PT Paint and Palel (Pty) Ltd and Another v Verios and Others (2024/084378) [2024] ZAGPJHC 807 (16 August 2024)

REPUBLIC OF SOUTH AFFRICA

IN THE HIGH COURT OF SOUTH AFRICA

GAUTENG LOCAL DIVISION, JOHANNESBURG

Case Number: 2024-084378

1. REPORTABLE: NO

2. OF INTEREST TO OTHER JUDGES: NO

3. REVISED: NO

16 August 2024

In the matter between:

PT PAINT AND PALEL (PTY) LTD First Applicant SOLOMON PHUTI MASHITISHO Second Applicant and ANDREW VERIOS First Respondent TROY VERIOS Second Respondent XANTIUM TRADING 410 (PTY) LTD Third Respondent COMPANIES AND INTELLECTUAL PROPERTY COMMISSION Fourth Respondent RBI CHARTERED ACCOUNTANTS’ INC Fifth Respondent NEDBANK LIMITED Sixth Respondent

JUDGMENT

Summary:

Civil procedure – urgent application – whether the applicants meet the requirements in respect of urgency as set out in rule 6(12).

Security law – whether the perfecting of the second applicant’s shares in the first applicant by the third respondents was legally effected.

Modiba J

[1] This is an opposed urgent application in which the applicants seek the following relief:

“1. That this application be heard on an urgent basis in accordance with the provisions of Rule 6(12) and that the requirements pertaining to service and time periods be dispensed with;

2. …

PART - A

3. An order declaring that the appointment of the First and Second Respondents as directors of the First Applicant by the Fourth Respondent be declared as invalid and unlawful in terms of section 163(2)(a) read with sections 76(2), 77(3) and 77(10) of the Companies Act No. 71 of 2008 (“the Act”) and the Memorandum of Incorporation of the First Applicant;

4. An interim order interdicting and prohibiting the First and Second Respondents from:

4.1 acting in the name of the First Applicant, signing anything on behalf of the First Applicant, or purporting to bind the First Applicant or authorising the taking of any action by or on behalf of the First Applicant;

4.2 acquiescing in the carrying on of the First Applicant’s business; and/or

4.3 any act or omission in the name of the First Applicant despite knowing that the act or omission was calculated to defraud a creditor, employee or shareholder of the First Applicant, or had another fraudulent purpose, pending the hearing and determination of Part B of this application;

5 That the status of the Second Applicant as the sole director of the First Applicant be restored;

6 That any act taken by the Sixth Respondent to appoint the First and Second Respondent as signatories to the First Applicant’s banking account be declared invalid and unlawful and that the Sixth Respondent be directed to restore the Second Applicant as the sole signatory in respect of the First Applicant’s bank account;

7 Directing the First, Second and Fourth Respondents to pay the costs of this application on an attorney own client scale;

8 Interest on the aforesaid costs at a rate of 11,75% per annum until date of payment; and

9 Further and/or alternative relief this Honourable Court may deem fit.

PART - B

1. Declaring, in terms of section 163(2) of the Companies Act No. 71 of 2008 read together with section 162 of the Act that the First, Second and Fourth Respondents:

1.1. An order restraining the conduct complained of by the First and Second Applicants (section 163(2)(a));

1.2. An order declaring any person delinquent or under probation, as contemplated in section 162 of the Act (section 163(2)(f)(ii));

1.3. An order directing the First Applicant or any other person to restore to a shareholder any part of the consideration that the shareholder paid for shares, or pay the equivalent value, with or without conditions (section 163(2)(g));

1.4. An order varying or setting aside a transaction or an agreement to which the First Applicant is a party and compensating the First Applicant or any other party to the transaction or agreement (section 163(2)(h));

1.5. An order to pay compensation to an aggrieved person, subject to any other law entitling that person to compensation (section 163(2)(j));

1.6. An order directing rectification of the registers or other records of the First Applicant (section 163(2)(k)), where so required;

2. Directing the First, or any other Respondents to pay the costs of this application on an attorney own client scale;

3. Interest on the aforesaid costs at a rate of 11,75% per annum until date of payment; and

4. Further and/or alternative relief this Honourable Court may deem fit.” (sic)

[2] The first, second and fifth respondents oppose the application. I conveniently refer to them jointly as the respondents. Although the respondents took issue with the urgency of the application, during oral argument, their counsel conceded that the alleged urgency of the application is linked to the merits. It is for that reason that a have considered the applicants’ case on urgency and the merits to determine whether they make out a case for the relief sought in respect of Part A.

[3] The background facts are largely common cause. Until 28 July 2021, the third respondent held shares in the first applicant. It sold the shares to the second applicant in terms of a sale of shares agreement (agreement) concluded on the aforesaid date. The first respondent represented the third respondent in this transaction in his capacity as its sole director.

[4] Prior to this acquisition, the second applicant was employed by the first applicant. He was appointed as its director on 30 August 2018. From that date, he became its co-director together with the first respondent. Subsequent to concluding the agreement, these parties also concluded a service agreement and a suretyship. I deal with the latter agreements later in this judgment.

[5] In the agreement, reference to the purchaser is to the second applicant. Reference to the seller is to the third respondent. The material terms of the agreement are as follows:

“2.2 The Seller owns 100% of the Shares in the Company and wishes to sell their Shares to the Purchaser as part of an agreed B-BBEE process and as allowable by the South African company laws and B-BBEE regulations.

2.3 The Purchaser wishes to purchase the Seller’s Shares on the terms and conditions contained herein.”

3 The Purchaser hereby with effect from the Effective Date, purchases the Shares from the Seller, subject to the terms and conditions recorded in this Agreement. ”

4.1 Purchase price

The Purchase price shall be made up as follows:

4.1.1 an amount of R100.00 (One Hundred Rand) for the Shares;

4.1.2 the loan accounts as outlined in the Trial balance, inclusive of the loan between the Seller and the Company in the amount of R2 796 917,70 (Two million seven hundred and ninety-six thousand nine hundred and seventeen Rand and seventy cents) attached hereto as “Annexure E”. For the avoidance of doubt, the aforesaid loan is set to equalise the Nedbank term loan between the Seller and Nedbank, which loan is repayable by the Company monthly to Nedbank on the same terms and conditions as set out therein;

4.1.3 the motor vehicles, which values are as agreed upon between the Parties and as set out more fully in the schedule attached hereto as “Annexure G” and which schedule shall be further subject to verification by the auditors for the time being with the Trial Balance within ten (10) days of the signature of this Agreement. In respect of the motor vehicles:

4.1.3.1 Same are to be transferred to the Company within 30 days of the conclusion of this agreement but not later than 30 June 2021;

4.1.3.2 The loan in respect of the motor vehicles shall be repaid after the Loan Accounts set out in clause 4.1.2 are settled and shall bear interest at the official interest rate:

4.1.3.3 The loan in respect of the motor vehicle shall be repayable within 36 months, on a monthly basis after the Loan Accounts set out in clause 4.1.2 are settled, and

4.1.3.4 The motor vehicles shall remain as security on the loan for the Seller until fully repaid by the Company.

4.1.4 The Nedbank Overdraft in the books of the Company as of 28 February 2021. In relation hereto:

4.1.4.1 The Nedbank Overdraft shall be covered by the Seller’s guarantee as contained in the Liberty Policy which is being paid off in the amount of R65 000.00 (Sixty-five thousand rand) per month directly to Nedbank by the Company in order to reduce the Company’s monthly overdraft to a level of R2 million.

4.1.4.2 Upon signature of this Agreement and no later than 30 June 2021, the Seller shall transfer Liberty Policy in favour of the Nedbank Overdraft to the Company, to the value of R2 Million.

4.1.4.3 The Company will, on receipt of the Liberty Policy, record the transfer to it as income to the Company and the Seller will expanse (sic) the Liberty Policy in its books of account in favour of the Company.

4.1.5 The Purchaser will, however, have the right to settle the Purchase Price and subsequent loans as detailed in this clause 4 for an amount of R15 million which amount shall include the value of the Services Agreement entered into between the Seller and the Company.”

4.2 With effect from the Effective Date, the Parties shall:

4.2.1 transfer the Shares to the Purchaser;

4.2.2 deliver, to the Purchaser, duly executed share certificate which comply with the provisions of section 51 of Companies Act;