Nompozolo v Phytomed Close Corporation and Others (1142/2015) [2015] ZAECPEHC 39 (2 June 2015)

IN THE HIGH COURT OF SOUTH AFRICA

EASTERN CAPE LOCAL DIVISON, PORT ELIZABETH

CASE NO: 1142/2015

Date heard: 28 May 2015

Date delivered: 2 June 2015

NOT REPORTABLE

In the matter between

BRIAN NOMPOZOLO

Applicant

And

PHYTOMED CLOSE CORPORATION

First Respondent

ANELE PAKADE

Second Respondent

ESTATE LATE MAVIS TOYI

Third Respondent

PHILA PAMELA SIPAMLA

Fourth Respondent

JUDGMENT

GOOSEN, J.

[1] The applicant seeks an order against the second, third and fourth respondents directing them to deliver to him, income and expenditure

statements and other financial documents of the first respondent. The documents sought are those from the inception of the first respondent “to the most recent transaction date”. The application is opposed. The second and fourth respondents are members of the first respondent. The third respondent is the “estate late Mavis Toyi”. The executor of the deceased estate is not cited. The late Mavis Toyi was a member of the first respondent until her death in 2011.

[2] The applicant bases his claim for access to the documents, in his founding affidavit, on the allegation that he is a member of the

first respondent and that he is entitled to share in the profits of the first respondent. He states that during September 2007 he, together with the second and third respondents and the late Mavis Toyi, purchased the membership interest in the first respondent. It is alleged that the four purchasers entered into an agreement that they would obtain equal membership interest and share equally in the profits made by the first respondent. The purchase consideration was R1,000,000 payable in the form of R300,000 in cash and the balance payable by way of purchase of stock for the business over a period of 5 years.

[3] It is common cause that the first respondent was purchased in September 2007 and that the applicant acquired a 25% interest in the first respondent. Apart from this the factual basis of the applicant’s claim is disputed. The respondents set out the factual background as follows: The first respondent trades in organic medical supplements which it sources from Edelweiss Pharmaceutical Pty Limited. The fourth respondent was employed as a manager. In 2007 the then sole member of the first respondent, Moodley, offered to sell his membership interest to the fourth respondent for R1,000,000. She could not afford the price. As a result, she arranged that the applicant, her late mother Mavis Toyi and the second respondent should jointly negotiate the purchase of the first respondent. This resulted in the agreement referred to. At the time the applicant could not afford the R100,000 contribution each of them was to make. He accordingly paid off this amount over a period of two months. The first respondent then adopted what is referred to as the Network Marketing Plan which, on a reading of the papers, involved each of the members in direct marketing activities and the recruitment of distributors on behalf of the first respondent.

[4] In 2007 and 2008 and the first respondent did not generate profits which could be distributed to members. Instead an amount of R10,000 was paid to each member for each of the two years by way of advanced earnings based on the sales activity of the members.

[5] According to the fourth respondent the applicant was not particularly successful in his marketing activities and he effectively ceased active involvement in the first respondent’s business. In September 2010 the applicant approached the fourth respondent and the late Mavis Toyi and requested a loan of R100,000 because he was experiencing financial difficulties. His proposal was that he wanted to start a new business venture in the property field. He prepared a loan agreement which the late Mavis Toyi signed. The second and fourth respondent refused to enter into the loan agreement because the applicant wanted to withdraw his capital from the business whilst nevertheless retaining his membership interest. The loan agreement was never signed. Instead the parties entered into an agreement to repay the R100,000 invested by the applicant upon the applicant’s resignation as a member of the first respondent.

[6] The applicant signed a CK 2 document indicating his resignation as a member of the first respondent. An amended founding document

reflecting the fourth respondent and Mavis Toyi’s membership interest at 33% each and that of the second respondent at 34% was signed by the members on 6 August 2010 and submitted to the Registrar of Close Corporations 15 September 2010. As a result of this the applicant ceased to be a member of the first respondent and had no further involvement with the business activities of the first respondent from September 2010 until the present.

[7] In his reply the applicant admits that he was paid R100,000 in September 2010. He states, however, that this was pursuant to a loan agreement in terms of which his membership interest was “housed” by the remaining members. He admits that he was not involved in the first respondent’s business activities after 2010. It appears from the allegations in his founding affidavit that his first contact with the members of the first respondent after September 2010 was in October 2014 when he requested a members meeting. The members refused to hold such meeting, resulting in a request for certain documents in February 2015 and ultimately this application.

[8] The application is not founded upon the provisions of the Promotion of Access to Information Act 2 of 2000 (hereinafter “PAIA”)

although the heads of argument filed on behalf of the applicant rely upon this Act. At the hearing of the matter, Counsel for the

applicant was constrained to concede that – on the facts as must be accepted in the light of the disputed facts on the papers

–the applicant had made out no case for obtaining any documents relating to the period after his resignation from the first

respondent.

[9] Applicant’s counsel could offer no explanation for the applicant’s failure to disclose either the alleged loan agreement or his ostensible resignation as a member in 2010. Counsel could also not explain why the applicant had taken no steps at all after 2010 until October 2014 to assert his alleged right of access to information relating to the activities of the first respondent.

[10] As indicated, there is a material dispute of fact regarding the applicant’s status as a member of the first respondent. The

applicant seeks final relief in these proceedings and has not sought a referral of the matter for the hearing of oral evidence. The well-known rule in Plascon-Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd [1984] ZASCA 51; 1984 (3) SA 623 (A) at 634I-635B applies. It must therefore be accepted that the applicant ceased to be a member of and have any proprietary interest in the affairs of the first respondent during or about September 2010. On this basis, even if it is accepted that the application is one properly brought in terms of PAIA (a proposition which was vigorously denied by the respondents), the applicant has failed to make out any case for an order directing access to any information after September 2010.

[11] The question that arises is whether a case has been made out for such information or documents for the period when the applicant was a member of the first respondent.

[12] Section 50 of PAIA deals with rights of access to records of private bodies. It provides that:

(1) A requester must be given access to any record of a private body if –

a. That record is required for the exercise or protection of any rights;

b. That person complies with the procedural requirements in this Act relating to a request for access to that record; and

c. Access to that record is not refused in terms of any ground for refusal contemplated in Chapter 4 of this Part.

[13] The section sets out the essential averments which must be made in order to bring the application within the ambit of PAIA. In this instance the application is founded on the allegation that the applicant is a member of the first respondent; that he requires the documents sought in order to investigate what has transpired in the business of the first respondent and in particular whether any dividend has accrued to him and that he has requested the first respondent to give him access to all relevant documents.

[14] In my view, the fact that the applicant was a member of the first respondent does not assist the applicant in this application. The notice of motion seeks relief against the second, third and fourth respondents only. The documentary information sought is that of the first respondent. The applicant does not seek any order against the first respondent. The letter of demand in which the documents were first sought was addressed to the first respondent. No request for information was made at any stage to the second, third or fourth respondents. To the extent that the application can be said to fall within the ambit of PAIA it must fail at the first hurdle set up by section 50 of PAIA, namely that the procedural requirements of requesting the information from the second, third and fourth respondents prior to launching this application were plainly not met. It must also fail at the level of what is requested, namely information held by the first respondent. There is no allegation that the second, third and fourth

respondents are in possession of the documents sought by the applicant.

[15] I was referred to Davis v Clutchco (Pty) Ltd 2004 (1) SA 75 (C) in support of an argument that an applicant as member of a close corporation is entitled to information held by the close corporation

if he or she reasonably requires such information to protect a right, and it has not been refused on any of the grounds listed in section 68 of the Act. That matter concerned a shareholder who sought access to information held by the company of which he was a shareholder. It is wholly distinguishable on the facts. Here the applicant does not seek any order against the close corporation of which he was a member.

[16] The applicant has not made out any case in terms of section 50 of PAIA or on any other basis for the granting of the order set out in the notice of motion. In the result the application must fail.

[17] I make the following order:

The application is dismissed with costs.

___________________________

G. GOOSEN

JUDGE OF THE HIGH COURT

Appearances:

For the Applicant

N. Msizi

Instructed by Mqanto & Associates Attorneys

For the Respondents

M. Nobotana

Instructed by Lulama Prince Attorneys