IN
THE HIGH COURT OF SWAZILAND
Civ.
Case No. 1028/95 & 1029/95
In
the matter between:
DANGER
GENGELE NYONI Applicant
vs
G.S.
FRANCO INVESTMENTS (PTY) LTD & MODERN
PRINTING
WORKS (PTY) LTD 1st Respondents
GONZALO
SANCHEZ FRANCO 2nd Respondent
CORAM: S.W.
Sapire A.J.
FOR
APPLICANT Advocate Kades
FOR
RESPONDENTS Mr. L. Marnba
Judgment
(22/8/95)
In
the two matters before me, the applicant seeks relief as set forth in
the Notices of motion.
The
first prayer in each is for condonation of the applicant's non
compliance with the rules, relating to form and service of the
applications on the respondent and allowing the matter to be heard as
one of urgency in terms of the rules of this Honourable Court.
In
my view there is no justification whatsoever in this procedure having
been adopted in this case. The reasons for which is said the matter
are urgent, are baseless and do not approach what according to
decided cases is to be shown before a matter is to be treated as
urgent. There is no reason to believe that any harm would have been
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occasioned
to the applicant or any other person, if the times, and procedures
prescribed by the rules for the hearing of applications had been
observed.
In
paragraph 21 of the affidavits, the applicant in what is supposed to
be compliance with the rules submitted that it was a matter of some
urgency that he be given access to the information to be found in the
books of the company.
He
says, "I was previously and for a period of fifteen years until
the 28th February 1995, employed by the 2nd respondent as the Manager
of L.M. Restaurant in Mbabane. Upon the termination of my aforesaid
employment, I requested of 2nd respondent that he provides me with
the information mentioned herein, but he has at all times failed to
do so, despite numerous requests having been made by me to him."
These
allegations are unspecific and the evidence is quite clear that for
the period that the applicant had been a director of the two
companies concerned, made no serious attempt to have access to the
books and that his alleged present need for access has only arisen
because of his dispute with the 2nd respondent.
The
applicant went on to say that "he (referring to Franco) has
deliberately mislead me as to the whereabouts of these records, by
falsely informing me that the same were in the possession of Ernst
and Young".
I
have sought in vain in the papers to find any substance for this
allegation, which appears to be contradicted by the facts.
The
third ground advanced by the applicant to justify adopting the
urgency procedure is that he "verily believes and fears that the
2nd respondent might in some manner endeavour to withhold the
information from me, concerning the true value of my shares, in the
1st respondent, and that he has removed the books of account for the
1st respondent from the possession of Ernst and Young with this
purpose in mind."
This
is an utterly fatuous submission, devoid of any factual basis.
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The
applicant's prayer for condonation for non compliance with the rules,
should be refused. As the matter was argued and affidavits were
found, it would be pointless for me to strike the matter off the roll
and I therefore turn to the merits.
Firstly
the relief sought by applicant in paragraph 2 of the Notice of Motion
is that the respondents forthwith delivered to the registered office
of the 1st respondent, being Ernst and Young, Embassy House, Allister
Miller Street, Mbabane, all the books and documents relating to the
1st respondent. A number of books and documents are specified, Mr.
Kades who appeared for the applicant was unable to indicate that the
court had a power to make such an order. A company in terms of the
relevant legislation is indeed obliged to keep books of account.
These books of account, of whatever they may consist are to be kept
either at the registered office or at some other place which the
directors determine.
The
court has no power to direct where the books are to be. This prayer
will have to be refused.
In
paragraph 3, the applicant seeks an order that "the applicant or
his duly authorised representative should be permitted to inspect the
aforesaid items mentioned in 2, above."
The
applicant as a director of the two companies which are a subject
matter of these two applications has a right to examine the books and
records of the company. This has never been in doubt and has never
been denied by the respondents. There is no basis for the court
ordering that these persons be permitted to inspect the books as the
right rests in the applicant irrespective of any order that I may
make. There is no evidence that a demand to see the books has been
made and refused.
It
would not be desirable to dismiss the application on technical
grounds if there was any further or alternative relief which could be
granted to the applicant.
The
applicant as I have said, has a right to inspect the books and
records of the company in which he is a director. But this is not
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unlimited
right and this is not the right which he may exercise in
any-unreasonable time. The convenience of the company has to be
considered and what is reasonable in any particular circumstances may
differ from time to time.
The
purposes for which the applicant may inspect the books is also, has
been suggested, limited to inspections for the purpose of furthering
the company's interest, not his own. The avowed purpose of the
applicant's intention to inspect the books and records is to enable
him to evaluate his share in the business and to sell his shares in
each of the companies following on a breach of his relationship with
the 2nd respondent.
I
am not satisfied that he is entitled to the relief he claims, for
this purpose.
If
there had been evidence that the 2nd respondent had in some way or
other impeded the applicant or refused him access to the books I
might have been persuaded to grant an interdict preventing such
impeding but such is not the case.
A
brief examination of the history of this matter reveals that the
applicant and the 2nd respondent have been associated with each other
principally as employer and employee in the business of the L M
Restaurant and that the 2nd respondent who was the employer, when he
formed his companies, appears to have issued or caused to be issued
an insignificant number of shares to the applicant, in one company
and a very small number in the other. The purpose of this could
hardly have been economic. The real reason appears to be that in
terms of the Company Legislation, it is required of every private
company that there be no less than two members and no less than two
directors. In compliance with this, it seems the 2nd respondent has
his holdings in the two companies together with the applicant. This
does not detract from the applicant's right to examine the books of
the companies. What does affect his right is his motive and where I
am satisfied, as the probabilities seem to indicate that his motive
is merely to harass the respondent, I should dismiss the application
on that ground alone. It would not be proper to grant alternative
relief in the absence of
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any
proof of the demand by the applicant to have access to the books and
that such demand has been refused. On examination on correspondence
which has passed makes it clear that the respondent has not refused
access to the books and indeed has made a sincere offer to the
cooperative.
The
opening salvo in the matter was a letter from an Attorney Mlangeni
and Company addressed to Franco Investments (Pty) Limited. I believe
the letters were addressed to both companies for the attention of Mr.
G.S. Franco. The letter written by an attorney says that the writer
acts for one Danger Nyoni and that he is a shareholder and
co-director with addressee in the companies G.S. Franco Investments
(Pty) Limited and Modem Printing Works Limited. The letter records
that this position has obtained since the inception of the companies
a number of years ago. The letter then turns to the applicant's
problems regarding his interest in the company which are stated to be
that no dividend has been declared, that he has no access to books of
account and that he has generally had no say in the affairs of the
company.
It
is fatuous for a director who has not exercised his rights to examine
the books for many years to say that he has had no access to the
books of account. The applicant does not point to any instance in the
past year, before the breach of his relationship with Franco, where
he sought to have access to the books of account and was refused. The
alleged problem stated in the attorney's letter on examination has no
basis in fact. The letter makes it clear that the applicant now
wishes to sell his interest in the companies, and that he seeks the
cooperation of Mr. Franco who is the 2nd respondent in this regard.
The
letter warns that "should you choose not to cooperate, my client
will have no alternative but to institute proceedings for the
liquidation of these companies so that he can realise the worth of
his shareholding." This is a serious but empty threat and it is
difficult to see how the applicant's interest were at any time being
advanced by applying for the liquidation of the companies.
The
2nd respondent's answer to this letter is written in conciliatory
terms. In it, Mr. Franco, the 2nd respondent says he appreciates Mr.
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Mlangeni's
gesture of drawing his attention to the applicant's action. He says
that he has no problem with the applicant's wishing to realise his
shares in the company and recorded that, he in good faith offered the
applicant 5% in the shares of the company. He went on to say that "I
assure you there is nothing sinister about my motives in connection
with the sale," and "your client is free to contact the
auditors of the company, so that the worth of his shares may be
calculated. I will be available for further assistance in this
regard."
This
letter cannot be regarded in any way as a refusal to cooperate, or
can it be read as an undertaking or indication that the books of
accounts were with the auditors. In fact the 2nd respondent
specifically offers his cooperation and such cooperation must be
understood to include an examination of the books in so far as such
is necessary in relation to the realisation of the applicant's
shares. This was the last communication from the 2nd respondent
before these applications were launched. What happened subsequently
was that the applicant changed attorneys and his new attorney wrote
letters to various other people.
On
2nd May 1995, a letter was written by Attorneys Simelane and Company
to the Managing Director Mr. Franco. He informed Mr. Franco that Mr.
Mlangeni was no longer acting and that "we wish to put on
record, we are instructed that you have effectively been excluding
our client from participating in the management of the company, as a
director and his rights as a shareholder have also been disregarded."
No specific instance is ever recorded or attended to notwithstanding
that the parties had been associated for a period of fifteen years.
The letter continued "your conduct firstly as a majority member
is unduly prejudicial to our client, and constitutes an act of
minority oppression to our client." No factual basis for this
allegation is laid.
The
letter also states "Your further actions as a director in
frustrating the exercise of our client's rights as a director,
constitutes conduct which in breach of your client's duty ..."
The basis of this conclusion is not stated.
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The
letter is so much puffery and unsubstantiated allegation. The letter
concludes "We accordingly request your written confirmation
within three days of date of delivery of this letter that you will
desist from seeking to frustrate our client in exercise of his rights
as a member and director. 5.2. You will grant our client immediate
access to all books and records of the company. 5.3. You will account
to our client in respect of all salaries and other benefits taken by
your in the company, in your capacity as director. That you will not
act - of the management of the company."
The
applicant has no right to demand an answer to all these questions
within three days, without any indication of what the trouble was in
the company and why the demands was being made. Moreover there was no
need for him to be granted immediate access to the books. As a
director he was entitled to examine the books for the purposes of
carrying out the duties as a director and there was nothing to show
that he was being denied such access. On the contrary as we have
seen, the only letter so far from the 2nd respondent is an offer to
cooperate.
The
further letters which were addressed to the accountants and which
passed between the accountants themselves can have little bearing on
this application.
The
applicant has sadly misconceived his rights in this matter and has
laid no foundation to demonstrate the need for any alternative
relief. The application accordingly must be dismissed with costs.
S.W.
SAPIRE
ACTING
JUDGE
