THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Not Reportable
Case no: 638/2022
In the matter between:
MICHELLE ARMITAGE NO
APPELLANT
and
VALENCIA HOLDINGS 13 (PTY) LTD
FIRST RESPONDENT
SHAUN MICHAEL GREEN
SECOND RESPONDENT
MARK DOUGLAS SMITH

THIRD RESPONDENT
RONALD JAMES HOY

FOURTH RESPONDENT
DEREK NORMAN STANBRIDGE

FIFTH RESPONDENT

Neutral citation: Armitage NO v Valencia Holdings 13 (Pty) Ltd and Others
(638/2022) [2023] ZASCA 157 (23 November 2023)
Coram:
DAMBUZA, MEYER and GOOSEN JJA, KATHREE-
SETILOANE and SIWENDU AJJA
Heard:

26 September 2023
Delivered:
23 November 2023
Summary:
Company law ─ action by executor of deceased shareholder’s
estate ─ s 163 of the Companies Act 71 of 2008 (the Act) ─ oppressive or unfairly

prejudicial conduct ─ whether interest free shareholder loans as an advance on
future dividends constituted oppressive or unfairly prejudicial conduct ─
deceased shareholder consenting to the loans ─ claim for payment of indemnity
insurance proceeds ─ buy and sell ─ indemnity insurance proceeds not equal to
value of shares ─ share buy-out procedure binding on the executor ─ oppressive
or unfairly prejudicial conduct not established ─ award of compensation under
s 163(2)(j) not competent.

________________________________________________________________

ORDER
________________________________________________________________

On appeal from: Gauteng Division of the High Court, Johannesburg (Adams J
with Fisher and Malindi JJ concurring, sitting as a court of appeal):
The appeal is dismissed with costs, which shall include the costs of two counsel.
________________________________________________________________

JUDGMENT
________________________________________________________________
Siwendu AJA (Dambuza, Meyer, Goosen JJA, and Kathree- Setiloane AJA
concurring):

[1] This appeal is based on the oppressive or unfairly prejudicial conduct
remedy in s 163(1) of the Companies Act 71 of 2008 (the Act). Its genesis flows
from interest free loans granted by the first respondent, Valencia Holdings 13
Limited (Pty) Ltd (Valencia) to its shareholders, as an advance on future
dividends. The full court of the Gauteng Division of the High Court,
Johannesburg (the full court) found the loans were not oppressive or unfairly
prejudicial, and set aside a compensation order granted to the appellant in terms
of s 163(2)(j) of the Act. The appeal is with the special leave of this Court.

[2] Mrs Michelle Armitage NO (the appellant) instituted an action against the
respondents in the Gauteng Division of the High Court, Johannesburg (the high
court) in her capacity as the executrix of the estate of her late husband, Mr Alan
Armitage (the deceased). She claimed payment of R6 768 900, being the proceeds
of a life insurance policy paid to the respondents. She alleged amongst the
numerous grounds for the action, that the respondents engaged in oppressive and
prejudicial conduct envisaged in s 163 of the Act.

[3] The deceased, who died on 12 December 2013, was a minority shareholder
in the first respondent, Valencia Holdings 13 (Pty) Ltd (Valencia). The second to
fifth respondents were co-shareholders in Valencia together with the deceased.
At the time of his death, the shares in Valencia were held in the following
proportions: (a) 7.5% of the shares were allotted to the deceased and the second
respondent, Mr Shaun Michael Green respectively; (b) The third respondent, Mr
Mark Douglas Smith and the fourth Mr Hoy each held 27.33% of the shares; and
(c) the fifth respondent Mr Derek Norman Stanbridge held 5.33% of the shares.
The remainder of the shares were held by Black Economic Empowerment (BEE)
shareholders. They played no role in the litigation.

[4] Valencia is a non-trading holding company. It has two wholly owned
operating subsidiaries, MDS International Skills (Pty) Ltd and MDS NDT
Consultants (Pty) Ltd. Over and above their respective shareholding, the deceased
and the respondents were joint directors of Valencia and its wholly owned
subsidiaries, making Valencia a closely held group.

[5] In terms of Clause 15.1 of the shareholders’ agreement, the shareholders
agreed that the value in Valencia lay in their collective skills and expertise. They
decided to take out and maintain a ‘buy and sell’ indemnity insurance on each
other’s lives in the event of the death or disability of one of them. The insurance
policy was issued in May 2012. They jointly determined the premium payable
with their insurance broker, based on an estimated value of Valencia’s shares, and
adjusted the insurance premium by 3.5% annually.

[6] From 29 February 2012 to 29 February 2016, the deceased and the second
to fifth respondents (respondents) devised a mechanism to fund their personal
financial needs by way of ‘interest free shareholder loans’ (the loans). They styled
the loans as ‘advance payments on future dividends’. The scheme operated in this

manner. When one of the shareholders required funds for personal expenses,
these would be sourced from one of Valencia’s subsidiaries. Since Valencia did
not possess a bank account, payments would then be made by the subsidiary to
the shareholder or to a third party on behalf of the requesting shareholder.

[7] At each financial year end, the subsidiary from which the funds were
drawn, would record the amounts advanced against the name of the requesting
shareholder, and furnish a single journal entry of all the shareholder loans
advanced to Valencia. The amounts paid on behalf of each shareholder would be
recorded against that shareholder’s loan account as an ‘interest free shareholder
loan’. As and when Valencia declared a dividend, it would first amortise the loans
against the dividend due to the relevant shareholder. To the extent that a balance
stood in credit after settling the loan, it would be paid to that shareholder.

[8] The insurance policy taken out on the life of the deceased was paid out to
the surviving shareholders in an aggregate sum of R6 768 900. In April 2014, the
respondents tabled an offer to the appellant to acquire the deceased’s shares.
Negotiations faltered and the respondents withdrew the offer. A deluge of
litigation on several aspects of the affairs of Valencia, including a contested
application for disclosure of company information, followed. The upshot is that
three years after the death of the deceased, in March 2017, following the
institution of the action in January 2017, the respondents made another offer ‘with
prejudice’ to purchase the deceased’s shares for R6 768 900. They offered to pay
the purchase price over 60 months with interest at the rate of 10.25% from the
date of the signature of the settlement agreement.

[9] The appellant declined the offer, and alleged that the respondents enjoyed
a substantial benefit by way of ‘huge interest free loans made by Valencia’ to her
exclusion. She made a counter-offer asserting that: ‘The simple, fair and

appropriate resolution to that is that the amount of R 6 768 900.00 should attract
interest from the date of the receipt of the proceeds at the appropriate interest rate
which we suggest to you would be the prime overdraft rate over the period . . .’.
The counter offer was not accepted.

Section 163 (1) proceedings
[10] In the trial proceedings, the appellant alleged in Claim 1 that there was an
oral agreement between the respondents and the deceased that the proceeds of the
insurance policy would be paid to the survivor or executor of the estate of the first
dying shareholder. In the alternative, she claimed that the death of the deceased
was a ‘trigger event’ in terms of the shareholders’ agreement. The respondents
were required to pay the appellant the proceeds of the insurance policy, for the
proportionate portion of the shares of the deceased but failed to do so.

[11] In Claim 2, which she pleaded in the alternative to Claim 1, the appellant
alleged that the respondents acted in concert and engaged in ‘oppressive and/or
unfairly prejudicial’ conduct (the conduct) under s 163(1) and (2) of the Act in
disregard of her interests. She attacked the advance of the loans to the respondents
on the grounds that they were prohibited financial assistance to the directors,
made in breach of ss 45(3)(a) and (b) of the Act.1 She alleged that the loans were
not sanctioned by a special resolution of shareholders as required by s 45(3)(a)(ii)
of the Act. Furthermore, when Valencia granted the loans, it had a debt of

1 Section 45(3) of the Companies Act 71 of 2008 provides:
‘Despite any provision of a company’s Memorandum of Incorporation to the contrary, the board may not authorise
any financial assistance contemplated in subsection (2), unless—
(a) the particular provision of financial assistance is—
(i) pursuant to an employee share scheme that satisfies the requirements of section 97; or
(ii) pursuant to a special resolution of the shareholders, adopted within the previous two years, which approved
such assistance either for the specific recipient, or generally for a category of potential recipients, and the
specific recipient falls within that category; and
(b) the board is satisfied that—
(i) immediately after providing the financial assistance, the company would satisfy the solvency and liquidity
test; and
(ii) the terms under which the financial assistance is proposed to be given are fair and reasonable to the
company.’

R3 319 709 with Investec Bank, which attracted debt servicing interest. She
furthermore alleged that, Valencia failed to satisfy the solvency and liquidity test.
She also alleged that the respondents acted in concert and increased the loans to
themselves ‘notwithstanding that the company had been advised that such loans
were improper and/or contrary to provisions of the Act.’

[12] Her second complaint about the oppressive or unfairly prejudicial conduct,
also pleaded in the alternative, was that she had been excluded from participating
in the loan scheme and should have been afforded a similar benefit. The
respondents wrongfully withheld company information. She maintained that a
payment of the proceeds of the insurance policy was an ‘equitable’ means to
avoid a dispute about the purchase price of the shares, expenses and legal costs
associated therewith.

[13] Lastly, the appellant sought an order declaring the second to fifth
respondents, delinquent directors and placing them under probation in terms of s
162 of the Act (delinquency claim). She claimed the respondents grossly abused
their position as directors. They had intentionally or through gross negligence,
inflicted harm on the company and/or acted in a manner that amounted to gross
negligence, wilful misconduct or breach of trust in the performance of their
functions as directors. It is not necessary to deal with those allegations since they
are no longer relevant to the appeal.

[14] Although the high court dismissed the appellant’s claims based on: (a) the
oral agreement; (b) the breach of s 45 of the Act; and (c) the delinquency claim,
it found that there was unfair and oppressive conduct. The high court ordered the
respondents to pay a sum of R6 768 900 in terms of s 163(2)(j) of the Act, in
proportion to the proceeds received when they realised the insurance. It reasoned
that the appellant had been unfairly excluded from shareholder benefits and that:

‘[a]part from not benefiting from the proper distribution of the profits of the company, [the
appellant] was also prejudiced by the non-payment of the interest on [the] loans. This
constitutes a violation of the conditions of fair play on which every shareholder is entitled to
rely on’.

[15] The respondents challenged the high court’s findings and the
compensatory order, on appeal to the full court. The appellant was granted leave
to cross-appeal against the refusal to declare the respondents delinquent directors.

[16] The full court reversed the decision of the high court and found that the
conduct complained of did not entitle the appellant to relief in terms s 163 of the
Act. It also dismissed her reliance on s 45 and reasoned that: ‘. . . the deceased
concluded a shareholders’ agreement with his co-shareholders in terms of which
he specifically agreed to the manner in which he would be obliged to dispose of
his shareholding in Valencia. It held that the appellant was not entitled to
conveniently use an oppression remedy for the ulterior purpose of avoiding
compliance with the terms of the shareholders’ agreement’. The full court further
dismissed the cross-appeal to declare the respondents, delinquent directors.
Dissatisfied with the outcome, the appellant turned to this Court.

In this Court
[17] The appeal has crystallised to the dismissal of the oppressive or prejudicial
conduct claim under s 163(1) of the Act and is restricted to the orders setting aside
the compensation award made in terms of s 163(2)(j) of the Act. The appellant
did not challenge the dismissal of her cross-appeal.

[18] At the heart of the appeal, is whether the oppressive or unfairly prejudicial
conduct has been established. The submission on behalf of the appellant centred
on the loans and their characterisation as advance dividends. The argument was

that since the appellant ‘was to be considered a shareholder, the effect of not
paying her such advance dividends was clearly prejudicial and unfairly
disregarded her interests’. Given that the loans were shareholder loans, then she
was treated differently from the other shareholders without reason, so it was
argued.

[19] The respondents argued on the other hand that the appellant failed to prove
the above allegations. The respondents submitted first, that the deceased
consented to the loans. Secondly, after his death, his estate, enjoyed the benefit
of the loans until 2017. Thirdly, the appellant failed to follow the procedure
stipulated in the Memorandum of Association (MoA) dealing with the disposal
of the deceased’s shares. Lastly, the respondents contended that the appellant
impermissibly contrived the relief in terms of s163 to secure the payment of the
insurance policy proceeds.

The law
[20] The relevant provisions of s 163(1) and (2) of the Act read:
‘Relief from oppressive or prejudicial conduct or from abuse of separate juristic personality of
company –
(1)
A shareholder or a director of a company may apply to a court for relief if–
(a)
any act or omission of the company, or a related person, has had a result that is
oppressive or unfairly prejudicial to, or that unfairly disregards the interests of, the applicant;
(b)
the business of the company, or a related person, is being or has been carried on or
conducted in a manner that is oppressive or unfairly prejudicial to, or that unfairly disregards
the interests of, the applicant; or
. . .
(2)
Upon considering an application in terms of subsection (1), the court may make an
interim or final order it considers fit, including–
. . .
(j)
an order to pay compensation to an aggrieved person, subject to any other law entitling
that person to compensation.’

[21] The provision expands the relief beyond a shareholder and permits a
director to apply personally for a remedy against the company. It mitigates one
of the general rules of company law: when a person becomes a shareholder of a
company, that person undertakes to be bound by majority decisions even if the
decision affects their rights as a shareholder.2 As this Court stated in Grancy
Property Limited v Manala3 (Grancy), s 163 is in some respects the equivalent to
s 252(1)  of the Companies Act 61 of 19734 (the old Companies Act). The
substantial body of case law dealing with s 252 of the old Companies Act,
repealed by the current Act, applies to the assessment of oppressive or unfairly
prejudicial conduct.

[22] It is notable that the language employed in the provision differs from that
of the old Companies Act. The court in Visser Sitrus (Pty) Ltd v Goede Hoop
Sitrus (Pty) Ltd and Others5 (Visser) observed that although the new provision
may not directly alter the character of the regulated conduct, the inclusion of the
word ‘oppressive’ in the text connotes conduct of ‘a more egregious kind.’ I agree
with the remarks made in Visser that it would be difficult to find that conduct is
‘oppressive’ without such conduct being ‘unfairly prejudicial’ Nevertheless, the
test is an objective one, and as held by the court in De Sousa and Another v
Technology Corporate Management (Pty) Ltd and Others,6
‘The prejudicial inequity or unfairness lies not in the legally justifiable exclusion of the affected
member from the company's management, but in the effect of the exclusion on such member
if a reasonable basis is not offered for a withdrawal of his or her capital.’

2 Sammel and Others v President Brand Gold Mining Co Ltd 1969 (3) SA 629 (A) at 678G-H.
3 Grancy Property Ltd v Manala and Others [2013] ZASCA 57; [2013] 3 All SA 111 (SCA); 2015 (3) SA 313
(SCA).
4 Section 252(1) provided that: ‘Any member of a company who complains that any particular act or omission of
a company is unfairly prejudicial, unjust or inequitable, or that the affairs of the company are being conducted in
a manner unfairly prejudicial, unjust or inequitable to him or some part of the members of the company, may,
subject to the provisions of subsection (2), make an application to the Court for an order under this section’.
5 Visser Sitrus (Pty) Ltd v Goede Hoop Sitrus (Pty) Ltd and Others 2014(5) SA 179 (WCC) at paras 54 to 55.
6 De Sousa and Another v Technology Corporate Management (Pty) Ltd and Others [2017] ZAGPJHC 109;
[2017] 3 All SA 47 (GJ); 2017 (5) SA 577 (GJ) para 44.

[23] This Court in Louw and Others v Nel7 (Louw) sets out the criteria for
granting relief as follows:
‘An applicant for relief under s 252 cannot content himself or herself with a number of vague
and rather general allegations, but must establish the following: that the particular act or
omission has been committed, or that the affairs of the company are being conducted in the
manner alleged, and that such act or omission or conduct of the company's affairs is unfairly
prejudicial, unjust or inequitable to him or some part of the members of the company; the
nature of the relief that must be granted to bring to an end the matters complained of; and that it
is just and equitable that such relief be granted. Thus, the court's jurisdiction to make an order
does not arise until the specified statutory criteria have been satisfied.’ (Own emphasis.)

Is the conduct complained of oppressive or prejudicial?
[24] The respondents maintained that the deceased’s participation and consent
to the loan scheme vitiates the appellant’s claim. Their position is reinforced by
the principle in Irvin and Johnson Ltd v Oelofse Fisheries Ltd8 (Irvin and
Johnson) where the court held that:
‘Oppression is something done against a person’s will and in his despite. It is not something
done with his acquiescence or consent, and still less something done with his co-operation.’

[25] In this case the consent is borne out by the annual financial statements for
the financial year ending February 2013 signed by the deceased, reflecting a
credit loan account of approximately R600 000 in his favour. Mr Koski, called as
an expert by the appellant to testify at the trial, confirmed that the deceased had
the benefit of the shareholder loan account. Payments were made to third parties
for his personal expenses on his behalf.

[26] The appellant sought to disavow that the deceased’s consent to the loans
scheme bound her. She submitted instead that, as executrix, her position is

7 Louw and Others v Nel [2010] ZASCA 161; 2011 (2) SA 172 (SCA); [2011] 2 All SA 495 (SCA) para 23.
8 Irvin and Johnson Ltd v Oelofse Fisheries Ltd 1954 (1) SA 231 (E) at 243B-C.

analogous to that of the executor in Van den Bergh v Coetzee9 (Van den
Bergh).The question in Van den Bergh, was whether knowledge of certain latent
defects by the deceased in respect of a sale of a property could be imputed to the
executor. The court found that there was no legal basis to do so and held that:
‘. . . the executor does not step into the shoes of the deceased on his death; he does not succeed
to the person of the deceased. He is simply required to administer and distribute his estate under
the provisions of the Administration of Estate Act 66 of 1965. In my view, there is no justifiable
legal basis to connect the executor with the acts of the deceased. The executor's position is
regulated by the Act’.

[27] In the present matter, the rights and dominium in the shares remained
vested in the deceased estate.10 The appellant’s role was to administer the
deceased estate in accordance with the deceased’s last will and testament. The
provisions of the Memorandum of Association (MoA) read with the shareholders’
agreements bound the appellant in relation to the management of the deceased’s
assets in Valencia. I deal with the effect of the shareholders agreement below.

[28] In answer to the evidence pointing to the deceased’s consent, counsel for
the appellant submitted that we should consider the benefit derived from the loans
over time. After the deceased died, the appellant could not participate in the loan
scheme. She was not treated equally with the other shareholders, so it was argued.
Therefore, the Court should order the payment of the proceeds realised by the
respondents from the ‘buy and sell’ insurance policy in exchange for the shares.
It was intimated that an independent valuation of the shares in Valencia would be
difficult. To bolster the argument for the payment of the proceeds, counsel sought
to persuade us that under s 163(2) of the Act, this Court can  exercise a similar
discretion to that articulated in Oakdene Square Properties (Pty) Ltd and Others

9 Van den Bergh v Coetzee 2001 (4) SA 93 (T) at 95H-I.
10 See s 3 of the Estate Duty Act 45 of 1955; also Gaffoor NO and Another v Vangates Investments (Pty) Ltd and
Others [2012] ZASCA 52; 2012 (4) SA 281 (SCA); [2012] 2 All SA 499 (SCA) para 33.

v Farm Bothasfontein (Kyalami) (Pty) Ltd and Others11 (Oakdene) and grant an
order it considers appropriate.

[29] First, the submission misconstrues the ‘buy and sell’ provisions which bind
the appellant. It was submitted their effect is that the shareholders would ‘use the
proceeds’ to buy the deceased’s shares. It was argued that shareholders
determined the value and contemplated that the premium paid for the ‘buy and
sell’ insurance policy ‘would match’ the value of the shares in Valencia. The
relevant part, of the shareholders’ agreement states:
‘15
BUY-SELL
. . .
15.3
The death or disablement (as determined by the rules applicable to such disablement
insurance) of a shareholder or the person who holds a controlling interest in a shareholder shall
be deemed to constitute a ‘trigger event’ as contemplated in clause 14, in which event the other
shareholders agree to use the proceeds of such indemnity insurance to purchase the shares and
claims proportionately or as may otherwise be agreed between them, held by the deceased or
disabled shareholder or the person who holds the controlling interest in a shareholder.
15.4  To avoid doubt the provisions of clause 19 will apply when valuing the shares and
claims for the purposes of this clause 15.
15.5
Accordingly, the shareholders agree that if there is any shortfall between the proceeds
of the indemnity insurance and the fair value of the shares and claims, if any, such shortfall or
difference will be deemed waived and the fair market value of the shares of the offering
shareholder will be the value determined under the buy-sell insurance agreements to be
concluded by the shareholders after signature of this agreement, provided that if such buy-sell
insurance has not been taken out, prior to an offer being received (or deemed to be received)
by an offeree then the fair value of the shares will be determined in accordance with clause 19.
. . .
DETERMINATION OF FAIR VALUE
The fair value of the shares will be determined annually by the auditors of the company (‘the
valuer’) at its cost. Such fair value as determined will be recorded in the notes of the auditor's

11 Oakdene Square Properties (Pty) Ltd and Others v Farm Bothasfontein (Kyalami) (Pty) Ltd and Others [2013]
ZASCA 68; 2013 (4) SA 539 (SCA); [2013] 3 All SA 303 (SCA) paras 18-21.

(valuer's) financial report presented to the directors and will represent the total sum to be
insured in accordance with, and as contemplated by the provisions of clause 15 collectively
representing each of the legacy shareholder's amount insured proportionate to his shareholding.
For any purpose under this agreement, such fair value shall be determined in accordance with
the following provisions.’

[30] The difficulty with the appellant’s submission is that she did not dispute
that the premium paid for the ‘buy and sell’ insurance was based on an estimated
value of the shares, agreed to between the shareholders and the insurance broker.
The phrase ‘to use the proceeds’ does not mean ‘pay the proceeds’ as suggested.
The argument isolates the phrase from the rest of the provisions in a manner that
is inconsistent with the overall terms of the shareholders’ agreement. It, thus,
yields an unbusiness - like result.12

[31] When clause 15.3 is read with clause 15.5, it is clear that the shareholders
anticipated that there could be a shortfall between the estimated value fixed for
determining the premium, on the one hand, and the actual value of the shares, on
the other. They had agreed on a contractual means to bear that risk. Whether or
not there was a shortfall, and its extent could only be determined after the
independent valuation envisaged under clause 19. Since that has not occurred,
there is no basis to determine the compensation amount claimed. The submission
is not sustainable. It entails the reinstatement of the award made by the high court,
in disregard of the prevailing agreements.

[32] Second, the assertion that there was unequal treatment does not assist the
appellant. The loan account ledger, presented at the trial reflects movements in
the shareholders’ loan accounts. It shows that Valencia maintained the deceased’s
loan account beyond his death. The evidence of Mr Koski supports the

12 Natal Joint Municipal Pension Fund v Endumeni Municipality [2012] ZASCA 13; [2012] 2 All SA 262 (SCA);
2012 (4) SA 593 (SCA) para 18.

contentions by the respondents. He confirmed that the deceased’s estate had the
benefit of an interest free loan until 2017. From 2013 to 2017, Valencia declared
dividends of R35 million and amortised the deceased’s loan account and those of
other shareholders, as was the agreed practice.

[33] Mr Koski conceded that the deceased’s loan account was adjusted after
Valencia declared a dividend in 2016.The evidence also showed that three of the
four remaining shareholders received loans during 2014 to 2015. Only two of the
shareholders received new loans during the period 2015 to 2016. And only one
shareholder took out a new loan during 2016 to 2017. Ultimately, after the
deceased’s loan account was settled, the nett movement on the loan accounts of
other shareholders decreased rather than increased between 2017 and 2018. There
is no evidence of a diminution of benefits to the estate after the deceased died.

[34] The argument that a court has a discretion to grant relief under s 163(2) in
the circumstances of this case cannot be sustained. Here too, as in Oakdene, the
court’s discretion is ‘bound up’ by the jurisdictional requirements in s 163(1)(a)
for an act or omission that is oppressive or unfairly prejudicial. Objectively, the
appellant’s allegations do not withstand the scrutiny required for relief under s
163. That there are difficulties with the valuation of the shares compounded by
the effluxion of time, is not a basis to grant the relief sought. The Court in Louw
makes it plain that the conduct of the minority seeking relief is not immune to
scrutiny.13

[35] The respondents made numerous tenders to purchase the shares at fair
market value, and later, for a sum close to the amount awarded to the appellant
by the high court. She, however, elected to embark on lengthy litigation to force

13 Fn 7 supra.

the sale of the shares on terms not contemplated by the shareholders in Valencia’s
constitution documents. As correctly contended by the respondents, the refusal of
the tender counters the appellant’s reliance on the oppression remedy.14 That
would be more so in the present case, where the refusal of the tender was based
on incorrect factual grounds.

[36] Confronted with the above challenges, the appellant revived her complaint
that the loans breached s 45 of the Act. She submitted that there could not have
been unanimous consent about their grant once the deceased died. The
shareholders and directors were no longer the same. Her position as an executor
of the estate meant that she could not create a debt in Valencia.

[37] Section 45 is designed to protect shareholders against self- serving
directors who breach their fiduciary duties. On the facts of the present matter, it
is doubtful that a cure for the breach of s 45 lies in the oppression or unfair
prejudicial remedy. In any event, the s 45 complaint was not amongst the grounds
for appeal before the full court. The appellant did not cross-appeal its dismissal
by the high court. It is unnecessary to decide it in this appeal.

[38] In conclusion, the requirements for relief under s 163 were not established.
In the result, I make the following order:
The appeal is dismissed with costs, which shall include the costs of two counsel.

__________________________

N T Y SIWENDU

ACTING JUDGE OF APPEAL

14 Bayly and Others v Knowles [2010] ZASCA 18; 2010 (4) SA 548 (SCA); [2010] 3 All SA 374 (SCA) para 24.

Appearances

For the appellant:

A C Botha SC
Instructed by:
Brian Kahn Inc Attorneys, Randburg
Claude Reid, Bloemfontein

For the respondents:

A Subel SC and P Cirone
Instructed by:
Knowles Husain Lindsay Inc, Sandton

McIntyre Van der Post, Bloemfontein

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL

From:
The Registrar, Supreme Court of Appeal
Date:

23 November 2023
Status:
Immediate
The following summary is for the benefit of the media in the reporting of this case and does
not form part of the judgments of the Supreme Court of Appeal
Armitage NO v Valencia Holdings 13 (Pty) Ltd and Others (638/2022) [2023] ZASCA 157 (23
November 2023)
Today the Supreme Court of Appeal (SCA) dismissed an appeal with costs including costs of two
counsel. The appeal emanated from the full court of the Gauteng Division of the High Court,
Johannesburg (the full court) with special leave being granted by the SCA.
The appellant, Mrs Michelle Armitage NO, in her capacity as the executrix of the estate of her late
husband, Mr Armitage (the deceased), instituted an action against the respondents in the Gauteng
Division of the High Court, Johannesburg (the high court) claiming payment of R6 768 900, being the
proceeds of a life insurance policy paid to the respondents. She alleged, amongst the numerous
grounds for the action, that the respondents engaged in oppressive and prejudicial conduct envisaged
in s 163 of the Companies Act 71 of 2008 (the Act). The deceased was a minority shareholder in the
first respondent, Valencia Holdings 13 (Pty) Ltd (Valencia). The second to fifth respondents (the
respondents) were co-shareholders in Valencia together with the deceased.
In terms of Clause 15.1 of the shareholders’ agreement, the shareholders agreed that the value in
Valencia lay in their collective skills and expertise. They decided to take out and maintain a ‘buy and
sell’ indemnity insurance on each other’s lives in the event of the death or disability of one of them. The
insurance policy was issued in May 2012. From 29 February 2012 to 29 February 2016, the deceased
and the respondents devised a mechanism to fund their personal financial needs by way of ‘interest
free shareholder loans’ (the loans). They styled the loans as ‘advance payments on future dividends’.
The scheme operated in this manner. When one of the shareholders required funds for personal
expenses, these would be sourced from one of Valencia’s subsidiaries. Since Valencia did not possess
a bank account, payments would then be made by the subsidiary to the shareholder or to a third party
on behalf of the requesting shareholder.
At each financial year end, the subsidiary from which the funds were drawn, would record the amounts
advanced against the name of the requesting shareholder, and furnish a single journal entry of all the
shareholder loans advanced to Valencia. The amounts paid on behalf of each shareholder would be
recorded against that shareholder’s loan account as an ‘interest free shareholder loan’. As and when
Valencia declared a dividend, it would first amortise the loans against the dividend due to the relevant
shareholder. To the extent that a balance stood in credit after settling the loan, it would be paid to that
shareholder.

The insurance policy taken out on the life of the deceased was paid out to the surviving shareholders
in an aggregate sum of R6 768 900. In April 2014, the respondents tabled an offer to the appellant to
acquire the deceased’s shares. Negotiations faltered and the respondents withdrew the offer. Three
years after the death of the deceased, in March 2017, following the institution of the action in January
2017, the respondents made another offer ‘without prejudice’ to purchase the deceased’s shares for
R6 768 900. They offered to pay the purchase price over 60 months with interest at the rate of 10.25%
from the date of the signature of the settlement agreement. The appellant declined the offer, and alleged
that the respondents enjoyed a substantial benefit by way of ‘huge interest free loans made by Valencia’
to her exclusion. She made a counter-offer which was not accepted.
In the high court, the appellant, in claim 1, alleged that there was an oral agreement between the
respondents and the deceased that the proceeds of the insurance policy would be paid to the survivor
or executor of the estate of the first dying shareholder. In the alternative, she claimed that the death of
the deceased was a ‘trigger event’ in terms of the shareholders’ agreement. In Claim 2, which she
pleaded in the alternative to Claim 1, that the respondents acted in concert and engaged in ‘oppressive
and/or unfairly prejudicial’ conduct under s 163(1) and (2) of the Act in disregard of her interests. She
attacked the advance of the loans to the respondents on the grounds that they were prohibited financial
assistance to the directors, made in breach of ss 45(3)(a) and (b) of the Act. Lastly, the appellant sought
an order declaring the second to fifth respondents, delinquent directors and placing them under
probation in terms of s 162 of the Act (the delinquency claim).
The high court dismissed the appellant’s claims based on: (a) the oral agreement; (b) the breach of s
45 of the Act; and (c) the delinquency claim however, it found that there was unfair and oppressive
conduct ordered the respondents to pay a sum of R6 768 900 in terms of s 163(2)(j) of the Act, in
proportion to the proceeds received when they realised the insurance. Upon challenging this order on
appeal to the full court, the appellant was also granted leave to cross-appeal against the refusal to
declare the respondents as delinquent directors. The full court reversed the decision of the high court
and found that the conduct complained of did not entitle the appellant to relief in terms s 163 of the Act.
It also dismissed her reliance on s 45. The full court further dismissed the cross-appeal to declare the
respondents, delinquent directors. Dissatisfied with the outcome, the appellant turned to the SCA.
The issue before the SCA was whether the oppressive or unfairly prejudicial conduct had been
established by the appellant.
In coming to a conclusion, the SCA found that the deceased consented to the loans. It held that there
was no evidence of a diminution of benefits to the estate after the deceased died. The SCA reasoned
that in the present appeal, the rights and dominium in the shares remained vested in the deceased
estate. The appellant’s role was to administer the deceased estate in accordance with the deceased’s
last will and testament. The provisions of the Memorandum of Association, read with the shareholders’
agreements, bound the appellant in relation to the management of the deceased’s assets in Valencia.
The proceeds of the indemnity insurance were not equal to the value of the shares since the value had
not been determined.
The SCA held further that, the conduct of the minority is relevant when considering relief in terms of s
163. Viewed objectively, the appellant’s allegations do not withstand the scrutiny required for relief
under s 163 of the Act. The fact that there may be difficulties with the valuation of the shares
compounded by the effluxion of time, was not a basis to grant the relief sought.
In the result, the SCA held that the requirements for relief under s 163 were not established and
accordingly dismissed the appeal with costs including costs of two counsel.
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