IN THE HIGH COURT OF SOUTH AFRICA (WESTERN CAPE HIGH COURT)
REPORTABLE

CASE NO. 10547/2008

In the matter between:

AND

DINES GIHWALA						FIRST RESPONDENT
DINES GIHWALA						 SECOND RESPONDENT
SHANTI GIHWALA N.O.						 THIRD RESPONDENT
KANTIELAL JERAM PATEL N.O.					 FOURTH RESPONDENT
NARENDRA GIHWALA N.O.					 FIFTH RESPONDENT
KIRAN GIHWALA N.O.						 SIXTH RESPONDENT
HOFMEYER HERBSTEIN & GIHWALA INC	SEVENTH RESPONDENT
Coram:						DLODLO,J
Judgment by:					DLODLO,J
For the Applicant:				ADV. P. HODES (SC)
						ADV. JPV McNALLY (JHB COUNSEL)

Instructed by:					WEBBER WENTZEL 
						10 Fricker Road 
						Illovo Boulevard 
						JOHANNESBURG
						(REF. G. Van der Linde/V. Moshovich)
						TEL. NO. O11 530 5000

						15th Floor, convention Towers
						Heerengracht
						Foreshore
						CAPE TOWN
						(REF. A. Magerman
For the Respondents:				ADV. L.A. ROSE-INNES (SC)

						CAPE TOWN 
						(REF. M. Phillips) 
						TEL. NO. 021 419 7115

Judgment delivered on:				18 JUNE 2010

IN THE HIGH COURT OF SOUTH AFRICA 
(WESTERN CAPE HIGH COURT, CAPE TOWN)
REPORTABLE 
CASE NO. 10547/2008

In the matter between:

AND

DINES GIHWALA							FIRST RESPONDENT
DINES GIHWALA							 SECOND RESPONDENT
SHANTI GIHWALA N.O.					 		THIRD RESPONDENT
KANTIELAL JERAM PATEL N.O.						 FOURTH RESPONDENT
NARENDRA GIHWALA N.O.				 		FIFTH RESPONDENT
KIRAN GIHWALA N.O.							 SIXTH RESPONDENT
HOFMEYER HERBSTEIN & GIHWALA INC	              			SEVENTH RESPONDENT

JUDGMENT DELIVERED ON 18 JUNE 2010

DLODLO, J

BACKGROUND

[3] Mr. Gihwala subsequently approached MG with his own independent offer. To this end, Mr. Gihwala sent an e-mail to Mr. Narotam on 6 April 2005 to which he attached electronic copies of the document entitled "Scharrig Mining Limited Investment Memorandum - April 2005" ("the Scharrig Investment Memorandum") and other related information. A copy of this e-mail and the attached Scharrig Investment Memorandum is annexed to the Founding papers and marked "FA5". This is set out in the Scharrig Investment Memorandum as follows:
"1.3 The discount is attributable to the introduction of a black economic empowered consortium and as a result of a trading statement released by the Company indicating an increase in earnings and headline earnings of between 160% and 170%.
1.4 The composition of the investment consortium, by economic value, is approximately as follows:
1.4.1 	
1.4.2 	

3.1.1 An SPV will be formed, the ordinary shares will be owned by the Sam Jonah Family consortium and Mr. DCM Gihwala consortium. 3.1.2

3.1.3 	

At the time, Mr. Gihwala's offer was more attractive to MG (in liquidation) than the Interactive Capital offer because the former required a much smaller capital outlay. Moreover, what Mr. Gihwala was proposing was a much simpler and ostensibly more transparent partnership structure. Mr. Gihwala also indicated to MG (in liquidation), at the time, that there would be a subsequent opportunity to acquire further shares in Scharrig at an attractive purchase consideration of R2.25 per share plus a notional interest charge.

"In addition, the BEE consortium has been granted an option to acquire a further 34.38 million shares in the company from companies and trusts associated with Mr. Theunis Scharrighuisen ("the option"). The option can be exercised in whole or in part by the BEE consortium on or before 22 July 2005 at a price per share of 225 cents plus 0.043 cents per day from 22 April 2005 until the date the option is exercised ("option price "). Should the option be exercised and result in the BEE consortium acquiring 35% or more of the shares in Schamin, an offer to minorities will be made at the option price in terms of the SRP Code on Mergers and Takeovers."

"I refer to our telephonic discussion relating to joining you in your investment in the Scharrig Mining Limited deal and wish to confirm that we will invest an amount ofRl million. We hereby authorize you to utilize Rl million from the available funds you hold on our behalf for this investment... "
It is important to note that, by this time, Mr.Gihwala had already held funds in the trust account of Hofmeyer (the Seventh Respondent), on behalf of MG, which were intended for other investments. For practical reasons, Mr. Narotam, on behalf of MG (in liquidation), therefore authorized Mr. Gihwala to utilize some of those funds for the Scharrig investment.

[6] At the time, it was not clear whether Mr. Gihwala was acting in his personal capacity, as representative of the Seventh Respondent or as an authorized trustee of the DGFT in making the subsequent investment in Scharrig on MG's (in liquidation) behalf. An e-mail dated 18 November 2005 by Mr. Gihwala to Mr. Narotam, a copy of which is annexed to the Founding papers and marked "FA9" sheds some light on the arrangement and provides as follows:
"The shares are in SPV controlled by me. Whoever buys the shares will receive a declaration of trust from me to the effect that it/he/she is the beneficial owner of the shares. "

Mr. Gihwala disputes the alleged partnership though. It was further accepted that Mr. Gihwala would hold the Scharrig shares on MG's (the beneficial owner) behalf in a Special Purpose Vehicle ("SPV") and that MG (in liquidation) was, for all intents and purposes, Mr. Gihwala's investment partner. Moreover, it was within both Mr. Gihwala and MG's (in liquidation) awareness, given the prevailing circumstances discussed in greater detail above, that Mr. Gihwala owed various fiduciary duties and was accountable to MG in respect of its investment in Scharrig.

[9] The terms of MG's (in liquidation) participation in this continuing investment opportunity was confirmed in an e-mail from Mr. Narotam to Mr. Gihwala, dated 28 June 2005, a copy of which is annexed to the Founding papers and marked "FA15". The aforesaid e-mail reads as follows:

"	It is not clear on what legal basis your client demands the
information and records	You are requested to clarify the basis for the
demand so that the demand may receive proper consideration	 Our
client denies any form ofpartnership. "
It is needless to mention that the writing generated further correspondence between the parties.

ISSUE FOR DETERMINATION

LEGAL PRINCIPLES: DUTY TO ACCOUNT

DISCUSSIONS

"the action for an account and the debatement thereof is well recognized in our law, the leading case being Doyle and Another v Fleet Street Motors PE (Pty) Ltd 1971 (3) SA 760 (A). At 763 Holmes JA made the following pertinent observations:
'6. Where the issue of sufficiency and the element of debate appear to be correlated, the Court might, in an appropriate case, find it convenient to undertake both enquiries at one hearing, and to order payment of the amount due (if any).

Before dealing any further with submissions, it is appropriate that one has regard to the relevant circumstances which governed the relationship between the parties.

RELATIONSHIP BETWEEN MG AND MR. GIHWALA

THE ACCOUNTING

DG7" - SCHARRIG MINING LIMITED SHARE PARTNERSHIP WITH DINES GIHWALA

Assumptions
Loan from Standard Bank 1374352 shares @ 2.34)	R 3 215 983.68	
Interest  rate	R           0.11	
Amount invested (888 888 shares @ 2.25) 
Number of shares acquired	R 2 000 000.00 
R 2 263 240.00	
Indicative placement price	R            5.75	
MG EXITS AT R5.75: INTEREST PAYABLE FOR 12 MONTHS		
Sale  proceeds	R13 013 630.00	
Bank  loan	R 3 215 983.68	
Interest for 12 months + commitment fee)	R   40 1997.96	

Estimated taxation	R 2 761 333.07	
Net proceeds	R 6 634 315.29	
MG share	R 3 317 157.65	
MG investment	R 1 000 000.00	
MG profit before priority interest	R   2 317 157.65	
Priority interest @ 10.5% for 12 months	R      105 000.00	
Net profit on investment	R     2 212 157.65	
DG share on MG profit	R       553 039.41	
Net MG profit after tax	R     1 659 118.24	
Estimated tax calculation		
Sale proceeds	R 13 013 630.00	
Cost of investment		
Initial investment	R   5 215 983.68	
Bank interest	R     401 997.96	
Priority interest	R      105 000.00	
	R   5 722 981.64	
Profit	R    7 290 648.36	
Company tax @ 29%	R    2 114 288.02	
	R    5 176 360.34	
STC@12.5%	R      647 045.04	
	R    2 761 333.07	
MG proceeds		
Initial investment	R 1 000 000.00	
Priority interest	R   105 000.00	
MG Profit	R 1 659 118.24	
Total proceeds	R 2 764 118.24	
Check		
diff	R            0.00	
"DG6" -	SEENA MARENA INVESTMENTS: INV (R0015109)
INVITO SECT 78 (2A)
IN TERMS OF ATTORNEYS ACT 53 OF 1979

PEOPLE'S BANK - CLIENTS (SEC 78 (2)A) C0000909

DATE	DETAILS	REF.	EXTRA	DEBIT	CREDIT	BALANCE	
	Balance B/F					R      0.00	
08 AUG 2005	Investment
interest
adjustment	T910311			R   78 256.58		
08 AUG 2005	Withdraw
investment:
50015109	T910311		R10 078 256.58			
22 JUN 2005	Deposited
investment:
50015109	T1123			R5 000 000.00		
22 JUN 2005	Deposited
investment:
50015109	T1121			R5 000 000.00		

(b) Details as to whose direct and indirect economic interests the Scharrig equity instruments were acquired for;
(c) Details of the amount, source and costs of any financing received in relation to each Scharrig equity instrument;
(d) Full details of any encumbrances which apply in respect of the acquired Scharrig equity instrument;
(e) Full details of any costs, taxes and the like which fall to be deducted from the return due to MG generated by the Scharrig investment;

ACCOUNT: TEN MILLION RAND (R10 MILLION)

[24] According to Mr. Gihwala the Ten million rand (R10 000 000.00) was not used by him. That alone does impose an obligation on him to account for failure to utilize the funds. Mr. Hodes SC is correct in contending that to the extent that the Ten million rand (R10 000 000.00) was placed on account with the People's Bank, Mr. Gihwala must necessarily explain why that was done and particularly why the monies were invested in the name of Seena Marena Investments (Pty) Ltd. It is so that it is pointed out in the Replying papers that "DG6" to the Answering Affidavit reveals that the account into which the monies were paid was an interest bearing account contemplated under section 78 (2A) of the Attorneys Act, 1979.

ACCOUNT: HOFMEYERS; TRUST ACCOUNT

16 MAY 2005	Received       Direct
Deposit-Taurin
Management	106980			R   540 250.00	R 1 240 250.00	
06 JUN 2005	Payment:     Ngatana Prop Inv (Pty) Ltd			R 1 240 250.00		R          0.00	
20 JUN 2005	Direct deposit: Taurin Management     Prop Anstalt	112086			R 10 000 000.00	R10 000 000.00	
22 JUN 2005	Investment: HHG/SEENA MARENA/SEC 78(2 A)			R 5 000 000.00		R 5 000 000.00	
22 JUN 2005	Investment: HHG/SEENA MARENA/SEC 78(2 A)			R 5 000 000.00		R           0.00	
08 AUG 2005	Received     People's Bank Seena Marena Inv-Close Investment	120544			R 10 078 256.58	R10 078 256.58	
08 AUG 2005	Payment:  University Stellenbosch			R    21 073.92		R10 057 182.66	
08 AUG 2005	Dines         Gihwala Family Trust			R    57 182.66		R10 000 000.00	
10 AUG 2005	Paid:           Taurin Management Anstalt	120967		R 10 000 000.00		R           0.00	
17 MAR 2006	Received        Dines Gihwala Family Trust -    Seena    Marena Investments	155136				R 2 794 118.24	
29 MAR 2006	Paid:          Foreign Exchange      amount paid to Switzerland (DG)       -       FX IB63S01179 ZAR2764118.24	157037				R           0.00	
30 MAR 2006	FX    IB63S0111179 Taurin   Management Bank         Charges Foreign Exchange Trf to Switzerland...	157038		R       600.00		R         600.00	
30 MAR 2006	FX    IB63S0111179 Taurin  Management Bank          Charges Foreign Exchange Trf to Switzerland...	157038		R          90.00		R         690.00	
04 APR 2006	Received        Dines Gihwala Family Trust -    Seena    Marena Investments	158952			R     50 000.00	-R   49 310.00	
18 APR	

Switzerland

Business Balance Trust Balance Holding Trust Investment Balance Investment Account	161087		R 50 000.00		R        690.00

R 0.00 
R 0.00 
R 0.00 
R00   15109.00	

OBSERVATION

[28] In the circumstances I make the following order:
(a) It is ordered that the First, the Second and the Seventh Respondents shall within fourteen (14) days from the date of this order render a full and proper account to the Applicants in respect of the First Applicant (MG in liquidation), alternatively the Second Applicants' investment in Scharrig Mining Limited ("the Scharrig investment") and shall provide a statement of account, duly supported by all relevant vouchers, dealing with at least but not limited to how, when, by whom and for what purposes the First alternatively the Second Applicants' funds of:
(i) One million rands (Rl 000 000.00), which were held in trust by the Seventh Respondent on behalf of the First Applicant (MG in liquidation), alternatively the Second Applicant in the Seventh Respondent's   First   National   Bank   trust   account   number 51331425227 from 9 February 2005 upto and until 14 April 2005 and subsequently dispersed, and 

(b) It is ordered that there be a debate of the said accounts and payment by the First, Second to Sixth and/or the Seventh Respondents to the First Applicant (MG in liquidation), alternatively the Second Applicant of whatsoever amounts appear to be due to either of them upon such debatement;
(c) It is ordered that the First, the Second and the Seventh Respondents shall pay jointly and severally, the one paying the other to be absolved, the Applicants' costs of suit herein on a scale as between Attorney and own client.