Gihwala NO and Another v Bam (4268/2008) [2012] ZAWCHC 264 (23 May 2012)

Gihwala NO and Another v Bam (4268/2008) [2012] ZAWCHC 264 (23 May 2012)

The court found that the payments made to the defendant for the sale of shares were in contravention of section 38 of the old Companies Act and constituted illegal financial assistance. The agreement and payments were void for illegality, and the defendant was unjustly enriched. The defence of res judicata failed because the parties and causes of action differed from the prior litigation, and the curators' claim was not prescribed as prescription only began running upon their appointment. The fraudulent conduct and knowledge of the directors could be imputed to the companies, but not to the curators, who were not party to the illegality. The in pari delicto defence did not bar the...

Citation
[2012] ZAWCHC 264
Parties
Plaintiff: Dines Chandra Manilal Gihwala N.O.; Plaintiff: George Papadakis N.O.; Defendant: Hendrik Roelof Bam
Court
Western Cape High Court, Cape Town
Jurisdiction
South Africa
Judgment Date
23 May 2012
Case Number
4268/2008
Procedural Posture
Civil Action / Final Judgment
Outcome
Plaintiffs succeed. Defendant ordered to repay the purchase price and costs; curators to return shares to defendant.
Judges
Allie
Legal Topics
Unjust Enrichment, Condictio Ob Turpem Vel Iniustam Causam, Section 38 Companies Act, Prescription, In Pari Delicto, Curatorship Liability
Commercial and Corporate Civil Procedure Unjust Enrichment Condictio Ob Turpem Vel Iniustam Causam Section 38 Companies Act Prescription In Pari Delicto Curatorship Liability

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Parties

Dines Chandra Manilal Gihwala N.O.

Plaintiff

George Papadakis N.O.

Plaintiff

Hendrik Roelof Bam

Defendant

Procedural Posture

Civil Action / Final Judgment

Legal Issues

  1. 1 Whether the defendant is obliged to repay the purchase price of shares received under an agreement contravening section 38 of the Companies Act.
  2. 2 Whether the defence of res judicata applies given prior litigation between related parties.
  3. 3 Whether the claim for repayment has prescribed under the Prescription Act.

Ratio Decidendi

The court found that the payments made to the defendant for the sale of shares were in contravention of section 38 of the old Companies Act and constituted illegal financial assistance. The agreement and payments were void for illegality, and the defendant was unjustly enriched. The defence of res judicata failed because the parties and causes of action differed from the prior litigation, and the curators' claim was not prescribed as prescription only began running upon their appointment. The fraudulent conduct and knowledge of the directors could be imputed to the companies, but not to the curators, who were not party to the illegality. The in pari delicto defence did not bar the...

Court Disposition

Plaintiffs succeed. Defendant ordered to repay the purchase price and costs; curators to return shares to defendant.

Orders

  • Defendant shall pay plaintiffs the sum of R9,866,434.18.
  • Defendant shall pay interest at 15.5% per annum from date of service of summons to date of payment, in terms of section 2A of the Prescribed Rate of Interest Act No. 55 of 1975.