Mamela Taxi Rank (Pty) Ltd v Mamela Taxi Association and Others (CA 155/2010) [2010] ZAECMHC 31 (28 October 2010)

IN THE HIGH COURT OF SOUTH AFRICA

(EASTERN CAPE HIGH COURT: MTHATHA)

CASE NO. CA 155/2010

REPORTABLE

In the matter between:

MAMELA TAXI ASSOCIATION …...............................................1st Appellant

NDUMISO AARON GODLOZA …................................................2nd Appellant

NTSIKELELO MESILANE …........................................................3rd Appellant

and

MAMELA TAXI RANK (PTY) LTD …............................................Respondent

JUDGMENT

ALKEMA J

[1] This appeal arises from a judgment delivered by the court a quo on the return day of the Rule Nisi. The court neither confirmed nor discharged the Rule, but issued a mandamus. There are two issues: The first issue is to what extent, if any, the court has the power to make an order which is neither claimed in the relief by either party, nor canvassed in the papers or in argument. The second issue is what order this court, sitting as a court of appeal, should make.

[2] The background to the proceedings and the facts giving rise thereto are relatively uncomplicated and generally undisputed. They are the following.

[3] The respondents in the court a quo are the appellants in this appeal, but for the sake of continuity and ease of reference I intend to continue referring to them as the respondents. Likewise, the applicant company in the court below is the respondent in this appeal and for the same reasons I shall refer to it as the applicant.

[4] The applicant and first respondent are both juristic persons; the former being a registered company and the latter a voluntary association. The applicant carries on business as a taxi operator and the first respondent as an association of an unknown number of taxi operators. It seems to be common cause that the members of the applicant are also members of the first respondent. Save as aforesaid, the evidence does not disclose any other form of legal nexus between the applicant and the first respondent.

[5] One Boya, the deponent to the launching affidavit of the applicant, and one Sirenya together with the second and third respondents, are the sole directors and shareholders of the applicant. The fourth respondent is the First National Bank where a sum of R150000.00 belonging to applicant is kept. It has not entered the fray and no further reference to it is required.

[6] The main protagonists to the litigation are the members and directors of the applicant who are divided into two camps: the said Boya and Sirenya in one corner, and the second and third respondents in the other. These, then, are the dramatis personae in these proceedings.

[7] The banking account of the applicant company was at all relevant times kept at Standard Bank. On my understanding of the rather poor description in the papers of the directors’ signing powers, it would appear that all five of the original directors of

the applicant have signing powers of cheques. (The fifth director had become deceased before the events arose which gave rise to this litigation, and he was never replaced). Of the five, two directors are jointly required to sign cheques. This was and continues to be the remaining position at all relevant times to this application.

[8] On a reading of the papers, it is quite clear that at all material times the said Boya, supported by the said Sirenya, suspected the second respondent, who is supported by the third respondent, of dishonesty in relation to financial transactions involving the company. Likewise, the second respondent supported by the third respondent, suspected Boya and Sirenya of similar misdemeanors. The clouds bearing the potential of a directors’ deadlock causing the substratum of the company to disappear, started gathering on the horizon during July 2009.

[9] Towards the end of August 2009 the mutual distrust culminated in the second and third respondents signing a company cheque of R150000.00 drawn on the applicants’ Standard Bank account and depositing the funds into the FNB account of the first respondent. On the respondents’ case, this transfer was motivated by a fear that Boya intended, with the assistance of Sirenya, to misuse these funds for personal gain, and in an attempt to protect the applicants’ funds from possible misappropriation on the part of Boya.

[10] On the applicant’s case, Boya during July 2009 suspected the second and third respondents from misappropriating company funds for personal gain. During August 2009 it came to Boya’s notice that the second and third respondents had unlawfully

transferred the sum of R150000.00 from the account of the applicants’ company to the first respondent. On making enquiries from the bank, they established that the sum was unlawfully transferred to the first respondent’s account towards the end of August 2009. They immediately launched an urgent application, on notice, against the respondents claiming an interlocutory interdict freezing the FNB account of the first respondent and certain other ancillary relief.

[11] On 15 September 2009 the court, per Sangoni ADJP, (as he then was) granted a Rule Nisi in favour of the applicant calling on the respondents to show cause why the account of the first respondent held at FNB in which the sum of R150000.00 was kept, should not be frozen pending the outcome of the action. In addition, it ordered that such relief operate as an interim interdict pending

determination of the application on the return date. The Rule Nisi reads as follows:

“2. THAT a Rule Nisi be hereby issued calling upon the Respondents to show cause to show cause, if any, on Thursday, the 15th day of October 2009 why:

2.1 the Fourth Respondent should not be ordered to Freeze the First Respondent’s account number 62016342678 pending the finalization of an action to be instituted within 10 (ten) days from the date of this order by the Applicant against First, Second and Third Respondents should such action not be instituted within the said period, this order shall lapse.

2.2 the First, Second and Third Respondents should not be ordered to pay costs of the application. The fourth Respondent to pay costs only in the event of it opposing the same.

3. THAT paragraph 2.1 of the Rule Nisi shall operate as an interim interdict pending the finalization of this application.

4. THAT this order shall be served on the Fourth Respondent by the sheriff of the High Court, Mthatha.

[12] It is opportune at this stage of the judgment to pause in order to reflect on the nature of the relief sought and granted.

[13] The relief sought by the applicant company was in the nature of a temporary interdict pending the outcome of an action to be instituted. As such, it was intended to operate as an interlocutory order or temporary interdict. No final relief was sought. It was brought as an urgent application, on notice, and was decided only on the applicant’s launching affidavit. Although it was opposed by the respondents on the date of hearing, their answering affidavits, including the applicants’ replying affidavit, were only filed and served after the Rule Nisi was issued and the interim interdict was granted.

[14] The relief sought was not changed by the above events, and remained in the nature of interim relief on the return date. Put differently, the relief claimed on the return date remained the grant of a temporary interdict pending the outcome of an action.

The disclosure of the respondents’ defence in their answering affidavits and their claims of fraud and theft on the part of Boya and Sirenya, did not change the relief claimed by the applicant company from temporary relief to final relief. The claim for final relief was contained in the pending action, not in the interdict proceedings.

[15] Finally, the grant or refusal of an interdict is part of the law of procedure. As such, in the consideration of an interim or temporary interdict, the court is not required to finally resolve issues of fact or of substantive law between litigating parties. A weighing up of the probabilities of conflicting versions and findings of fact are not required at this stage. The court’s

approach to a temporary interdict does not involve the Plascon Rule, and nor is the applicant required to prove a clear substantive right. These are considerations in the grant of final relief.

[16] All the court is required to do at the interim stage, is to consider whether or not the applicant has shown a prima facie legal right to the relief sought. Such right may be open to some doubt, provided that the balance of convenience favours the applicant. It is often said that the clearer the right the less the role played by the requirement of the balance of convenience.

[17] The position in the consideration of a final interdict is, of course, different. When a final interdict is sought, the applicant must show, on a balance of probability, the existence of a clear substantive legal right to the relief sought. The requirement of balance of convenience plays no role in the grant of a final interdict. The test and approach in final interdict proceedings

are different (the Plascon Rule), but since the court a quo was concerned with the grant of a temporary interdict (albeit on the return date), nothing further need be said.

[18] The above, I believe, is trite. See, for instance Harms, Civil Procedure in Superior Court, p A36 (para A5.1) – p.A44 (para A5.12A).

[19] The issue before the court a quo on the return date was accordingly whether the Rule Nisi should be confirmed or discharged. Such issue depended on whether or not the court a quo was satisfied that the applicant had made out a case for the grant of an interim interdict. At the risk of repetition and stating

the obvious, the requirements of an interim interdict are:

a prima facie right;

a well-grounded apprehension of irreparable harm if the interim relief is not granted and the ultimate relief is eventually granted;

the balance of convenience favouring the grant of the interim interdict; and

no other remedy available.

See, for instance, Harms (supra) at p.A-40 (para A5.7) and the cases cited.

[20] Usually, if the court on the return date finds that the facts found proved support the requirements of an interim interdict pending the outcome of the action, then it confirms the Rule Nisi. If not so satisfied, then the court discharges the Rule which has the effect that no interim interdict is granted. This is usually what is required by the court a quo. (I shall return later to the circumstances under which a court will make another order).

[21] On the return day the court a quo in this case made the following order (I quote verbatim):

“1. The fourth respondent, FNB, be and is hereby ordered to unfreeze the account of the first respondent being Account Number 62016342678 and immediately withdraw from it a sum of R150 000,00 (one hundred and fifty thousand rand), issue a bank guaranteed cheque payable to the applicant and then hand it over to the Sheriff of this Court.

2. The Sheriff of this Court be and is hereby ordered and directed to deposit the cheque aforementioned into the bank account of the applicant at Standard Bank, Mthatha West, Account Number 08 133 893 7.

3. Miss Nombulelo Boya, Mr Mhlangabezi Sirenya, Mr Ndumiso A. Godloza, Ms Nontsikelelo Mesilane and any other member of the applicant be and are hereby interdicted and restrained from withdrawing and in any other way dealing with the said account of the applicant until a properly made resolution of the applicant directs when and by whom the account shall be handled.

4. The second and third respondents to pay costs of this application.”

[22] The two issues which arise, as I said at the outset of this judgment, are whether the court had the power to make the order which it did; and secondly, if it did not have such power, what order this court should make. I shall deal with the two issues in the same order.

[23] The power of the court to grant judgments and issue orders is not unlimited; it is limited by law and judicial constraints. One of the basic tenets of the Rule of law and the interests of justice is the right to a fair trial, and this is recognized by the Constitution as a fundamental right (s.34). A trial or legal proceedings can only be fair if, inter alia, the persons against whom the order is made are parties to the litigation, the material issues are adequately canvassed in the papers, ventilated by the evidence and addressed during argument by the parties to the litigation. It follows that the judgment or order must be confined to these issues. If not, it results (in the words of Harms DP in the case of Zuma to which I shall shortly refer) “… … in a judgment by ambush (which) is not permitted, … …” and therefore in an unfair trial.

[24] Relying on Salisbury Municipality v MacMuldrow Ltd, 1916 AD 252, the learned authors of Herbstein and Van Winsen, The Civil Practice of High Courts of South Africa. (5th Ed.)(Vol.1) p.924, state:

“Generally speaking, the court will not grant a judgment upon an issue that was not in dispute in the pleadings.”

[25] In S v Van der Sandt 1997 (2) SACR 116 (W) Van Dijkhorst J said at 132 (c):

“A fair trial is in essence a proper ventilation of the dispute before an unbiased competent tribunal.”

[26] See also RAF v Reynolds [2006] JOL 17050 (W) (not reported elsewhere) p.6 and 7 (para 8); Groenewald NO and another v Swanepoel 2002 (6) SA 724 (E); Tshabalala v S [1999] 1 All SA 677 (C).

[27] In Kouesa v Minister of Home Affairs, Namibia and Others 1996 (4) SA 965 (NmS) the Namibian Court of Appeal said at 973 I-974 A:

“It would be wrong for judicial officers to rely for their decisions on matters not put before them by litigants neither in evidence or in oral or written submissions. Now and again a Judge comes across a point not argued before him by counsel but which he thinks material to the resolution of the case. It is his duty in such a circumstance to inform counsel on both sides and to invite them to submit arguments either for or against the Judge’s point. It is undesirable for a Court to deliver a judgment with a substantial portion containing issues never canvassed or relied on by counsel.”

[28] The principle has now received authorative and formal recognition by the Supreme Court of Appeal in National Director of Public Prosecutions v Zuma (Mbeki and others intervening) [2009] ZASCA 1; 2009 (2) SA 277 SCA and confirmed in Ekurhuleni Municipality v Dada NO and others [2009] 3 All SA 379 (SCA).

[29] At p. 287-288 (para 15), delivering a unanimous judgment, Harms DP in Zuma (supra) said:

“… in exercising the judicial function judges are themselves constrained by the law. … … This commendable approach was unfortunately subverted by a failure to confine the judgment to the issues before the court; by deciding matters that were not germane or relevant; by creating new factual issues; … …”

[30] At p.289 (para.19) the learned Judge said:

“The independence of the Judiciary depends on the Judiciary’s respect for the limits of its powers. … … its function is to adjudicate the issues between the parties to the litigation and not extraneous issues.”(my emphasis).

[31] Finally, at p.299 (para.47) the learned Deputy President warned:

“Judgment by ambush is not permitted … … the other party may well be prejudiced because evidence may have been available to it to refute the new case on the facts.”

[32] As always, there are exceptions to the Rule. The reported number of cases on the exceptions, ironically by far outnumber the reported cases on the Rule. It is not possible, indeed not advisable, to even attempt categorizing the exceptions by way of illustration. It suffices to refer to the following examples:

[33] If a legal point is not raised during argument, and provided:

1. the issue is raised on the pleadings or affidavits;

2. the facts were canvassed in evidence; and

3. the court has invited the parties to make written legal submissions on

the point,

the court then may decide the case without having heard oral argument in court.

Wyebank Funeral Services CC v Minister of Trade and Industry & others [2009] JOL 23366 (KZD) at p. 13; S v Nel 1987 (4) SA 276 (O); Kannenberg v Gird 1966 (4) SA 173 (C)

[34] If parties agree on something in addition to the lis then before Court – and seek an order from the court that by consent their agreement be incorporated in a court order –

then, and only in that event, such agreement may be made an order by the Court. Put differently, even if the issue is not ventilated

either on the papers or in evidence and nor in argument, then the court may make an order on such issue by agreement between the

parties. Transvaal Canoe Union v Butgereit and another 1990 (3) SA 398 (TPD) at 404 D-F and the authorities referred to at 406H.

[35] A court may raise the constitutionality of any point mero muto even in the absence of it being raised on the papers or evidence, but provided the applicable Rules have been complied with and the parties have been given the opportunity to address the court on the issue. See Frans Barnard Potgieter v Lid van die Uitvoerended Raad: Gesondheid, Provinsiale Regering Gauteng en andere [2002] 1 All SA 589 (T).

[36] Finally, a court is entitled, under the claim of alternative relief, to make certain orders of procedural nature and not specifically claimed by either party such as adjournments, matters being struck off or removed from the roll, referring issues to oral evidence and the like. If claims under alternative relief relate to substantive legal issues, the court will only grant relief if the basis for such relief has been laid in the particulars of claim or supporting papers, and the order is not inconsistent with the substantive relief claimed. See Mgoqi v City of Cape Town and another 2006 (4) SA 355 (C); Port Nolloth Municipality v Xhalisa 1991 (3) SA 98 (C) at 112 C-F; MEC Dept. of Education, Eastern Cape Province v Gqebe [2009] JOL 23717 (LAC).

[37] There are many more examples, but I believe the above sufficiently demonstrate that as a general principle, the exceptions to the Rule are only permitted if they do not compromise any litigant’s right to a fair trial. At the core of the Rule that any judgment or order must be based on properly ventilated issues, lies the right to a fair trial. In consequence, if such right

is compromised, then an exception to the Rule will not be allowed.

[38] I now turn to examine the order made by the court a quo and to determine to what extent, if any, it eroded either party’s right to a fair trial.

The first part of the first order is to “unfreeze” the first respondent’s banking account where the funds are presently kept. On a benevolent interpretation of the order, its

effect is simply to discharge the Rule Nisi. This was undoubtedly the main issue before the court a quo and the issues were properly ventilated and argued. The question is rather whether the court was correct in effectively discharging the Rule Nisi, and I will shortly return to such issue.

[39] The second part of the first order directs the fourth respondent (FNB) to issue a bank guaranteed cheque drawn on the first respondent’s account for R150000.00 and hand it over to the Sheriff. The second order directs the Sheriff to then deposit

the said cheque into the banking account of the applicant. The third order interdicts all the directors and members, including Boya and Sirenya “… and any other member …, who are not parties to the litigation, from withdrawing and in any other way dealing with the said account of the applicant until a properly made resolution of the applicant directs when and by whom the account shall be handled.” The effect of all these orders is that the first respondent must return the funds to the applicant and that the account of the applicant is effectively frozen until the deadlock is resolved.

[40] It is immediately apparent that none of the issues raised by the orders mentioned in the preceding paragraph were either ventilated in the papers or asked for in the relief claimed by either party, and nor were they raised in the written heads of argument before the court a quo. It is also clear from the context of the judgment that they were not raised in oral argument before the court a quo.

[41] It was not the applicant’s case, and nor did it ask, that the funds be returned to it. It merely asked for an order freezing the third respondent’s account where the funds were kept pending the outcome of the action. This was the order which was granted by the issue of the Rule Nisi; and this was the order which the applicant sought on the return day. And nor was it the respondent’s case that such an order be made. On the contrary, the second and third respondents’ case is that the funds should not be kept in the applicant’s account because they harbour a well-grounded apprehension that Boya and Sirenya may misappropriate the monies (my emphasis). The disputes between the parties form the subject of the pending action. Neither party asked the court a quo to resolve such dispute at the interdict stage.

[42] The order in paragraph 3 was made gratuitously. Neither party asked the court a quo to freeze the applicant’s account pending the resolution of the dispute between its directors in regard to the “handling of the account.” It is an issue not canvassed in the papers and the order may have far-reaching consequences. Effectively, if the applicant’s

banking account is frozen, even temporary, it may be cash-strapped and unable to pay running expenses or wages. It may result in its financial demise and liquidation. Neither party was given the opportunity to air their views on these issues.

[43] Finally, neither Boya nor Sirenya are parties to the litigation and neither are “any other members of the applicant” parties to the proceedings. No relief of any nature could have been granted against any of them. The terms of the second order are specifically directed against “… … any other member … … who are not parties to the litigation ….” With respect, the Court had no power to make such an order.

[44] In my respectful view, the orders made by the court a quo seriously impeded all the parties’ respective rights to a fair trial. On this ground alone the order of the court a quo should be set aside.

[45] However, and even if the court a quo did have the power to make the orders, it also, with respect, misdirected itself on the merits of all three orders.

[46] It is common cause that the funds were transferred from the applicant’s account to the first respondent’s account. The issue is whether the transfer was lawfully executed. On the version of Boya and Sirenya, the transfer was unlawful because,

firstly, there was no valid company resolution taken authorizing the second and third respondents to transfer the funds; and secondly and in any event, they transferred the funds with the intention to misappropriate same and defraud the applicant. On the second and third respondents’ version, Boya and Sirenya were not authorized by a valid company resolution to institute these proceedings, and in any event, since Boya and Sirenya intended to steal the funds from the company, they, (the second and third respondents) acted in the best interest of the applicant and its members to prevent the pending theft by transferring the funds to the first respondent. These are the issues in the pending action between the parties.

[47] As I remarked earlier in this judgment, the test to be applied and the approach of the court a quo at this stage of the proceedings should have been directed against the grant or otherwise of an interim interdict.

[48] This is recognized by the learned Judge at the outset of his judgment (although he conflates the requirements of an interim interdict with that of a final interdict, but since he did not decide the case as an interdict nothing turns on this). The puzzling feature of the judgment is that after referring to the requirements of a (final) interdict, the judgment then proceeds to state that the cause of action is based on the mandament van spolie and the case is then decided as a spoliation application.

[49] Save to say that the application is in the nature of interdict proceedings and that neither party has made out a case or asked for a spoliation order, it is abundantly clear that at the core of the factual disputes is the lawfulness of the transfer of the

funds and the authority of Boya and Sirenya to represent the applicant company. The factual and legal resolution to these disputes

depend on issues such as, inter alia, whether or not the signing powers of cheques by directors require at all a company resolution before each cheque is signed; the true intention on the part of the second and third respondents to transfer the funds to the first respondent; whether Boya and Sirenya were properly authorized to institute these proceedings on behalf of the applicant; the number of directors required to constitute a quorum; whether Boya was the chief executive officer of the applicant at the time with a casting vote; the issue of a possible derivative action under section 266 of the Companies Act, and so forth. The above issues, having regard to their nature and multiplicity, and therefore the issue of the lawfulness of the transfer, are in my respectful view incapable of resolution on the papers, even on a robust approach.

[50] The object and purpose of an interim interdict is, inter alia, to protect the status quo and rights of parties from imminent harm, danger or prejudice pending the outcome of legal proceedings. Even if spoliation procedure is competent (which I seriously doubt) on the facts of this case, the requirement of an unlawful deprivation must be established as a necessary requirement for the grant of a spoliation order. In finding that the transfer of the funds to the first respondent was unlawful which warranted a spoliation order, the learned Judge not only made a finding in the absence of proven facts before court, but it also effectively pre-empted the findings of the trial court which are presently pending in the action and therefore lis pendens. It follows that, in my respectful view, the court a quo misdirected itself in issuing the order.

[51] It remains to make a final comment. In the third order the court a quo interdicted and restrained the directors “… and any other member of the applicant …” from withdrawing funds from the applicant’s account “… until a properly made resolution of the applicant directs when and by whom the account shall be handled.” (my emphasis)

[52] The effect of the aforesaid, read with the first part of the first order “unfreezing” the account of the first respondent, is that the Court a quo re-instated the temporary interdict pending “… a properly made resolution …”

[53] The order claimed by the applicant and granted under the Rule Nisi was a temporary interdict pending the outcome of an action to be instituted (which has now been instituted). If the court a quo was of the view that a temporary interdict should be granted pending the outcome of the action, it should have confirmed the Rule Nisi. Instead, it effectively discharged the Rule Nisi, then re-instated a different Rule Nisi not subject to the action contemplated by the applicant or by the Rule Nisi and presently pending before another Court, but subject to the court’s own condition (the passing of a valid resolution) not asked for by any other parties. In my respectful view, it clearly misdirected itself in this regard as well.

[54] In the words of Harms DP in Zuma (supra):

“Judgment by ambush is not permitted.”

[55] The judgment and order of the court a quo vacillated from an interim interdict, to spoliation, and to a final interdict. I am driven to the conclusion that it should be set aside in toto and replaced with an appropriate order applying the test of and approach to an interim interdict. It is to this issue I now turn.

[56] During the closing stage of argument in the appeal Mr Ntayiya, the attorney who appeared on behalf of the respondent (the applicant in the court a quo), made a startling concession. He informed the court that he had seen the resolution authorizing Boya to launch the application and depose to the affidavit of the applicant, but which was not attached to the papers. Notwithstanding Boya’s contention under oath to the contrary (presumably prepared by Mr Ntayiya), he submitted that such resolution was not “a valid resolution.” It follows, as he was constrained to concede, that Boya was not properly authorized by the applicant to institute the proceedings. If this is so, then the appeal should succeed and the Rule Nisi should be discharged without further ado. The question is what weight, if any, this court may place on a concession of legal nature without knowing on what facts such a concession is made,

[57] The rule that a court is not bound by concessions of legal nature made by legal representatives, is trite and needs no authority. This is so because the submission or concession may be wrong. In my view, there is no difference in principle where neither the facts from which the legal inference is drawn, nor the reasoning for drawing such inference, is known to the court. If this court is bound by the concession, then the judgment is based on facts and legal inferences only known to one legal representative not canvassed and ventilated in court, and not knowing whether the facts and legal inferences are correct. For all I know, Boya in his capacity as Chief Executive Officer may have a casting vote and the resolution was valid, or it may be valid for other reasons.

[58] I therefore hold that this court is not bound by the concession. The only relevance thereof is that it is a further firm pointer to the need for a fully ventilated hearing before a court in the pending action before a final order can be made.

[59] I have already referred to the requirements of an interim interdict. In regard to establishing the facts in support of the requirements, the approach is different to that of a final interdict where the Plascon rule is employed. In the case of an interim interdict the test in Webster v Mitchell 1948 (1) SA 1186 (W) at 1189 as modified by Ogilvie Thompson J in Gool v Minister of Justice 1955 (2) SA 682 (C) at 688 has been followed in long line of cases including Simon NO v Air Operations of Europe AB [1998] ZASCA 79; 1999 (1) SA 217 (SCA) at 228 G-H; Msunduzi Municipality v Natal Joint Municipal Pension/Provident Fund 2007 (1) SA 142 (N) at 152 E-F; Camps Bay Residents and Ratepayers Association v Augoustides and Others 2009 (6) SA 190 at 195E-196C.

[60] This test, as modified, may be summarized as follows. The court takes the facts set out by the applicant together with the facts set out by the respondent which the applicant cannot dispute, and considers whether, having regard to the probabilities of

ultimate success and onus, the applicant should (not could) obtain final relief at the trial. If serious doubt (not some doubt) is thrown on the case of the applicant by facts set out by the respondent in contradiction, then interim relief should not be granted. If there is some doubt, but the balance of convenience favours the applicant, then temporary relief should be granted pending the outcome of the action.

[61] In applying the above test, I am not at all convinced that the facts set up by the respondents throw serious doubt on the applicant’s chances of success at the trial. Although open to some doubt, the respective rights seem to be evenly balanced. The remaining number of directors and members of the applicant company are even in number and, unless a deadlock can be prevented by a casting vote or by a derivative action under the Company’s Act, they seem to have equal chances of success or failure. The determining factor in the application therefore lies in the balance of convenience. In determining the balance of convenience, the court must have regard to the consequences of an interim interdict being granted as opposed to it being refused.

[62] If an interim interdict is not granted, and the applicant is successful at the trial, it may be a hollow victory if the funds have in the meantime been squandered by second and third respondents. On the other hand, if the interim interdict is granted and the Rule is confirmed, the funds remain safe in the account of the first respondent and the applicant can continue operating its own account and business. This will be in the best interest of not only the applicant, but also of all its directors and shareholders, including the second and third respondents. I am therefore of the view that the balance of convenience favours the grant of the Rule Nisi.

[63] In regard to the question of costs, the respondent (the applicant in the court a quo) was substantially successful in the appeal. Although the appellants achieved success in that the order of the court a quo is to be set aside, it was success in form and not in substance. Adv. Hinana, on behalf of the appellants, correctly submitted that the order of the court a quo should be set aside, but strenuously argued that the Rule Nisi should be discharged. The object to be achieved by the appellants was to return the funds to them where the second and third respondents could regain control over the applicant’s company and its account. They failed in this object and are consequently substantially unsuccessful in the appeal. It follows that the appellants should, in my view, pay the costs of the appeal.

[64] In the above circumstances it follows that the Rule Nisi should be confirmed, with costs.

[65] I therefore make the following order:

1. The appeal succeeds and the order made by the court a quo is set aside in its totality, and is replaced by an order in the following terms:

“1.1 The Rule Nisi granted by this court on 15 September 2009 be and is hereby confirmed.

The costs are reserved for decision by the trial

Court hearing the pending action.

2. The appellants in the appeal are to pay the costs of appeal, the one paying the others to be absolved.”

____________________

I agree

SMITH J

NDENGEZI AJ

Heard on : 03 September 2010

Delivered on : 28 October 2010

Counsel for Appellants : Adv. Hinana

Instructed by : V.V. Msindo & Associates

Attorney for Respondents: Mr Ntayiya

Instructed by : Messrs Fikile Ntayiya & Associates