Emailing Review Application Final (1) Yyy

1
IN THE HIGH COURT OF SOUTH AFRICA

GAUTENG LOCAL DIVISION, JOHANNESBURG
Case NO:
In the matter between:
JONGISIZWE HOPA Applicant
And
LULAMA SIMPHIWE MEHLOMAKULU First Respondent
THE BUGSY SHARE TRUST Second Respondent
LULAMA SIMPHIWE MEHLOMAKULU N.O. Third Respondent
JOSE ALBERTO DELGADO N.O. Fourth Respondent
ELDERBERRY INVESTMENTS 139 (PTY) LTD Fifth Respondent
EM-THREE INVESTMENT HOLDINGS (PTY) LTD Sixth Respondent
JUDGE J A HEHER Seventh Respondent
In re:
In the Private Arbitration Between:
And
LULAMA SIMPHIWE MEHLOMAKULU First Defendant

THE BUGSY SHARE TRUST Second Defendant
LULAMA SIMPHIWE MEHLOMAKULU N.O. Third Defendant
JOSE ALBERTO DELGADO N.O. Fourth Defendant
ELDERBERRY INVESTMENTS 139 (PTY) LTD Fifth Defendant
EM-THREE INVESTMENT HOLDINGS (PTY) LTD Sixth Defendant
2
NOTICE OF MOTION
KINDLY TAKE NOTICE THAT the Applicant intends to make an Application to the
above Honourable Court on the __________________________________________
at 10H00 or as soon thereafter as the matter may be heard or on a date to be arranged
with the Registrar for an order in the following terms:
1. Condonation of the late prosecution of the review application under the
Arbitration Act, and where necessary under rule 53 and under contract.
2. Setting aside the Arbitral Award by the Seventh Respondent, dated the 31st of
December 2020, a copy of which is annexed to the founding affidavit marked
annexure “A”, in terms of Section 33 of the Arbitration Act, 42 of 1965;
3. Remittal of parts of Arbitral Award by the Seventh Respondent, dated the 31st
of December 2020, a copy of which is annexed to the founding affidavit
marked annexure “A”, in terms of Section 32 of the Arbitration Act, 42 of
1965, for reconsideration and for the making of a freshaward, which remittal
and reconsideration is linked to the petition relating to rule 53;
4. Setting aside the Arbitral Award by the Seventh Respondent, dated the 31st of
annexure “A”, in terms of clause 26.4 of the Shareholder’s agreement;

3
5. Leave to review the Arbitral Award the Seventh Respondent, dated the 31st of
annexure “A”, under Rule 53 of the Uniform Rules of the Honourable Court;
6. In relation to the rule 53 review, Directing the Parties on how the pleadings
and/or what processes are to be handled and/or followed;
7. Granting the Applicant such further or alternative relief as this Honourable
Court may deem just and equitable; and
8. Directing that the costs of this application be borne by any of the Respondents
who oppose this application, and to the extent that they oppose this
application, such costs to include those of two counsel.
KINDLY TAKE NOTICE THAT the affidavit of Jongisizwe Hopa and the annexures
thereto shall be used in support of this application.
KINDLY TAKE NOTICE FURTHER THAT the Applicant has appointed the offices of
G CHABALALA ATTORNEYS c/o MORWASEHLA ATTORNEYS, OFFICE 405,
Boston Building, 130 Main Street, Marshall Town, Johannesburg, as the address at
which he will accept notice and service of all process in these proceedings.
KINDLY ALSO TAKE NOTICE THAT the Applicant consents to electronic service of
all notices and all process in these proceedings to the email address:
eservice@cinc.co.za carbon copying gasta@cinc.co.za ; mbali@cinc.co.za and
morwaattorneys@gmail.com
4
KINDLY FURTHER TAKE NOTICE THAT if you intend opposing the application, you
are required:
(a) To file a notice of opposition within 5 (five) days from date of service hereof;
and
(b) In such a notice to appoint attorneys with an address as envisaged in Rule
6(5)(b) of the Uniform Rules of Court, at whose address you will accept service
of all notices and process in these proceedings; and
(c) To file your answering affidavit, if any, within 15 (fifteen) days from date of
service of the notice of opposition referred to above.
TAKE NOTICE FURTHER THAT if no such notice of intention to oppose be given, the
application will be placed on the roll for hearing on an unopposed basis.
Signed at JOHANNESBURG on this the ________ of April 2021.
__________________
G CHABALALA INC.
Applicant’s Attorneys
81 Jean Avenue
Doringkloof
Centurion
Tel: 012 667 1319
Fax: 086 693 3624
Email: gasta@cinc.co.za
Electronic service: eservice@cinc.co.za
Ref: CCL196/CHABALALA
c/o MORWASEHLA ATTORNEYS
5
OFFICE 405, Boston Building
130 Main Street, Marshall Town
Johannesburg
Tel: 011 339 1321
Cell: 076 641 7870
Ref: Neileng/Chabalala
TO: REGISTRAR OF THE ABOVE HONOURABLE COURT

JOHANNESBURG
AND TO: FLUXMANS INC.

1st to 5th Respondents Attorneys
30 Jelicoe Avenue, Rosebank
Private bag X41, Saxon World, 2132
Tel: 011 328 1843
Fax: 086 610 3337
Email: cstrime@fluxmans.com
bdum@fluxmans.com
RefL CJ Strime/B Duma/140509
AND TO: JUDGE J A HEHER

7th Respondent
29 The Braids Road
Emmarentia
Johannesburg
Email: heher.legal@gmail.com
Tel: 011 646 8887
6
Case NO:
And
In re:
In the Private Arbitration Between:
1
7
And
ELDERBERRY INVESTMENTS 139 (PTY) LTD Fifth Defendant
FOUNDING AFFIDAVIT
I, the undersigned
JONGISIZWE HOPA
do hereby declare under oath:
1.
1.1. I am an adult male Mechanical Engineer and businessperson, born on the 23rd
of November 1959, I am a minority shareholder in the Sixth Respondent, EM-
THREE Investment Holding (Pty) Ltd, an entity with registration number
2002/.032168/07, and presently resident at 18 Centre Road, Walkerville,
Gauteng Province.
1.2. I am the Applicant in this matter and have inherent authority to depose to this
affidavit.
2
8
1.3. The facts contained herein are, unless otherwise indicated, within my personal
knowledge and are to the best of my belief both true and correct.
1.4. Any submission made herein based on legal advice received, I confirm that
such legal advice was accepted.
1.5. For ease of reading, in this affidavit I will from hereon forward refer to myself
in the third person.
2.
PARTIES
2.1. The First Respondent is Lulama Simphiwe Mehlomakulu (hereinafter
referred to as “Mehlomakulu”), an adult male businessman with identity
number: 700702 5368 083, who is a Director of the Sixth Respondent, with his
principal place of business at 1st Floor, Atterbury House, Hampton Office Park,
20 Georgian Crescent, Bryanston, Gauteng Province. The First Respondent
is cited in his capacity as:
2.1.1. The ‘controlling Shareholder’ in EM-Three Investment Holdings (Pty)
Ltd (hereinafter referred to as “EM-Three”) through The Bugsy Share
Trust and as a related person in relation to EM-Three as envisaged
by Section 2 of the Companies Act, 71 of 2008 (hereinafter referred to
as “Companies Act”); and
3
9
2.1.2. as a restrainee in terms of the shareholders agreement in respect of
EM-Three.
2.2. The Second Respondent is The Bugsy Share Trust (hereinafter referred to
as “Bugsy Trust”), IT: 2558/2003, represented by the trustees acting in such a
capacity and who are cited herein as Respondents and which has chosen its
domicilium citandi et executandi in terms of the shareholders agreement
referred to below at 43 Eton Way, Silvertree Estate, Westlake, Cape Town,
Cape Province.
2.3. The third Respondent is Lulama Simphiwe Mehlomakulu N.O. a trustee of
Bugsy Trust, in his capacity as a trustee of Bugsy Trust with his chosen
domicilium citandi et executandi in terms of the shareholders agreement at 43
Eton Way, Silvertree Estate, Westlake, Cape Town, Cape Province.
2.4. The fourth Respodnent is Jose Alberto Delgado as nominee of the Best Trust
Company (Western Cape) Pty Ltd, N.O. as trustee of the Bugsy Share Trust,
in his capacity as a trustee of Bugsy Trust his chosen domicilium citandi et
executandi in terms of the shareholders agreement at 43 Eton Way, Silvertree
Estate, Westlake, Cape Town, Cape Province.
2.5. The fifth Respondent is Elderberry Investments 139 (Pty) Ltd (hereinafter
referred to as “Elderberry”), with registration number: 2011/008567/07, a
company duly registered and incorporated according to the laws of the
Republic of South Africa and which has its registered address at 1st Floor,
4
10
Atterbury House, Hampton Office Park, 20 Georgian Crescent, Bryanston,
Gauteng.
2.6. The Sixth Respondent is EM-Three Investment Holdings (Pty) Ltd (“EM-
Three”), with registration number 2002/032168/07, a company duly registered
and incorporated according to the laws of the Republic of South Africa and
which has its principal place of business at First Floor, Atterbury House,
Hampton Office Park, 20 Georgian Crescent, Bryanston, Gauteng. This
Respondent has not opposed the arbitration and was not a participant in the
arbitration proceedings.
2.7. The Seventh Respondent is Judge J.A Heher, a retired Judge of Appeal, who
in relation to the Parties presided over a private arbitration proceeding and
made an award in the proceedings, which arbitral award is the subject of this
application. Judge J.A Heher’s address is 29 The Braids Road, Emmarentia,
with his chosen electronic mail address being heher.legal@gmail.com. Judge
J.A Heher’s arbitral award is appended hereto marked annexure “A”.
JURISDICTION
2.8. The honourable court has jurisdiction to hear this matter as the entire cause
of action arose within this Court’s jurisdiction.
3.
PURPOSE OF APPLICATION
5
11
3.1. The Applicant seeks the above Honourable Court’s condonation relating to
extension of the time period as per the dictates of section 38 of the Arbitration
Act No. 42 of 1965, particularly in reference to the Applicant’s request for leave
to remit and set aside the arbitration award in terms of section 32 and 33.
3.2. The Applicant brings the application to review an arbitration award in terms of
sections 32 and 33 of the Arbitration Act.
3.3. The Applicant also seeks a review of the arbitration award and its setting aside
under contract.
3.4. Finally, the Applicant petitions the above Honourable court to review the
arbitration proceedings under Uniform rule 53, given that the subject of the
arbitration concerns section 163(1)(a), (b) and (c) of the Companies Act, which
matters of law fall legitimately under the court’s jurisdiction.
4.
PROCESS BACKGROUND
4.1. On the 28th of September 2018 the Applicant prosecuted an action against the
First to the Sixth Respondents, which action was prosecuted out of this
6
12
Honourable Court with case number 35671/2018. The combined summons is
appended hereto marked annexure “B”.
4.2. In the action as prosecuted by the Applicant: Claim A was premised on section
163 of the Companies Act, while Claim B was premised on breach of contract.
4.3. Following service of their notice of intention to defend, the First to the Fifth
Respondents served their Special Plea, Plea and Counter claim on the 30th of
November 2018. The First to the Fifth Respondents Special Plea, Plea and
counter claim is appended hereto marked annexure “C”.
4.4. On the 29th of January 2019, the Applicant served his plea to the counter claim,
which document we do not append hereto as it is not material for the purpose
of this application.
4.5. On the same 29th of January 2019, the Applicant served his replication to the
Special Plea. It is important to highlight that the Applicant was ill advised in his
replication, particularly in conceding that the matter prosecuted under section
163 of the Companies Act is subject to the arbitration clause as contained in
the Shareholder’s agreement. The Replication to the special plea together with
the Shareholder’s agreement are appended hereto marked annexure “D”
and “E” respectively.
4.6. Subsequent thereto, the First to the Fifth Respondents together with the
Applicant agreed to remove the matter from the High Court and take it to
private arbitration.
7
13
4.7. On 14th of March 2019 the Applicant was notified of the section s189 of the
Labour Relations Act process, that a consultation would commence about the
possibility of his retrenchment from Reatile Gastrade (Pty) Ltd and setting out
reasons for a proposed restructuring. On 29th of March 2019 the Applicant was
dismissed with effect from 30th of April 2019.
4.8. The Applicant referred his dismissal to the CCMA as he was not employed by
Reatile Gastrade (Pty) Ltd, he was employed by Reatile Group (Pty) Ltd with
registration number 2003/027219/07 (hereinafter referred to “Reatile Group”).
On 4th of June 2019 his retrenchment was then also instituted by Reatile Group
which notified him that it accepted that his employment had been with Reatile
Group and not Reatile Gastrade (Pty) Ltd but that ‘based on its operational
requirements’ Reatile Group considered that it had no option but to dismiss
him. On 14th of June 2018 Reatile Group retrenched the Applicant with
immediate effect.
4.9. On or about the 27th of May 2019, the First to the Fifth Respondents’ legal
representatives together with the Applicant’s legal representatives signed pre-
arbitration minutes. Which minutes the Applicant pleads were not discussed
with him, and was not made available to him until the instance that he received
the arbitration bundle, and his attention was not drawn to the pre-arbitration
minutes.
4.10. Judge HEHER was appointed as the arbitrator, having been nominated by
Fluxmans Incorporated and accepted by the Applicant’s legal representation.
It is important to state that this form of appointment of the arbitrator does not
8
14
accord with what is contained in the Shareholder’s agreement, under which
the Applicant was persuaded to withdraw his action from the court to an
arbitration process.
4.11. The arbitration was done via video by agreement between the Parties, and
service was by email.
4.12. The arbitration started on 12 August 2020 and concluded on 30 September
2020.
4.13. At the close of the arbitration, an agreement was reached insofar as heads of
arguments were concerned. The Applicant’s erstwhile Counsel was to submit
the Applicant’s heads on the 23rd of October 2020, and the Defendants’
Counsel was to submit their heads on the 13th of November 2020. At the hands
of the Applicant’s Counsel, the submission of the heads was delayed.
4.14. Following settlement of his fees, the Arbitrator, Judge Heher, submitted the
arbitration award on or about the 6th of January 2021, with the award dated
the 31st of December 2020.
4.15. The Applicant’s erstwhile attorneys advised the Applicant that they are
considering the award in its totality, and will with time make a decision on
whether to review the Arbitrator’s findings or not.
4.16. The Applicant’s erstwhile attorneys also stated that they had sent the award
to a different Counsel for consideration and for her view on the matter.
9
15
4.17. The Applicant’s erstwhile attorneys further advised that the Applicant was to
submit the application for review under rule 53 of the Uniform rules of the
honourable court. Further stating that the rule does not prescribe a time
period, and that they could not locate case law which spoke to time periods
for review under this rule.
4.18. The Applicant’s erstwhile attorneys also advised that what is reasonable time
in the case of a review could be borrowed from ‘PAJA’ [Promotion of
Administrative Justice Act, 3 of 2000] as a majority of reviews stem from there.
The Applicant’s erstwhile attorneys then advised that under PAJA the period
under which one may lodge a review is 180 days, and further that if this time
period is not met condonation may be requested as the 180 days is not a hard
cap.
4.19. The Applicant’s erstwhile attorneys also advised that “it is therefore extremely
unlikely that one would be barred from a review based on a time period of less
than 60 days from the date of the award, i.e. the end of March.” Appended
hereto marked annexure “F” is a copy of the email correspondence from the
Applicant’s erstwhile attorneys stating the above.
BACKGROUND OF FACTS
4.20. The Applicant together with the Bugsy Share Trust are the only shareholders
in EM-Three.
10
16
4.21. EM-Three was incorporated in 2002 under the name ‘Riccla 1726 (Pty) Ltd’,
and was acquired as a shelf company by Mehlomakulu and Mr. Leven
Moodley on or about October 2003, which acquisition was followed by a name
change to the present name.
4.22. The Applicant was invited to join EM-Three at its construction stage, during or
about November 2003.
4.23. The Applicant was recruited by Mr. Leven Moodley, and was offered equity in
exchange of his participation in constructing EM-Three into a successful
business.
4.24. The Applicant acceded to the invitation to join EM-Three on the promises that
were made in terms of equity and premised on the idea of what the entity
would be constructed to be.
4.25. At the instance of the Applicant joining EM-Three, the entity was at its embryo
stage with no tangible assets, policies and business plan, though the idea for
how the entity would operate existed in the minds of its founders and was
verbally communicated to the Applicant.
4.26. The Applicant had worked under the impression that he, Mr. Leven Moodley
and Mehlomakulu would be equal partners in EM-Three. This impression was
dispelled in a meeting between the Applicant, Mr. Leven Moodley and
Mehlomakulu, wherein the Applicant was informed that Mehlomakulu and Mr.
Leven Moodley would each gain 40% (Forty percent) of EM-Three and the
Applicant would only gain 20% (Twenty percent) shareholding therein.
11
17
Confirmation of this initial shareholding arrangement is appended hereto
marked annexure “G”.
4.27. Ms. Nokwanele Qonde, a fourth shareholder, was approached and offered
shares of 8% (Eight percent) of the stake in EM-Three.
4.28. As a consequence of the addition of Ms. Nokwanele Qonde, the Applicant’s
shares were watered down to 10% (Ten percent) with 8% (Eight percent)
going to Ms. Nokwanele Qonde and the remaining 2% (Two percent) going to
Mehlomakulu and Mr. Leven Moodley in equal shares.
4.29. Mehlomakulu and Mr. Leven Moodley held the shares through their chosen
vehicles, Bugsy Trust being Mehlamkhulu’s chosen vehicle.
4.30. The shareholdership of the company on 18 May 2006 was expressed as
follows: The Bugsy Trust at 41% (Forty-one percent), The Losras Trust at 41%
(Forty-one percent), Mr Jongisizwe Hope at 10% (Ten percent) and Ms
Nokwanele Qonde at 8% (Eight percent). The shareholder’s agreement is
appended hereto marked annexure “E”.
4.31. Ms. Nokwanele Qonde left EM-Three in 2008 following a dispute around her
maternity leave.
4.32. Mr. Leven Moodley left EM-Three in 2011 following irreconcilable differences
between himself and Mehlomakulu.
4.33. Both Mr. Leven Moodley and Ms. Nokwanele Qonde were fairly compensated
for the value of their shares in EM-Three.
12
18
4.34. After the exit of Mr. Leven Moodley from EM-Three the share structure in EM-
Three became 16.04% (Sixteen point zero-four percent) shareholding in the
hands of the Applicant and 83.96% (Eighty-three point nine six percent)
shareholding in the hands of Mehlomakulu, through Bugsy Trust. The
shareholding remains the same to date.
4.35. The Applicant worked on EM-Three from 2004 until mid 2005 without
remuneration, while funding his attendances and engagements in relation to
EM-Three from his own pocket.
4.36. In 2005 the Standard Bank of South Africa Ltd (hereinafter referred to as the
Bank) provided loan funding to Reatile Group to the extent of R5 million (Five
million rand). Following this commercialization and capitalization of EM-
Three's asset, Mehlomakulu and Mr. Leven Moodley rewarded themselves
with lumpsum payments.
4.37. With an exception of the instance when the Applicant was requested to assist
Mr. Leven Moodley in his ventures, all Shareholders in EM-Three were
employed within the subsidiaries of EM-Three and presented as directors of
EM-Three subsidiary Reatile Resources, and were represented within the
boards of the Reatile Group subsidiaries by one or more of the other
Shareholders, following the capitalization and commercialization of EM-Three
subsidiary Reatile Resources.
4.38. This employment of the Shareholders within the subsidiaries of EM-Three and
their appointments as Directors on the boards of EM-Three subsidiaries
13
19
induced remuneration, and entirely linked to them being Shareholders in EM-
Three.
4.39. As a consequence, all the Shareholders of EM-Three received monthly
remuneration and remuneration for their roles as directors. Accordingly, the
Shareholders were able to draw profit and enjoyment of their shares in EM-
Three, albeit indirectly.
4.40. The fifth Respondent, Elderberry was incorporated on the 11 April 2011. Its
directors were and continue to be Mehlomakulu and his daughter, Diatile
Mehlomakulu. Elderberry’s only business and investment is 26% (Twenty six
percent)of the equity in Vesquin Trading (Pty) Ltd. It is imperative to state that
Elderberry, similarly to the business of EM-Three, is an investment holding
Company.
4.41. In September 2011, Elderberry and Vitol concluded a shareholders agreement
in relation to Vesquin Trading (Pty) Ltd (hereinafter referred to as “Vesquin”),
which is the vehicle through which the joint venture was and is still conducted.
It is important to highlight that this joint venture was initially envisioned for the
benefit and exploitation of Reatile Group, a subsidiary of EM-Three.
4.42. On 11th of November 2015. the Industrial Development Corporation (IDC)
indicated that it was willing to subscribe for 35% (Thirty five percent) equity
interest in Reatile Group at a subscription price of about R510 million (Five
hundred and ten million rand). This offer was made to Reatile Group / EM-
14
20
Three through the First Respondent, the First Respondent did not disclose the
offer to the Applicant, the EM-Three board or the Reatile Group board.
4.43. On 13th of January 2016 the First Respondent submitted a written offer to
purchase the Applicant's shares in EM-Three for a price of R30 million (thirty
million rand) payable in six instalments, over a period of five years, on
condition that the Applicant remains in the employ of the Reatile Group during
that period. The offer is appended hereto marked annexure “H”.
4.44. On 22nd of January 2016 the Applicant responded to the offer in writing
requesting a revised consideration of the value, one that was not dependent
on the Standard Bank valuation. Which response is appended hereto marked
annexure “I”.
4.45. On the 26th of January 2016, following the Applicant submitting the written
response of the 22nd of January 2016 the First Respondent with a written
response to the offer. This resulted in an acrimonious exchange where the
First Respondent threatened the value and the marketability of the Applicant’s
shares should he not accept the then current offer of R30 million (Thirty million
rand) for his shares.
4.46. The Applicant, who was now in distress, advanced another letter proposing to
seek a potential purchaser to buy his shares on more reasonable terms, the
First Respondent in response indicated that he would frustrate any efforts of
15
21
a potential purchaser conducting due diligence, if he himself did not approve
of them. This letter is appended hereto marked annexure “J1”.
4.47. In early February 2016, being aware that the IDC was conducting due
diligence, the Applicant decided to find out what value they were considering
to subscribe for the 35% (Thirty five percent) stake in Reatile Group, in order
for him to ascertain what the value of his own shares could be. The Applicant
contacted Thembisile Salman, a middle manager involved in the due diligence
of Reatile Group and arranged for a meeting at a coffee shop.
4.48. The Applicant and Mr. Salman discussed the proposed IDC transaction. Mr.
Salman stated to the Applicant that he was aware that Standard Bank had
disposed of its 35% (Thirty five percent) interest in Reatile Group for about
R115 million (One hundred and fifteen million rand). It was during this meeting
where the Applicant discovered that the IDC was contemplating an offer for
R510 million (Five hundred and ten million rand). During the course of the
conversation the Applicant decided that he should find out if the IDC might be
interested in buying his shares and asked Mr. Salman to gauge possible
interest from IDC.
4.49. The Applicant then advanced another letter to the First Respondent for
possible buyout of his shares, this time, using the valuation that Mr. Salman
had informed him of through the IDC's due diligence. This letter is appended
hereto marked annexure “J2”.
16
22
4.50. In early March 2016, a Reatile Group board meeting was held and upon an
update on the IDC being required, the First Respondent asked the Applicant
to recuse himself from the meeting. In the Applicant’s absence, the First
Respondent tabled allegations against the Applicant which resulted in the
board voting for the removal of the Applicant as a director. The Applicant was
never provided an opportunity to table an explanation in front of the Reatile
Group board.
4.51. On the 15th of March 2016, at a convened EM-Three shareholders meeting
the First Respondent tabled another motion to remove the Applicant as a
director of EM-Three and all its subsidiaries, the Applicant objected, the
motion passed and was implemented.
4.52. Subsequent thereto the Applicant’s employment was then relocated to a
subsidiary of Reatile Group called Reatile Gastrade, where he was excluded
from the operations and oversight of EM-Three's trading subsidiary, Reatile
Group.
4.53. In the year 2018, the First Respondent initiated a process as he wanted to
purchase the Applicant’s shares and suggested the use of an "independent
valuator" to liaise between them so as to avoid any escalation of emotions.
The Applicant agreed to listen to Mr. Michael Golding, who had been
performing valuations of and for Reatile Group since 2008 and his most recent
valuation was in 2016 representing Reatile Group in discussions with the IDC.
17
23
4.54. On the 25th of June 2018, Mr Golding advanced an offer to the Applicant of
R58 million (Fifty eight million rand) which included the calculation of a 15%
(Fifteen percent) minority discount and marketability discount.
4.55. As EM-Three does not trade, its value is wholly dependent on the value of
Reatile Group.
4.56. The Applicant rejected the proposal and set out his reasons on 11th of July
2018. Which Email is appended hereto marked annexure “K”.
5.
CONDONATION
5.1. The distinction on where the Applicant finds or locates his application is
important also for the purpose of condonation.
5.2. The Applicant finds or locates its application for review on the Arbitration Act,
42 of 1965, under rule 53 of the Uniform Rules of the Honourable Court and
also on contract, being the Shareholder’s agreement.
5.3. The Applicant has been advised that under the Arbitration Act an application
for review and remittal of the award ought to be done within 6 weeks of the
written award, per the dictates of section 33 and 32 respectively.
5.4. The Applicant is also advised that clause 26.4 of the Shareholder’s agreement
allows for a review of an arbitration award in the instance that a manifest error
presents in the arbitration award. Further that, under clause 26.4 there is no
18
24
prescribed period under which the review may be made, the only precondition
being that such a review is to be made before the award is made an order of
court.
5.5. Accordingly, an application for condonation is made in relation to the non-
compliance with the Arbitration Act, and should the court find that a request
for condonation is necessary for review under rule 53 and under clause 26.4
of the Shareholder’s agreement, the Applicant uses the assertions under this
paragraph to advance such a condonation application, and reserves his rights
to seek latitude to amplify his papers in relation to same.
5.6. DEGREE OF LATENESS
5.6.1. Under the Arbitration Act the Applicant ought to have brought this
application within 6 weeks of receipt of the written award.
5.6.2. Having received the award on or about the 6th of January 2021, the
Applicant ought to have brought the application on or before the 17th
of February 2021.
5.6.3. At the instance of the signing of this application, the Applicant’s
application is 7 weeks late.
5.6.4. Which period the Applicant submits is not unreasonably late,
considering that which is stated in the preceding paragraphs, and also
that the First to the Fifth Respondents have not acted on the order
19
25
until on or about the 16th of March 2021, when they sent a notice of
taxation for costs.
5.6.5. Also in considering the degree of lateness, the Applicant highlights
that the First to the Fifth Respondents have not sought to make the
arbitration award an order of court.
5.6.6. The Applicant submits that the degree of lateness is not unreasonably
protracted.
5.7. REASON(S) FOR DELAY
5.7.1. The Applicant borrows paragraphs 4.15 to 4.19 above and marries
same herein as if specifically stated and relied upon.
5.7.2. The Applicant as a lay person had cloaked his erstwhile attorneys with
an obligation to provide legal counsel and professional services, on
which he can place reliance.
5.7.3. The Applicant’s erstwhile attorneys advised the Applicant that he had
180 days, and at minimum he had 60 days which 60 days would expire
on the end of March 2021 – which leads to the conclusion that they
were speaking to 60 and 180 court days.
5.7.4. The Applicant had no reason to second guess his erstwhile counsels,
and initially accordingly relied on such advice.
20
26
5.7.5. The Applicant’s erstwhile attorneys started engaging a different
advocate to represent the Applicant for the review. This process took
some time.
5.7.6. The Applicant started to lose faith in his erstwhile attorneys as their
answers to his questions were not satisfactory, so the Applicant
started engaging another firm of attorneys. After about two weeks, the
law firm declined to represent the Applicant in the review due to
reasons internal to the processes of the firm.
5.7.7. A family member had engaged the Applicant’s current attorneys
(herein after referred to as the “Applicant's attorneys”) on various other
legal matters.
5.7.8. Following the frustrations experienced by the Applicant with his
erstwhile attorneys, the Applicant considered engaging the
Applicant’s attorneys to consider the arbitration award and advice on
same.
5.7.9. The Applicant contacted the Applicant's attorneys on the 25th of
January 2021, and enquired on his availability to consider the
arbitration award; after the Applicant had also discussed the
confidentiality of the arbitration process and the award, the Applicant's
attorneys confirmed that they would consider the matter however the
relevant attorney was swamped and would only attend to it in 3 weeks.
21
27
5.7.10. On the same 25th of January 2021 the Applicant caused the arbitration
award (54 pages), the Applicant’s Heads of Argument (24 pages) and
the Defendants’ Heads of Argument (142 pages) to be sent to the
Applicant's attorneys.
5.7.11. For a period, the Applicant's attorneys would borrow time from other
engagements and consider the matter a few pages at an instance,
and would request further documentation from the Applicant.
5.7.12. Which resulted in part of the record being sent to the Applicant's
attorneys on or about the 8th of February 2021.
5.7.13. The Applicant's attorneys set aside 5 days to summarily consider the
papers, and not the full record.
5.7.14. On the 22nd of February 2021 the Applicant's attorneys advised the
Applicant that there was a need for a meeting to be arranged between
the Applicant's attorneys, the Applicant's erstwhile attorneys and the
Applicant.
5.7.15. The three Parties met on the 24th of February 2021, for about 2 hours.
5.7.16. The Applicant's attorneys advised the Applicant that a review under
the Arbitration Act is strictly on limited grounds, and he is not able to
chase the 6 week period without fully considering the record, or the
Applicant's attorneys would be derelict in his duties and such a
decision would upset his oath of office.
22
28
5.7.17. Following that engagement, the Applicant's attorneys advised the
Applicant that there was a need to comprehensively consider the
matter which involved reading of 15 full lever arch files, and a
considerable body of emails, and numerous consultations with the
Applicant.
5.7.18. Following the advice by the Applicant's attorneys, a decision was
made to review the arbitration award.
5.7.19. In relation to paragraphs 5.7.7 through to 5.7.16, please find
appended hereto the confirmatory affidavit of the Applicant's attorneys
as appended hereto marked annexure “L”.
5.7.20. The Applicant accordingly submits that the delay was occasioned by
the incomplete advice given to the Applicant by the Applicant’s
erstwhile attorneys.
5.7.21. The Applicant pleads that had he known of the 6 weeks period stated
under the Arbitration Act, the Applicant would have insisted that the
application for review be made within the dictates of the letter of the
law and would have impressed on the Applicant's erstwhile attorneys
to deal with the matter with urgency, and/or would have sought the
assistance of the Applicant's attorneys much earlier than he did.
5.7.22. The Applicant pleads that though the Applicant's attorneys became
aware of the matter within the 6 weeks period, they only had an
opportunity to consider the matter much after the expiry of the period.
23
29
5.7.23. The Applicant pleads that the delay which happened at the hands of
the Applicant's attorneys was warranted as the Applicant's attorneys
were new to a matter which had been going on for a period exceeding
3 years and with a record that comprises of several thousands of
pages.
5.7.24. It is evident that the Applicant's attorneys have acted as a reasonable
professional in their position, particularly to try and gain as much
information on the matter as they could, which included meeting with
the Applicant’s erstwhile attorney and having numerous meetings with
the Applicant.
5.7.25. The Applicant pleads that there is no flouting of the court rules by the
Applicant, and that he did not act negligently or with malice.
5.7.26. The Applicant pleads that the reasons for the delay are reasonable,
and prays that the court’s findings should so reflect.
5.8. PROSPECTS OF SUCCESS
5.8.1. The Applicant has been advised to narrow down the issues before
court, and not to follow the path taken in the initial arbitration by both
sides.
24
30
5.8.2. Accordingly the Applicant’s case is premised on specific grounds,
which grounds are prima facie evident, and accordingly raise the
Applicant’s prospect of success considerably.
5.8.3. The Applicant’s case is premised on direct application of the
Companies Act and on the application and enforcement of the
Shareholder’s agreement as it presents, not as it ought to have
presented.
5.8.4. The Applicant advances that the review is not intended to frustrate the
processes of the claim of the other Party and is founded on good faith
and valid grounds.
5.8.5. The Applicant accordingly pleads that his prospects of success on the
review are high and that the condonation shall not be given simply for
the matter to fail on review.
5.9. PREJUDICE
5.9.1. The Applicant pleads that the Respondent has not and shall not suffer
prejudice with the granting of the condonation.
5.9.2. The Applicant accepts that the Respondent received the arbitration
award between the 31st of December 2020 and the 6th of January
2021.
25
31
5.9.3. Since the instance of receipt of the award, the Respondent has not
taken any action to confirm the judgment as an order of court or any
other action, with an exception of sending a taxation notice on the 16th
of March 2021.
5.9.4. The grounds upon which the Applicant premises his review application
ought to be of interest to the Respondent, particularly for the proper
finalization of the matter.
5.9.5. The Applicant pleads that the Respondents suffer no prejudice which
is irreparable, while the Applicant will suffer prejudice under the “once
and for all principle” as the consequence of the arbitration award as it
presents is that the Arbitrator has made pronouncements on the
Applicant’s oppression claim under section 163(1) while in truth the
Arbitrator only made a pronouncement on section 163(1)(a) to the
exclusion of subsection (b) and (c), while the Applicant had
prosecuted the matter under those subsections also.
5.9.6. The Applicant further pleads that the consequence of the arbitration
award is narrowing down the entitlement of the Applicant without
reason, as the Arbitrator made the award on the Applicant’s “rights”
instead of “interests” which stands against what is contained in the
Companies Act.
5.10. Accordingly, the Applicant prays for an order that its late filing of the review
application under the Arbitration Act, and where necessary under rule 53 and
in contract, be condoned.
26
32
6.
6.1. The Applicant proceeds to engage the issue of review.
6.2. To best present the application in these papers and where plausible, the
Applicant separates the grounds of review per the empowering provisions.
6.3. Further, to avoid duplication of assertions, where the grounds of review
present in more than one empowering provision, the Applicant will explicitly
rely on the already stated ground(s).
7.
The Applicant finds it necessary to place the following before court prior to speaking
about the grounds of review:
7.1. In relation to the oppression claim, the Applicant had prosecuted an action out
of the honourable court, prior to the matter being withdrawn from this court to
the hands of the Arbitrator.
7.2. This was done against the specific assertion under section 163 of the
Companies Act, that the matter may be brought to court in the form of an
application.
27
33
7.3. The quality of the pleadings that prosecuted the action is a great concern to
the Applicant’s attorneys. The Applicant is advised that the pleadings are not
properly drafted and the matter itself should not have continued on these
papers, and the findings by the Arbitrator in relation to the application to
amend, evidences the poor quality in the drafting by the Applicant’s erstwhile
attorneys. It is reiterated that as a lay person, the Applicant greatly relied on
his erstwhile attorneys’ advice and professionalism in conduct, skill and care
as should have been accorded to his legal matter.
8.
REVIEW UNDER THE ARBITRATION ACT
8.1. GROUND ONE:
8.1.1. The Arbitrator has failed to make a finding under section 163(1)(b) of
the Companies Act.
8.1.2. The Arbitrator has only dealt with section 163(1)(a) of the Companies
Act, hence he has sought result in A.12. through to A.19. of the
arbitration award.
8.1.3. The Applicant pleads that section 163(1)(b) does not require a result,
and therefore a claim under section 163(1)(b) cannot fall at the lack of
result as is seen in A.12. through to A.19. of the arbitration award.
28
34
8.1.4. No reason exists for an interpretation of the award to extend to
findings under section 163(1)(b) particularly as the claim under section
163(1)(a) fell entirely at the ‘lack’ of result shown by the Applicant.
8.1.5. The Arbitrator in paragraph 116 of the award borrows from Gotthard
SA Pilati v Witfontein Game Farm (Pty) Ltd, in finding that “The results
of the act or omission and not the conduct itself must be unfairly
prejudicial or unfairly disregard the applicant’s interests”.
8.1.6. The Applicant is inclined to agree with the Arbitrator’s assertions
under paragraph 116 insofar as it relates only to section 163(1)(a)
however the Applicant pleads that the requirement of a result does not
extend to section 163(1)(b).
8.1.7. The Applicant pleads that the effect of the findings by the Arbitrator
either excludes a consideration of section 163(1)(b) or the Arbitrator
has expanded the test under section 163(1)(a) to cover subsection
(b).
8.1.8. Should it be that the Arbitrator has expanded the test under section
163(1)(b), the Applicant pleads that the Arbitrator has misconducted
himself in relation to his duties as an arbitrator and/or exceeded his
powers, and the arbitration award should be set aside.
8.1.9. Should it be that the Arbitrator has not considered section 163(1)(b)
the Applicant pleads that claim A should be remitted to the Arbitrator
for consideration.
29
35
8.1.10. The Applicant further pleads that the Arbitrator does not have the
power to elect what part of the case that the Applicant has prosecuted
should be part of the award and which should be entirely excluded.
Therefore, the Applicant accordingly prays that the Arbitrator has
exceeded his powers, and the award should be set aside.
8.2. GROUND TWO:
8.2.1. The Arbitrator has failed to make a finding under section 163(1)(c) of
the Companies Act.
8.2.2. The Arbitrator has only dealt with section 163(1)(a) of the Companies
Act, hence he has sought result in A.12. through to A.19. of the
arbitration award.
8.2.3. The Applicant pleads that section 163(1)(c) does not require a result,
and therefore a claim under section 163(1)(c) cannot fall at the lack of
result as is seen in A.12. through to A.19. of the arbitration award.
8.2.4. No reason exists for an interpretation of the award to extend to
findings under section 163(1)(c) particularly as the claim under section
163(1)(a) fell entirely at the ‘lack’ of result shown by the Applicant.
8.2.5. The Arbitrator in paragraph 116 of the award borrows from Gotthard
SA Pilati v Witfontein Game Farm (Pty) Ltd, in finding that “The results
of the act or omission and not the conduct itself must be unfairly
prejudicial or unfairly disregard the applicant’s interests”.
30
36
8.2.6. Though the Applicant is inclined to agree with the Arbitrator’s
assertions under paragraph 116 insofar as it relates only to section
163(1)(a) the Applicant pleads that the requirement of a result does
not extend to section 163(1)(c).
8.2.7. The Applicant pleads that the effect of the findings by the Arbitrator
either excludes a consideration of section 163(1)(c) or the Arbitrator
has expanded the test under section 163(1)(a) into subsection (c).
8.2.8. Should it be that the Arbitrator has expanded the test under section
163(1)(c), the Applicant pleads that the Arbitrator has misconducted
himself in relation to his duties as an arbitrator and/or exceeded his
powers, and the arbitration award should be set aside.
8.2.9. Should it be that the Arbitrator has not considered section 163(1)(c)
the Applicant pleads that claim A should be remitted to the Arbitrator
for consideration.
8.2.10. The Applicant further pleads that the Arbitrator does not have the
power to elect what part of the case that the Applicant has prosecuted
should be part of the award and which should be entirely excluded.
Therefore, the Applicant accordingly prays that the Arbitrator has
exceeded his powers, and the award should be set aside.
8.3. GROUND THREE:
8.3.1. The Arbitrator has misconducted himself in relation to his duties as
an Arbitrator.
31
37
8.3.2. The Arbitrator has exceeded his powers in relation to the Applicant’s
claim.
8.3.3. The Arbitrator in making a decision not to make a determination of
section 163(1)(b) and (c) has misconducted himself.
8.3.4. The decision by the Arbitrator not to make a determination on section
163(1)(b) and (c) exceeds the power the Arbitrator has.
8.3.5. Due to the nature of arbitration processes, it is most important for the
Arbitrator to make findings or address in his award all of the various
claims raised by the Applicant.
8.3.6. Though the claim was comprehensively prosecuted, the Arbitrator
has left the claim around section 163(1)(b) and (c) unattended and
without acknowledgment.
8.3.7. The Applicant pleads that the Arbitrator had a duty to make a
decision on section 163(1)(b) and (c) as that was part of the
Applicant’s case.
8.3.8. The Applicant prays that the arbitration award in relation to the
Applicant’s claim, alternatively in relation to claim A, should be set
aside.
8.4. GROUND FOUR:
32
38
8.4.1. The Applicant submits that the Arbitrator in applying “rights” over
“interests” has done so against the dictates of section 163(1) and
particularly subsection (a) to which the Arbitrator has limited his
decision.
8.4.2. The Arbitrator in paragraph 115 of his decision states that “The
claimant brings the present arbitration by virtue of his right as
shareholder. He must therefore show that the conduct of which
he complains adversely affected or is affecting his rights as a
shareholder: Count Gotthard SA Pilati v Witfontein Game Farm (Pty)
Ltd supra at para 17.5.” The Emphasis is at the hand of the Applicant.
8.4.3. Count Gotthard SA Pilati v Witfontein Game Farm (Pty) Ltd [2013] 2
All SA 190 (GNP) at paragraph 17.5 specifically states that “The test
however is whether the acts or omissions that unfairly prejudiced the
Applicant’s interests resulted in affecting the Applicant in his capacity
as a shareholder. The precise question is whether the harm which the
Applicant has suffered is something he or she is entitled to be
protected from.”
All SA 190 (GNP) at paragraph 17.4 states that “I would think that the
concept interests could include interests not flowing from the
memorandum of incorporation of the company, but from an
understanding or agreement between the parties. Interests “arise[s]
out of fundamental understanding between the shareholders, which
33
39
formed the basis of their association but was not in contractual form.”
[Saul D Harrison & Sons Plc, Re [1995] 1 B.C.L.C at 19- English Court
of Appeal]. The acts complained of need thus not necessarily flow
from the Articles of Association or by example from a majority vote,
but for instance from a breach of trust or acrimony between the parties
flowing from the fundamental understanding between the
shareholders. Canadian Courts interpret the phrases similar to those
in s163 on a general fairness standard based on the reasonable
expectations of the Applicant and not only strict legal rights.”
Emphasis is at the hand of the Applicant.
8.4.5. The Applicant pleads that section 163(1)(a) protects ‘interests’ and not
only the rights.
8.4.6. As a consequence, preference or applying of rights over interest
narrows down the test and is contrary to the dictates of section 163(1)
of the Companies Act.
8.4.7. The Applicant pleads that the Arbitrator did not have the power to
narrow the test, and to do so without explanation, and accordingly
pleads that the Arbitrator has exceeded his powers.
8.4.8. The Applicant prays that the Arbitration award in relation to claim A be
set aside, as the Arbitrator exceeded his powers.
8.5. GROUND FIVE:
34
40
8.5.1. The Arbitrator on or about the 5th of August 2020, made an order in
relation to the Applicant’s application to compel discovery.
8.5.2. The Arbitrator awarded the First through the Fifth Respondent’s costs
on a punitive scale in relation to the application to compel. On the 1st
of November 2020 the bill of costs was taxed by Judge Heher, The
Seventh Respondent, and the taxed bill was R592 039.35 (Five
hundred and ninety-two thousand and thirty-nine rand and thirty five
cents). Confirmation of this bill of cost and the taxation is appended
hereto marked annexure “M” and “N” respectively. At the instance
of settling of this affidavit, the Applicant was not in possession of the
taxed bill of costs, therefore had to rely on secondary evidence to
confirm same. The Applicant may seek leave to supplement his
papers, to expand on this evidence.
8.5.3. This order was not in writing and was not incorporated into the
arbitration award. This is against the dictates of section 24(1) of the
Arbitration Act which states that “The award shall be in writing and
shall be signed by all the members of the arbitration tribunal.”
8.5.4. The Applicant pleads that the Arbitrator has misconducted himself in
relation to his duties as an arbitrator, and/or has committed a gross
irregularity in the conduct of the arbitration proceedings and/or has
exceeded his powers.
8.5.5. The Applicant accordingly prays that the award in relation to the
application to compel be set aside.
35
41
8.6. GROUND SIX:
8.6.1. The Applicant pleads that in relation to the application to compel
discovery, the Arbitrator made an award for punitive costs against the
Applicant.
8.6.2. The Applicant pleads that the Arbitrator was not empowered at that
stage to make such an award, as paragraph 6.6 of the arbitration
minutes state that “at the conclusion of the arbitration the Arbitrator
shall make an award as to costs…”.
8.6.3. The Arbitrator was only empowered to make an award as to costs at
the conclusion of the arbitration.
8.6.4. The award on costs in relation to the application to compel discovery
was premature and without authorization.
8.6.5. The Applicant pleads that the Arbitrator has exceeded his powers and
prays that the award be set aside.
8.7. GROUND SEVEN:
8.7.1. Under claim B, the Applicant prosecuted an action for breach of the
Shareholder’s Agreement against the First Respondent.
8.7.2. In his particulars of claim, the Applicant pleads the following amongst
other things:
36
42
8.7.2.1. “By failing to inform the company in writing of his
involvement in the fifth defendant;” [emphasis is the
Applicant’s own] at paragraph 24.1.
8.7.2.2. “By diverting business opportunities relating to or
connected to the business of the company away from the
company and to the fifth defendant without providing any
written notification to the board containing sufficient
detail to enable the board to assess the opportunity for
commercial exploitation by the company.” [emphasis is the
Applicant’s own] at paragraph 24.4.
8.7.3. Although the First to Fifth Respondents deny the correctness of
paragraphs 24.1 and 24.4 of the particulars of claim, through
paragraph 25 of their plea, the denial is done without consideration of
clause 35 of the shareholders agreement under which the First
Respondent made the undertaking.
8.7.4. The Applicant pleaded, correctly, that there was a need for a written
notice from the First Applicant in relation to the Fifth Respondent.
8.7.5. The Arbitrator under A.20. and A.21. deals with the issue of notice,
though it may be comments made in passing.
8.7.6. In paragraph 135.5. of the award the Arbitrator states that “the Board
members of Reatile (including Mr. King) were aware of and had no
37
43
objection to Mehlomakulu’s personal interest in the joint venture. I
think it likely that Hopa also was informed and did not object although
the information may not have meant much to him at the time.”
8.7.7. In paragraph 137 of the award the Arbitrator states that “I should
mention that I accept the evidence of the defendants that, in informing
the Board of his decision to participate, the Board was well aware that
Reatile would obtain spin- off benefits from Mehlomakulu’s
association with Vitol in the joint venture other than those derived from
the trade in crude oil.”
8.7.8. The Applicant pleads that there was no written notice to either the
board of EM-Three or its subsidiary company, Reatile Group, by
Mehlomakulu.
8.7.9. The Applicant pleads that its founding papers stated the lack of written
notice. The Arbitrator accepts informal notice or verbal notice as
sufficient notice for the purpose of the shareholder’s agreement, as is
seen in paragraphs 135.5 and 137 of the award. This position upsets
the role of the Arbitrator and has resulted in the Arbitrator condoning
as sufficient and correct, notice which was not given in accordance to
clause 35 of the shareholder’s agreement.
8.7.10. Accordingly, the Applicant pleads that the Arbitrator has exceeded his
powers and has misconducted himself in overriding the dictates of the
Shareholder’s agreement, particularly did so without stating his
reasons.
38
44
8.7.11. This is further shown where the Arbitrator augments his findings on
the First Respondent’s notice by accepting through conjecture that
this said notice must have been made known to the Applicant, without
any evidence to this supposition being presented.
8.7.12. The Applicant prays the arbitrator’s finding be set aside.
8.8. GROUND EIGHT:
8.8.1. The Applicant pleaded in paragraph 17, that ‘the First Respondent
conducts business as a buyer and seller of energy products, including
petroleum products and does so in direct competition with the Sixth
Respondent and its subsidiaries.’
8.8.2. At paragraph 16.1 of their Plea, the First to the Fifth Respondents
stated that “Elderberry buys and sells crude petroleum products,
excluding LPG.”
8.8.3. This position is noted by the Arbitrator in paragraph 87 of the award.
8.8.4. Vesquin Trading (Pty) Ltd, with registration number 2011/011181/07,
is the entity that the Fifth Respondent together with a third Party, Vitol,
have entered into a joint venture and formed. It is in relation to the
First Respondent’s participation in Vesquin Trading (Pty) Ltd that the
Applicant prosecuted a claim for breach of contract:. Claim B.
39
45
8.8.5. In the Vesquin Trading (Pty) Ltd annual financial statements, for the
year ending 31 December 2017, LPG (Liquid Petroleum Gas) is noted
as part of the inventories, with an annual trade/returns of R26 795 077
(Twenty-six million seven hundred and ninety-five thousand and
seventy-seven rand). These financials are appended hereto marked
annexure “O”.
8.8.6. The First Respondent knew or reasonably ought to have known that
the company wherein he holds shares and is an executive director is
trading in LPG, in direct competition with the Sixth Respondent, and
consequently against the shareholder’s agreement.
8.8.7. The direct assertion by the First to the Fifth Respondent in the plea
that the Fifth Respondent does not sell LPG was intended to be
misleading and to gain advantage in the hearing over the Applicant.
8.8.8. The Applicant pleads that the award in relation to claim B, has been
inappropriately obtained, and in accordance with section 33(1)(c) of
the Arbitration Act should be set aside.
8.9. Insofar as remittal of the matter to the Arbitrator, the Applicant specifically
pleads that he does not have the finances to pay for the Arbitrator to
reconsider the matter. The Applicant therefore prays that the issues that the
court finds should be remitted to the Arbitrator, should rather be ordered to be
considered by the Court, as section 163 states that a claim under section 163
should be brought before court via application. And that same can and should
be done under rule 53 of the Uniform rules.
40
46
9.
REVIEW UNDER CONTRACT
9.1. Clause 26.4 of the Shareholder’s agreement states that “The decision of the
arbitrator shall, in the absence of manifest error, be final and binding on the
parties to the arbitration and may be made an order of Court at the instance
of any party to the arbitration.”
9.2. For the purpose of this section, the Applicant draws the Honourable court’s
attention to the presence of manifest error in the arbitration award, in the
Applicant’s claim in both Claim A and B.
9.3. The consequence of clause 26.4 is that where manifest error presents, the
decision of the Arbitrator is not final and is not binding on the Parties and may
not be made an order of court.
9.4. The Applicant submits that there is manifest error(s) which render the
arbitrator’s decision(s) under Claim A and B inconclusive and not binding, and
hereunder raises the manifest error(s).
9.5. GROUND NINE:
41
47
9.5.1. To the extent applicable, the Applicant borrows his assertions under
Ground one and three and marries same herein as if specifically
stated and relied upon.
9.5.2. Under Claim A, the Arbitrator has failed to make a finding and/or
determination under section 163(1)(b) of the Companies Act, though
the Applicant has prosecuted its claim inclusive of this subsection.
9.5.3. The failure by the Arbitrator to make a determination under section
163(1)(b) is a manifest error on the part of the Arbitrator, which
renders the arbitration award not final and not binding on the Parties.
9.5.4. The Applicant prays that it is not and was not his intention that his
claim under section 163(1) should be subdivided, and as a
consequence the findings of the Arbitrator under claim A, have been
cloaked in manifest error(s) which affect the entire findings under
Claim A.
9.5.5. The Applicant accordingly prays for an order that the failure by the
Arbitrator to make a decision under section 163(1)(b) constitutes a
manifest error, and the award in relation to Claim A is not final and not
binding on the Parties.
9.5.6. The Applicant further prays that the arbitration award in relation to
Claim A be set aside.
42
48
9.6. GROUND TEN:
Ground Two and three and marries same herein as if specifically
stated and relied upon.
9.6.2. To avoid further duplication, the Applicant borrows his plea under
paragraph 9.5.2. through to 9.5.6. and marries same herein as if
specifically stated and relied upon, with the specific edit that section
163(1)(b) is replaced with section 163(1)(c).
9.7. GROUND ELEVEN:
9.7.1. The Applicant submits that the Arbitrator in applying “rights” over
“interests” has done so against the dictates of section 163(1) and
particularly subsection (a) to which the Arbitrator has limited his
decision.
9.7.2. The Arbitrator in paragraph 115 of his decision states that “The
claimant brings the present arbitration by virtue of his right as
shareholder. He must therefore show that the conduct of which
he complains adversely affected or is affecting his rights as a
shareholder: Count Gotthard SA Pilati v Witfontein Game Farm (Pty)
Ltd supra at para 17.5.” The Emphasis is at the hand of the Applicant.
All SA 190 (GNP) at paragraph 17.5 specifically states that “The test
43
49
however is whether the acts or omissions that unfairly prejudiced the
Applicant’s interests resulted in affecting the Applicant in his capacity
as a shareholder. The precise question is whether the harm which the
Applicant has suffered is something he or she is entitled to be
protected from.”
All SA 190 (GNP) at paragraph 17.4 states that “I would think that the
concept interests could include interests not flowing from the
memorandum of incorporation of the company, but from an
understanding or agreement between the parties. Interests “arise[s]
out of fundamental understanding between the shareholders, which
formed the basis of their association but was not in contractual form.”
[Saul D Harrison & Sons Plc, Re [1995] 1 B.C.L.C at 19- English Court
of Appeal]. The acts complained of need thus not necessarily flow
from the Articles of Association or by example from a majority vote,
but for instance from a breach of trust or acrimony between the parties
flowing from the fundamental understanding between the
shareholders. Canadian Courts interpret the phrases similar to those
in s163 on a general fairness standard based on the reasonable
expectations of the Applicant and not only strict legal rights.”
Emphasis is at the hand of the Applicant.
9.7.5. The Applicant pleads that section 163(1)(a) protects ‘interests’ and not
only the rights.
44
50
9.7.6. As a consequence, preference or applying of rights over interest
narrows down the test and is contrary to the dictates of section 163(1)
of the Companies Act.
9.7.7. The Applicant accordingly pleads that a manifest error presents in the
Arbitrators decision and accordingly the decision should be set aside.
9.8. GROUND TWELVE:
Ground Seven and marries same herein as if specifically stated and
relied upon.
9.8.2. Under Claim B, the Arbitrator has accepted as adequate notice, the
First Respondent’s notice which was not given in writing and in
accordance with the Shareholder’s agreement.
9.8.3. Claim B is prosecuted as a breach of contract, the contract being the
shareholder’s agreement.
9.8.4. In deciding against the Applicant’s claim, the Arbitrator finds that there
was notice which was given, and that notice was adequate for the
purpose of the shareholder’s agreement. This position is
unsustainable as the shareholder’s agreement specifically states that
the notification should be in writing and it ought to contain sufficient
details.
45
51
9.8.5. The Applicant pleads that there is manifest error in the attainment of
the decision, as well as the decision itself of the Arbitrator in that he
has gone against the explicit assertions of the shareholder’s
agreement and has made a finding which is not supported by the
contract which is alleged to have been breached.
9.8.6. The Applicant accordingly prays for an order that the decision by the
Arbitrator in relation to verbal notice being sufficient notice under the
shareholder’s agreement is a manifest error, and the award in relation
to Claim B is not final and not binding on the Parties.
9.8.7. The Applicant further prays that the arbitration award, in relation to
Claim B, be set aside.
9.9. GROUND THIRTEEN:
Ground Eight and marries same herein as if specifically stated and
relied upon.
9.9.2. Under Claim B, the Arbitrator made a decision premised on the
position that Vesquin Trading (Pty) Ltd does not trade in LPG [Liquid
Petroleum Gas].
9.9.3. It is evident in Vesquin Trading (Pty) Ltd’s financials that the entity
does trade in LPG [Liquid Petroleum Gas].
46
52
9.9.4. The Applicant prays for an order that Vesquin Trading (Pty) Ltd does
or previously did trade in LPG [Liquid Petroleum Gas] in direct
competition with the Sixth Respondent, and that the decision of the
Arbitrator that states otherwise presents with a manifest error, and
therefore the decision of the Arbitrator is not final and not binding on
the Parties.
9.9.5. The Applicant prays that the arbitration award, in relation to Claim B,
should be set aside.
9.10. The Applicant pleads that where one or more of the above grounds are found,
as they should, to present with manifest error, clause 26.4 mandates that the
decision is not final and not binding on the Parties, therefore the Applicant
pleads that the decision of the Arbitrator is not final and is not binding.
9.11. The Applicant further pleads that the natural consequence which follows the
decision of the Arbitrator, which is not final and not binding, is that the award
should be set aside.
9.12. The Applicant prays that the arbitration award be set aside.
10.
REVIEW UNDER 53 OF THE UNIFORM RULES.
47
53
10.1. The Applicant acknowledges that there is a no appeal agreement in the
arbitration minutes, clause 17.
10.2. The Applicant pleads that he prosecuted a claim with all the various issues
due for determination.
10.3. The Applicant pleads that the actions of the Arbitrator not to arbitrate on parts
of the case prosecuted by the Applicant cannot be left unattended and
undisturbed.
10.4. It cannot be the intention of the legislature under section 28 of the Arbitration
Act, read together with clause 17 of the arbitration minutes, that the matter be
rendered final even in instances such as this, where the Arbitrator has failed
to make an award on parts of the Applicant’s case.
10.5. The Applicant is aware of the dictates of section 32 of the Arbitration Act which
relates to the remittal of awards.
10.6. The Applicant however pleads that he is not in a position to fund a duplication
of the effort initially paid for in the initial arbitration.
10.7. The Applicant accordingly prays that the Honourable Court consider matters
that ought to have been considered by the Arbitrator, or matters that the court
would order under paragraph 8 to be remitted to the Arbitrator, and to do so
under rule 53.
48
54
10.8. Where the Arbitrator is found to have misconducted himself, exceeded his
power and/or where the award is deemed to be improperly obtained, the
award should be set aside.
10.9. The Applicant prays that he initially sought that the oppression claim be heard
before the Honourable Court as that is where the Applicant understood section
163 to order that the matter should be heard.
10.10. The Applicant pleads that his erstwhile attorneys advised him to take the
matter for arbitration, and advised him on the associated costs, and informed
him that he would get a resolution quickly and that the costs would be
manageable. The estimate given to the Applicant was R1 million (One million
rand), while the costs of the application to compel as taxed by the Arbitrator
on its own depleted the estimated costs.
10.11. Contrary to the advice of his erstwhile attorneys, the arbitration has been an
entirely expensive process for the Applicant, and now presents with a
likelihood of infringing on the Applicant’s rights under section 34 of the
Constitution, as the Applicant stands firm on the truth that there is a dispute
still to be adjudicated, and referring the matter back to arbitration would
impoverish the Applicant and/or deny him an opportunity to have his matter
decided by application of the law.
10.12. The Applicant also pleads, in relation to Grounds Seven and Eight, that the
award in relation to Claim B cannot be allowed to stand undisturbed as, the
Arbitrator has entirely disregarded the provisions in the shareholder’s
agreement on the requirement for written notice, and the Respondents have
49
55
intentionally misled and/or inappropriately obtained the award in relation to
LPG. Accordingly allowing the Arbitration award to stand would unfairly
prejudice the Applicant.
10.13. The Applicant equally pleads that it is in the interests of justice that leave for
review under rule 53 be granted.
10.14. Accordingly, the Applicant prays that the grounds stated hereunder be
considered by the Honourable Court under rule 53 of the Uniform rules.
10.15. In relation to which, the Applicant advances the following grounds for
consideration under rule 53 of the uniform rules:
10.15.1. GROUND ONE;
10.15.2. GROUND TWO;
10.15.3. GROUND SEVEN;
10.15.4. GROUND EIGHT.
10.16. The Applicant pleads that advancing the review application under rule 53, and
for the application to be heard at the instance of this application would overly
burden the honourable court, and the Applicant has opted to separate the
application for leave to make a review application under rule 53 and the actual
review under rule 53.
50
56
10.17. The Applicant pleads for leave to review the Arbitrator’s findings under rule
53, and when such leave is granted the applicant seeks an opportunity to
submit pleadings in relation to the review under rule 53.
10.18. The Applicant accordingly prays for leave to review the Arbitrator’s findings
per GROUNDS ONE, TWO, SEVEN and EIGHT under rule 53, and for an
order that the review be heard at a later stage, further granting the Applicant
leave to submit a declaration in relation to review.
11.
RELIEF SOUGHT
The Applicant accordingly prays for relief as prayed for in the notice of motion, read
together with the prayers contained under each ground of review.
___________________
JONGISIZWE HOPA
I certify that the deponent acknowledged that he knows and understands the contents
of this affidavit, which was signed and sworn before me at
_________________________________ on this ________ day of APRIL 2021 and
that the provisions of the Regulations contained in Government Notice R1258 of 21
July 1972, as amended, were complied with.
_______________________
COMMISSIONER OF OATHS
Full names:
51
57
Designation:
Address:
52
58
IN THE PRIVATE ARBITRATION BETWEEN
JONGISIZWE HOPA Claimant
and
ELDERBERRY INVESTMENTS 139 (PTY ) LTD Fifth Defendant
AWARD
1. This arbitration involves two claims by the claimant (Mr. Hopa, hereinafter
referred to as Hopa). The first, said to be founded in section 163(2) of the
Companies Act of 2008, seeks relief arising from oppression of a minority
shareholder; the second claims a statement and debatement and payment of
damages, said to arise from breaches of a shareholders’ agreement. All relief is
claimed against the first defendant (Mr. Mehlomakulu, hereinafter referred to as
Mehlomakulu), the second defendant (The Bugsy Share Trust, hereinafter
referred to as the Trust) and the fifth defendant (Elderberry Investments 139
(Pty) Ltd), jointly and severally or in the alternative.
Page 1 of 54
59
2. Mehlomakulu, the Trust, and the third and fourth defendants (in their capacities
as trustees of the Trust), have counterclaimed for relief consequent upon
alleged breaches of the shareholders’ agreement by Hopa.
A. The background to the disputes
3. Hopa, Mehlomakulu and a certain Mr. Leven Moodley studied for the MBA
degree at the University of the Witwatersrand at the same time. Mehlomakulu
already possessed a B.Sc degree in chemical engineering while Hopa held a
B.Eng (Mech).
4. Mehlomakulu and Mr. Moodley envisioned a BEE company that would invest in
companies in the mining services, energy and petroleum sectors. To that end
they acquired a shelf company in 2002. When a third person, a Mr. Moloi, joined
them, the company name was changed to EM-Three Investment Holdings (Pty)
Ltd (the sixth defendant, hereinafter referred to as ‘the Company’). It was
agreed that the Company should trade and hold investments through
subsidiaries.
5. Mr. Moloi soon departed, leaving the the Trust, Mehlomakulu’s vehicle, and the
Losras Trust, Moodley’s vehicle as shareholders. In December 2003 a further
shelf company was acquired as a subsidiary of the Company and given the
name Reatile Resources (Pty) Ltd. In 2011 its name was changed to Reatile
Group (Pty) Ltd. (This company will hereinafter be referred to as ‘Reatile’ without
differentiation.)
6. About the beginning of 2004 Moodley suggested that Hopa be invited to work
for the Company with a view to him ultimately being offered shares if he proved
himself.
Page 2 of 54
60
7. Mehlomakulu deposed that by the time Hopa joined the Company it already had
a clear business plan and strategy and had developed a pipeline of proposed
business transactions. I accept his evidence, there being no contradiction of it.
8. In 2005 the Standard Bank of South Africa Ltd (hereinafter referred to as the
Bank) provided loan funding to Reatile to the extent of R5 million. This was
crucial seed funding which enabled Mehlomakulu to resign his employment at
PetroSA and devote himself fully to the affairs of Reatile, all of which set Reatile
on a path to success. In April 2005 Moodley and Mehlomakulu offered Hopa
employment in Reatile as Technical and Operations Director. Hopa accepted
and concluded a contract of employment with Reatile on 28 April 2005. He
reported to Moodley as CEO of Reatile (as did Mehlomakulu as an employee of
that company) while Moodley (as a director) reported to Mehlomakulu (as
Chairman of the Board).
9. In May 2005 a shareholders’ agreement (effective from 1 March 2004) was
executed in Reatile which left the Company with 62.5% of its shares and
introduced the Bank (with 12.5%). Hopa was not a participant at this stage.
10. During July 2005 Hopa was seconded to the QD Group (Pty) Ltd in anticipation
of the purchase of an interest in that company by Reatile. By July 2006 that
proposal had been abandoned and he returned to Reatile.
11. On 18 May 2006 a shareholders’ agreement in the Company was executed
between the Trusts (the existing 50% shareholders), Moodley, Mehlomakulu,
Hopa, a Ms. Qonde and the Company, recording the relationship between the
shareholders, the conduct and management of the Company’s investment
holding business and the relationship between the Company and its
shareholders. Although Moodley and Qonde subsequently left the Company, the
Page 3 of 54
61
terms of agreement have remained substantially the same ever since. It is worth
recording them at this stage to the extent that the disputes relate to such terms.
12. The beneficial ownership of the Company was to be held as follows:
The Losras Trust — 41%
The Bugsy Trust — 41%
Hope — 10%
Qonde — 8%
13. Clause 9.2 gave each shareholder the right to nominate, have appointed and
retained on the Board, one director in respect of each complete tranche of
shares constituting 20% of all issued shares issued to the shareholders.
14. Clause 9.3.1 provided, inter alia, that a director would cease to hold office if “the
shareholder who nominated him as a director in terms of the provisions of
clause 9.2 notifies the Company and the relevant director, of his removal from
office”.
15. Clause 16 laid out the dividend policy of the Company as follows:
“16.1 All dividends to be declared or paid by the Company from time to time
shall be determined by the board.
16.2 The board shall be entitled to withhold the declaration or payment of
dividends for as long as any monies are owing on loan account by the
Company to any shareholder or to any of its current creditors and any decision
as to the declaration or non-declaration of any dividend shall be in the sole and
absolute discretion of the board whose decision shall be final and binding.”
Page 4 of 54
62
16. Clause 17 regulated the transfer of shares. Clause 17.3 provided for pre-
emptive rights for a period of five years from the effective date, and perhaps,
longer. The correct interpretation of Clause 17.3 (and subsequent sub-clauses)
is a matter of dispute but does not need to be dealt with in this award.
17. Clause 18 also gives rise to dispute. It provides, in so far as relevant, as follows:
“18.1 Unless all of the shareholders agree otherwise in writing a shareholder
(‘offeror’) shall, subject at all times to the provisions of 17.3, be deemed to have
offered all his shares and loan accounts for sale to the other shareholders pro-
rata to their then existing shareholdings upon the happening of any of the
following events —
18.1.1 if the offeror commits a material breach of this Agreement and which
breach is not remedied within 30 days from service of written notice by any
other shareholder specifying the relevant breach, and requiring it to be
remedied; ….
18.2 The offer referred to in clause 18.1 will be deemed to have been made on
the day preceding the happening of the relevant event and will be subject to the
following terms —
18.2.1 the purchase consideration payable for the shares will be the fair value
thereof and for the loan accounts will be an amount equal to the face value
thereof as recorded in the books of account of the Company, provided that;
18.2.1.1 In the circumstances described in 18.1.1 the purchase price for the
shares will be the fair value thereof less 50%; ….”
18. Clause 28.1 provided that:
Page 5 of 54
63
“The shareholders undertake to co-operate fully and to consult with one another
in regard to the business and the expansion of its activities.”
“The shareholders shall at all times during the continuance of this Agreement
observe the principles of good faith towards each other in the performance of
their obligations in terms of this Agreement.”
“The shareholders shall take all reasonable steps to avoid a conflict of interest
between their own interests and those of the Company. Any conflict or potential
for conflict must immediately be brought to the attention of all other
shareholders in writing.”
21. Clause 34 provided as follows:
“34.1 For the purpose of this clause ‘business’ means the business of the
Company and its subsidiaries and any entity in which the Company has an
interest.
34.2 The shareholders and Moodley and Mehlomakulu in their personal
capacities (“the restrainees”) undertake that they shall, on or before the
signature date, inform the Company in writing of the details of the details of all
their direct or indirect shareholdings, interests or involvement in any company,
proprietorship, corporation, partnership, firm, undertaking or entity of any nature
whatsoever, engaged in or carrying on any business of activity within the
territory competitive to the business as at the effective date …. The restrainees
further undertake that they shall at all times inform the Company in writing of
any increase or change in any such shareholding, interests or involvement ….
Page 6 of 54
64
34.3 The restrainees each undertake to the Company and to each other that
they will not anywhere within the territory, whether directly or indirectly, in any
manner whatsoever … be engaged, interested or involved … in or with any
entity carrying on business competitive in any material respect with the
business ….
34.5 The shareholders each further undertake to the Company that they will
not, at any time, … reveal or disclose …. confidential information or details of or
concerning the business or affairs of the Company, its subsidiaries or any entity
in which the Company holds a financial interest ….
34.7 The restrainees each agree and undertake not to assume the office of
director in any company carrying on business similar to or competitive to that of
the Company or any of its subsidiaries.”
22. Clause 35 of the Agreement provided:
“The shareholders, Mehlomakulu and Moodley personally undertake, jointly and
severally, in favour of all other shareholders and the Company that for so long
as they are shareholders and to the extent that they may lawfully do so, to
introduce every business opportunity relating to or connected to the business of
the Company (as defined in 34.1) which is introduced or offered to them or any
of them, by means of a written notification to the board containing sufficient
detail to enable the board to properly assess such opportunity for commercial
exploitation by the Company.”
23. Hopa was not required to pay for his shares in the Company.
24. In July 2006 Hopa rejoined Reatile. Moodley decided that he could be most
effectively deployed at Reatile Gaz (Pty) Ltd, a subsidiary formed to conduct
Page 7 of 54
65
business in the liquefied petroleum gas industry. Hopa was informed of his
secondment “to provide technical and operational support” on 1 July 2006.
25. During 2007 the Company’s share capital was reorganised, in consequence of
which Hopa’s holding decreased to 8.72%
26. Also during 2007, a change in Reatile’s maternity leave policy, that operated to
the detriment of Ms. Qonde, led to her resignation and departure from Company.
The Trusts each acquired half of her shares in the Company for a consideration
of R150 000.
27. On 28 January 2008 Hopa was recalled to Reatile principally to support
acquisition and funding activities for existing and new business ventures.
28. In December 2008 a new shareholders’ agreement in Reatile saw its
shareholding divided 65%:35% between the Company and the Bank.
29. Reatile had prospered but was struggling to maintain a sustainable cashflow.
Mehlomakulu proposed a solution that involved the creation of a trading division
(Reatile Trading) within Reatile to conduct the business of trading in petroleum
products including crude oil. That embraced the purchasing of such products
abroad and importing them into the domestic and regional market.
Mehlomakulu, having been previously employed at Sasol and PetroSA, was
knowledgeable and experienced in this kind of business. The proposal was
accepted by the Reatile board.
30. Reatile Trading operated for 3 years. Its success was modest. The uncontested
evidence was that its business was unsustainable for at least six reasons:
30.1. Mehlomakulu was the initiator and driver of the business. His active
participation was indispensable to its success. Reatile Trading was
Page 8 of 54
66
however a relatively unimportant division of Reatile from both a strategic
and revenue perspective. Mehlomakulu could not afford to participate in it
to the prejudice of Reatile as a whole.
30.2. The business imposed serious commercial risk to Reatile and its
subsidiaries arising from the terms inherent in oil contracts and the
enormous cost of purchase and low profit margins, as well the need to
provide letters of credit and the cession or pledge of such letters backed
by a guarantee from Reatile in each case.
30.3. As Reatile was a black-owned company and as Reatile Trading occupied
the position of intermediary between buyer and seller, Reatile came to be
regarded as engaged in ‘fronting’ in conflict with the provisions of
prevailing BEE legislation by many prominent stakeholders in the
government and energy sector.
30.4. Trading in crude oil carries a real reputational risk which reflected
negatively on Reatile and its subsidiaries.
30.5. The gap in the market for an intermediary had been less lucrative than
Mehlomakulu anticipated. Many buyers and sellers dealt directly with
each other, bypassing middlemen such as Reatile Trading.
30.6. The Rand - Dollar exchange rate added a layer of complexity and
unpredictability to a business that was already contingent on an
unpredictable, volatile crude oil price.
31. On 23 November 2010 a Reatile Trading report was submitted to the Board of
Reatile. In the report and at the Board meeting the difficulties set out in the
preceding paragraph of this award were discussed. It was proposed that Reatile
Trading should cease to trade in crude oil and that it should instead form a joint
Page 9 of 54
67
venture with Vitol (an international oil dealer1) as its BEE partner with a 26%
interest in the venture; further, the staff of Reatile Trading should move to Vitol.
The Board noted these proposals.
32. During 2010 and 2011 Mehlomakulu represented Reatile in extensive
negotiations with Vitol about the possibility of forming a joint venture on the
basis that had been proposed to the Reatile board.
33. Mehlomakulu and Mr. Harvey Foster, Vitol’s country manager for South Africa,
both testified that negotiations snagged on the identity of the BEE compliant
minority shareholder for two reasons:
33.1. Although Foster and Mehlomakulu had formed a strong business
relationship, Foster and Vitol where unwilling to partner with people and
companies that they did not know well. These included the Reatile
shareholders other than Mehlomakulu.
33.2. More importantly, Vitol refused to partner in any business dealing with the
Bank for historical reasons and because it viewed the Bank’s substantial
shareholding in Reatile and its representation on the Board of Reatile as
inimical to Reatile’s profile as a BEE partner.
34. Mehlomakulu deposition of what happened subsequently, although disputed,
was not disturbed in cross examination:
“158. Vitol was still eager for me to join it as a BEE partner in a proposed joint
venture. I did not have any Standard Bank connection, and I had an established
business relationship with Vitol and Mr. Foster specifically. I did not thus
1Vitol is a global energy and commodity trading company based in the Netherlands. It
had been the leading seller in transactions involving Reatile Trading as a middleman
during the preceding three years.
Page 10 of 54
68
personally have the same traits that disqualified Reatile Resources according to
Vitol’s criteria.
159. I informally conveyed to Reatile Resources’ board members that —
159.1 Vitol refused to conclude the proposed joined venture with Reatile
Resources; and
159.2 Vitol was eager to conclude a similar joint venture with me.
160. The Board members did not object. On the contrary there was a broad
consensus that I should actively pursue the opportunity of partnering with Vitol.
As Reatile Resources and its subsidiaries would no longer conduct the
business of buying and selling crude oil and crude oil products and as there
was no longer any possibility of a joint venture between Vitol and Reatile
Resources, my association with Vitol —
160.1 did not create a conflict of interests;
160.2 did not constitute a business opportunity for Reatile Resources or its
subsidiaries.
161. Moreover I was encouraged to foster my association with Vitol because my
association could create business opportunities for Reatile Resources and its
subsidiaries. Precisely because Vitol and Reatile Resources operate in the
same general industry but do not conduct competing businesses, there were
many areas of potential collaboration between the companies. [Underlined in
his deposition.]
162. Indeed, as I will explain below, Reatile Group eventually obtained
significant business precisely because of my link to both companies.
Page 11 of 54
69
163. I was hesitant to express in a board meeting, Vitol’s main reasons for
rebuffing Reatile Group. As Standard Bank had representatives on the Board
and as it was our key funding partner with an ongoing relationship, it would
have been embarrassing and imprudent to formally put on record that the
Bank’s mere involvement with Reatile Group was a deal-breaker to Vitol.
164. Reatile Trading was closed down in the first quarter of 2011. I pursued the
joint venture with Vitol through Elderberry Investments 139 (Pty) Ltd. The
enterprise only took concrete shape in September 2011. This was when
Elderberry and Vitol formalised their shareholding in Vesquin Trading (Pty) Ltd
(“Vesquin”) by concluding a shareholders’ agreement. Vesquin is the company
through which the joint venture was (and continues to be) conducted.”
35. Elderberry was incorporated in South Africa on 11 April 2011. Its directors were
Mehlomakulu and his daughter, Diatile. Its only business and investment is 26%
of the equity in Vesquin Trading (Pty) Ltd.
36. During 2010 Moodley and Mehlomakulu developed different views about the
strategic path of Reatile. Moodley decided to go his own way. In April they
reached an agreement in principle and on 12 December 2011 signed a share
buyback agreement providing for a phased buy-out by the Trust of the entire
Losras Trust shareholding in the company at a price of R29 million with the
funding assistance of the Bank.
37. In consequence of the buy-out Hopa’s shareholding increased, pro rata, to
16.04% of the issued share capital of the Company. The Trust now held, as it
does today, 83.96% of the balance.
38. Hopa decided to leave the employ of Reatile and join Moodley at his company,
Tulisa Cables (Pty) Ltd, with effect from 1 June 2010. He remained a non-
Page 12 of 54
70
executive director of Reatile for the period of approximately 20 months while at
Tulisa.
39. Towards the end of 2011 Mehlomakulu re-employed Hopa at Moodley’s request
as a Business Development Manager. A new employment contract was signed
on 12 April 2012. Part of Hopa’s job description was to identify the capital
requirements of Reatile, and to find and engage with funders.
40. In early 2011 Reatile Resources (Pty) Ltd changed its name to Reatile Group
(Pty) Ltd as part of a rebranding exercise.
41. In 2013 Mehlomakulu ,as representative of the Trust, caused Hopa to be
appointed as a director of the Company as the nominee of the Trust.
42. During 2015 the Bank started to wind down its formal relationship with Reatile. (I
shall deal with the reasons later.) The minutes of the Board meeting of 5
September 2015 under the heading ‘Project New Dawn’ reflect:
“4.1.1 As a result of the IDC’s significant participation in the Reatile business, it
is proposed that its funding be consolidated and that the Standard Bank
contribution be reduced.
4.1.2 the IDC’s COO has approved the project in principle and the process of
valuing the Reatile Group as a whole is underway.”
43. The Board minutes of 17 November 2015 (under the same heading) reflect the
following:
“4.3.1 The Chairman reported that discussions had been held with Standard
Bank for Em-Three Investment Holdings to purchase Standard Bank’s and SH’s
[i.e Hopa’s] shareholding in Reatile Group. Payments will be made over a
Page 13 of 54
71
period of time and it is envisaged that R110 million will be paid to Standard
Bank for its 35% equity in Reatile Group over a six year period.
4.3.2 New strategically-placed shareholders in Reatile Group would be then
approached in the market.
4.3.3 Standard Bank has approved the proposal in principle, and agreements
are in the process of being drafted for signature. Standard Bank will fund the
transaction in full and has requested that it retains its observation role at the
Reatile Group board meetings, which the Chairman has agreed to.”
Hopa testified, and I accept his testimony, that the intention to acquire his
interest in the Company was first brought to his notice at this (Reatile) Board
meeting.
44. On 21 December 2015 the Chief Financial Officer of Reatile sent an email to its
directors stating :
“… we are now at the final stages of the SBSA buyback and I need your
signatures for approval please.”
45. The email also set out the steps of the SBSA transaction as follows:
“1. SBSA will advance a bridge loan to EM-Three Investment Holdings (Pty) to
the amount of R130 million. R130 million includes the purchase price of the
shares by EM-3 from SBSA of R115 million and an additional R15 million to
funding the buyback of the 5% of the Engen shares in Reatile Gaz in terms of
the BEE requirements of Project Khula.
2. As security for the bridge loan, SBSA gets a guarantee from Reatile Group.
Page 14 of 54
72
3. In 2016 the bridge loan from SBSA to EM-3 will be replaced with a
preference share facility.”
The attachments to the email for signature included a round robin resolution of
directors authorising Mehlomakulu as Chairman to sign all documents on behalf
of Reatile in relation to the due diligence investigation by the IDC into Reatile
‘with the view of possibly obtaining a minority stake in Reatile Group.’
46. Hopa signed and returned the resolution.
47. On 13 January 2016 Mehlomakulu, on behalf of the company, submitted a
written offer to purchase Hopa’s shares in the Company for a price of R30
million payable in six equal instalments subject to undertakings by Hopa, inter
alia, to remain in the employ of the Reatile Group for 5 years from 1 January
2016. The important part of the offer for the purposes of this arbitration is the
following:
“The following factors were taking into consideration in arriving at the above
offer price:
- The agreement reached between Reatile Group (Pty) Ltd (“Reatile Group”)
and the Standard bank of South Africa Limited (“SBSA”) in connection with buy-
back of SBSA’s direct 35% interest in the share capital of Reatile Group for a
consideration of R115 million (refer Annexure A);
- The findings of the PwC Valuation Methodology Survey (“the Survey”), which
indicate that the value of an indirect 9.75% interest in Reatile Group would be
considerably less that that of direct 35% interest in Reatile Group owing to
reduced control and marketability (refer Annexure B for a salient extract of the
Survey) ….”
Page 15 of 54
73
48. Mehlomakulu’s version, in his deposition, of what had transpired concerning the
IDC prior to this offer was important in the context of the dispute, was not
disputed and can with profit be inserted at this point:
“272. At the same time as Hopa and I were negotiating2 about the sale of
shares, Reatile Group and the IDC were in the midst of negotiating about the
IDC’s potential equity investment in the Realtile Group.
273. Senior IDC executives and I had negotiated about the proposed terms of
the transaction since at least October 2015.
274. We agreed that the transaction would proceed in several stages. First,
Reatile Group would give the IDC a fair valuation of the equity interest for sale.
Second, the IDC would make an initial offer on the basis of that valuation. This
would be followed by extensive due diligence investigation, by the IDC, into
Reatile Group’s corporate and commercial affairs. Should these steps be
completed successfully, the parties would then attempt to settle on a price and
agree on the terms of their contract.
275. Reatile Group received an initial offer from the IDC on 11 November 2015.
The IDC indicated that it was willing to subscribe for 35% equity interest in
Reatile Group at a subscription price of R510 million.
276. The IDC then commenced its due diligence investigation, led by Mr.
Thembasile Salman.
277. While I managed the transaction at a high level, Reatile Resources was
led in the negotiations about the final price by a third party independent
2 Hopa disputed any ‘negotiation’ prior to receipt of the offer. His subsequent reply
made it clear that he had no wish to sell. Mehlomakulu, however, does refer to
‘previous discussions’ but does not refer to negotiations.
Page 16 of 54
74
consultant, Mr. Michael Golding, who is a chartered accountant with vast
experience and an excellent track record of assisting Reatile Group.
278. The due diligence investigation was lengthy and extensive. To my
recollection, the investigation was ongoing during at at least, January, February
and March 2016.”
Although not mentioned in his deposition it appeared from Mehlomakulu’s
subsequent evidence and Golding’s deposition that the Company’s (‘fair
valuation’) proposal to the IDC was R675 million.
49. On 22 January 2016 Hopa replied in writing the Company’s offer in the following
terms:
“I thank the company for offering to buy my shares for R30 million and do
understand that this is in line with the offer made to Standard Bank. Standard
Bank has considerations that have made them to reconsider their position as
shareholder. I, on the other hand, do not have such similar considerations
bearing on me. I want to sell my shares in 4 to 5 years’ time, that is when I
reach sixty (60). I am in no hurry to sell now. However, I am willing to review my
decision, if an offer that is made now meets my long term family needs.”
50. Hopa set out further options and concluded:
“This letter is an attempt to offer us both alternatives that can provide us with
win-win solutions. I hope you will consider them in the spirit in which they are
made. I do note that there may be other alternatives. I am willing to consider
them too as I would like to find a solution both of us will be happy with.”
Page 17 of 54
75
51. Hopa’s letter was handed to Mehlomakulu at a lunch meeting between the two
on 26 January 2016. What transpired at this meeting is in dispute and will be
discussed later. It is clear that the atmosphere became heated.
52. At the end of the day Hopa, in a state of depression, returned home and
discussed the matter with his wife. The following day she called him and told
him what she had found on the internet regarding ‘shareholder oppression’, a
doctrine of which Hopa was previously unaware.
53. As requested by Mehlomakulu, Mr. Golding sent his workings behind the offer to
Hopa on 28 January. Hopa regarded them as a ‘scam’.
54. On 3 February Mehlomakulu and Hopa held a further meeting at which the latter
set out in (in Exhibit B) his reasons for rejecting Golding’s reliance on the Bank
sale of its shares in Reatile. He also set out his version of Mehlomakulu’s
behaviour at the meeting of 26 January, stating, ‘I seriously fail to understand
why you want to force my hand in selling now’. He concluded, ‘I therefore need
time to find other buyers and hope you will give me the time and space to
explore this further. I hope these discussions will eventually result in mutual
agreement that can create mutual satisfaction. I hope that talking at this level
does in no way adversely influence or affect the way we work as well.’
55. The following day, 4 February, Hopa contacted Mr. Salman, whom he knew to
be part of the IDC diligence team. He arranged a meeting at a restaurant in
Bryanston for the same day. There is only Hopa’s evidence as to what
happened at that meeting and that was the subject of intense cross
examination. It too will be dealt with in due course as it is cardinal to deciding
the counterclaim.
Page 18 of 54
76
56. A few days later Mr. Salman informed Hopa that his (Salman’s) manager had
told him that a purchase of Hopa’s shares could not be done separately from the
‘main purchase’ i.e by the IDC of shares in Reatile.
57. On 15 February Hopa gave Mehlomakulu a letter dated 12 February 2016
reiterating some of his version of the events of 26 January and 3 February, and
offering a counter proposal as presaged in the second meeting. ‘In this I used
the valuations I had received from the IDC.’ According to Hopa, Mehlomakulu
was dismissive but did entertain the possibility of a new offer.
58. There are differences between the witnesses as to what followed. In essence,
towards the end of February 2016 Mehlomakulu phoned Hopa and told him that
he had received a call from Golding or Lazarus of the IDC (depending on
whether the version of Hopa or Mehlomakulu is accepted) reporting that Hopa
had offered his shares to the IDC. Hopa confirmed that he had had such a
discussion. Mehlomakulu called a shareholders’ meeting of the Company after
the Egoli Gas board meeting of 25 February. He accused Hopa of jeopardising
the IDC deal. An argument ensued.
59. On 1 March 2016 Hopa sent an email with a proposal to sell his shares on a
staggered basis. Mehlomakulu acknowledged receipt but withdrew the offer of
R30 million made by the Company for the shares.
60. In early March a Reatile board meeting was held. When an update on the IDC
was required Mehlomakulu asked Hopa to recuse himself. When Hopa returned
he detected a change in attitude of the Board members towards him. He was
not asked to explain his contact with the IDC and did not volunteer an
explanation.
Page 19 of 54
77
61. The minutes of a meeting of the shareholders of the Company on 15 March
reflect the following:
“LSM [Mehlomakulu] noted that the shareholders’ meeting was called to discuss
the recent attempt by JH [Hopa] to sell his shares in Em-Three Investment
Holdings (Pty) Ltd to the IDC outside of the provisions of the shareholders’
agreement and in conflict with the transaction the Reatile Group was
negotiating with the IDC. Furthermore that JH requested the IDC to keep his
dealings with them confidential outside of LSM’s knowledge.”
The minutes further record that:
“LSM tabled a motion to remove JH as a director of EM-3 and all the companies
within the Reatile Group of companies. In support of this motion, LSM tabled a
resolution from the Trustees of the Bugsy Trust ….”
62. The motion was passed. It was noted in the minutes that:
“The removal of Mr. J Hopa from the boards of the Reatile Group and related
companies as a representative of EM-3 is in terms of clause 9.2 and and 9.3.2
of the EM-3 Shareholder’s Agreement.”
63. Hopa states in his deposition that he began compiling information relevant to his
oppression claim in 2017. The following is a summary of his evidence in regard
to his difficulty in obtaining supporting documentation from the Company and
Reatile:
63.1. He asked Mehlomakulu’s personal assistant for some Reatile board
minutes for 2010 and 2011 that he did not have and ‘got some but not
others’.
Page 20 of 54
78
63.2. He then asked for ‘the rest of the minutes of Em-3’. After some
interrogation (by Mehlomakulu) and delay he received the files.
63.3. He then asked for the Reatile files from 2016 onwards. He was refused
access and obstructed. He refers to these as ‘critical information’, without
explaining why.
64. As will be seen large numbers of documents were called for by the claimant in
these proceedings and discovered by the defendants. They were neither
inspected to determine their relevance to the claimant’s case nor for the purpose
of satisfying the claimant of the sufficiency or otherwise of the discovery.
65. Hopa deposed that ‘2018 was a relatively quiet year’, citing his employment at
Reatile Gastrade away from the centre of Reatile’s operations. He was invited
by Mehlomakulu to become a director of that company but declined as he
viewed the invitation as merely expedient in the circumstances.
66. Mehlomakulu called him. He wanted to buy Hopa out and suggested they use
an independent valuator to liaise between them so as to avoid any escalation of
emotions. Hopa agreed to listen to his ‘emissary’. Mehlomakulu sent Golding.
After a discussion, Golding to undertook to send a proposal for a buy-out. This
he did on 25 January 2018, setting out the basis for his thinking. (It appears that
the valuation at which he arrived for Hopa’s shares was about R60 million.)
Hopa was dissatisfied, describing the offer in his deposition as ‘creative
accounting’, furnishing various reasons for his rejection, and rejecting the
application of a minority discount, which, in his view, conflicted with the
provisions of the shareholders’ agreement. On 11 July 2018 Hopa replied setting
out his reasons for rejecting the proposal.
Page 21 of 54
79
67. In September 2018, Hopa, being of the opinion that an agreement was not
possible, instructed his attorney to initiate the present claim.
68. On 14 March 2019 Hopa was notified (under s 189(3)) of the Labour Relations
Act) that a consultation would commence about the possibility of his
retrenchment from Reatile Gastrade and setting out reasons for a proposed
restructuring. On 29 March 2019 he was dismissed with effect from 30 April
2019.
69. Hopa referred his dismissal to the CCMA. On 4 June 2019 Realtile notified him
that it accepted that his employment had been with Reatile Group (Pty) Ltd and
not Reatile GasTrade (Pty) Ltd but that ‘based on its operational requirements’
Reatile Group considered that it had no option but to dismiss him. On 14 June
2018 it implemented this decision with immediate effect.
70. In setting out the aforesaid chronology I have tried to limit events to what is
common cause. I have not attempted to deal with conflicts between the parties
nor to reconcile differences in their versions.
A. The Pleadings
A.1. The Claimant’s Claim
71. It is the Claimant’s case that he has been side-lined in the business of the
Company by the actions of Mehlomakulu as the representative of the majority
shareholder and that he wishes to sell his shareholding to the majority
shareholder (para 18). Although the Trust is the majority shareholder the
evidence throughout demonstrates that the dominant voice in the Company and
Reatile has been and is that of Mehlomakulu.
Page 22 of 54
80
A.2. The Oppression Claim
72. In paragraphs 20 and 21 the Claimant sets out the conduct which he alleges
‘has had an oppressive or unfairly prejudicial effect or unfairly disregards the
interests of the [Claimant] as is envisaged in section 163(1) of the [Companies]
Act’ (para 22).
73. The conduct alleged in paragraph 20 is set in the context of the negotiations
between Hopa and Mehlomakulu about the sale of the former’s shareholding in
the Company that took place in or about January 2016 (para 19).
74. The allegations made in paragraph 20 are specific:
“During the negotiations the first and second defendants (the first defendant
acting on behalf of and controlling the second defendant) made it clear to the
[Claimant] that they would:
20.1 In the future continue to refuse to authorise or pay dividends, as
had been the case, whilst [the Claimant ] was the minority shareholder;
and
20.2 Refuse to permit any prospective purchaser to access any
information about and pertaining to [the Company] in order to value the
shares in [the Company] so as to arrive at a fair and market related
value of the shares; and
20.3 Ensure that in the event of the majority shareholder in [the
Company] making an offer for the [Claimant’s] minority shareholding in
[the Company] that such valuation would take into account (contrary to
clause 18.3.2 of the shareholders’ agreement) the fact that [the
Claimant’s] shareholding was a minority shareholding and therefore was
Page 23 of 54
81
to be treated as being of lesser value than the shares held by the
majority shareholder.”
75. In addition to the three grounds in paragraph 20, the Claimant relied upon five
further grounds of alleged oppression:
“21.1 The first and second defendants excluded [the Claimant] from the
operations of [the Company] and its subsidiaries, and [the Claimant’s]
directorship of [the Company] was terminated at a general meeting during
March 2016; and
21.2 [The Claimant] has been denied access to any information about [the
Company] or its subsidiaries on the instruction of the first defendant despite
repeated requests for such information; and
21.3 The first and second defendants have failed to authorise or pay dividends
as a means through which the minority shareholder may share in the profits of
[the Company]; and
21.4 The first defendant has given himself large bonuses in lieu of declaring a
dividend so as to avoid paying [the Claimant] as minority shareholder in [the
Company] any dividends; and
21.5 The first defendant has informed [the Claimant] that, if [the Claimant] did
not accept the offer for [the Claimant’s] minority shareholding of R30 million, the
first defendant would endeavour to make the minority shareholder’s
shareholding worthless or of little value.”
Page 24 of 54
82
A.3. The Breach of Contract Claim
76. This claim is premised on breaches of clauses 34 and 35 of the shareholders’
agreement (para 23). The allegations are that the first defendant has breached
the agreement:
76.1. in that he is a director of and has advanced the interests of the fifth
defendant, a competitor of the sixth defendant and its subsidiaries (para
23); and
76.2. by competing, through the fifth defendant, with the sixth defendant and its
subsidiaries (para 24); and
76.3. by failing to inform the Company in writing of his involvement with the fifth
defendant (para 24.1); and
76.4. by breaching his undertaking to the Company and being engaged as a
director, in an entity carrying on business competitive in any material
respect with the business of the Company or its subsidiaries (para 24.2);
and
76.5. by revealing or disclosing to any third party (in this case the fifth
defendant) outside the Company the trade secrets, business
connections, confidential information, details concerning the business or
affairs of the Company, its subsidiaries or any entity in which the
Company holds a financial interest (para 24.3); and
76.6. by diverting business interests related or connected to the business of
the Company away from the Company and to the fifth defendant without
providing any written notification to the Board containing sufficient detail
Page 25 of 54
83
to enable the Board to asses the opportunity for commercial exploitation
by the Company (para 24.4).
77. I realise that my summary differs somewhat from the structure of paragraphs 23
and 24 of the claim but I have been obliged to construe the paragraphs in order
to make sense of them. It may be that paragraph 24 (introduction) is not
intended to provide an independent ground but is instead stated as a qualifier of
all the succeeding sub-paragraphs; but such an interpretation appears
inconsistent with the allegations in paragraphs 24.3 and 24.4.
A.4. The Relief claimed by the Claimant
78. This relief is divided according to Claims A and B (a distinction not made in the
body of the claim). In addition Claim A appears to contain relief appropriate to
both the contractual and the oppression claims; Claim B on the other hand
appears to be limited to the contractual claim. I will assume that the inclusion of
paragraphs 25.1, 25.2 and 25.3 are misplaced as the relief set out there does
not flow from allegations of oppressive conduct.
79. In paragraph 25.4 the claimant seeks an order for the appointment of an
independent auditor to value the shareholding of the Company and the
shareholding of the claimant in the sixth defendant ‘according to the terms of the
shareholders’ agreement’.
80. In paragraph 25.5 the claimant seeks an order directing the first and second
defendants ‘as majority shareholder’, to allow the independent auditor access to
the necessary documents relating to the first (sic) and sixth defendants and of
its (sic) subsidiaries so as to arrive at a fair and reasonable value of his
shareholding.
Page 26 of 54
84
81. In paragraph 25.6 the claimant seeks an order in terms of section 163(2)(e) of
the Companies Act directing an exchange of shares and that the first or second
defendant be ordered to pay him the fair and market related valuation of his
minority shareholding in the sixth defendant.
82. In paragraph 25.7 the claimant seeks an order in terms section 163(2)(j)
ordering the first and second defendants to pay compensation as a result of
their oppressive and prejudicial conduct towards the Claimant as a minority
shareholder of the sixth defendant.
83. In respect of the Breach of Contract claim the claimant requires, as relief, the
rendering of a full account by the first defendant and/or the fifth defendant of the
business conducted by the fifth defendant from 2011 until the present,
debatement of that account and payment of damages.
A.5. The Application to amend the Statement of Claim
84. On 22 September 2020 (after the claimant’s case had been closed and during
the cross-examination of Mehlomakulu) the claimant gave notice of intention to
amend his statement of claim in the following respects:
84.1. By the deletion of paragraph 21.1 in its entirety and its replacement with
the following:
“21.1 Excluded [the claimant] from the operations of the sixth defendant
and its subsidiaries by [the claimant’s] directorship of the sixth defendant
being terminated at a general meeting during March 2016 and that of
the subsidiaries unlawfully by way of shareholders’ written resolutions
dated 1 April 2016”
84.2. By inserting the following paragraph [as] 21.6:
Page 27 of 54
85
“21.6 Brought about [the claimant’s] retrenchment of his employment
with the sixth defendant’s subsidiary Reatile Group (Pty) Ltd.”
85. The application was vigorously opposed. After hearing argument on 28
September 2020 I refused the amendment and stated that I would furnish
reasons and a costs order in the course of this award. These are the reasons:
85.1. The application had been brought at a late stage of the arbitration
hearing. I was not satisfied that prejudice to the defendants could be
excluded or met by an appropriate order for costs.
85.2. The proposed paragraph 21.1 was vague and embarrassing in material
respects particularly :
85.2.1. in the absence of particulars of the facts and law on which the
claimant relied for the alleged ‘unlawfulness’;
85.2.2. in the failure to connect either the first or second defendant with
the termination of the claimant’s directorships in the Company or
its subsidiaries or in the alleged exclusion from their operations.
85.3. The proposed paragraph 21.2 was vague and embarrassing in its
allegation and lack of particularity about the manner in which the first and
second defendant ‘brought about’ the retrenchment from the Reatile
Group (Pty) Ltd.
85.4. Both amendments were excipiable in so far as they sought to introduce
alleged oppression of the claimant as a director or employee. The
claimant’s cause of action (for oppression) is founded in his capacity as a
shareholder. No link was made between that claim and his position as
either employee or director: Aspek Pipe Co (Pty) Ltd v Mauerberger 1968
Page 28 of 54
86
(1) SA 517 (C) 525B-D; Count Gotthard SA Pilati v Witfontein Game
Farm (Pty) Ltd [2013] 2 All SA 190 (GNP) para 17.5.
85.5. I further agreed with defendants’ submissions, having heard Hopa’s
evidence in full, that there existed no basis for him to allege (and no
reasonable prospect in establishing) that his rights qua shareholder in the
company could have been harmed by wrongs committed against him as
a director and employee of the Company or Reatile.
85.6. He had not alleged or proved that he had a right or legitimate
expectation, derived from his status as a shareholder to participate in the
management of the Company or its subsidiaries: De Sousa and another
v Technology Corporate Management (Pty) Ltd and others 2017 (5) SA
577 (GJ) paras 44-45;
85.7. Hopa had not alleged or proved that his rights under the shareholders’
agreement would be harmed or threatened by no longer being a director
or employee of the Company or any of its subsidiaries: cf De Villiers v
Kapela Holdings (Pty) Ltd and others 2016 JDR 1942 (GJ).
86. The application to amend was misconceived and bound to fail. There is no
reason why the claimant should not bear the costs.
A.6. The Defendants’ Plea
87. The defendants admitted that the fifth defendant (Elderberry) buys and sells
crude petroleum products, excluding liquid petroleum gas, but pleaded that the
Company and Reatile do not trade and none of their subsidiaries buys or sells
petroleum products.
Page 29 of 54
87
88. The defendants further admitted that in or about January 2016 Hopa and
Mehlomakulu entered into negotiations for the sale of the former’s shareholding
in the Company.
89. The defendants pleaded that the practice of the Company throughout was not to
pay dividends but to reinvest the profits in the Company.
90. With regard to the IDC, the defendants pleaded that:
1. Between October 2015 and March 2016 the management of Reatile and the
Company were in negotiation with the IDC regarding the possibility of the IDC
investing in the group (para 19.3 of the plea).
2. In or about February 2016, Hopa, with full knowledge of the IDC negotiations
and of his fiduciary obligations to the Company and Reatile:
2.1 offered clandestinely to sell his shares in the Company to the IDC without
the knowledge or consent of the Company, Mehlomakulu, Mr, Delgado (the
fourth defendant and the second trustee of the Trust), the Trust or Realtile;
2.2 requested the IDC not to disclose his approach and offer, to the Company,
Mehlomakulu, Delgado, the Trust or Reatile;
2.3 materially prejudiced the Company, Mehlomakulu, the Trust and Reatile in
the IDC negotiations (para 19.4);
and in so doing Hopa breached inter alia:
2.4 clauses 28.1, 28.2 and 28.4 of the shareholders’ agreement and his duty as
a director of the Company:
2.4.1 his duty not to use his position or any information obtained while acting in
the capacity of a director to gain personal advantage; and
Page 30 of 54
88
2.4.2 his duty to perform his functions in good faith, for a proper purpose and in
the best interests of the Company (para 19.5).
91. The defendants pleaded further that it was solely or mainly as a result of this
conduct that the IDC withdrew its offer to purchase Hopa’s shares in 2016. The
defendants also admitted that Hopa’s directorship was terminated during a
general meeting held on or about 4 May 2016 and that such termination was a
result of the conduct and breaches of his duties as a director previously relied
on.
92. Save for the aforegoing, the defendants substantially denied the allegations
made on behalf of Hopa.
A.7. The Counterclaim of the First to Fourth Defendants
93. The defendants pleaded reliance on:
93.1. clauses 18.1.1 and 18.1.2 of the shareholders’ agreement. (However,
during closing argument reliance on the last mentioned sub clause was
abandoned.); and
93.2. upon the duty to co-operate fully and to consult in regard to the business
and expansion of the Company’s activities(clause 28.1); and
93.3. upon the shareholders’ duty at all times to observe the principle of good
faith towards each other in the performance of their obligations in terms
of the agreement (clause 28.2).
94. The defendants repeated the allegations of breach made in paragraphs 19.3,
19/4 and 19.5 of the plea and alleged that such breaches were material.
Page 31 of 54
89
95. The defendants further gave Hopa 30 days notice from date of service of the
counterclaim to remedy the alleged breaches and pleaded that should he fail to
do so the Trust tendered payment of 50% of the fair value of the shares,
determined in accordance with clause 18.3 of the agreement and would claim
transfer of the said shares to the Trust.
A.8. The Relief claimed by the First to Fourth Defendants
96. The defendants sought, in the event of the failure to remedy the breaches, an
order for transfer of the claimant’s shares in the Company for a consideration of
50% of their fair value, determined in accordance with clause 18.3.
A.9. The Claimant’s Plea to the Counterclaim
97. Mr Hopa denied all the material allegations in the counterclaim.
A.10. The Procedure followed in the Arbitration
98. The arbitration was conducted online. The parties exchanged full sworn witness
statements of persons on whose testimony each would rely in advance of the
hearing. Those statements stood as the evidence in chief of the witnesses
called. In the event, the only witness for the claimant was Hopa himself. For the
defendants, Mehlomakulu and Mr. Harvey Foster of Vesquin testified as did Mr
King, a director of Reatile. The deposition of Mr. Pinkney was admitted by
consent. A sworn deposition by Mr. Michael Golding was filed on behalf of the
defendants but he was not called as a witness. It seems to me, that, in so far as
this deposition contained unequivocal statements against the interest of the
party filing it, such statements must be considered admissions. Where a sworn
statement of a person who it is intended it should be called is disclosed to the
opposing party, the party disclosing does so at its own risk including the
consequences of an admission in the deposition.
Page 32 of 54
90
99. At the pre-arbitration meeting the merits and quantum were separated. The
parties also agreed during the hearing that the possible determination of a
penalty in the counterclaim should stand over. During argument defendants’
junior counsel conceded that clause 18.2.1.1 of the agreement contained a
penalty provision that fell within the terms of the Conventional Penalties Act,
1962. In consequence, it was further agreed that, should I be minded to uphold
the counterclaim, I would, in this award, only issue a declarator that the claimant
has breached the terms of clause 28.1 and/or 28.2 and/or 28.4 (as the case
may be) of the shareholders’ agreement and therefore be entitled to the relief
provided in clause 18.1.1, read with clause 18.2.1.1, subject to the possible
application of the Conventional Penalties Act.
A.11. The Character and demeanour of the witnesses
100. More often than not the impression left by witnesses is neutral or adds little to
the resolution of a dispute. In this instance, the personalities of Hopa and
Mehlomakulu were so contrasting as to justify comment, the more especially as
my observations bear on both credibility and the probabilities.
101. Hopa emerged as a reticent, non-confrontational, sensitive and somewhat
insecure individual who, although clearly intelligent, was generally reluctant to
promote himself or his perceived interest even in the face of challenges,
preferring rather to leave events to the direction of others. It was common cause
that he seldom spoke at or contributed to the (many) board meetings that he
attended.
102. Mehlomakulu, on the other hand, was an out-and-out leader, creative, highly
intelligent, astute and driven, an in-your-face personality who clearly did not step
back from a confrontation when he regarded his interest as being at stake.
Page 33 of 54
91
103. The respective levels of business success of the two men could be measured
by the contrast in the levels of self-confidence which they displayed.
104. The respective natures of the two protagonists contributed, in my view, to the
unfolding of their dispute. Mehlomakulu (with Mr. Moodley) created the
Company and its subsidiaries and ran them largely as their own fiefdom; Hopa
publicly concurred while secretly resenting his colleagues’ dominance. His
resentment was fuelled by his own nature and the reality of a shareholding
which carried no power or influence, no tangible fruit in dividend income, no
access to perquisites such as a company credit card or entertainment
allowance, and an insubstantial salary. He was acutely aware of the need to
provide for his retirement. He also had the perception that his insight into the
affairs of the Company and its operations was being restricted, although he was
silent and apparently consenting in directors’ meetings when questions could
have been asked. Nor did he raise objections to employment in what might be
regarded as backwaters of the Company.
105. As to the credibility and reliability of Hopa and Mehlomakulu, there is much to be
said. The events extended over a period of about 14 years and where
contemporaneous documents were not available both witnesses were fallible.
Mehlomakulu was in the more favourable position, possessing ready access to
the Company’s and Reatile’s documents and because his experience was the
more direct, and, essentially, more hands on. Hopa, by contrast, had been
involved in directors’ meeting and relatively little else. In those meetings he
contributed little but invariably approved the minutes without dissent. He also
signed off financial statements without reservation but later questioned them in
evidence. In 2016, depressed and anxious over Mehlomakulu’s response to his
(Hopa’s) rejection of the Company’s offer for the shares, his wife drew his
Page 34 of 54
92
attention to the provisions of the Companies Act relating to shareholder
oppression.
106. I think it is very clear that much of his subsequent evidence was coloured by his
ex post facto identification of events which he perceived as oppressive and his
self-induced belief that Mehlomakulu had been duplicitous. That assessment
however does not apply, in my estimation, to the events surrounding the IDC
transaction, the offers and rejections in relation to the shares and the IDC
meeting between Hopa and Salman, where there were clear, identifiable and
significant interests in play for both parties and the Company. For reasons which
I will make clear, I find that the probabilities strongly favour Hopa in these
regards.
107. In January 2016, Hopa received an offer for his shares from Mehlomakulu on
behalf of the Trust. It was less than he expected. he regarded it, with some
justification, as out of kilter with the fair market value despite its express reliance
on the Standard Bank’s sale of its shares in Reatile. He knew that the Bank’s
35% interest had been sold back to Reatile for about R115 million but he
thought that there had been an element of compulsion in the sale that rendered
it not comparable. Although Mehlomakulu repudiated such a conclusion, the
hard fact is that Mr. Golding, the Company’s own valuer and Mehlomakulu’s
trusted adviser described the Bank in his witness statement as a ‘distressed
seller’ i.e a forced seller.
108. Hopa also knew that the IDC had been conducting a due diligence investigation
at Reatile since about October 2015 with a view to acquiring or subscribing for
35% of the shares in Reatile (i.e the equivalent of the interest disposed of by the
Bank). But I am satisfied that he was not fully informed about the proposed IDC
transaction or the negotiations; he had not been kept in the loop concerning the
Page 35 of 54
93
details of the negotiations, did not know that Reatile had proposed a selling
price of R675 million and did not know that the IDC had countered with a
proposal for R510 million, If he had known (or been informed by Mehlomakulu of
these facts) he would certainly have made mention of them in his rejection of
the first offer for his shares as the proposed transaction was at a price vastly
different from the Standard Bank figure.
109. Hopa testified that Mehlomakulu seemed to be in a hurry to purchase his
shares. That accords with the probabilities. The Company had submitted an
offer that diverged materially from the levels of price offered in the iDC
negotiations. He did not disclose these figures to Hopa but instead presented
him with an offer, far removed from reality, on the representation that it
constituted fair market value. That he was in a hurry to close the sale before the
details of the IDC negotiations came to Hopa’s ears is the overwhelming
inference. That he was angry and voiced threats (whether with serious intent or
not, matters not, at this point) is likely. It is consistent with the facts, was quickly
reduced to writing by Hopa and conforms with the power relationship between
the parties. Mehlomakulu, justifiably, described the negotiations with Hopa as
‘robust'. I think that was probably an understatement.
110. Since the shareholders’ agreement required of Mehlomakulu (perhaps, in
practical terms, even more so than Hopa, given his controlling interest in the
Company) both good faith and co-operation and consultation, it seems clear that
both in relation to to the IDC negotiations and in relation to the offer to purchase
Hops’s shares, Mehlomakulu’s observance of the contract fell short of his
contractual obligations under clauses 28.1 and 28.2 of the agreement. I shall
return to this matter when I consider the counterclaim.
Page 36 of 54
94
111. Nevertheless, it seems probable to me, given my findings as to his underlying
discontent, that Mrs Hopa’s reference to shareholders’ oppression fanned the
flames of the present conflict. From then Hopa looked back on his history with
the Company to find support for such an action; old irritations and suspicions
that had lain dormant for years were awakened. In every instance, as the cross-
examination of Hopa and the production of relevant documents established,
Hopa had voiced no objection and never committed such reservations as he
had to writing. In evidence instances abound, some of which metamorphosed
into shareholder oppression in the statement of claim:
111.1. the unfairness of the original allocation of shares in the Company to him;
111.2. the perceived tyranny by Mehlomakulu in relation to Ms. Qonde’s
maternity allowance;
111.3. the inconsistencies in Reatile financial statements and strategy
documents in regard to the relationship of the fifth defendant to Reatile;
111.4. the murky history of the ‘Oilgate’ scandal;
111.5. Mehlomakulu’s procurement of ‘unfair’ bonuses;
111.6. the ‘no dividend’ policy of the Company.
112. In all these instances the evidence adduced by the claimant was either non-
existent, trivial or explained satisfactorily by Mehlomakulu, often with the
assistance of contemporary documents of which Hopa had knowledge or had
signed.
113. With these preliminary remarks I proceed to consider each of the independent
allegations in the statement of claim.
Page 37 of 54
95
114. First, the law. Section 163 of the Act provides:
“(1) A shareholder or director of a company may apply to a court for relief if —
(a) any act or omission of that company, or a related person, has had a result
that is oppressive or unfairly prejudicial to, or that unfairly disregards the
interests of, the applicant.
(b) the business of the company, or a related person, is being or has been
carried on in a manner that is oppressive or unfairly prejudicial to, or that
unfairly disregards the interests of the applicant; or
(c) the powers of a director or a prescribed officer of the company, or a person
related to the company, are being or have been exercised in a manner that
is oppressive or unfairly prejudicial to, or that unfairly disregards the
interests of, the applicant….”
115. The claimant brings the present arbitration by virtue of his right as shareholder.
He must therefore show that the conduct of which he complains adversely
affected or is affecting his rights as a shareholder: Count Gotthard SA Pilati v
Witfontein Game Farm (Pty) Ltd supra at para 17.5.
116. The results of the act or omission and not the conduct itself must be unfairly
prejudicial or unfairly disregard the applicant’s interest: Ibid at para 17.6
117. It is not sufficient that the impugned conduct may (in the future) produce a
harmful result. That result must have occurred, even if it is ongoing: Kudumane
Investment Holdings Ltd v Northern Cape Manganese Company Ltd [2012] 4 All
SA 203 (GSJ) paras 52-53.
118. An applicant under this section must show that the impugned conduct has
harmed him in a commercial sense. Emotional harm does not qualify for relief:
Page 38 of 54
96
De Sousa and another v Technology Corporate Management (Pty) Ltd and
others at para 53
119. In discussing the principles I have not find it necessary to determine whether
Mehlomakulu was a 'related person’ under the Act nor indeed that such a finding
is necessary for Hopa to obtain relief. I shall assume that Mehlomakulu does fall
within the definition.
A.12. The alleged threat to refuse to authorise or pay dividends
120. For the reasons that I have already put forward I find it probable that a threat
having substantially this thrust was uttered by Mehlomakulu in the course of his
‘robust negotiations’. I have little doubt that he could, had he so wished, have
influenced the Board of the Company (clause 16 of the agreement), and of
Reatile (if necessary) in the matter of its dividend policy. However:
120.1. There is no evidence that Mehlomakulu has unfairly done so in the
intervening period since the threat or that the persistent policy of not
declaring dividends has been arrived at without sound reason.
120.2. There is no evidence that Hopa ever attempted to change the policy,
even at a shareholders’ meeting.
120.3. In so far as the long-applied policy of reinvestment of profits is
concerned, that policy, while no doubt disadvantageous to Hopa, has the
result of increasing the ultimate value of the claimant’s shareholding. I
cannot find that Hopa has suffered harm as a result.
120.4. Hopa has failed to prove any prejudicial consequence resulting from the
threat.
Page 39 of 54
97
A.13. The alleged refusal to permit a prospective purchaser to access
information in order to value the claimant’s shares in the Company
121. For the stated reasons I find it probable that a threat having substantially this
content was uttered my Mehlomakulu.
122. However, there is no evidence of a consequence. Hopa did not testify that he
was deterred by the threat from seeking a purchaser, or that any purchaser has
presented himself and been refused access, despite the lapse of more than four
years since the threat was made.
A.14. The alleged threat to ensure that in the event of an offer being made by the
majority shareholder for the minority shareholding, its valuation would
take into account, (contrary to clause 18.3.2) the fact that the claimant’s
shareholding was a minority interest and therefore to be treated as being
of lesser value than the shares being held by the majority shareholder.
123. I think, in the context of the negotiations, it is likely that the effect of the minority
shareholding on the valuation arose. However, its seems in the highest degree
unlikely that any threat would have included the bracketed words ‘contrary to
clause 18.3.2’ of the shareholders’ agreement. (I assume that these were
inserted as a gloss by the hand that settled the pleadings); or that Mehlomakulu
would have suggested in any way that he was acting other than in reliance on
his own genuine interpretation of the agreement. There is nothing unfair in
insisting on one’s own perceived rights not can it be prejudicial to do so when
the aggrieved party retains every right to assert and enforce all such rights as
are lawful.
Page 40 of 54
98
124. In any event no prejudicial or unfair result has followed such a threat. It was not
suggested by Hopa that the 2018 offer to him was influenced (or tainted) by the
threat.
125. These findings are made on the assumption that clause 18.3.2, properly
interpreted, excludes the application of a minority discount and also that,
irrespective of the application of clause 18.3.2, there is no legal basis for taking
such a discount into account. I have not heard sufficient argument on either side
on these questions of the interpretation of the agreement.
A.15. The alleged exclusion of the claimant from the operations of the sixth
defendant and its subsidiaries
126. I cannot find, either in the shareholders’ agreement, or as a matter of general
law, that a shareholder is entitled to participate in the operations of a company
or its subsidiaries (as distinct from his clear right to participate in its affairs). That
is the right and function of the management of the company and is exercised in
this case through the board in terms of clause 14 of the agreement.
127. As a fact I find no such exclusion proved by the claimant. The agreement does
not require the Company or its subsidiaries to employ him. There is no evidence
that he has ever been excluded from the expression of his opinion at a
shareholders’ meeting or that his voice has been unjustly ignored. Unfair or
unlawful termination of his employment does not entitle him to relief under the
section unless it can be linked to inequity or prejudice as a shareholder.
A.16. The denial of access to any information about the sixth defendant or its
subsidiaries on the instruction of the first defendant despite repeated
requests for such information.
Page 41 of 54
99
128. The evidence is clear as I have mentioned earlier that the claimant was
provided with information from time to time at his request. He has not identified
the documents with which he was not provided or the information which he
complains was not forthcoming.
129. The claimant has not established prejudice or an unfair disregard of his interests
in the sense of a commercial consequence resulting from absence of access to
information e.g. that he needed to value his shares in order to place a value on
them for the purpose of a sale to a prospective purchaser, and has suffered a
loss in consequence.
A.17. The alleged failure by the first and second defendant to authorise or pay
dividends as a means by which the minority shareholder may share in the
profits of the sixth defendant.
130. This allegation is entirely without support in the evidence. The board is the
decision maker, not either of the defendants. There is no allegation or
suggestion of improper influence on the board. As I have earlier pointed out the
policy adopted by the board has been consistent, long-standing and rational.
There is no evidence that the policy was undertaken with an intention to
prejudice the claimant.
A.18. Mehlomakulu has given himself large bonuses in lieu of declaring a
dividend so as to avoid paying the claimant dividends.
131. This allegation is without any factual foundation in the evidence. The defendant
proved that bonuses are determined and approved by the remuneration
committee of the Company and not the first defendant.
A.19. Mehlomakulu informed the claimant that if he did not accept the offer for
the claimant’s minority shareholding of R30 million he (Mehlomakulu)
Page 42 of 54
100
would endeavour to make the minority shareholder’s shares worthless or
of little value.
132. For the reasons given previously I find that Mehlomakulu probably made this
threat. Nevertheless, it was not proved by the claimant that Mehlomakulu did
anything whatsoever to put his threat into effect. On the contrary it was common
cause that the Trust increased its offer in 2018 to R60 million, a price which I
have been given no reason to regard as of “little value”.
133. I accordingly conclude that the claimant has failed to establish a cause of action
provided for section 263(1) of the Act based on the grounds of oppression set
up in his statement. In the circumstances, it is regrettable that I am unable to
make an order for the purchase of Hopa’s shares by the Company or the
majority shareholder since the evidence is clear that no party wishes Hopa to
remain a shareholder in the Company.
A.20. The claim based on breaches of the shareholders’ agreement
134. Paragraphs 24.1 and 24.2 of the statement of claim are founded in unlawful
competition: the claimant was of necessity required to prove that Elderberry
Investments 139 (Pty) (Ltd) was at all material times a competitor of the
Company (in the field of trading in crude oil). I shall assume without deciding
that clause 34.2 is wide enough to embrace increases in or changes in a
company in which there was no shareholding, interest or involvement at the
effective date of the shareholder's agreement. Clause 34.3 requires competition
in a material respect with the business of the company.
135. The evidence of the defendants establishes as a strong probability that:
135.1. Reatile (through its division Reatile Trading) resolved in 2010 to cease
trading in crude oil and acted on that resolution;
Page 43 of 54
101
135.2. in adopting that decision Reatile acted on rational grounds;
135.3. subsequently Reatile Trading explored the potential to engage in a joint
venture with Vitol in the business of trading in crude oil. It was unable to
pursue that opportunity because of Vitol’s opposition for reasons arising
personally on the side of Vitol, namely, its objection to partnering with
Standard Bank and with persons or entities with whom it was unfamiliar;
135.4. the joint venture between Elderberry and Vitol in Vesquin was formed at
a time when Reatile had ceased to trade and there was no element of
competition involved;
135.5. the Board members of Reatile (including Mr. King) were aware of and
had no objection to Mehlomakulu’s personal interest in the joint venture. I
think it likely that Hopa also was informed and did not object although the
information may not have meant much to him at the time.
A.21. The allegation that Mehlomakulu breached the shareholders’ agreement by
disclosing trade secrets concerning the business of the Company and its
subsidiaries.
136. This allegation was totally unsubstantiated. I also agree with counsel for the
defendants that the claim was defective in so much as it contained no allegation
that the claimant had suffered damages as a result of the breach; nor indeed
were any damages proved. I further agree that no basis was laid for holding the
fifth defendant liable for any relief consequent upon such a breach of the
shareholders’ agreement by Mehlomakulu.
Page 44 of 54
102
A.22. The alleged diversion of business opportunities relating or connected with
the business of the company to the fifth defendant.
137. This appears to rely on a breach of clause 35 and is not based upon the breach
of any fiduciary duty. I have already held that the establishment of Vequin as
dealer in crude oil and Mehlomakulu’s participation in it through Elderberry did
not breach the terms of the shareholders’ agreement. I should mention that I
accept the evidence of the defendants that, in informing the Board of his
decision to participate, the Board was well aware that Reatile would obtain spin-
off benefits from Mehlomakulu’s association with Vitol in the joint venture other
than those derived from the trade in crude oil.
138. There is undoubtedly much more that could be said about the fallibility of the
claimant’s claims (as the defendants have submitted). I shall however confine
myself to dismissing the two claims with costs.
A.23. The Counterclaim
139. The evidence in relation to the events following the claimant’s rejection of the
Company’s offer on 26 January requires analysis. Essentially, the claimant was
the only witness to these matters in so far as his dealings with the IDC were
concerned. The defendants did not call Mr. Salman or Mr. Lazarus to rebut his
version.
140. The claimant testified that he was confused and upset by the threats made by
Mehlomakulu who, he said, ‘doesn’t make jokes’. He did not know which way to
turn to obtain information to place a valuation on his shares. He recalled that the
IDC was conducting a due diligence and made up his mind to try to find out
what value they were considering. He made contact with Mr. Salman, a middle
manager involved in the investigation, and arranged to meet him at a restaurant
Page 45 of 54
103
in Bryanston. He and Salman discussed the proposed IDC transaction. Salman
was aware that the Bank had disposed of its 35% interest in Reatile for R135
million. Salman informed him that the IDC had made an offer of R510 million.
During the course of the conversation the claimant decided that he should find
out if the IDC might be interested in buying his shares. (This was an opportunity,
latent, but certainly present to his mind, when he arranged the meeting and was
activated by the information furnished by Salman.) He asked Salman to make
confidential inquiries of his superiors and suggested a price of R100 million for
the shares. Hopa denied that he had suggested to Salman that the IDC might
be overpaying for its investment in Reatile. There is no evidence to rebut that
denial. Salman subsequently phoned and informed him that the IDC was not
interested and would require consideration of any such purchase to form part of
the main transaction between itself and Reatile.
141. The foregoing is my summary of the probable course of events, a distillation of
diverse fragments in Hopa’s evidence. That evidence was rambling and mine is
not the only possible result that might be reached. It seems to me, however, to
be the most probable because it fits the context of contemporaneous events.
Most particularly it accords with Hopa’s most fundamental concerns of:
141.1. Determining a value for his shares; and
141.2. Finding a potential purchaser.
In doing so Hopa was most unlikely to have intended to harm the IDC’s
negotiations with Reatile. Throughout his long and taxing cross-examination I
never gained the impression of a witness who was consciously untruthful or
who regarded himself as anything but a participant in the welfare of the
Company and Reatile, notwithstanding his desire to further his own interest.
Page 46 of 54
104
142. I accept as more probable that Salman was aware of the Standard Bank price
since Hopa’s evidence is confirmed by the deposition of Mr. Golding, who said
that he and Mehlomakulu expressly informed the IDC of that price and he
provided cogent reasons for having done so. Mehlomakulu’s explanation that,
more than three months after the due diligence had commenced, the IDC had
not been informed, because ‘the time was not yet right’ was startling and
unlikely. I reject the evidence of Mehlomakulu who testified that Mr. Lazarus was
very upset because the IDC had not been informed of the Standard Bank
transaction. It seems to me that the reason for his evidence was to paint a
picture of Hopa’s unfaithfulness to the Company by disclosing details designed
to show that the Company had deliberately decided to withhold the information
until an appropriate opportunity had been reached.
143. The question which arises is the effect of my finding (concerning the probable
course of the conversation between Hopa and Salman) on the contractual
obligations by which Hopa was bound. Although his proposal to the IDC was by
no means the equivalent of a formal offer to sell (as the pleadings and counsel
submitted), and was predicated on further negotiations on price if and when
interest was shown, I agree with the defendants’ counsel that the feelers put out
by Hopa, and his albeit tentative proposal created a potential conflict of interest
between himself and the Company which was brought about by putting his own
interest above that of the Company. It also provided the real prospect that it
would derail the IDC transaction. His request to Salman that his approaches be
kept confidential, well intentioned as it may have been, simply exacerbated that
breach. I am satisfied that the defendants proved that Hopa breached clause
28.4 of the shareholders’ agreement.
Page 47 of 54
105
144. The defendants alleged in the counterclaim that the breaches by Hopa
“materially prejudiced” the Company, Mehlomakulu, the Trust and Reatile in the
IDC negotiations. Clause 18.1.1 requires that a ‘material breach’ be committed
to bring about a deemed offer and the consequences set out in clause 18.2.1.1.
Although the plaintiff’s breaches were not shown to have caused long term
damage to the Company or his fellow shareholders and the degree of concern
supposedly shown by Mr. Lazarus was not so important as to be reflected in
testimony by Lazarus, Salman or any other representative of the IDC, and
furthermore, was according to Mehlomakulu, ‘smoothed over’, and negotiations
continued for at least 2 months thereafter, and in addition the defendants led no
evidence as to what actually caused the breakdown in the negotiations and
proved no link between Hopa’s overtures to the IDC and the breakdown3, I have
no doubt that the the inappropriate contact between Hopa and the IDC resulted
in some measure of disturbance of the negotiation process, delay, ill-feeling and
certainly a breakdown in the confidence between the shareholders in the
Company. While a minor breach of a material term does not necessarily justify
cancellation of a contract: Culverwell v Brown 1988 (2) SA 468 (C) at 475E, the
obligation which was breached in this case went to the heart of the relationship
of trust between the parties, and the Company and the Trust were entitled to
regard to regard it as a material breach of the shareholder's agreement.
145. Ordinarily, a finding that Hopa has materially breached the shareholder's
agreement would be decisive of the result. In this case it is not.
146. There is a basic principle of justice that a litigant who seeks relief must come
with clean hands. If a court is satisfied on the evidence that a litigant behaved in
a manner that is legally or morally reprehensible and such behaviour is related
3Golding’s deposition listed Hopa’s indiscretion as ‘the final nail in the coffin’, but this
opinion was preceded by two material factors for which Hopa carried no responsibility.
Page 48 of 54
106
to the relief which he claims, the court has a discretion to refuse him that relief
regardless of the merits of his claim: Underhay v Underhay 1977 (4) SA 23 (W)
24E-F; Chikadaya v Chikadaya and another [2000] JOL 6437 (ZH).
147. In the present case I have found that Hopa was driven to approach the IDC for
information that might assist him in valuing his shares and in doing so breached
clause 35 of the shareholder's agreement.
148. Mehlomakulu was at all times under a duty to show good faith towards Hopa in
the carrying out of his obligations under the agreement (clause 34.2). One of
those obligations was to consult with and keep Hopa informed about steps
taken to extend the business of the Company (clause 34.1); the negotiations
with the IDC and particularly the making and receipt of an offer and counteroffer
fell within the scope of that clause.
149. During his cross-examination Mehlomakulu was generally a fluent, assured,
credible and persuasive witness. However, when questioned about the course
of the IDC negotiations and the circumstances of his January offer to Hopa and
its rejection, he vacillated and was often unconvincing in his replies, for example
(and not intending to be comprehensive):
149.1. in his witness statement he gave his reason for making the offer to Hopa
in January 2016 as the provision made by the Standard Bank for an
additional amount for that purpose. When it was pointed out to him that
by December the additional amount had already been re-allocated he
changed his version;
149.2. his attempts to distinguish the proposed acquisition from the basis on
which the Bank held its shares;
149.3. whether the Bank was a distressed seller;
Page 49 of 54
107
149.4. whether the Bank price was disclosed to the IDC;
149.5. whether Hopa knew of the IDC’s R510 offer.
It was also notable that so able and diligent a businessman as Mehlomakulu did
not think it necessary to reply to the allegations made against him in Exhibit B.
150. If we examine the probabilities we find we find the reason for the change in the
quality of his testimony that I observed:
150.1. Mehlomakulu presented an offer to Hopa which relied on the Bank price
as its sole fair value comparable. Mehlomakulu knew however that the
Bank sale did not represent a fair value and was not comparable for the
following reasons:
150.1.1. He knew that the Company regarded an offer of R510 million by
the IDC for substantially the same equity interest as sold by the
Bank as below fair value and that the Company was negotiating
at R750 million on the basis that that price represented fair
value; this is clear from Golding’s deposition. Indeed, by
February 2016 the IDC offer had been increased to R675
million.
150.1.2. His own advisor, Michael Golding, not only described the Bank
as a ‘distressed seller’ in his deposition but explained in detail
why he regarded it as such. Give the oversight which
Mehlomakulu exercised in relation to the IDC negotiations, it is
not credible that he and Golding did not discuss the value of
using the Bank sale as a comparable in the offer to Hopa.
Page 50 of 54
108
150.1.3. Golding deposed that he and Mehlomakulu informed the IDC of
the Bank price and why they found it necessary to do so. It goes
without saying that if the IDC and the Company were negotiating
at a price between R510 million and R750 million Mehlomakulu
and Golding must have furnished the IDC with strong reasons to
distinguish the Bank sale from fair value.
150.1.4. Hopa also believed that the Bank sale was a ‘forced sale’. He
gave a reason (the Bank’s obligations under the Basel 3
protocols) which was not disputed in cross examination.
150.2. Mehlomakulu did not disclose to Hopa either the Company’s proposal of
R750 million or the IDC’s offer of R510 million. This is clear from:
150.2.1.The terms of the January offer for Hopa’s shares and its reliance
on the Bank sale as representing fair value;
150.2.2.Hopa’s obvious ignorance of the IDC negotiations in his
response to the Company’s offer; Mehlomakulu’s vague
suggestion that Hopa may have become aware of the offer in
discussions between board meetings was unconvincing;
150.2.3.Mr. King, a trusted director of the Company was kept in the dark.
We know that the board meetings of Reatile make no reference to
Reatile’s offer or the IDC’s counter offer. Hopa was not involved in
the affairs of the Company or the due diligence.
150.3. In strong contrast, Mehlomakulu was privy to confidential information of
the Company and Reatile (‘I am the one who was negotiating it’) while
Hopa was not.
Page 51 of 54
109
150.4. Mehlomakulu not only submitted the offer for R30 million on the strength
of a fair value comparable, knowing that it was not, but he failed to
disclose information to which he was privy which would have showed that
it was not, all with the intention of inducing Hopa to rely on the
‘comparable’ sale and to sell his shares to the Company below fair value.
There was in the circumstances both a fraudulent misrepresentation and
a fraudulent non-disclosure by the Company for which Mehlomakulu was
directly responsible.
151. Counsel for the defendants made much of the fact that Mehlomakulu never
carried out his threats. This he submitted showed that no such threats had been
uttered and that Hopa had lied. I find the context shows otherwise. Hopa
thought the threats were genuine and would be carried out, but in fact they were
uttered with the more immediate purpose of pressuring him into accepting the
offer before he could become aware of the details of the IDC negotiations; once
they failed to achieve that, they no longer served a purpose. However, the
making of such threats exacerbated the moral obloquy that attached to the
fraudulent attempt to persuade the uninformed Hopa to accept the offer at a
lower price than he would have if he had been fully informed.
152. Mehlomakulu persisted during the arbitration in his false representation that
offer of R30 million was fair and that Hopa had unnecessarily and without
justification approached the IDC.
153. I conclude therefore:
153.1. that the offer made to Hopa was made in bad faith and probably
fraudulently;
Page 52 of 54
110
153.2. that Mehlomakulu breached his own duty of good faith to his fellow
shareholder in failing to keep him abreast of and disclose the details of
the IDC negotiations when such disclosure became material;
153.3. both failings preceded and were contributory to Hopa’s misguided
approach to the IDC and consequent breach of his own obligations;
153.4. Mehlomakulu carried his bad faith through to his deposition and evidence
at the arbitration.
154. These being my findings, I am satisfied that Mehlomakulu did not come to the
arbitration with clean hands. An arbitration should not, in the circumstances,
lend its aid to the enforcement of the penalty provided for in clause 18.1.1 of the
agreement.
155. I therefore dismiss the counterclaim.
156. My order in this arbitration is as follows:
156.1. The claim is dismissed with costs, such costs to include the application to
amend the statement of claim.
156.2. The counterclaim is dismissed with costs.
156.3. All such costs are to include the costs of two counsel.
156.4. The claimant and the defendants (jointly and severally) are to share
equally in the costs of conducting the proceedings online, the recording
of the evidence and its transcription, and the fees of the arbitrator.
Dated at Johannesburg on this 31st day of December 2020
Page 53 of 54
111
JA Heher
Arbitrator
Page 54 of 54
112
113
114
115
116
117
118
119
120
121
122
123
124
125
126
127
128
129
130
131
132
133
134
135
136
137
138
139
140
141
142
143
144
145
146
147
148
149
150
151
152
153
154
155
156
157
158
159
160
161
162
163
164
165
166
167
168
169
170
171
172
173
174
175
176
177
178
179
180
181
182
183
184
185
186
187
188
189
190
191
192
193
194
195
196
197
198
199
200
201
202
203
204
205
206
207
208
209
210
211
212
213
Best regards
Sizwe
From: Bradley Barrable <bradley@pearsona6orneys.co.za>

Sent: Monday, January 25, 2021 4:42 PM
To: 'Sizwe Hopa' <sizwe@netacGve.co.za>
Cc: 'Thando Hopa' <thandohopa@gmail.com>
Subject: RE: review of case
Hi Sizwe
I have already sent copies of the award to Adv Ria Bezhuidenhout, she will review the scope of the ma6er
and assess whether it is something that she feels she is suited to assist us with and further whether she
has the capacity to assist us.
Based on her reply you could either meet with her to get a feel for whether she would be suited to assist
you alternaGvely and what I have suggested is that she prepare a short CV for you to peruse.
The procedure for review is based on high court rule 53 which reads as follows:
“Save where any law otherwise provides, all proceedings to bring under review the
decision or proceedings of any inferior court and of any tribunal, board or officer
performing judicial, quasi-judicial or administraGve funcGons shall be by way of noGce of
moGon directed and delivered by the party seeking to review such decision or
proceedings to the magistrate, presiding officer or chairperson of the court, tribunal or
board or to the officer, as the case may be, and to all other parGes affected—
(a) calling upon such persons to show cause why such decision or proceedings should
not be reviewed and corrected or set aside, and
(b) calling upon the magistrate, presiding officer, chairperson or officer, as the case may be, to
despatch, within fi_een days a_er receipt of the noGce of moGon, to the registrar the record of such
proceedings sought to be corrected or set aside, together with such reasons as he or she is by law
required or desires to give or make, and to noGfy the applicant that he or she has done so.”
You will note that the rule does not prescribe any Gme limits. It is for this reason that one need only bring
your applicaGon within a reasonable Gme in other words that the process of review is not simply abused
to ensure that a party cannot obtain saGsfacGon based on the judgment.
A must admit that I am not able to find case law on this specific issue presumably because a review
(outside of other legislaGon with its own Gme periods) has not been challenged on the basis of having
been brought late.
To give some context as to what the court deems a reasonable period, we can look at the Gme period
prescribed in PAJA which is where the majority of reviews stem from. In this case one has 180 days to
launch a review. In addiGon, one can sGll apply for condonaGon for late filing on that Gme period. It is not
to say that we wish to place ourselves in a situaGon of asking for condonaGon however it does show that
even the 180 day period is not a hard cap. It is therefore extremely unlikely that one would be barred
from a review based on a Gme period of less than 60 days from the date of the award, i.e the end of
March.
Regards
Bradley Barrable
Page 3 of 4
214
Email: bradley@pearsona@orneys.co.za
The informaGon in this message is confidenGal and may be legally privileged. It is intended solely for the addressee. Access to this message by
anyone else is unauthorised. If you are not the intended recipient, any disclosure, copying or distribuGon of the message, or any acGon or
omission taken by you in reliance on it, is prohibited and may be unlawful. Please contact the sender immediately if you received this message
in error
From: Sizwe Hopa <sizwe@netacGve.co.za>

Sent: Saturday, 23 January 2021 10:56
To: 'Bradley Barrable' <bradley@pearsona6orneys.co.za>
Cc: 'Thando Hopa' <thandohopa@gmail.com>
Subject: review of case
Hi Bradley
Please confirm that there is no need to rush the review and that we sGll have Gme. What is your source to
assure us that we can apply for a review for instance in March instead of before the end of this month?
We cannot afford a mistake at this point so please find out and get back to me by Monday a_ernnon. I
know you said that there is no specific performance in the award so there is no need to rush, but does
does the law say? We cannot afford to make any assumpGons at this point in Gme. we need an
unequivocal answer on this.
Best regards
Sizwe
Page 4 of 4
215
216
217
218
219
220
221
222
223
224
225
226
227
228
229
230
231
232
233
234
235
236
237
238
239
Case NO:
And
CONFIRMATORY AFFIDAVIT
I, the undersigned
GASTAVUS CHABALALA
do hereby make oath and state:
1.
1.1 I am an adult male director, and the attorney of record of the Applicant
240
practicing at 81 Jean Avenue, Doringkloof, Centurion, Gauteng Province.
1.2 The facts hereinafter stated fall within my personal knowledge, unless
otherwise stated and are to the best of my knowledge both true and correct.
2.
I have read the founding affidavit deposed to by the Applicant herein and confirm the
correctness thereof insofar as it refers and relates to me.
______________________
GASTAVUS CHABALALA
I certify that the deponent acknowledged that he knows and understands the
contents of this affidavit, which was signed and sworn before me at
_________________________________ on this ________ day of APRIL 2021 and
that the provisions of the Regulations contained in Government Notice R1258 of 21
July 1972, as amended, were complied with.
_______________________
COMMISSIONER OF OATHS
Full names:
Designation:
Address:
241
Subject: RE: payment
Date: Wednesday, 24 March 2021 at 14:33:06 South Africa Standard Time
From: Sizwe Hopa
To: 'Bradley Barrable'
CC: 'Gasta Chabalala'
A2achments: image001.jpg
Hi Bradley
Can you please send us the bill for the below as we need to check that we are not being double charged?
Best regards
Sizwe
From: Bradley Barrable <bradley@pearsonaQorneys.co.za>

Sent: Monday, November 2, 2020 4:38 PM
To: 'Sizwe Hopa' <sizwe@netacWve.co.za>
Subject: RE: payment
Hi Sizwe
Thank you for the below.
Unfortunately Judge Heher has presented us with the taxed bill in respect of the applicaWon to compel
discovery. I must admit that I have never seen such high figures allowed a]er taxaWon and both I and our
costs consultant would consider taking the taxaWon on review however this will have the effect of
increasing the legal costs even further. The judge has allowed a bill of R592 039.35 which unfortunately
needs to be seQled.
My suggesWon is that we aQribute the R350 000.00 you have paid to the bill of costs, in addiWon you have
available an amount of R100 000.00 on trust which puts us at R450 000.00.
We can then request an indulgence from Paul on the payment of his account in order for you to make the
final payment and we will of course agree to the same.
Once again I can only say that I am uQerly shocked and flabbergasted at the costs the judge has allowed in
the circumstances. I understand that my shock is no comfort however I cannot offer more in the
circumstances.
Regards
Bradley Barrable
Email: bradley@pearsona2orneys.co.za
242
Tax Invoice
Judge Jonathan A. Heher
29 The Braids Rd
Emmarentia
2193
Tel: 011 646 8887
email: lornaheher@gmail.com
Attention: Mr B Barrable Matter: J Hopa v Mehlomakulu &

Others
Reference No:
Company Name: Pearson Attorneys
VAT No 4770238493 Invoice No: F 181
Date: 2021/01/01
Date Description Fee
2020/11/01 On taxing bill of costs (6 hours) R 21 000,00
2020/11/19 On resumed hearing (1 day) R 35 000,00
2020/12/31 On writing and delivering award (66 hours) R 231 000,00

R 287 000,00
Your client’s half-share R 143 500,00
Bank Details
J A HEHER
First National Bank
Branch no: 258605
Account No: 50451936023
Please pay within 30 days

243
244
245
246
247
248
249
250
251
252
253
254
255
256
257
258
259
260
261
262
263
264
265
266
267
268
269
270
271
272
273
274
275
276
277
278
279
280
281
282
283
284
285
286
287

Emailing Review Application Final (1) Yyy

Uploaded by

Copyright:

Available Formats

You might also like

Emailing Review Application Final (1) Yyy

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Emailing Review Application Final (1) Yyy

Uploaded by

Copyright:

Available Formats

1

IN THE HIGH COURT OF SOUTH AFRICA

JONGISIZWE HOPA Applicant

LULAMA SIMPHIWE MEHLOMAKULU First Respondent

THE BUGSY SHARE TRUST Second Respondent

LULAMA SIMPHIWE MEHLOMAKULU N.O. Third Respondent

JOSE ALBERTO DELGADO N.O. Fourth Respondent

ELDERBERRY INVESTMENTS 139 (PTY) LTD Fifth Respondent

EM-THREE INVESTMENT HOLDINGS (PTY) LTD Sixth Respondent

JUDGE J A HEHER Seventh Respondent

JONGISIZWE HOPA Applicant

LULAMA SIMPHIWE MEHLOMAKULU First Defendant

above Honourable Court on the __________________________________________

at 10H00 or as soon thereafter as the matter may be heard or on a date to be arranged

with the Registrar for an order in the following terms:

1. Condonation of the late prosecution of the review application under the

December 2020, a copy of which is annexed to the founding affidavit marked

annexure “A”, in terms of Section 33 of the Arbitration Act, 42 of 1965;

of December 2020, a copy of which is annexed to the founding affidavit

marked annexure “A”, in terms of Section 32 of the Arbitration Act, 42 of

and reconsideration is linked to the petition relating to rule 53;

December 2020, a copy of which is annexed to the founding affidavit marked

annexure “A”, in terms of clause 26.4 of the Shareholder’s agreement;

December 2020, a copy of which is annexed to the founding affidavit marked

and/or what processes are to be handled and/or followed;

7. Granting the Applicant such further or alternative relief as this Honourable

Court may deem just and equitable; and

application, such costs to include those of two counsel.

thereto shall be used in support of this application.

G CHABALALA ATTORNEYS c/o MORWASEHLA ATTORNEYS, OFFICE 405,

eservice@cinc.co.za carbon copying gasta@cinc.co.za ; mbali@cinc.co.za and

(b) In such a notice to appoint attorneys with an address as envisaged in Rule

of all notices and process in these proceedings; and

service of the notice of opposition referred to above.

application will be placed on the roll for hearing on an unopposed basis.

Signed at JOHANNESBURG on this the ________ of April 2021.

TO: REGISTRAR OF THE ABOVE HONOURABLE COURT

AND TO: FLUXMANS INC.

AND TO: JUDGE J A HEHER

GAUTENG LOCAL DIVISION, JOHANNESBURG

In the matter between:

JONGISIZWE HOPA Applicant

LULAMA SIMPHIWE MEHLOMAKULU First Respondent

THE BUGSY SHARE TRUST Second Respondent

LULAMA SIMPHIWE MEHLOMAKULU N.O. Third Respondent

JOSE ALBERTO DELGADO N.O. Fourth Respondent

ELDERBERRY INVESTMENTS 139 (PTY) LTD Fifth Respondent

EM-THREE INVESTMENT HOLDINGS (PTY) LTD Sixth Respondent

JUDGE J A HEHER Seventh Respondent

In the Private Arbitration Between:

JONGISIZWE HOPA Applicant

LULAMA SIMPHIWE MEHLOMAKULU First Defendant

THE BUGSY SHARE TRUST Second Defendant

LULAMA SIMPHIWE MEHLOMAKULU N.O. Third Defendant

JOSE ALBERTO DELGADO N.O. Fourth Defendant

ELDERBERRY INVESTMENTS 139 (PTY) LTD Fifth Defendant

EM-THREE INVESTMENT HOLDINGS (PTY) LTD Sixth Defendant

do hereby declare under oath: