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In the High Court of South Africa

Western Cape High Court, Cape Town

Case No:2717/2010

In the matter between:

TOBIAS NICOLAAS NEL …......................................................................................................Applicant

Versus

NIEUWOUDTVILLE ROOIBOS (PTY) LTD …......................................................................Respondent

JUDGMENT DELIVERED 8th APRIL 2010

Louw J

[1 ] The applicant in this application for a spoliation order is the managing director of the respondent company. He holds this position in terms of an employment contract which he concluded with the respondent on 20 January 2009 for a period of 5 years which is due to expire on 31 January 2014.

[2] The applicant was suspended on full remuneration from his position as managing director on 26 November 2009 pending an investigation and the outcome of possible disciplinary proceedings against him. As a consequence of his suspension the applicant is prohibited from entering his office at the respondent's premises at Nieuwoudtville. He now seeks spoliation orders reinstating him in his position as managing director, restoring his access to and possession of the respondent's premises and restoring his possession of his company laptop, cellphone and office keys.

[3] The respondent private company was incorporated in 2008 with an authorised capital of 1 000 ordinary shares with a par value of R 1, 00 each of which 104 shares were issued to its eight directors, including the applicant, who each received 13 shares.

[4] The respondent was established to provide producers of rooibos tea in the Northern Cape with a facility to process and market their produce. To this end land was acquired in Nieuwoudtville and the construction of the facility commenced in September 2008. The whole project has been funded exclusively by the department of Agriculture of the Northern Cape. Although the respondent's dry storage facility and factory was completed in December 2009, problems with the funding for the successful completion of the whole project have arisen.

[5] The applicant's suspension followed a meeting of the respondent's board of directors which was held on 26 November 2009 at Kimberley and at which seven of the eight directors were present. The applicant's suspension did not appear on the agenda for the meeting but he was informed at the meeting by the chairman of the board that she intended to propose a resolution for his suspension on the strength of allegations against him contained in a document which was drawn up after a fact-finding mission commissioned by the department of Agriculture of the Northern Cape Province. According to the applicant he disputed the allegations made against him. This is disputed by the respondent's chairman who deposed to the answering affidavit on behalf of the respondent. It is common cause, however, that the applicant called for proof of the allegations. After a discussion, the applicant was requested to leave the meeting and the remaining six directors then voted in favour of his immediate suspension as managing director. The applicant was called back and was informed of the outcome. The meeting was then adjourned for the chairman to prepare a letter for his suspension. The letter suspending him with full pay was then handed to the applicant who signed receipt of the letter.

[6] Upon his return to Nieuwoudtville the applicant, who states that he did not know that he could refuse to do so, complied with the request by one of the respondent's officials to vacate his office and relinquish his keys and the company laptop assigned to him. The applicant immediately consulted an attorney who wrote a letter on his behalf on 2 December 2009 to the department of Agriculture, requesting information regarding his suspension. The attorney did not advise him that he had been unlawfully spoliated. Due to the Christmas and new year holiday period, the applicant only managed to consult his present attorneys on 15 January 2010 who then advised him that he had been unlawfully spoliated from his position and wrote a letter of demand on his behalf on 4 February 2010 calling for his reinstatement by 8 February 2010. The respondent's reply dated 10 February 2010, refusing to reinstate the applicant was received by the applicant's attorneys after this application was launched on 10 February 2010.

[7] Mr Elliott who appeared on behalf of the respondent, submitted that the application should be struck from the roll for lack of urgency. As to the merits of the application, he contended that that the applicant was lawfully suspended, that the applicant's position in the company is not of the nature that would entitle him to apply for a spoliation order and that in any event, the applicant acquiesced in the decision of the respondent's board to suspend him.

[8] The principle underlying a spoliation order was stated as follows by Innes CJ in

Nino Bonino v de Lanqe 1906 TS 120 at 122:

It is a fundamental principle that no man is allowed to take the law into his own hands; no one is permitted to dispossess another forcibly or wrongfully and against his consent of the possession of property, whether movable or immovable. If he does so, the Court will summarily restore the status quo ante, and will do that as a preliminary to any inquiry or investigation into the merits of the dispute.

[9] Section 220 of the Companies Act provides for the removal of a director by way of an ordinary resolution before the expiration of the director's period of office. No provision is, however, made in the Companies Act for suspending a director pending the outcome of proceedings for his removal. The articles of association of a company may, however, make provision for the suspension of a director. In this case the model articles contained in table B of schedule 1 to the Companies Act is applicable. It does not make provision for the suspension of a director. The conduct of the board of directors and the chairman of the board in suspending the applicant was therefore without legal foundation but this does not perse entitle him to a spoliation order.

[10] I assume in favour of the applicant that he was dispossessed wrongfully and without his consent of his physical control of his office on the respondent's premises and of his office keys, his company laptop and cellphone. The question remains whether the applicant's physical control of the respondent's aforementioned property was of such a nature as would entitle him to bring an application for a spoliation order.

[11] In van der Merwe: Sakereg at 125-6, the author states that in our law a person in physical control of property with the intention of deriving some benefit from it is in principle entitled to ask for a spoliation order. The author points out that the required intention (animus) is widely interpreted by our courts and that spoliation orders have been granted to a wide variety of persons, including both male fide and bona fide possessors, a thief, a trustee, a pledgee, a precarist, a lessee, a depositary, a hire purchaser, a borrower, a building contractor and even an agent but anomalously, not to a servant or an employee who is in physical control of property of his master or employer and even though he may have a contractual claim against his master or employer.

[12] In support of the proposition that the applicant's position is more than that of a mere employee of the respondent and consequently entitles him to apply for a spoliation order, Mr McClarty on behalf of the applicant relies on the decision of the full bench of this court in Greaves and Others v Barnard 2007 (2) SA 593 (C). The applicant in that case (who was the respondent in the appeal before the full bench) held the position of marketing director in the respondent company. He was consequently both an employee and a director of the company. He was also one of three shareholders in the company holding 25 of the 97 issued shares in the company. His position was further determined by the shareholders' agreement with the other two shareholders. The agreement construed their relationship as that of quasi partners who owed each other a duty of good faith. Crucially, the agreement further provided that all benefits accruing to the company would be divided equally between the shareholders. The court emphasised that in considering the applicant's rights and interests in the company, it was not helpful to refer to the theoretical position of a shareholder in other companies but that regard must he had to the applicant's position within the particular company. In occupying his office, the applicant was carrying out his functions as an employee and as marketing director of the company. This required of him to act in the best interest of the company. By doing so, the applicant at the same time advanced his own interests by increasing the benefits accruing to the company in which benefits he would share in proportion to his shareholding. The applicant's particular financial interest in the company as a shareholder played a significant role in determining whether he should be entitled to ask for a spoliation order. The court held that even if the reference to a quasi partnership in the shareholder's agreement were to be ignored, the applicant's position in the company could not be equated to a person whose only interests is that of an agent or employee. Summing up the position, the court held as follows (at 598 H-J):-

Respondent occupied the property in question in his capacity as an executive director of and share-holder in third appellant with the rights and interests described in the shareholders' agreement. The respondent's interests in his possession of the property materially transcended those of a mere agent or employee. He clearly performed his work and occupied his office 'with the intention of securing some benefit for himself.' Respondent was accordingly entitled to ask for a spoliation order.

[13] The applicant's entitlement to occupy his office on the respondent's premises and to hold control over the office keys, the laptop and cellphone derives from his position as managing director and in particular, his contract of employment. The spoliation order may be granted if the applicant's position in the company is such that he performed his work and occupied his office with the intention of securing some benefit for himself. That is, that his interest in his possession of the respondent's property materially transcended those of an employee. In Greaves v Barnard the applicant was, in terms of the shareholders' agreement entitled to share in all benefits accruing to the company. His position as marketing director placed him in a position to advance the interests of the company and his position as share-holder in the company gave him a direct interest in the financial well-being of the company.

[14] The applicant has stated in his launching papers that his suspension has precluded him from carrying out his functions as an employee and director of the respondent to which he owes a fiduciary duty and from advancing his own interests in the respondent as a shareholder of the respondent. This statement is not denied by the respondent who was content to state that the applicant acquiesced not only in the procedure followed by the board but also in the board's decision to suspend him as managing director and that he further demonstrated his acquiescence by complying with the company's demands that followed from his suspension, to hand over his keys and laptop and to vacate his office.

[15] Ms Moletsane, the chairman of the board of directors of the respondent deposed to the answering affidavit on behalf of the respondent. She stated that a resolution was adopted at the meeting of 26 November 2009 that all the directors would surrender their shares in the respondent in favour of the department of Agriculture of the Northern Cape at no value. This is disputed by the applicant in his replying affidavit and he has filed an affidavit by a co-director Mr Lionel Louw who was present at the meeting and who also disputes that such a resolution was taken. It is, however, not in dispute that five of the eight directors subsequently on 19 January 2010, transferred their shares without recompense to the Northern Cape department of Agriculture.

[16] This is an application for final relief and the respondent's version of the resolution taken at the meeting must be accepted. But, even if that version is not accepted, on the facts that are common cause, the shares held by the applicantand the two remaining directors who have not transferred their shares do not afford them any realistic prospect of deriving any financial benefit from their shareholding in the respondent. In this case, other than the position of the marketing director in Greaves v Barnard, there is no shareholders' agreement which defines the benefits and entitles the shareholders to the benefits derived from their shareholding.

[17] In view of these facts, the applicant has not in my view established that his position as managing director and shareholder in the respondent entitled him to any benefit beyond the theoretical benefit that the shareholder of a company has to receive a dividend. The applicant's position as managing director requires of him to advance the interests of the respondent. He has his contractual claim against the respondent for his salary but this is not accepted in our law as a sufficient interest in the financial well being of the respondent to qualify as benefit he may intend to secure for himself by his physical control over the respondent's property. The applicant has consequently not, on the facts of this case established that he was in possession of the respondent's property with the intention of securing some benefit for himself.

[18] It follows that the application cannot succeed. There is no reason why the cost should not, in accordance with the normal rule, follow the event. The following order is consequently made:

The application is dismissed with costs.

LOUW J

Judge of the High Court

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