Reasons for order:
DE JAGER J:
The application serving before court is to have certain issues determined separately and upfront prior to hearing the main action in a manner and on a date/s directed by the managing judge. The applicants are Robert Douglas Wirtz, Windhoek Renovations CC and LH Equipment Sales CC, respectively. The respondent is Johannes Erasmus van Wyk. In the main action, the respondent is the plaintiff, and the applicants are the defendants. The issues sought to be determined separately and upfront are as follows:
‘1.1 Whether the plaintiff can – in the main action between the parties – achieve any relief in terms of the provisions of section 36 of the Close Corporations Act, given the fact that:
he (plaintiff) no longer is a member of either the second or third defendants, and has not been such member since at least February 2024; and
clause 4.3 of the association agreement governing the relationship between the three defendants stipulates that the provisions of section 36 are not applicable to the corporations or their members.
Whether the plaintiff is/was entitled to any dividends or profit sharing payable by the second defendant, given that:
clause 19.4.2 of the association agreement between plaintiff and the first defendant expressly stipulates:
"Accordingly, the Corporation may only declare and pay dividends after all Claims have been settled in full”; and
not all of the loan account claims against the corporation had been settled in full, at the junctures when plaintiff claims to have become entitled to a portion of dividends that according to him had to be declared; and that
It in any event at all times remained within the discretion of second defendant whether or not to declare dividends, and no grounds have been pleaded upon which the exercise of the discretion not to declare dividends could be faulted.
Whether the plaintiff complied with the provisions of clauses 9.2 and 9.3 of the agreement of sale when he purported to cancel the agreement, having regard to the provisions of clause 9.2, and specifically given that specifically clause 9.3 stipulated that:
"The purchaser shall not be entitled to cancel this agreement in the circumstances provided for in clause 9.2 unless he or his agent first gives the seller 30 days' notice in writing to remedy such breach and the seller failed to comply with such notice" (emphasis supplied), and if not, whether such failure was a total bar to his purported cancellation.’
Rule 63(6) provides as follows:
‘(6) Where it appears to the court mero motu or on the application of a party that there is in any pending action a question of law or fact which may conveniently be decided either before any evidence is led or separately from any other question, the court may make an order directing the trial of that question in such manner as it considers appropriate and may order that all further proceedings be stayed until the question has been disposed of.’
In Tshwane City v Blair Atholl, when dealing with repealed rule 33(4), which is similar to rules 63(6) and (7) read together, the South African Supreme Court of Appeal quoted Erasmus Superior Court Practice as follows:
‘The entitlement to seek the separation of issues was created in the rules so that an alleged lacuna in the plaintiff's case can be tested; or simply so that a factual issue can be determined which can give direction to the rest of the case and, in particular, to obviate the leading of evidence. The purpose is to determine the plaintiff's claim without the costs and delays of a full trial.' [Footnote omitted.].’
and
‘The procedure is aimed at facilitating the convenient and expeditious disposal of litigation. The word convenient within the context of the subrule conveys not only the notion of facility or ease or expedience, but also the notion of appropriateness and fairness. It is not the convenience of any one of the parties or of the court, but the convenience of all concerned that must be taken into consideration.' [Footnotes omitted.].’
In Denel (Edms) Bpk v Vorster that court said that:
'Before turning to the substance of the appeal, it is appropriate to make a few remarks about separating issues. Rule 33(4) of the Uniform Rules – which entitles a Court to try issues separately in appropriate circumstances – is aimed as facilitating the convenient and expeditious disposal of litigation. It should not be assumed that that result is always achieved by separating the issues. In many cases, once properly considered, the issues will be found to be inextricably linked even though, at first sight, they might appear to be discrete. And even where the issues are discrete, the expeditious disposal of the litigation is often best served by ventilating all the issues at one hearing, particularly where there is more than one issue that might be readily dispositive of the matter. It is only after careful thought has been given to the anticipated course of the litigation as a whole that it will be possible properly to determine whether it is convenient to try an issue separately.'
In Consolidated News Agencies (Pty) Ltd (in Liquidation) v Mobile Telephone Networks (Pty) Ltd and Others that court stated that:
‘[89] Before concluding we are constrained to make the comments that follow. Piecemeal litigation is not to be encouraged. Sometimes it is desirable to have a single issue decided separately, either by way of a stated case or otherwise. If a decision on a discrete issue disposes of a major part of a case, or will in some way lead to expedition, it might well be desirable to have that issue decided first.
[90] This court has warned that in many cases, once properly considered, issues initially thought to be discrete are found to be inextricably linked. And even where the issues are discrete, the expeditious disposal of the litigation is often best served by ventilating all the issues at one hearing. A trial court must be satisfied that it is convenient and proper to try an issue separately.
[91] In the present case counsel for both parties informed us that notwithstanding a decision in this matter a number of issues would still be outstanding. Not all of the remaining issues were identified, nor do they appear to have occupied the mind of the court below.'
The issues sought to be separated appear discrete but must be properly considered with reference to the case as a whole. The parties’ respective cases, as set out in the pleadings, are as follows.
The respondent’s first main claim is based on section 36 of the Close Corporations Act 26 of 1988 (the Act). According to him, circumstances arose which rendered it just and equitable that he ceased to be a member of the corporations (the second and third applicants), alternatively, that the first applicant ceases to be a member, against payment of a fair price. It is common cause that the respondent is no longer a member of the corporations, but his counsel submitted that he must still be compensated.
The applicants admit the respondent was a registered member of the third applicant. However, in respect of the second applicant, the applicants’ position is that the respondent was incorrectly registered as its member as he breached the agreement of sale of the member’s interest (the sale agreement) because, save for a deposit representing 2,1 per cent member’s interest, he failed to pay the total purchase price of N$35 000 000. The applicants rely on a forensic analysis and audit report by PricewaterhouseCoopers (PwC) for its plea that the respondent’s attempts to pay for the member’s interest were null and void and of no effect, and any and/or every book entry that purported to reflect a contrived or simulated payment by the respondent to the first applicant (after the deposit was paid), was null and void given the provisions of sections 39(1)(a) and 40(a) of the Act. Alternatively, if the court finds that those sections find no application, the applicants plead that the respondent would only have been entitled to 31,26 per cent member’s interest, and an amount of N$12 670 703 remained due and payable by the respondent but due to his breach of the sale agreement, the first applicant cancelled it.
In a counterclaim, the first applicant seeks an order confirming cancellation of the sale agreement and directing that the respondent forfeits all moneys paid to the first applicant thereunder, and he pleads that if the counterclaim is granted, the respondent would have no locus standi for the relief sought in convention.
The respondent pleads he purchased 49 per cent member’s interest in the second applicant and became the rightful owner thereof on the basis set out in his second main claim referred to below. The respondent’s position is that the court may decide, should it uphold the cancellation claims, whether to adjudicate on the section 36 claim. The respondent further pleads that the forfeiture claim is based on clause 10 of the sale agreement, the provisions of which amount to a penalty stipulation under the Conventional Penalties Act 15 of 1962, which claim is out of proportion to the prejudice suffered by the first applicant and the penalty stands to be reduced to the extent the court considers equitable in the circumstances.
The respondent’s second main claim is as follows. The purchase price of N$35 000 000 for the 49 per cent member’s interest in the second applicant was payable by way of a deposit of N$1 500 000 through a cash payment of N$1 000 000 and delivery of a Toyota Fortuner to the value of N$500 000 and the balance was payable in eight annual payments from dividends to be declared from the second applicant’s profit. The deposit was duly paid, and the respondent made annual payments from time to time by allocating the amount of profit share due to the respondent to the credit of the first applicant. As payments were made, the member’s interest was transferred to the respondent in tranches pro rata to the portion of the purchase price paid in any specific year. By 2017, after four years, the respondent had paid N$31 688 112,54 of the purchase price of N$35 000 000, and in September 2017, the parties orally agreed that the first applicant would accept that payment as full payment of the purchase price for 49 per cent member’s interest and agreed to transfer the last portion of the 49 per cent member’s interest to the respondent. The oral agreement was reduced to writing and signed by the parties. The first applicant’s purported cancellation of the sale agreement amounted to a repudiation thereof, whereupon the respondent, on 20 February 2023, cancelled the sale agreement and claimed repayment of the amount of N$31 688 112,54, tendered return of the 49 per cent member’s interest, and claimed unpaid profit share of the second applicant for the years 2018 up to 20 February 2023 in the amount of N$22 516 931,30.
The applicants deny the oral agreement and the respondent’s cancellation of the sale agreement.
If the court finds the parties did not conclude the oral agreement or that it is unenforceable, the respondent claims damages suffered in the amount of N$22 516 931,30, being the profit share he would have received had the first and second applicants not breached the first applicant’s contractual obligation in clause 21 of the association agreement by deliberately refusing to cause and obstruct the second applicant from making profit share payments.
The applicants deny the breach alleged by the respondent in the preceding paragraph. They plead the second applicant was precluded from making profit share payments because of clause 19.4.2, read with clause 2.2.6, of the association agreement. They further plead that the first and second applicants were never requested or put to terms to make such payment, and the entitlement to the amounts claimed has become prescribed. Lastly, they plead the second applicant may only declare and pay dividends after all claims have been settled in full.
Should the court find that the sale agreement is unenforceable, and should the court find that a claim for restitution is not precluded as both parties to the invalid contract performed in full, the respondent claims payment of N$31 688 112,54 on the following bases. The sale agreement is void and unenforceable by virtue of sections 39(1)(a) and 40(a) of the Act in that the relevant written consent of every member of the second applicant was not obtained. The respondent made the payment of N$31 688 112,54 in the reasonable and bona fide belief that the sale agreement was valid. The respondent tendered return of the 49 per cent member’s interest and delivered a duly signed CC2 form to the first applicant. The first applicant appropriated the amount of N$31 688 112,54, is enriched at the respondent’s expense, and the respondent is impoverished accordingly, which enrichment is unjustified, alternative, sine causa.
The first applicant denies the respondent paid the amount alleged by him in the preceding paragraph, and he further denies the alleged unjustified enrichment.
Having considered the issues arising from the case, it must be determined whether the issues identified in the amended notice of motion should be heard separate and upfront.
In Socotra Island Investments (Pty) Ltd v The Commissioner of Inland Revenue, when dealing with a separation application, the court applied certain guiding principles set out in Copperzone 108 (Pty) Ltd v Gold Port Estates (Pty) Ltd, which principles reduce to five pertinent questions. During oral argument, the court invited counsel to answer those questions. The questions, counsel’s answers thereto and the court’s findings thereon are as follows:
First, will a separate hearing materially shorten the proceedings?
According to the applicants, a separate hearing will tremendously shorten the proceedings. The applicant’s counsel argued the section 36 claim will cover an unbelievable amount of litigious events from 2013 to date, and if determined upfront, it will eliminate those disputes. On the court enquiring whether the same result could not be achieved by having that evidence substituted with evidence on affidavit, it was submitted that even if that is done, lengthy cross-examination would be required.
According to the respondent, the same issues will again be dealt with in the main hearing because the first applicant’s conduct is central to several issues. He referred to the section 36 claim, the reduction in the purchase price agreement, the agreement of the members’ interest transfer, the forfeiture clause, the enrichment claim and interpreting the shareholders agreement.
What the court concludes from the parties’ respective submissions is that a separate hearing may shorten the proceedings, but the same issues may again be dealt with at the main hearing because the first applicant’s and the respondent’s conduct is relevant to several issues. The resultant conclusion is that the time saved by a separate hearing may not be reason enough to order a separation.
Second and third, will a separate hearing result in a significant delay in the case’s ultimate finalisation, and are there prospects of appeals on the issues sought to be separated?
The applicants’ counsel argued that, although the order following the separate hearing would be final it would not be appealable because it would bring an end to those issues only and not the case as a whole and when an overall finding is made at end of the case, it would be capable of being addressed at that stage on the overall merits. He further submitted it would be unlikely that a leave to appeal application would succeed. It was however conceded that the possibility of an appeal was not excluded, but submitted in the same breath that leave to appeal would not be given as the entire litigation would not be disposed of.
According to the respondent, a separate hearing will significantly delay the case’s ultimate finalisation. He described the anticipated delay as extraordinary and submitted there will most definitely be appeals following a separate hearing.
The parties intend to lead evidence on the issues sought to be separated. For that purpose, they will file witness statements. If a ruling in favour of a separation is delivered on 23 April 2025, the case would be postponed for a few weeks to, for example 4 June 2025, for the parties to file witness statements and for the allocation of a separate hearing date. Hopefully, a suitable hearing date could be set in July 2025, and judgment could follow in August 2025. That results in a total delay of four months, which in and of itself is not exorbitant. However, the court must agree with the respondent’s counsel that there will be appeals one way or the other following the separate hearing. The parties are or were involved in at least six civil cases and a criminal case. Their relationship is far beyond the ordinary acrimony involved in litigation. Considering their litigation history and relationship gleaned from the papers filed of record, there is a greater possibility that appeals will follow than that appeals will not follow. If time is allocated for a leave to appeal application, the filing of answering and replying papers and heads of argument, hearing the leave to appeal application and delivery of the ruling therein, it would take the matter to the middle of November 2025. The court is alive to the fact that a leave to appeal hearing could be heard and disposed of on 23 April 2025, but realistically, considering the parties’ litigation history and relationship that would not happen. The parties will more probably than not file papers in support of and in opposition to a leave to appeal application as well as heads of argument. If a petition to the Supreme Court is added following a possible refusal of leave to appeal, it would take the matter to January 2026 (at least) for a decision on the petition. The real possibility of appeals will exacerbate the delay to January 2026, which would be a significant delay in the case’s ultimate finalisation negating the rationale for a separate hearing. By that time, the case could be set down for trial, if not completed. If leave would be given to appeal, albeit by this court or the Supreme Court, the delay would be even longer. The resultant conclusion is that the answers to questions two and three are strong indicators for refusing a separation order.
Fourth and fifth, are the issues sought to be separated discrete or inextricably linked to other remaining issues and would evidence required to prove the separated issues overlap with what is required to prove the remaining issues?
According to the applicants, the section 36 claim is intertwined with several other issues but in hearing those other issues the court will determine whether section 36 is available to the respondent. The applicants contended that if the section 36 claim is heard it would dispose of other evidence that would be based on section 36 so there would be no evidence overlap. The applicants’ case is that since the respondent is no longer a member, the section 36 claim became irrelevant.
According to the respondent, all issues are interlinked because they all relate to the parties’ conduct. The respondent’s counsel argued there will be an evidence overlap because the same factual evidence will have to be led for the different issues and if a separate hearing is held it is not excluded that a different judge will be the trial judge and there could, in any event, be conflicting factual and legal findings. In particular, he argued there would be an overlap in evidence on the reduction of the purchase price agreement about the conduct of the parties since 2020, the payment of the purchase price of which there are three versions on what was paid, concluding the real agreements, the parties’ conduct from the first tranche of members’ interest transferred, the issue of withholding dividend payments would require a look at the parties’ conduct from the start, the penalty reduction, and the enrichment claim would require a wide investigation. The respondent’s counsel argued that the parties’ conduct after 2020 indicate their relationship is beyond repair and the first applicant kicked the respondent out and as it would have served nothing to remain a member, he left in 2023, but he must still be ordered to cease being a member and that does not affect his compensation claim and the question remains whether he was justified in instituting the action and costs for that. The respondent contended that once either of the cancellation claims succeeds, the section 36 claim is irrelevant, save for costs. The respondent submitted that the dividends or profit share issues depends on an interpretation of the association agreement and sale agreement and the background and context thereto require extensive evidence. According to the respondent, the evidence required to establish the validity of either cancellation is intertwined with one another and that the evidence required for the section 36 claim overlaps to a large extent with the evidence required for the cancellation claims. It was pointed out that the first applicant, in his amendment to introduce the cancellation claim, prayed that adjudication of the section 36 claim be held over until the cancellation claim is adjudicated and now, he wants the exact opposite. According to the respondent, the evidence of all issues overlap.
If the applicant’s counsel is correct, a determination upfront on the section 36 claim may at first blush be tempting to curtail the main proceedings but the desire swiftly dissipates on realisation that, as illustrated above, that may not be the ultimate result. Inevitably, the case will require evidence of events that occurred over several years. The founding affidavit starts off that the ambit of the proceedings is wide, and it involves various inter-related disputes with three crisp and critical main issues (referring to the issues sought to be separated). Then it is alleged that any of those issues not finally resolved in a separate hearing shall remain part of the disputed issues in the main action and any issue finally resolved shall serve as a final determination thereof for purposes of the main action. That allegation raises obvious red flags for ordering a separate hearing. Notwithstanding the delay, piecemeal litigation is discouraged. What is clear, however, even on the applicants’ version is that the issues are intertwined and coincidentally, there will be an overlap of evidence, and several issues would remain outstanding. That being the case, a separation is usually refused because witnesses will have to be recalled covering issues which they had already testified about, it will result in the lengthening of the trial, the wasting of costs, potential conflicting findings of fact and credibility of witnesses, and it will also hinder cross-examination.
A last issue to consider is the case’s age. The case was instituted in June 2020. In two months, it would be in the court system for five years and it is not near completion. The current application is the third opposed interlocutory proceeding, one of which was settled the day before the hearing resulting in a court order made pursuant to an agreement between the parties setting out dates for exchanging further pleadings and postponing the matter for a case management conference. The case management conference could not proceed because the respondent brought an application to compel discovery. The ruling on that application was delivered on 3 September 2024 compelling discovery and again postponing the matter for a case management conference, that time to 2 October 2024. That case management conference could also not proceed because of the applicants’ intention to bring the current application. Whereas more than five days would be required for trial, the disposal benchmark for the case was 18 months, being December 2021. To date, the case passed the disposal benchmark by three years and four months already and it is nowhere near completion. Considering the respondent’s most recent intention to amend and the applicants’ objection thereto, another interlocutory proceeding is possibly coming. Any further delays should not be taken lightly and avoided.
Litigants are entitled to have their disputes ventilated in court, but they are not entitled to more time than necessary in the court system to do so. The court does not have unlimited resources, and it must apportion its available resources commensurate to various litigants. As the Judge President wrote:
‘The justification for the move away from the orthodox adversarial system (also the Zuckermanian credo) was the recognition that it is unrealistic to premise a system of civil justice delivery on the notion that its cost to society is irrelevant and that litigants have the right to litigate at whatever cost, by whatever means and for as long as they want.’
Keeping a case longer in the system than required affects the system at large and other litigants already in it and those anticipating to institute cases. In other words, it is not convenient to the court to have a matter longer in the system than necessary. To have a separate hearing must be convenient to all concerned, including the court. All things considered, various indicators are against a separate hearing and it should, as a result, be refused. On costs, both counsel submitted during oral argument that it should be capped under rule 32(11) even though the respondent, in his answering affidavit, stated that it should be uncapped. There is no reason to deviate from the general cost rule that it follows the event. In conclusion, it is ordered that:
The application under the amended notice of motion dated 13 February 2025 is dismissed.
The applicants must pay the respondent’s costs occasioned by the aforesaid application jointly and severally, the one paying the others to be absolved, including the costs of one instructing and one instructed legal practitioner, capped under rule 32(11).
The matter under INT-HC-OTH-2024/01082 is finalised and removed from the roll. |
