Cape Pacific Ltd v Lubner Controlling Investments (Pty) Ltd and Others (9/93) [1995] ZASCA 53; 1995 (4) SA 790 (AD); [1995] 2 All SA 543 (A) (19 May 1995)

Cape Pacific Ltd v Lubner Controlling Investments (Pty) Ltd and Others (9/93) [1995] ZASCA 53; 1995 (4) SA 790 (AD); [1995] 2 All SA 543 (A) (19 May 1995)

The Supreme Court of Appeal found that Lubner exercised complete control over both Lubner Controlling Investments (Pty) Ltd and Gerald Lubner Investments (Pty) Ltd in relation to the Findon shares, using both companies as his alter egos to evade the appellant's rights. The transfer of shares was effected at Lubner's behest for the sole purpose of defeating the appellant's entitlement, constituting fraudulent or seriously improper conduct. The court held that policy considerations strongly supported piercing the corporate veil in these circumstances, as neither company stood to benefit and only Lubner did. The appellant's failure to pursue remedies against Gerald Lubner Investments (Pty)...

Citation
[1995] ZASCA 53
Parties
Appellant: Cape Pacific Ltd; Respondent: Lubner Controlling Investments (Pty) Ltd; Respondent: Gerald Lubner Investments (Pty) Ltd; Respondent: Gerald Mervyn Lubner
Court
Supreme Court of Appeal
Jurisdiction
South Africa
Judgment Date
19 May 1995
Case Number
9/93
Procedural Posture
Civil Appeal / Appeal From Absolution From the Instance in the Cape Provincial Division
Outcome
Appeal upheld. The order of absolution from the instance and costs order against the appellant are set aside and replaced with orders for delivery of shares and cession of the loan account, and costs against the respondents. Cross-appeal dismissed.
Judges
Van Heerden, Smalberger, Vivier, F H Grosskopf, Van den Heever
Legal Topics
Piercing Corporate Veil, Specific Performance, Fraudulent Conduct, Company Control, Abuse of Corporate Personality
Commercial and Corporate Civil Procedure Piercing Corporate Veil Specific Performance Fraudulent Conduct Company Control Abuse of Corporate Personality

Case Brief

Summary, issues, holding and outcome

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Parties

Cape Pacific Ltd

Appellant

Lubner Controlling Investments (Pty) Ltd

Respondent

Gerald Lubner Investments (Pty) Ltd

Respondent

Gerald Mervyn Lubner

Respondent

Procedural Posture

Civil Appeal / Appeal From Absolution From the Instance in the Cape Provincial Division

Legal Issues

  1. 1 Whether the corporate veil of Lubner Controlling Investments (Pty) Ltd and Gerald Lubner Investments (Pty) Ltd should be pierced to enforce a judgment for delivery of shares and a loan account against them and Gerald Mervyn Lubner.
  2. 2 Whether the transfer of shares from Lubner Controlling Investments (Pty) Ltd to Gerald Lubner Investments (Pty) Ltd was effected to evade the appellant's rights.
  3. 3 Whether the appellant's failure to pursue remedies against Gerald Lubner Investments (Pty) Ltd precludes relief by piercing the corporate veil.

Ratio Decidendi

The Supreme Court of Appeal found that Lubner exercised complete control over both Lubner Controlling Investments (Pty) Ltd and Gerald Lubner Investments (Pty) Ltd in relation to the Findon shares, using both companies as his alter egos to evade the appellant's rights. The transfer of shares was effected at Lubner's behest for the sole purpose of defeating the appellant's entitlement, constituting fraudulent or seriously improper conduct. The court held that policy considerations strongly supported piercing the corporate veil in these circumstances, as neither company stood to benefit and only Lubner did. The appellant's failure to pursue remedies against Gerald Lubner Investments (Pty)...

Court Disposition

Appeal upheld. The order of absolution from the instance and costs order against the appellant are set aside and replaced with orders for delivery of shares and cession of the loan account, and costs against the respondents. Cross-appeal dismissed.

Orders

  • The second defendant is ordered to deliver the shares and cede the loan account in Findon Investments (Proprietary) Limited to the plaintiff within thirty days of 19 May 1995.
  • Alternatively, within the aforesaid period, the second defendant is to deliver the said shares and cede the said loan account to the first defendant, which in turn is to deliver the said shares and cede the said loan account to the plaintiff.