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IN THE HIGH COURT OF SOUTH AFRICA

(WITWATERSRAND LOCAL DIVISION)

CASE NO 08/8695

In the matter between

MOORE JEAN-MARIE DENIS MAURICE APPLICANT

and

NOUVEAU INVESTMENTS CC FIRST RESPONDENT

MOORE JUANITA CATHERINE SECOND RESPONDENT

BRIAN KAHN INCORPORATED ATTORNEYS THIRD RESPONDENT

______________________________________________________________

J U D G M E N T

______________________________________________________________

VAN OOSTEN J

[1] This application concerns a third person in a marriage relationship. But it has little in common with the normal love-triangle. Firstly, the third person, I have referred to is a close corporation known as Nouveau Investments CC, the first respondent herein, and secondly, it features in a broken-down marriage relationship which is at the point of being finally dissolved by this Court, pursuant to a divorce action pending between the husband Dr Moore, who is the applicant and his wife, Mrs Moore, the second respondent. There is one further party in this application, a firm of attorneys, Brian Kahn Incorporated, the third respondent, who are the attorneys of record on behalf of Mrs Moore.

[2] In the present application the applicant seeks an order for the winding-up of Nouveau Investments, as well as an order for the costs thereof to be paid by the second and third respondents.

[3] The factual background to this application is the following: The close corporation was created and registered during 1994, for the sole purpose of owning an immovable property (the property). The Moors are the only registered members of the close corporation, each holding a 50% members’ interest. The shareholding however, is in dispute: it is the applicant’s case that he is the beneficial owner of the entire shareholding and that his wife holds the 50% shareholding registered in her name, as his nominee. Mrs Moore hotly disputes this assertion. The dispute also features in the divorce action, which has followed the route, as one regrettably often experiences, of acrimonious litigation, where each party jealously seizes each and every opportunity that may arise, to gain an advantage to the other.

[4] While dealing with this dispute it is necessary to say something about the nature thereof. The applicant has approached this Court on a regrettable paucity of information on this aspect. In the papers before me he merely states that Mrs Moore holds the 50% shareholding registered in her name as his nominee. This as could be expected elicited a denial from Mrs Moore in the answering affidavit, which in the replying affidavit was not taken any further, except perhaps for mentioning that the dispute (sub nom “ the nominee dispute”) ranks amongst the many others in the divorce action. The attitude of the applicant is inexcusable: he has approached the Court for relief in which this aspect is of vital importance and he was expected to openly provide all the facts relevant to the dispute. It is simply not acceptable, as the applicant has attempted to do, to brush his remissness aside on the basis that he was not prepared to allow his wife to have a “preview” of the evidence that will be led at the divorce trial on this issue. In the view I take of this matter it is not necessary to say anything more in this regard, save that the applicant’s attitude will have a bearing on the costs order I propose to make, as will become apparent later in the judgment.

[5] Next I turn to the winding-up application. The close corporation’s sole asset was the property. Mrs Moore was empowered in terms of a resolution of the close corporation to sell the property for a purchase price of R2,4m, and to sign all necessary documents to give effect thereto. The resolution however is silent on what was to happen to the proceeds of the sale, which therefore plainly remained the entitlement of the close corporation. Mrs Moore sold the property in early 2006, and registration of transfer to the purchaser occurred on 30 August 2006. On 1 September 2006 the net proceeds of the sale amounting to R2 065 963, 60 (the proceeds) were however deposited into Mrs Moore’s bank account, which she says had been used by her for some 11 years for investment purposes to their benefit. The applicant states that he only became aware of the whereabouts of the proceeds during the beginning of this year upon an analysis of the documents discovered by Mrs Moore in the divorce action. Mrs Moore says he should have been aware thereof much sooner. Be that as it may, it seems to me that this aspect was not as openly dealt with as one would have expected.

[6] The funds however, seemingly without the applicant’s knowledge or consent, were paid over to the third respondent attorneys. As much appears from a letter by them dated 13 February 2008, in which it is explained that “our client proposes dealing” with the proceeds in the following manner: firstly, the sum of R60 000 to be retained as a refund to Mrs Moore in respect of an alleged payment she had made on behalf of the applicant to a third person, secondly, the sum of R91 777, 00 to be held in trust in respect of the close corporation’s estimated capital gains tax liability; and, thirdly, the remaining balance to be divided in equal shares between the Moors. It is further stated that Mrs Moore would “retain” her share while the applicant’s share would be held in trust pending the divorce. It appears from the letter that the “invested funds” (ie the retained share of the applicant and the tax monies) had been deposited into two separate accounts in the attorneys’ trust account, styled “Brian Kahn Inc - Moore dispute - tax monies” and “Brian Kahn Inc – Moore dispute – retained share”. Lastly, the letter invited the applicant to sign a form annexed thereto, which is a consent in draft form, for the “invested funds” to be invested at the firm’s bankers in an interest bearing account. The applicant, as indicated in his attorneys’ response to the letter, refused to do so. It must therefore be accepted that the “invested funds” are presently held by the third respondent in trust not earning any interest.

[7] Prior to delivering her answering affidavit, Mrs Moore through her attorneys made an open tender “to avoid the need of liquidation”, which concerning the proceeds encompassed that each of the applicant and Mrs Moore be paid the amount representing their loan account (ie R423 890 each); plus a dividend out of the sum of R1 666 406,60 (being the balance after allowance is made for the retention to pay the income tax) after the passing of a resolution declaring such; that an income tax return be submitted for the close corporation, upon assessment of which the tax was to be paid out of the funds being held in trust by the third respondent attorneys and the balance, if any, to be distributed equally between the parties. It was further suggested that the close corporation thereafter be deregistered. The offer was refused by the applicant in a letter dated 13 March 2008. Following upon the refusal the final approach adopted by Mrs Moore in her answering affidavit is that she will not utilise any of the proceeds other that the amount standing to her credit in respect of her loan account in accordance with the latest audited financial statements for the close corporation, which the applicant by signing it acknowledged as correct.

[8] From what I have set out above it is clear that the close corporation has served its purpose. Its only property has been sold and the proceeds thereof are the subject of the matrimonial disputes between the Moors. Considerations concerning the day-to-day running and management of the business of the close corporation, or of a deadlock having arisen between the members, therefore do not arise. The only way forward is the dissolution of the close corporation either by deregistration or liquidation. The former was declined by the applicant. The latter, in my view amply provides for a proper resolution of the dispute now existing between the parties. Counsel for the applicant, in my view correctly so, has described Mrs Moore’s handling of the proceeds as “self-help”. She was clearly not entitled to unilaterally deal with the close corporation’s funds as she deemed fit. Those monies had to follow the legal route unless the parties by agreement resolved otherwise. Regrettably her attorneys vigorously participated in what can only be described as a unilateral partial distribution of the funds of the close corporation, much, as was to be expected, to the exclusive benefit of their client. Counsel for Mrs Moore argued that she was entitled to appropriate and fully deal with her share of the loan account as her entitlement thereto as well as the amount thereof had been certified in the financial statements of the close corporation, which the applicant had signed. I am unable to agree. Those funds firstly, fall within the close corporation and secondly, in any event form part of the disputes in the divorce action. To allow one party in these circumstances, to unilaterally appropriate any portion of those funds, in my view, would, for obvious reasons, open the door to all kinds of irregularities. I am not surprised that the applicant resorted to the remedy of liquidation – the notion of his wife’s attorneys being in control of the funds of the close corporation, in which he has an interest of at least 50%, and using a portion of it for the benefit of their client and further as a tool to procure a settlement, is simply unacceptable. The law must follow its course: the winding-up of the affairs of the close corporation would be just and equitable. The liquidator to be appointed, with all the statutory mechanisms at his disposal, will ensure that in the best interest of all concerned an equal distribution of the balance of the funds available for distribution be accomplished.

[9] As to costs of this application I am not satisfied that Mrs Moore should be mulcted in those costs. The applicant as I have alluded to, was less than frank with this Court. There is nothing to show that Mrs Moore acted mala fide in dealing with the proceeds. She at all times was able to account in full for the proceeds and her retention thereof was obviously based on ill-considered advice. I am also of the view that the third respondent attorneys should not be ordered to pay any costs: their advice to their client, albeit anything but impartial, was not such as to warrant an order for costs against them. But their costs, on the other hand, should not form part of the costs of the liquidation.

[10] In the result the following order is made:

10.1 The first respondent close corporation is wound-up in the hands of the Master of this Court.

10.2 The costs of this application, excluding the costs of the third respondent as a party to this application, are to be costs in the liquidation.

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FHD VAN OOSTEN

JUDGE OF THE HIGH COURT

COUNSEL FOR THE APPLICANT ADV J CANE

APPLICANT’S ATTORNEYS ALAN ALLSCHWANG & ASS

COUNSEL FOR THE SECOND

& THIRD RESPONDENTS ADV PJ VAN BLERK SC

SECOND & THIRD

RESPONDENTS’ ATTORNEYS BRIAN KAHN INC

DATE OF HEARING 10 JUNE 2008

DATE OF JUDGMENT 20 JUNE 2008

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