Van Der Watt v Schoeman and Others (3393/2022) [2023] ZAECQBHC 61; 2024 (1) SA 531 (ECGq) (12 October 2023)

Van Der Watt v Schoeman and Others (3393/2022) [2023] ZAECQBHC 61; 2024 (1) SA 531 (ECGq) (12 October 2023)

Section 163 of the Companies Act is applicable to situations of deadlock between shareholders or directors, not only to cases of minority oppression. The applicant, as an equal shareholder and director, was excluded from management and decision-making by the first respondent, who acted unilaterally and without proper authorisation. This conduct was found to be oppressive and unfairly prejudicial, disregarding the applicant's interests. The open offer made by the first respondent did not cure the prejudice, as the valuation reports underpinning the offer were found to be unreliable and based on incorrect information. The court held that the relief sought by the applicant, namely a buy-out...

Citation
[2023] ZAECQBHC 61
Parties
Applicant: Carin Van Der Watt; Respondent: Ada-Mari Schoeman; Respondent: Leap of Faith Patensie (Pty) Ltd; Respondent: GR Ferreira Boerdery; Respondent: Merwe Van Der Watt
Court
Eastern Cape High Court, Gqeberha
Jurisdiction
South Africa
Judgment Date
12 October 2023
Case Number
3393/2022
Procedural Posture
Oppression Remedy Application / Judgment After Opposed Application
Outcome
Application granted in part; the first respondent is ordered to purchase the applicant's shares and loan account at fair value, with valuation to be determined by an independent chartered accountant. Ancillary relief granted as set out in the order. Costs awarded to the applicant.
Judges
Bands
Legal Topics
Oppressive Conduct, Deadlock, Shareholder Remedies, Companies Act Section 163, Fair Valuation, Delinquent Director
Commercial and Corporate Oppressive Conduct Deadlock Shareholder Remedies Companies Act Section 163 Fair Valuation Delinquent Director

Case Brief

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Parties

Carin Van Der Watt

Applicant

Ada-Mari Schoeman

Respondent

Leap of Faith Patensie (Pty) Ltd

Respondent

GR Ferreira Boerdery

Respondent

Merwe Van Der Watt

Respondent

Procedural Posture

Oppression Remedy Application / Judgment After Opposed Application

Legal Issues

  1. 1 Whether section 163 of the Companies Act applies to a director or shareholder confronted with a deadlock with no reasonable prospect of reconciliation.
  2. 2 Whether the conduct of the first respondent is oppressive, unfairly prejudicial, or unfairly disregards the interests of the applicant.
  3. 3 Whether the relief sought by the applicant, including a buy-out at fair value and ancillary orders, is competent under section 163.

Ratio Decidendi

Section 163 of the Companies Act is applicable to situations of deadlock between shareholders or directors, not only to cases of minority oppression. The applicant, as an equal shareholder and director, was excluded from management and decision-making by the first respondent, who acted unilaterally and without proper authorisation. This conduct was found to be oppressive and unfairly prejudicial, disregarding the applicant's interests. The open offer made by the first respondent did not cure the prejudice, as the valuation reports underpinning the offer were found to be unreliable and based on incorrect information. The court held that the relief sought by the applicant, namely a buy-out...

Court Disposition

Application granted in part; the first respondent is ordered to purchase the applicant's shares and loan account at fair value, with valuation to be determined by an independent chartered accountant. Ancillary relief granted as set out in the order. Costs awarded to the applicant.

Orders

  • The first respondent is directed to purchase the applicant's shares and loan account in the second respondent at a fair value to be determined by an independent chartered accountant as specified in the order.
  • The parties must endeavour to agree on the appointment of a practising chartered accountant of not less than 15 years standing; failing agreement, the appointment will be made by the president or chairman of the Gqeberha Regional Association of the South African Institute of Chartered Accountants.