and Vivier J
• Judgment Date: 27 March 1979
• Citation: 1979 (4) SA 574 (C)
• Hearing Date: 19 February 1979
• Court: Cape Provincial Division

Zentland Holdings (Pty) Ltd v Saambou Nasionale Bouvereniging
1979 (4) SA 574 (C)

1979 (4) SA p574

Citation	1979 (4) SA 574 (C)
Court	Cape Provincial Division
Judge	Van Winsen J, Vos J and Vivier J
Heard	February 19, 1979
Judgment	March 27, 1979

Flynote : Sleutelwoorde

Company — Shares — B Granting of financial assistance in connection with the purchase of shares in contravention of s 86 bis (2) of Act 46 of 1926 — Sale by beneficial shareholders of their shareholdings and their loan accounts — Purchase price to be paid partly in cash and partly by a banker's guarantee — Clause providing that "purchaser shall not borrow any moneys for the purchase of the sellers' shares... which will have been C paid in cash" — Settlement thereafter that purchase price be secured by the passing of two bonds — No evidence how the price of the shares was to be paid — Agreement not in breach of s 86 bis (2) of Act 46 of 1926, as amended.

Headnote : Kopnota

D S, representing the beneficial shareholders in the appellant company, had entered into a written agreement with P in terms of which the shareholders sold to P their total issued shareholdings in appellant company as well as their loan accounts and claims with appellant. The purchase price of the issued shares, 11 fully paid up R1 in all, was stated to be R11 and the sellers' loan accounts and claims as R549 989. The purchase price was to be paid partly in cash and partly with the furnishing of a banker's guarantee. Clause 9 provided that the purchaser was to be given an option E of obtaining a mortgage bond against the company's assets fall amounts due to the seller but the purchaser "shall not borrow any moneys for the purchase of the sellers' shares in the company which will against the effective date have been paid in cash..." The option was not exercised by P who instead raised a bond of R625 000 for the appellant company over its immovable property. By a deed of settlement it was agreed that it was "for F the purchase of property". Respondent successfully applied for provisional sentence on the bonds. In an appeal the Court found that there was no evidence to show out of what moneys the R11 was to be paid. The appellant contended that the bonds had been granted in contravention of s 86 bis (2) of Act 46 of 1926, as amended.

G Held, that clause 9 had been introduced with the object of avoiding falling foul of the provisions of s 86 bis (2) of the Act.

Held, further, that it had not been established on a balance of probabilities either that there was an agreement to utilise loan moneys to be raised on mortgage against the company's property for the purpose of paying the purchase price of 11 shares in the company's or that such loan moneys were ever in fact used for that purpose.

H Held, further, that there were no facts to show that appellant's conduct, in relation to the agreement or the settlement or its disposal of the proceeds of the loans, was similar to that of a company "which gave the forbidden assistance with the purpose described in s 86 bis (2)".

Held, further, if the impoverishment test was relevant, that it was not clear that the appellant had suffered any impoverishment by reason of the loans raised by it. Appeal dismissed.

Appeal from a decision of FAGAN J. The facts appear from the reasons for judgment.

H L Berman SC (with him I J Aaron) for the appellant.

H C Nel SC (with him J J M van Zyl) for the respondent.

Cur adv vult. A

Postea (March 27).

Van Winsen J:

This is an appeal from the decision of FAGAN J granting B provisional sentence in favour of respondent (plaintiff in the Court a quo) against appellant (defendant in the Court a quo) in the sum of R363 389,66 together with compound interest thereon calculated at 12 per cent per annum from 25 May 1978 to date of payment, which sum was claimed in terms of three mortgage bonds passed by appellant in respondent's favour.

C The defence raised in the Court of first instance was that the bonds to the knowledge of respondent were granted in contravention of s 86 bis (2) of the Companies Act 46 of 1926, as amended, and accordingly they afforded respondent no cause of action. The learned Judge held that appellant had failed to establish that the probability of success for such a defence in D the main action was in its favour. The correctness of this conclusion is challenged on appeal in this Court.

The record in this case is burdened with a plethora of irrelevant information, much of which is of a confusing nature and constitutes matter of little or no assistance in the solution of the problem with which this Court is required to deal.

E Section 86 bis (2) - applicable at the point of time at which a decision in this matter is necessary - provided as follows:

"(2)

No company shall give, whether directly or indirectly, and whether by means of a loan, guarantee, the provision of security or otherwise, any financial assistance for the purpose of or in connection with a purchase F or subscription made or to be made by any person of or for any shares in the company or in any company to which it is subsidiary: Provided that nothing in this section shall be taken to prohibit -"

It was argued in the Court below that the evidence on record disclosed that appellant company afforded financial assistance by way of the provision of the three bonds on which respondent's action was based "for the purpose of or in connection with" the purchase of 11 shares in that G company by certain named persons.

The evidence placed on record in furtherance of this defence comes from one William Herbert Petersen, who does not appear from the papers before the Court to have had at any stage any part in the negotiations and dealings culminating in the registration of the three bonds whose validity H is impugned by appellant. This deponent states at the outset of his affidavit that the information he places before the Court derives "in so far as I have been able to establish same from documents made available to me". His relationship to the other persons concerned on appellant's side of the case remains throughout undisclosed. One Sidney Joseph Petersen, who was a party to the negotiations and dealings culminating in the registration of the bonds, states in a brief affidavit (he having been sued as a co-defendant in the Court a quo as surety for appellant's debts aforesaid) that he affirms "the correctness of the

allegations contained" in William Herbert Petersen's affidavit. No affidavit was filed on behalf of appellant company.

The facts appearing on the record relevant to the present enquiry can be A briefly summarised as follows. On 27 October 1970 one Sayed, representing the beneficial shareholders in appellant company (the "sellers"), entered into a written agreement ("the agreement") with Sidney Joseph Petersen ("Petersen") in terms of which the beneficial shareholders sold to Petersen their total issued shareholding in appellant as well as their B loan accounts and claims with appellant. Save for those above referred to no other shares had been...