Clarke and Others v Kwezi Mining (Pty) Ltd and Others (2010/47125) [2011] ZAGPJHC 240 (17 June 2011)

Clarke and Others v Kwezi Mining (Pty) Ltd and Others (2010/47125) [2011] ZAGPJHC 240 (17 June 2011)

The court found that the company, under the control of the second respondent, engaged in conduct that was unfairly prejudicial to the applicants as minority shareholders. This included funding litigation that was essentially a shareholder dispute, paying management fees and withdrawing funds in breach of the shareholders agreement, and manipulating company affairs to reduce the value of the applicants' shares. The court held that these acts constituted actionable conduct under section 252 of the Companies Act. The applicants established both particular acts and a general manner of conduct that was unfairly prejudicial, unjust, and inequitable. The court rejected the respondents' argument...

Citation
[2011] ZAGPJHC 240
Parties
Applicant: Jeremy Edward Clarke; Applicant: Michael William Wright N.O.; Applicant: Doreen Valerie Salmon MO.; Applicant: David Robert Buys MO.; Applicant: Gold-Rose Investments (Pty) Ltd; Respondent: Kwezi Mining (Pty) Limited; Respondent: Kwezi Group (Pty) Limited; Respondent: SADTU Investment Holdings (Pty) Limited; Respondent: National Council for Persons with Physical Disabilities in South Africa; Respondent: The Trustees for the time being of the Nonhlanhla Chili Family Trust; Respondent: The Trustees for the time being of the Abaqanduli Women Development Trust; Respondent: DA JO Investments (Pty) Limited
Court
South Gauteng High Court, Johannesburg
Jurisdiction
South Africa
Judgment Date
17 June 2011
Case Number
2010/47125
Procedural Posture
Review Application / Final Judgment on Application Under Section 252 of the Companies Act
Outcome
Application granted. The second respondent is ordered to purchase the applicants' shares at a fair value determined by independent auditors. Costs awarded to the applicants.
Judges
C G Lamont
Legal Topics
Minority Shareholder Protection, Unfair Prejudice, Section 252 Companies Act, Share Valuation, Shareholder Disputes
Commercial and Corporate Civil Procedure Minority Shareholder Protection Unfair Prejudice Section 252 Companies Act Share Valuation Shareholder Disputes

Case Brief

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Parties

Jeremy Edward Clarke

Applicant

Michael William Wright N.O.

Applicant

Doreen Valerie Salmon MO.

Applicant

David Robert Buys MO.

Applicant

Gold-Rose Investments (Pty) Ltd

Applicant

Kwezi Mining (Pty) Limited

Respondent

Kwezi Group (Pty) Limited

Respondent

SADTU Investment Holdings (Pty) Limited

Respondent

National Council for Persons with Physical Disabilities in South Africa

Respondent

The Trustees for the time being of the Nonhlanhla Chili Family Trust

Respondent

The Trustees for the time being of the Abaqanduli Women Development Trust

Respondent

DA JO Investments (Pty) Limited

Respondent

Procedural Posture

Review Application / Final Judgment on Application Under Section 252 of the Companies Act

Legal Issues

  1. 1 Whether the conduct of the company and the second respondent was unfairly prejudicial, unjust, or inequitable to the applicants as minority shareholders.
  2. 2 Whether the company improperly funded litigation that was essentially a dispute between shareholders.
  3. 3 Whether the resolution to pay management fees to the second respondent and the withdrawal of funds breached the shareholders agreement and prejudiced the applicants.

Ratio Decidendi

The court found that the company, under the control of the second respondent, engaged in conduct that was unfairly prejudicial to the applicants as minority shareholders. This included funding litigation that was essentially a shareholder dispute, paying management fees and withdrawing funds in breach of the shareholders agreement, and manipulating company affairs to reduce the value of the applicants' shares. The court held that these acts constituted actionable conduct under section 252 of the Companies Act. The applicants established both particular acts and a general manner of conduct that was unfairly prejudicial, unjust, and inequitable. The court rejected the respondents' argument...

Court Disposition

Application granted. The second respondent is ordered to purchase the applicants' shares at a fair value determined by independent auditors. Costs awarded to the applicants.

Orders

  • The second respondent is ordered to purchase from the applicants their shares in the issued share capital of the first respondent at a price to be determined by independent auditors appointed by the President of the Institute of Chartered Accountants as the fair and reasonable value as at the date of this order.
  • In determining the value, auditors must consider all relevant facts, including the value of all assets and obligations, and the minority nature of the shareholding.