TOPIC 2

❖ Salomon v Salomon and Co Ltd

Facts

• Mr. Salomon was a successful sole proprietor selling and repainting leather shoes &
boots
• Incorporated his business.
• He owned 20 001 of 20 007 company shares. Other 6 owned by his wife, daughter, and 4
sons.
• He sold the business for 39 000 pounds; 10 000 pounds was a debt to him.
• Company went into liquidation.
• Salomon was a secured debtor, so first in line.
• No money left for unsecured debtors, who claimed Salomon was using the company as
a front to evade his creditors.
• It was argued that Salomon & the company were in essence the same person and that
consequently Salomon could not lay a claim against the company but should rather be
liable for all the Company’s debt.

The Court of 1st Instance agreed, but the decision was overturned on appeal.
House of Lords (appeal) unanimous decision:

• Held, a company is separate from its members.

• Salomon followed procedures set out in the Companies Act.
• no evidence of fraud or impropriety on behalf of Salomon.
• Held, it is irrelevant that Salomon owned most of the shares in the company and was a
secured creditor.
 ❖ Dadoo Ltd v Krugersdorp Municipal Council

FACTS

• “Asiatics” were prohibited from owning immovable property in the then TVL by
certain laws
• Law was silent on companies owned by “Asiatics”
• In 1915 the company of Dadoo Ltd was registered. Share capital consisted of 150
shares, 149 owned by Mohamed Dadoo, and 1 by Dindar.
• Both were “Asiatics”

ISSUE
Whether ownership by Dadoo Ltd was ownership by its shareholder.

COURTS DECISION

• Held that a company is a legal person distinct from its members who compose it.
• Property vested in it cannot be regarded as property vested in its shareholders.

❖ Cape Pacific Ltd v Lubner Controlling Investments (pty) Ltd

FACTS

• LCI sold shares in Findon Investments to Cape Pacific in February 1979. These shares
entitled the holder to use and occupy a flat in Clifton.
• Lubner conducted business through a group of companies. He lived in the flat and
regarded it as his own.
• LCI purported to transfer Findon shares to Gerald Lubner Investments (GLI), of which
Lubner was a director, in December 1979.

ISSUE

Whether the appellant is entitled to the relief which it seeks.

COURTS DECISION

• The court ruled in favour of Cape Pacific as this was not done to further GLI’s corporate
interests, but to ensure Lubner continued to live in the Clifton flat.
 ❖ Airport Cold Storage (Pty) Ltd v Ebrahim

FACTS

• ACS done business with a CC run by the Ebrahims (father and son)
• The CC wound up, still owing money to ACS.
• After liquidation there is not enough money to pay
• ACS claimed money from Ebrahims.
• The CC took a debt of R600 000 without regard for the CC’s solvency.

ISSUE

Whether the father and son were personally liable for the debt.

COURT DECISION

• The court held that Ebrahims operated the business as if it were their own and without
regard for compliance with the statutory and bookkeeping requirements and ignored the
separate legal personality of the CC when it suited them.
• Father and son were held liable for debt to ACS.

❖ Ex parte Gore and others NNO

FACTS

• 41 companies that had formed part of a group of companies, referred to as ‘the King
Group’ which was being liquidated.
• The holding company was King Financial Holdings Limited (KFH),
• the directors of whom were the three King brothers and held a majority of the KFH
shares, which enabled them to exercise control of the King Group.
• They did not treat the companies as separate legal entities, and investors funds were
randomly moved between entities.
• Ultimately investors suffered losses.

ISSUE

Whether the court should pierce the corporate veil

COURTS DECISION

• The court found that the controllers of the companies treated the companies in such a
way that no separate legal personality of the members was visible.
• Also held that the remedy by s 20(9) may be granted on application by any interested
party or any proceedings in which the company is involved.
TOPIC 3
❖ Gihwala v Grancey Property Ltd

FACTS
• Gihwala and Grancey property had an agreement outside the company MOI.
• The parties agreed as to how the company and its directors would exercise these
powers.

ISSUE

Whether shareholder agreements should be consistent with the Companies Act and MOI.

COURTS DECISION

• The court held that a shareholders' agreement dealing with the right to be appointed as
a director and operating to nullify a provision in the Companies Act that provides for the
removal of directors, was valid.

❖ Royal British Bank V Turquand.

FACTS

• Mr Turquand was the official manager (liquidator) of the insolvent Cameron’s Coalbrook
Steam, coal, and Swansea and Loughor Company.
• It was incorporated under the Joint Stock Companies Act 1844.
• The company had given a bond for 2000 pounds to the Royal British Bank, which
secured the company’s drawing drawings on its current account.
• The bond was under the company’s seal, signed by 2 directors and a secretary.
• When the company was sued, It alleged that under its registered deed of settlement,
directors only had the power to borrow up to an amount authorized by a company
resolution.
• A resolution had been passed but did not specify how much the directors could borrow.
•

COURTS DECISION
• The court ruled the bond was valid, so British Royal Bank could enforce terms.
• Said the bank could not be deemed to know what amount that the directors were
allowed to borrow.
TOPIC 5
❖ Regal (hasting) Ltd V Gulliver

FACTS

• Regal (Hastings) owned a cinema

• The directors of Regal (Hastings) Ltd intended to acquire further cinemas before
selling the company as a going concern.
• For this purpose, they formed a subsidiary company of Regal (Hastings) Ltd
(Hastings Amalgamated Cinemas Ltd), of which they were also directors.
• The owner of the cinemas was only prepared to lease out the cinemas to the
subsidiary if the directors would give a personal guarantee for the payment of the
rent (which they did not want to do, knowing that the business would be sold and
they would no longer have control over whether or not the rent would be paid) or
if the subsidiary had a paid-up share capital of at least £5,000.
• Regal (Hastings) Ltd didn’t have the resources to acquire more than £2000 worth
of shares.
• Therefore, four of the five directors took up shares worth £2000 & they found
further people who took up the £1000 balance. In this way, the directors could
avoid giving a personal guarantee and were still able to acquire the lease (the
directors acted in good faith and for the benefit of Regal (Hastings) Ltd) − The
lease was signed.
• Soon, all shares in both Regal (Hastings) Ltd and Hastings Amalgamated
Cinemas Ltd were sold.
• The four directors sold their shares in Hastings Amalgamated Cinemas Ltd at a
profit.
• The new directors of Regal (Hastings) Ltd brought an action against the four
former directors, who had made a profit.
ISSUE
Was there a breach of the director's fiduciary duties to Regal?

COURTS DECISION.

The court held that directors must account for activities outside the company if

• (i) what the directors did is related to the company in such a way that it can be
said to arise out of their management of the co or because of their special
knowledge as directors; and
• (ii) their actions resulted in profits for themselves
 ❖ Robinson V Randfontein EStates Gold Mining Co Ltd

FACTS

• Robinson was a chairman of the board of REGM

• REGM held a lease in the mineral rights on a farm Waterval.
• Robinson wanted to buy the farm from the owner for the company, but they
could not agree on terms of sale.
• Director Robinson then purchases the farm in his name for 60 000 pounds
• He then sells the farm to the company for 275 000 pounds
ISSUE
If there was a breach of the director’s fiduciary duty.
COURTS DECISION

• The court held that if there is a breach of the director's fiduciary duty, the
company may choose to keep the acquisition and claim a refund of the profit
made by the director.
• Hence the court ordered Robinson to repay 215,000 pounds to the company.

❖ Industrial Development Consultants Ltd V Cooley

FACTS

• Cooley (Architect) who was a director of IDC Ltd (construction Co), negotiated
with a gas board on behalf of IDC to develop gas depots.
• Negotiations failed, but in private meetings, Cooley learned that there may be
personal business opportunities for himself.
• He was subsequently appointed as project manager on 4 projects with the gas
board.
• When IDC Ltd later found out about this, instituted for the plaintiff to account for
profits he made as a result of what they alleged was a breach of his fiduciary
duty to IDC Ltd.
COURTS DECISION
The court held “Cooley embarked upon a deliberate policy and course of conduct which
put his personal interest as a potential contracting party with the Eastern Gas Board in
direct conflict with his pre-existing and continuing duty as managing director of the
plaintiffs. That is something which for over 200years the courts have forbidden.”
 ❖ Kaimowitz V Delahunt And Others

FACTS

• Kaimowitz was a director and employee of a respondent company.

• On receiving notice that his employment was to be terminated, the applicant's
role within the company would be altered dramatically.
• His directorship would be sustained as a non-executive director.
• While he was entitled to attend director's meetings, he was prohibited from
being involved in the day-to-day management of the company.
• The court was therefore called to determine whether a director, for where
provided in the MOI is entitled to be involved in the day-to-day management of
the company.

COURTS DECISION.

• The court distinguished between the roles of a director and a manager.

• t a director is not entitled to the right to be involved in the day-to-day
management of company and may be delegated by the board.
• The court thus concluded that the management of a company in terms of its
overall supervision resides in the board as a collective as opposed to individual
directors

❖ Kukama V Lobelo

FACTS

• Mr L allowed money that was destined for company A to be paid into company
B’s account.
• After fraud was detected, he failed to refund SARS a fraudulent claim of R39 M.
• Mr L failed to alert his co-directors and co-shareholders of the fraudulent
transaction and payment into company B’s account.
COURTS DECISION

• The court declared Mr L delinquent because he caused harm upon company A in

terms of s162(5)(c)
• The court held that s 76(2)(b) of the companies Act, 2008 created a duty of a
director to communicate to his board, at the earliest opportunity, of information
that comes to his attention.
• Also, in breach of fiduciary duty he owed company A.
TOPIC 9
❖ Pezzuto V Dreyer
FACTS

• The appellant alleged that a handshake agreement of him and the other parties
had come into existence
• Pezzuto and De pollo initially entered a partnership for the exploration of SW
• mining dumps.
• De polo later brought in Dreyer (mining consultant). Dreyer stated that he had his
own partner, Wylie.
• They the agreement that they would split all monies at 25% (The handshake
agreement).
• Dreyer changed the agreement and where Pezzuto was told he will receive a
higher share that everyone.

COURTS DECISION

• The court held that the essentialia of a partnership was undoubtedly present
within the handshake agreement as the conduct of each party affirms this
• Further held that the agreement of matters other than the essentialia of the
partnership were not essential in the formation of such an agreement.
• The appeal was allowed with costs. The decision in the court a quo was
reserved.

❖ De Jager V Olifiants Tin “B” Syndicate

FACTS

• De Jager (appealing) whilst a member of a partnership to prospect for Tin and

acquire Tin proposition.
• Whilst engaged in prospecting for the partnership, he discovered Tin at a spot
which he thought fell within farm W, but prove to fall within farm T.
• The partnership at the time was negotiating for an option over W.
• De Jager without informing his partners of his discovery acquired for himself an
option over W.
COURTS DECISION.

• The court held that the member of the partnership owe each other a duty of
good faith as they are each other’s agent. Therefore, De Jager had to disgorge the
profits.
• He should have offered the rights to the syndicate first, even if the syndicate was
considering the rights on an adjourning farm.
TOPIC 10

❖ Land and Agricultural Development Bank of South Africa V Parker

FACTS