TSANGA
J
The
background
The
Applicant Honey and Blanckenberg, instituted interpleader in terms of
r30 of High Court Rules for the court to declare to whom it should
pay an amount of $70,000 currently held in trust as rentals for
certain companies.
According
to applicant's affidavit, the companies in question are being laid
claim to by nine different respondents. The tenth respondent, the
Registrar of Deeds, was cited to throw light on the question of
ownership by virtue of certain statutory returns that have been filed
with it.
Despite
the assistance that the court would indeed have obtained from the
tenth respondent's comments, none were availed as the tenth
respondent did not participate at all in these proceedings.
The
companies in question, namely Beverly East Properties and Karoi
Properties (the companies) were established by the late Brian James
Rhodes who died on 29 July 2006.
At
least this much is not in dispute.
The
companies own commercial premises described as 184 Mutare Rd; 186
Mutare Rd; 188 Mutare Rd; 194 Mutare Road, all in Msasa.
These
premises are leased.
Until
October 2011 the rentals were being collected by an estate agent,
namely, Robert Root and Company. They discontinued agency and
accounted to applicants for rentals held by them.
Certain
tenants have continued paying rentals to applicants.
The
applicant averred in its affidavit that it is currently holding
$70,000 in trust by way of accumulated rentals form these tenants.
In
its affidavit the applicant lays out the conflicting claims that it
has been saddled with as emanating from triple sources.
(i)
The first set of claimants for the rentals is a Trust called Phoenix
Trust which the deceased is said to have established in 1998. The
first and second respondents are identified by the applicants as
Trustees asserting that the Trust is the lawful owner of the entire
share capital in the companies and to whom applicants should account
for the rentals held as representatives of the companies.
(ii)
The second claimant, also laying claim to the rentals is said to be
Gideon Hwemende, the third respondent, (a former employee of the
deceased) whom the applicant indicates in its affidavit as having
made diverse claims to share holdings in the companies ranging from
40%, to 60%, as well as to the entire ownership of the companies.
(iii)
The third set of claimants are the fourth to ninth respondents who in
their capacity as Directors appointed by the third respondent, lay
claim to interests in the companies.
The
affidavits and various annexures filed by the different claimants
bear the hallmarks of a dramatic 'corporate soap opera'
characterised by intrigue, alleged chicanery, resultant grievance.
It
is necessary to set out the facts somewhat fully from the papers
filed of record as they have a bearing in determining in whose favour
the balance emerges in terms of this interpleader application.
The
Facts
Mr
Lourence Vermaak, the first respondent, initially submitted an
opposing affidavit on 12 March 2013 which was later withdrawn and
expunged from the record by court order obtained as a result of a
default judgement. From the correspondence on file, the reason for
the seeking that this initial opposing affidavit be withdrawn was
because it had been obtained through coercion. However, by the time
of its withdrawal, the third to ninth respondents had filed their own
opposing affidavits in which they drew heavily, in asserting their
claims, on this initial affidavit. Even after the first and second
respondents had filed their new affidavits, the third to the ninth
respondents appear to have ignored the fact that this document was
obliterated by an order of this court.
Whilst
bearing in mind that the document was wiped out, it is necessary to
set out briefly its contents in order to give some context to the
election by the third to ninth respondents to hang on its every word
despite the court order stating that it is expunged from the record.
In
the expunged affidavit, the first respondent averred that he had
resigned as Trustee of Phoenix Trust and Director of Beverley East
Properties which is not in dispute.
He
denied having laid claim to owning or representing the companies.
He
asserted that he had appointed himself as Director when he saw that
the companies were lying idle. He also swore that the second
respondent, Terence Cobden Rhodes, had been appointed fraudulently by
him (with one Kenny Regan) without his knowledge and that second
respondent was not even aware that he is a director or was a
director.
In
a dramatic twist to the applicant claim of a dispute, the first
respondent refuted that the share holdings in the companies were in
dispute in any way. He also stated that the third and ninth
respondents are current directors and shareholders of Beverly East
Properties and that he had no problems with this nor did he have any
interest in the matter.
Attached
as annexures were letters of withdrawal as Director of Beverly East
Properties.
The
eighth respondent, Farai Mutizwa, in his purported capacity as
Director of Beverly East Properties deposed to an affidavit in which
he essentially embraced the first respondent's affidavit as
embodying the correct position. He confirmed that the first and
second respondents had resigned and had not laid any interest in the
companies as they had resigned as both directors and company
secretaries. He also stated that ownership and control are in the
hands of the remaining respondents and that there are no
contradictory or competing interests.
He
also said that the third respondent is a director in the company.
He
referred to the only dispute as that pertaining to Directorship of
Karoi Properties, a case which he said they were making frantic
efforts to resolve.
In
that case which I will allude to later, JUSTICE ZHOU ordered tenants
of Karoi Properties to deposit rentals into the account of the
Registrar until the matter of ownership is resolved.
The
fourth, fifth, sixth, seventh and ninth respondents submitted
affidavits in support of the eighth respondent's averments.
The
third respondent, who was separately represented, initially deposed
to his own affidavit on 18 March 2013. He withdrew through a letter
from his legal practitioners to the Registrar of the High Court, two
days after its submission on the 20 of March.
In
its place, he submitted an affidavit stating that he too was
embracing the affidavit deposed to by the eight respondent.
It
is necessary to state briefly the contents of this affidavit as its
content have a bearing on why it was withdrawn.
In
addition, its contents also have some bearing on the first
respondent's later affidavit.
In
his initial affidavit, he gave a totally different picture of the
share ownership pertaining to the company compared to that deposed to
by the first respondent. He did not assert full ownership but instead
claimed that he had acquired 60% of the shareholding, with the
remaining 40% belonging to the estate of the late Brian James Rhodes.
He sought to shed light on how he came to own what he asserted as 60%
of the company.
In
essence, his claim was that he had been employed as clerk by Brian
James Rhodes in 1990 who was sole shareholder of companies. He was
elevated to controlling all the accounts for the companies in 1992
which included mining companies. He said that when Brian James Rhodes
became old, he proposed that he buy shares in Beverly East Properties
in 1999 so that he could become the majority shareholder. His claim
was that the deceased said he would work out a plan since the third
respondent did not have money.
He
asserted that in 2002 the said Brian Rhodes indicated that he was
handing him 60% of the company and drew up shareholding agreements.
He also gave him the title deeds of three properties Lorely, Beverly
East and Karol Properties.
He
further averred that by 2006 had paid up for the 60% shareholding in
each of the two companies and that at the time of his death Brian
Rhodes owned 40% of the company. He further submitted that he himself
had fallen ill and for seven years and could not control the two
companies.
It
was during this time he said that the companies had been left with no
Directors and that the first and second respondents had illegally
appointed themselves.
He
alleged that there is no record of how Phoenix Trust came to own 80%
or 100% of the shareholding in the two companies.
He
had submitted documents to support his claim in the form of receipts
from a petty cash book to show purchase. He also attached annexures
of the share agreements in Beverly East and Karoi Properties.
Also
among the annexures was a copy of a letter purportedly by Brain James
Rhodes offering the third respondent the properties in 2002.
Also
included was company resolution also from 2002, appointing the estate
agents as managers of the property.
Turning
back to the first respondent, he withdrew his initial opposing
affidavit on the 27 May 2013.
Having
the court's blessing to breath freely again and file new papers on
the basis of a court order granted by JUSTICE MATHONSI under case No.
HC3889/13, he filed a new opposing affidavit on the 12 July 2013.
Equally
unfettered by the first respondent's initial affidavit, the second
respondent also filed his own opposing affidavit.
In
his new opposing affidavit, the first respondent disputed the third
respondent's claim to share holding on a number of grounds.
He
asserted that from the evidence produced by the third respondent he
could not be owner as he had failed to produce proof of actually
paying for the shares, neither had he shown any proof of paying any
capital gains tax on the shares as required by the Capital Gains Tax
Act [Cap 23:01]. He also stated that no such share transfers were
ever processed by the first respondent's company that was at the
time managing the two companies as company secretaries.
In
addition, he attached a number of annexures which included a document
examiners report disputing the signatures to the share agreements
that had been produced by third respondent.
The
examiner opined that the signatures could have been forged but that
he required to see the originals.
What
clearly does not help third Respondent's claims is that also
included were a proven forged letter in which he had claimed 100%
ownership from 40% through indigenisation.
The
first respondent also questioned why the company needed to be
indigenised if as claimed by the third respondent in the affidavit he
had initially filed, he already owned 60% which would mean the
company was already compliant with indigenisation.
The
second respondent, Terence Cobden Rhodes, submitted an affidavit as
Trustee of Phoenix Trust.
He
asserted that he has never resigned as Trustee of Phoenix or Director
of Beverly East Properties (Pvt) Ltd and Karoi Properties (Pvt) Ltd.
He insisted in his affidavit that the entire shareholding of the two
companies is with Phoenix Trust.
He
refuted the claim by the third respondent that he owns 60% of
shareholding of either company.
The
Issues
Having
brought the application as an interpleader the Applicant court made
it clear that it is a disinterested party in the proceeding and will
abide by the decision of this court.
Mr
Chivhizhe counsel for first and second respondents, argued in limine
that fourth-ninth respondent have no locus standi as the Directors in
their personal capacity.
Owing
to the distinct legal persona of a company which is separate and
distinct from its members and shareholders, he argued that they
cannot arrogate to themselves to sue what can only be legally
suffered by Beverly East Properties and Karoi Properties.
Where
wrong is done to a company the proper complainant is the company
itself.
The
following cases were cited in support of these averments Salomon v
Salomon & Co Ltd [1897] AC 22; Dadoo Ltd & Others v
Krugersdorp Municipal Council 1920 AD 530; Foss v Harbottle (1893) 67
ER 169; Wallersteiner v Moir (No. 2) [1975] 1 All ER (CA) 849.
He
also argued that the claim for fourth-ninth respondents must fail on
the basis that they do have a direct and substantial interest in the
matters as they are not even shareholders.
He
further submitted that their appointment as Directors rests on a
person whose ownership is disputed and that one cannot appoint
directors to a company to which one has been unable to prove
ownership.
He
argued that the third respondent had failed to show ownership of the
property and had merely managed to put forward a series of
inconsistent claims.
The
third respondent did not file any heads of argument neither did he
appear in court on the appointed day. He was therefore in default and
was barred.
Ms
Kenende counsel for fourth to ninth respondents argued that there was
no dispute of fact as regards ownership on the basis of the first
respondent's initial affidavit, despite the fact that this had been
legally withdrawn and substituted.
She
insisted that both first and second respondents had resigned from the
company.
She
argued that Directors were properly before the court as it is their
duty to manage the company as agents of the company.
Turning
to these arguments.
The
rule is indeed well established that a company is a separate legal
persona capable of suing and being sued in its own name. As such,
shareholders have passive role especially where a company can use its
corporate character to obtain redress for the alleged wrong.
Where
the wrong doers are the directors themselves there are obvious
challenges in that they cannot bring a claim against themselves. Thus
under the exception to the rule in Foss v Harbottle (supra) a
shareholder can bring a derivative action as a corporate shareholder
to address a wrong done to the corporation.
It
seems to me that a practical approach to addressing the issue of the
Directors locus standi in this case, is an analysis of the
relationship between shareholders and directors and the roles
attendant upon each.
A
person who has acquired shares in a company and can produce
irrefutable proof of such ownership has a right to play a central
role in the governance of such company. Among such roles that a
shareholder is entitled to play include the appointment and removal
of directors and addressing issues of their remuneration.
The
appointment and removal of auditors as well as issues to do with
their remuneration is another such role.
Dealing
with issues of management and business of the company and also any
issues to do with the company's constitution is yet another.
Directors
so appointed by a legitimate shareholder have the right to commence
litigation in the company's name; to buy and sell property; to
employ people and to conduct the business of the company among some
of their rights.
The
difficulty on the case before me is that the Directors have been
appointed by a person whose very claim to ownership is strongly
challenged.
The
Directors in the persons of the fourth to the ninth respondents do
not deny that they were appointed by the third respondent in his
capacity as shareholder.
As
conceded by Ms Kenende none of them are shareholders.
The
annexures that were included in this application by the first
respondent indeed reveal that the third respondent's claim to share
ownership rests on quick sand.
As
stated by the first Respondent, there is no evidence of the requisite
tax having been paid for the shares as required by the law, neither
is there actual proof of payment for those shares.
Whilst
admittedly not conclusive, the forensic report suggests that the
signatures to the share agreements may have been forged.
What
clearly does not help the third respondent's claim to share
ownership is the annexure of a court case involving him which details
proven submission of a forged document in claim of 100% ownership to
one of the properties in this case.
In
the matter of South Mark Trading1
v Karoi Properties & Lorna Kruger & Retired Major Chademana &
Gedion Hwemende & National Indigenisation Board HH52-2013 which
this court takes cognisance of, the tenants of Karoi Properties
sought the guidance of the court as to whom to pay their rentals.
Mr
Hwemende (the third respondent in the current matter) claimed rentals
on the basis of 100% share ownership of Karoi Company. He based his
claim on a letter from the National Indigenisation & Economic
Empowerment Board (NIEEB) dated 30 September 2011.
That
letter, which turned out to be forged, stated that Mr Hwemende who
previously owned 40% now owned 100% shares in the company.
NIEEB
had written on January 20, 2012 denying Mr Hwemende's claims and
emphasising that the indigenisation process in the above mentioned
properties is yet to be finalised.
JUSTICE
ZHOU made the following remarks regarding the forged letter and the
very tenor underlying the claim:
“The
biblical aphorism: 'Whatever a man sows he will also reap' has
lost its meaning in our society. This matter presents a sordid
picture of a culture of wanting to reap where persons did not sow.………
2
The
fourth respondent was aware that he could not just wake up to find
himself as the holder of all the share in a company for free. He
would know too that the indigenisation legislation does not operate
in the manner that he sought to portray to justify his claim to a
100% shareholding in the first respondent.”
In
this particular matter, the third respondent initially claimed 60%
before throwing his lot with the 100% claim.
The
third respondent has undeniably made claims that have ranged from 40%
to 60% to 100%.
What
is before the court is evidence of claims to ownership which swing
like a yoyo.
It
is evident that from the papers filed of record that the assertions
of ownership lack veracity and consistency and merely lend credence
to the proverb that liars should have good memories.
As
this claim has been lodged in interpleader proceedings what the
claimant must allege, is succinctly stated in the case of Bruce NO v
Josiah Parkes and Sons (Rhodesia) Pvt (Ltd) and Another 1972 (1) SA
68 (R) where GOLDIN J at pp69 stated as follows:
“In
my view in proceedings of this nature the claimant must set out such
facts and allegations which constitute proof of ownership so that the
question whether or not to refer the matter to trial would arise only
in the event of there being a conflict of fact which cannot be
decided without hearing oral evidence.” (My emphasis)
The
test whether a claimant has discharged the onus of proving his
ownership is whether the probabilities are balanced in his favour.
The
case of Corlett Drive Estates v Boland Bank BPK and Another 1979 (1)
SA 863 p684 elucidates the purpose of setting out particulars of
claim as follows:
“The
purpose inter alia of the setting out of the claimant's particulars
of claim is to acquaint his opponent of the tenor of his case, so
that the latter can be put in the position of deciding whether to
oppose his claim or not.”
I
do not see any real dispute of fact on the basis of this interpleader
that ought to be referred to trial as in my view the third respondent
has not shown this court that he has any real basis for his assertion
of ownership.
The
third respondent did not file heads or make an appearance.
Notably
the third respondent did not challenge the first respondent's
application to withdraw his opposing affidavit which he said had been
obtained by coercion.
In
interpleader proceedings, where a claimant does not deliver any
details of his claim nor appear in support of a possible claim, the
court can exercise discretion and order the claim lapsed. (See Free
State Consolidated Gold Mines Operations BPK v Sam Flanges (1997) (4)
SA 644 (O) at p647).
If
the third respondent had full confidence in his claim, he would have
made every effort to defend it to its logical conclusion.
Instead
he withdrew his affidavit in which he had purported to shed light on
how he came to acquire the shares. In addition to the withdrawal, he
chose to assert his claim on the foundation of the first respondent's
affidavit which has been withdrawn and allowed to be substituted by
the court. Thereafter, the third respondent could not thereafter be
bothered to file his heads of argument or appear in court to file for
upliftment of a bar.
Given
these realities the court is entitled to draw the adverse inference
that in third respondent's own view, his claim had collapsed or for
that matter that a guilty conscience needs no accuser.
Taking
all the above into account, I do not think the evidence before this
court shows that third respondent has a valid claim as a share owner.
Accordingly
the claim by the fourth to the ninth respondents cannot stand as the
third respondent who appointed them has failed to prove that he is
indeed a share owner.
I
therefore uphold the point in limine raised by Mr Chivhizhe regarding
the lack of locus standi by fourth to ninth respondents and their
claim is accordingly dismissed.
The
first respondent has made it very clear that he has no claim to the
property and that his primary motive in filing the affidavit has been
to shed light in his capacity as former Trustee and Director of the
companies.
He
confirmed that he has resigned as both Trustee and Director.
I
now turn to the claim by the second respondent and whether his claim
justifies the release of the monies being held by the applicant to it
as the successful claimant.
The
assets of Phoenix Trust are said to include the corporate stock of
the two companies.
The
Trust, through its Trustees, is deemed the shareholder for the
purpose of a bringing a derivative action against a wrong done to the
company.
The
second respondent is stated as a Trustee as well as a Director of
both companies.
In
his capacity as Trustee he therefore has legal title to the Trust
property.
Since
the Trust is said to be the holder of the corporate stock whatever
benefits this court may award accrue to the Trust in whom the
companies are said to be vested. Since the Trustee purports that the
companies were transferred to the Trust some years ago by the late
Brian James Rhodes, there must be in existence evidence which can be
produced in support of this claim.
Such
Trust document was not part of the annexures in this application.
As
such, before the monies being held can be released, evidence of the
Trust legally owning the companies must be furnished to this court
through the Registrar of the High Court.
In
the circumstances, I make the following order:
1.
That the second respondent, Terence Cobden Rhodes as claimant in his
capacity as Trustee of Phoenix Trust in whom the companies are held,
is the lawful shareholder of the two companies.
2.
That the second respondent, upon lodging with this court a valid
Trust document effected by the deceased during his life time
transferring the properties to the Trust, shall be entitled to
require the Registrar of this Honourable court to release to the
Trust, the sum of $70,000 deposited with him in terms of r206(1) of
the High Court Rules 1971.
3.
That the third to the ninth respondents shall pay the costs of the
applicants and the first and second respondents.
Honey
and Blanckenberg, applicants legal practitioners
Winterton,
Holmes and Hill, first and second respondents legal practitioners
Tavenhave
& Machingauta, fourth to ninth respondents' legal practitioners
1.
There were 12 other companies cited in that matter
2.
See page 1 of the cyclostyled judgement
