Automated Summary
Key Facts
Six plaintiffs, including Titan Asset Management and Christoffel Wiese, allege fraud by Markus Jooste, former CEO of Steinhoff Intl, who misrepresented himself as acting on behalf of a consortium to acquire their interests in 'Lanzerac' for R220 million in Steinhoff Intl shares. The shares were later converted to Steinhoff NV shares via a scheme of arrangement. The plaintiffs seek rescission of the contracts and restitution, while the first defendant challenges the adequacy of their tender and non-joinder of Aussenkjer Boerdery.
Transaction Type
Share purchase of Lanzerac interests in exchange for Steinhoff Intl shares
Issues
- Whether the tender of substituted Steinhoff NV shares, instead of original Steinhoff Intl shares, constitutes valid restitution following rescission.
- Whether the plaintiffs are precluded from rescinding the contracts based on contractual terms that exclude cancellation rights for fraud.
- Whether the non-joinder of Aussenkjer Boerdery as a party to the action is a valid ground for exception under Uniform Rule 23.
Holdings
- The third exception was dismissed as the plaintiffs' tender of Steinhoff NV shares was deemed adequate for restitution. The court emphasized that the value of the consideration shares was negligible due to fraud, and substituted shares could suffice.
- The fourth exception regarding non-joinder of Aussenkjer Boerdery was dismissed. The court ruled that non-joinder does not invalidate the pleading as the cause of action was established, and the exception procedure was inappropriately used.
- The second exception was dismissed because the plaintiffs' rescission of the contracts due to fraud rendered the contracts void ab initio, including clauses precluding cancellation. The court held that the innocent party is not bound by such clauses.
Remedies
- Declaration that the contracts to which the plaintiffs were a party are duly cancelled.
- The sixth plaintiff and first plaintiff are entitled to payment of R50 million (adjusted for depreciation/appreciation of the transferred assets) from the first and second defendants.
- Order for the first defendant to make restitution to each plaintiff of the assets transferred under the contracts, subject to depreciation or appreciation adjustments.
- Interest on the restitution amounts awarded by the court, calculated from the time of the transactions.
- Costs of the suit are awarded against the first and second defendants jointly and severally.
Contract Value
220000000.00
Legal Principles
The court applied equitable principles of restitution, emphasizing that shares in a listed company are fungibles and can be substituted for restitution. It also discussed the unenforceability of contractual clauses excluding liability for fraud, noting that public policy precludes enforcement of such terms. Additionally, the judgment addressed procedural requirements under Uniform Rule 23 regarding exceptions to pleadings, distinguishing between peremptory and dilatory pleas.
Precedent Name
- Collin v Toffie
- Tswaing Consulting CC and Others v Northwest Provincial Government
- Anirudh v Samdei and Others
- Van Heerden en Andere v Sentrale Kunsmis Korporasie (Edms) Bpk
- Davidson v Bonafede
- Extel Industrial (Pty) Ltd v Crown Mills
- Wells v South African Alumenite Company
- Viljoen v Federated Trust Ltd
- Standard Bank of South Africa Ltd v Ocean Commodities Inc
- Afrox Healthcare Bpk v Strydom
- McIndoe and others v Royce Shoes (Pty) Ltd and Others
- Van Schalkwyk v Griesel
- Estate Vom Dorp v Scott
- North East Finance (Pty) Ltd v Standard Bank of South Africa Ltd
- Gallo Africa Ltd v Sting Music (Pty) Ltd
- Feldman NO v EMI Music SA (Pty) Ltd
- Mackay v Fey NO and Other
- Luke M Tembani and Others v President of the Republic of South Africa and Another
Key Disputed Contract Clauses
- The contracts specified that cancellation was only permissible for material breaches before the transfer date, or after the transfer date if specific performance or damages were inadequate. The plaintiffs claimed fraud vitiated these conditions.
- The parties agreed on the value of consideration shares (Steinhoff Intl shares) as R220 million, with that value allocated to the immovable properties transferred. The defendant contested the plaintiffs' ability to tender equivalent shares for restitution.
- The defendant raised clauses that purported to bar cancellation due to fraud. The court ruled such clauses unenforceable under public policy, as they sought to exclude liability for fraudulent misrepresentation.
- The contracts stipulated that the transaction was indivisible and interdependent, meaning termination of one agreement would allow termination of the remainder. This was central to the defendant's argument that rescission was precluded.
- The contracts required the first defendant to transfer the consideration shares to the plaintiffs by 09H00 on the closing date. The defendant argued this obligation had been fulfilled, precluding rescission.
Cited Statute
- Uniform Rules of Court
- Companies Act, 2008
Judge Name
A.G. Binns-Ward
Passage Text
- [39] The preliminary question raised in respect of the fourth exception is whether an exception was an appropriate procedural means for the first defendant to raise the point of non-joinder. Only if it was, will it become necessary to pronounce on the merit of the non-joinder point.
- [23] Does it matter in the circumstances of the current case that the shares that the plaintiffs tender are not exactly the same shares as the ones that they received from the first defendant? Not necessarily, in my view. I think there is a persuasive argument to be made that shares in a listed company are fungibles.
- [14] ... the effect of an innocent party resiling from a contract on that ground is that the agreement is regarded as being void ab initio, and the innocent party is accordingly not held bound by any of its terms.
Damages / Relief Type
- Restitution of transferred assets with adjustments for depreciation/appreciation
- Interest on restitution amounts (a temporae mora) and costs of suit against defendants
- Payment of R50 million (adjusted for asset value changes) for the sixth and first plaintiffs
- Declaration of contract cancellation
- Rescission of contracts based on fraudulent inducement