Gray and Others v Thesing Vastgoed BV and Others (267/85/av) [1986] ZASCA 129; [1987] 1 All SA 409 (A) (21 November 1986)

Gray and Others v Thesing Vastgoed BV and Others (267/85/av) [1986] ZASCA 129; [1987] 1 All SA 409 (A) (21 November 1986)

The court found that although the payment to Gray was labelled as a director's fee, it was not related to any services performed and was in substance a disguised payment to the seller of shares. However, the agreements of sale and lease were indivisible and interdependent, and the company's commitment to pay Gray was limited to funds received as rental from the lessee. The company acted merely as a conduit for the transmission of funds from the purchaser to Gray, and did not provide financial assistance for the purchase of its shares within the meaning of section 38(1) of the Companies Act. The payment was not made out of the company's own assets but from rental income received from the...

Citation
[1986] ZASCA 129
Parties
Appellant: Douglas Wagner Gray; Appellant: Nicholas Browse Gray; Appellant: Anne Dorothy Gray; Respondent: Thesing Vastgoed BV; Respondent: Michael Ginsberg Amler & Co; Respondent: Knorhoek Estate (Pty) Ltd; Respondent: Knorhoek Flora (Pty) Ltd
Court
Supreme Court of Appeal
Jurisdiction
South Africa
Judgment Date
21 November 1986
Case Number
267/85/av
Procedural Posture
Civil Appeal / Appeal From the Cape of Good Hope Provincial Division
Outcome
Appeal dismissed. Costs awarded to the first respondent on an attorney and client basis.
Judges
Corbett, Grosskopf, Smalberger, Nicholas, Nestadt
Legal Topics
Companies Act Section 38, Financial Assistance for Share Purchase, Sale of Shares, Invalidity of Contract, Director Remuneration
Commercial and Corporate Companies Act Section 38 Financial Assistance for Share Purchase Sale of Shares Invalidity of Contract Director Remuneration

Case Brief

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Parties

Douglas Wagner Gray

Appellant

Nicholas Browse Gray

Appellant

Anne Dorothy Gray

Appellant

Thesing Vastgoed BV

Respondent

Michael Ginsberg Amler & Co

Respondent

Knorhoek Estate (Pty) Ltd

Respondent

Knorhoek Flora (Pty) Ltd

Respondent

Procedural Posture

Civil Appeal / Appeal From the Cape of Good Hope Provincial Division

Legal Issues

  1. 1 Whether the agreement of sale of shares contravened section 38(1) of the Companies Act by providing financial assistance for the purchase of shares.
  2. 2 Whether the payment to Gray labelled as a director's fee was in substance financial assistance for the share purchase.
  3. 3 Whether the lease agreement and the sale agreement were indivisible and interdependent.

Ratio Decidendi

The court found that although the payment to Gray was labelled as a director's fee, it was not related to any services performed and was in substance a disguised payment to the seller of shares. However, the agreements of sale and lease were indivisible and interdependent, and the company's commitment to pay Gray was limited to funds received as rental from the lessee. The company acted merely as a conduit for the transmission of funds from the purchaser to Gray, and did not provide financial assistance for the purchase of its shares within the meaning of section 38(1) of the Companies Act. The payment was not made out of the company's own assets but from rental income received from the...

Court Disposition

Appeal dismissed. Costs awarded to the first respondent on an attorney and client basis.

Orders

  • The appeal is dismissed.
  • The appellants are ordered to pay the first respondent's costs as between attorney and client.