THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Not Reportable
Case nos: 802/2020 and 813/2020

In the matter between:
SURESH CHANDERBHAN MIRCHANDANI
APPELLANT
and
UNICA IRON & STEEL (PTY) LTD

RESPONDENT
AND
UNICA IRON & STEEL (PTY) LTD

APPELLANT
and
SURESH CHANDERBHAN MIRCHANDANI
RESPONDENT

Neutral citation: Mirchandani v Unica Iron & Steel (Pty) Ltd and Unica
Iron & Steel (Pty) Ltd v Mirchandani (Case no 802/2020
& 813/2020) [2022] ZASCA 58 (22 April 2022)
Coram:
SALDULKER, MOCUMIE and MBATHA JJA and
TSOKA and WEINER AJJA
Heard:
4 March 2022

Delivered:
This judgment was handed down electronically by
circulation to the parties’ legal representatives by email, publication on the
Supreme Court of Appeal website and release to SAFLII. The date and time
for hand-down is deemed to be have been at 10h00 on 22 April 2022.
Summary:
Damages – breach of profit share agreement and lease
agreements – claim for payment of utilities and bond charges erroneously
debited in appellant’s loan account and damages – tacit term of fiduciary
duties – liability in terms of s 218(2) read with s 76(2)(a) of the Companies
Act 71 of 2008 – and breach of common law fiduciary duty – s 218(2) of the
Companies Act 71 of 2008 and the common law fiduciary duty not pleaded.

ORDER

On appeal from: Gauteng Division of the High Court, Pretoria (Mngqibisa –
Thusi J, sitting as Court of first instance):
Case no: 802/2020
The appeal is upheld with costs including costs of senior counsel.
The judgment of the court a quo is set aside and replaced with the following
order:
2.1
‘Plaintiff’s claim 1 is dismissed with costs.
2.2
Defendant to pay the wasted costs of adjournment of 31 July 2017.
2.3
Defendant to pay the costs of the application to set aside the
subpoena duces tecum of the Plaintiff’s auditor.’
Case no: 813/2020
The appeal is dismissed with costs including costs of senior counsel.

JUDGMENT

Tsoka AJA (Saldulker, Mocumie and Mbatha JJA and Weiner AJA
concurring)

[1] There are two appeals before this court, SCA case no.813/2020 and SCA
case no. 802/2020. In the former case, Mr Suresh Chanderbhan Mirchandani (Mr
Mirchandani) is the appellant while in the latter case, Unica Iron & Steel (Pty)
(Ltd) (Unica) is the appellant. Both are the respondents in the respective cases. In

their respective appeals, they appeal against the judgment and orders granted by
the Gauteng Division of the High Court, Pretoria (the high court) on 3 March
2020, which orders were corrected by the high court on 4 September 2020. Both
appeals are with leave of the high court.

[2] The background facts in these matters are the following: in terms of a
written Profit Share Agreement (the profit agreement) concluded between Mr
Mirchandani and the respondent, Unica, on 21 May 2007, which profit agreement
was backdated to 4 December 2006, the former agreed to work for the latter as a
technical director on a profit sharing basis. In the agreement, it is recorded that
Mr Mirchandani will be a key person under whose leadership and guidance,
Unica will source, commission and run its plant in Babelegi, Hammanskraal,
successfully. The plant is hereafter referred to as Unica 1.

[3] It is common cause that pursuant to the profit agreement, Mr Mirchandani
sourced, commissioned and ran Unica’s plant successfully until his association
with Unica 1 was mutually terminated on 30 September 2010.

[4] Subsequent to the termination of his employment with Unica in 2010,
Unica was in the process of establishing a second plant to be known as Unica 2.
As Mr Mirchandani was unhappy in leaving Unica, he reported the company to
the Gauteng Department of Rural Development (GDRD). In the report, he alleged
that in establishing Unica 1, the directors deliberately breached the applicable
environmental laws, in particular, the provisions of the National Environmental
Management Act 107 of 1998 (NEMA), in that Unica 1 operated without ensuring
that the provisions of NEMA were duly complied with and that the operation of
the company would not endanger the environment.

[5] As a result of the complaint Mr Mirchandani laid against Unica with
GDRD, Unica was charged in terms of the Criminal Procedure Act 51 of 1977
(the CPA) for the contravention of the provisions of NEMA. In terms of s 105A
of the CPA, a Plea and Sentence Agreement (the plea agreement) was concluded
between Unica and GDRD in terms of which the former was fined a R5 million
penalty, half of which was suspended, plus R3 million in respect of the
rehabilitation of the environment.

[6] It is Unica’s contention that the profit agreement concluded between it and
Mr Mirchandani in 2006 was that the parties, in concluding the agreement
explicitly, alternatively tacitly, further alternatively, impliedly agreed that Mr
Mirchandani, as technical director and the responsible person for ensuring the
commissioning of Unica 1, would ensure that Unica complied with the provisions
of NEMA. He, however, failed to do so. His failure, so the contentions went, were
in breach of the profit agreement.

[7] The contentions that Mr Mirchandani, as the technical director of Unica
breached the terms of the profit agreement are unfounded. Firstly, the profit
agreement does not expressly state that compliance with the provisions of NEMA
was indeed a term of the agreement. Secondly, on the evidence of the other co-
directors, Mr Irshad Ul Haq (Mr Ul Haq) and Mr Mohammed Asif Qasim (Mr
Qasim), compliance with the provisions of NEMA could not have been a tacit
term of the profit agreement, as according to them, they were unaware of the
applicability of the provisions of NEMA when the profit agreement was
concluded between the parties. The inevitable conclusion is that the profit
agreement could therefore not have been entered into in contemplation of the
provisions of that Act. On the contrary, it is Mr Mirchandani’s evidence that the
provisions of NEMA were not complied with as a result of a deliberate and

conscious decision of the board of directors of Unica not to comply with the
provisions of the Act, as to do so, would delay the coming into operation of the
plant for a period of 18-24 months, which delay the company could ill-afford as
the company was eager to commence its operations and start generating income.

[8] Mr Mirchandani’s evidence that the provisions of NEMA were deliberately
not complied with is more probable than the denial of both Mr Ul Haq and Mr
Qasim. Mr Mirchandani’s testimony is corroborated by the following: (a) while
Mr Mirchandani was outside the country and unavailable, the other two co-
directors, namely, Mr Ul Haq and Mr Qasim completed an Industrial
Development Corporation (IDC) application to raise funds for the operation of
the plant. Amongst the requirements that the IDC required to be fulfilled before
funding could be provided, was compliance with the provisions of any
environmental legislation, such as NEMA. Both Mr Ul Haq and Mr Qasim’s
signatures were appended to the said application. Their statement that they were
not aware and not involved, while they had to comply with the requirements of
the IDC to obtain financial assistance, is improbable; (b) it is common cause that
for the successful operation of the plant, the plant required electricity. When
Eskom was approached to supply the company with electricity, it expressly
demanded that the company be compliant with any applicable environmental
legislation. The directors, without demur, stated that the company was indeed
compliant, hence Eskom agreed to supply the company with electricity; and (c)
when Eskom’s senior personnel met with the directors subsequent to the
application for the supply of electricity, he was again assured that Unica 1 was
indeed compliant with any applicable environmental legislation.

[9] To show that Mr Ul Haq and Mr Qasim’s version, with regard to NEMA,
is improbable, is further corroborated by the terms of the plea agreement reached
with the GDRD when the company was criminally charged for contravening the

provisions of NEMA. The entire plea agreement, including the mitigating
circumstances spelled out therein, does not suggest that the company operated as
it did because it was misled by Mr Mirchandani. That the allocation of blame to
Mr Mirchandani, is an afterthought, because the relationship between the
directors of Unica became toxic, appears more probable than that the non-
compliance was solely due to Mr Mirchandani alleged breach of his fiduciary
duties to Unica.

[10] The inevitable conclusion reached is that the three directors, with their eyes
open, took a conscious decision not to comply with the provisions of NEMA. In
these circumstances, it is inexplicable why the one director should take the blame
while the other two are absolved. In the circumstances of this matter, non-
compliance with the provisions of NEMA must surely be shouldered by Unica
and its three directors.

[11] Mr Mirchandani’s testimony that the company knowingly contravened the
provisions of NEMA on the basis that, should the authorities become aware of
the contravention of the provisions of the Act, refuge could be sought by reliance
on s 24G of NEMA ie rectification, cannot therefore be faulted. In terms of the
provisions of this section, a non-compliant company may apply for condonation,
on pain of paying a penalty and remedial damages to the GDRD, for the late
compliance with the provisions of the NEMA. This, in the result, is what Unica
did. It is therefore incorrect for Unica to accuse Mr Mirchandani of being
untruthful in the high court when he testified that there was non-compliance with
the provisions of NEMA because in 2006, s 24G of NEMA had not yet been
promulgated and was therefore not applicable. Mr Mirchandani’s evidence
regarding rectification in terms of s 24G is correct, as it is supported by the
following: it is common cause that NEMA was amended on 14 July 2004 by s 3
of the National Environmental Management Act 8 of 2004. At the time of the trial

of this matter, and his testimony, in the high court, the provisions of s 24G of
NEMA were indeed applicable. In this Court, counsel for Unica readily conceded
that indeed when Mr Mirchandani testified, s 24G of NEMA was applicable with
the result that the process of rectification as testified to by Mr Mirchandani was
indeed available for Unica to utilize.

[12] Unica’s claim for damages, allegedly, on the basis of breach of fiduciary
duty in terms of the common law is also unfounded and untenable. The evidence
on record reveals no such breach. It is undisputed that Mr Mirchandani, as the
technical director of the company, complied diligently with the terms of the profit
agreement. And because of him being a diligent technical director, at the time of
termination of his relationship with Unica, the plant was, as a matter of fact,
operational and profitable. During his tenure as the technical director of the
company, he pursued the interests of the company rather than his own. This being
the case, there cannot be any suggestions that while being the technical director,
he breached his fiduciary duties as alleged or at all.

[13] It is worth restating what breach of fiduciary entails. In Master of the High
Court Western Cape Division, Cape Town v Van Zyl1 the court stated:
‘Breach of fiduciary duty entails something materially different from the negligent discharge
of his or her functions by a person in a fiduciary position. Millett LJ (as he then was) stressed
this action in Briston and West Building Society v Mothew (t/a Stapley & Co) [1998]1 Ch
1[1996]4 All ER 698(CA) at p.712 [All ER], noting that “The Various obligations of a fiduciary
merely reflect different aspects of his core duties of loyalty and fidelity. Breach of fiduciary
obligation, therefore, connotes disloyalty or infidelity. Mere incompetence is not enough. A
servant who loyally does his incompetent best for his master is not unfaithful and is not guilty
of a breach of fiduciary duty”.’ (Emphasis added.)

1 Master of the High Court, Western Cape Division, Cape Town v Van Zyl [2019] JOL 41274 (WCC) para 108.

[14] In casu, at best for Unica, Mr Mirchandani was, at most, incompetent, if at
all. Like in Van Zyl, he may have done his ‘incompetent best’ to see to it that
Unica 1 was operational and profitable. It cannot therefore be said that he was
unfaithful and disloyal to Unica and thus breached his fiduciary duties to the
company.

[15] That Unica’s claim based on common law breach of fiduciary duty is
unfounded and is further supported by the testimony of Mr Ul Haq. In the court
a quo, he conceded that as the CEO, he knew that the company should have
complied with the by-laws. Surprisingly, he pleaded ignorance to the provisions
of NEMA, the national legislation and a constitutional imperative that guarantees
the safe environment for all. Furthermore, his denial that none of the directors,
but Mr Mirchandani, were aware of the applicability of the provisions of NEMA
is therefore improbable. This leads me to the alleged breach of s 218 read with
s 76(2)(a) of the Companies Act 71 of 2008 (the Companies Act).

[16] Unica’s reliance on the provisions of s 218 of the Companies Act, is
misplaced. It was neither pleaded, nor were the facts alluding to the applicability
of the provisions of the said section stated, to enable Mr Mirchandani to plead
thereto and to raise any defence that may have been available to him in terms of
s 77 of the same Act, such as prescription. The reliance on the provisions of s 218
of the Companies Act, is a non-starter. For the court a quo to base its reasoning
on the provisions of the section, which was not pleaded is, in my view, a
misdirection. The misdirection must be corrected.

[17] In Maake v Chemfit Finechemical (Pty) Ltd2 the Full Court, dealing with a
litigant who relied on the provisions of s 218, reasoned as follows: -

2 Maake v Chemfit Finechemical (Pty) Ltd [2018] ZALMPPHC 71 para 28.

‘Section 218 of the [Companies Act] provides a general remedy to any person who suffers loss
or damages as a result of contravention of the Act. However, it does not specify which
contravention the person may sue for. A creditor may sue a director of a company in his/her
personal, capacity for the loss or damage it has suffered as a result of that director(s) actions.
Since the section does not specify which actions may be regarded as contravention of the
[Companies Act], it follows that the creditor who sues must specify which contravention were
attributed to the director(s) and the exact losses or damages with sufficient particulars.
Sufficient facts should be pleaded to enable the director(s) to know which case they would
meet.’ (Emphasis added.)

[18] As pointed out above, Unica did not, in the court a quo plead sufficient
facts to enable Mr Mirchandani to know which case he had to meet. This failure
was not only prejudicial to Mr Mirchandani but breached the timeless rule of our
procedural law that a litigant, such as Unica, must plead sufficient facts to enable
its counterparty to know which case he/she has to meet. Not to do so, is extremely
prejudicial. So, was the case in the present matter.

[19] Unica’s reliance on Breetzke and Others NO v Alexander3, a decision of
this Court, in support of its argument that Mr Mirchandani breached his fiduciary
duties in terms of s 218 of the Companies Act, is thus misplaced. The facts in that
matter are distinguishable from the facts in the present matter. In that matter, a
trustee abused his position to further his own interests over the interests of the
trust, which he ought to have served. In the present matter, it is undisputed that
Mr Mirchandani served the interests of Unica rather than his own. In Breetzke
this Court, unequivocally, stated that ‘. . . The fiduciary must place the interests
of the other party to whom the duty is owed before their own. . .’.

[20] Thus, Unica has failed to prove that the term it relied on was express, tacit
or implied. In the present matter, there is neither suggestion nor evidence that Mr

3 Breetzke and Others NO v Alexander [2020] JOL 48345 (SCA) para36.

Mirchandani breached his fiduciary duties to Unica in furtherance of his own
interests. To the contrary, as technical director, he breached the provisions of
NEMA, in furtherance of Unica’s interests and not for his own. For this breach
by Mr Mirchandani, Unica 1 became operational and profitable. That the alleged
breach of the fiduciary duties owed to Unica, in not complying with the
provisions of NEMA, was solely for the benefit of Unica and the plant and not
for his own, admits no doubt.

[21] In the result, the conclusion reached is that Unica’s claim for damages
against Mr Mirchandani arising out a breach of fiduciary duties must fail.
Accordingly, the appeal must succeed.

[22] With regard to the accounting action relating to the rental charges and bond
repayments raised against his loan account in Unica, Mr Mirchandani testified
that the parties agreed to buy a house for him to live in it with his family. At the
beginning, the parties agreed that Mr Mirchandani would service the bond used
to acquire the house. But this did not meet the approval of Mr Qasim’s father who
suggested that Mr Mirchandani should rather rent the house until the purchased
house was transferred into his name.

[23] It was on this basis that the two lease agreements were concluded. On
expiry of the first lease agreement, which was for a period of three years, a second
lease agreement, also for a three-year period, was concluded. The parties to the
lease agreements agreed that Mr Mirchandani would pay rental while the charges
for utilities such as water, electricity and taxes, probably rates and taxes, would
be for the lessor’s account. That is to say, the utilities were to be paid by Unica
and not by Mr Mirchandani.

[24] Contrary to the agreements concluded, Mr Mirchandani’s loan account in
Unica, was, however, debited with the bond repayments instead of the rental
charges due and payable by him as well as the charges relating to water, electricity
and taxes, which in terms of the lease agreements, as pointed above, were to be
for the lessor’s account. This resulted in Mr Mirchandani’s loan account being
debited with bond charges which were higher instead of the rental amounts which
were lower. The net effect was that Mr Mirchandani’s share profit was adversely
affected. This was the amount which Mr Mirchandani instituted an action for and
succeeded in the high court.

[25] In addition, Mr Mirchandani claimed for his director’s salary as well as
wastages, which according to him, were agreed to be capped at 5% to maximise
the profitability of Unica 1. This, in turn would inevitably have no material effect
on his 17% share profit in terms of the profit agreement concluded with Unica.

[26] Unica’s contention that the issue of salaries and wastages were not resolved
at the meeting of the directors on 15 April 2010 is not supported by the evidence
on record. It is both Mr Mirchandani and Mr Qasim’s evidence that the issue of
wastages was resolved in that meeting of 15 April 2010. At page 932 of the
record, Mr Qasim confirmed the said agreement in the following terms ‘M-lady
this wastage allowance was discussed in this meeting on 15 April 2010…it was
myself, I took the initiative and I requested my other co-director that can we now
allow this thing for 5%, and was agreed’. (Emphasis added.)

[27] For Unica to turn around and contend that the issue of wastages was not
agreed to, on the basis of the facts recited by this Court in an earlier dispute that
was resolved in 20164, is untenable. In that matter, this Court was required to

4 Unica Iron and Steel v Mirchandani [2015] ZASCA 150; 2016 (2) SA 307 (SCA).

determine whether a document signed by the parties constituted a valid
agreement. The fact that this Court then referred to the meeting of 15 April 2010
and stated that the issue of 5% was not resolved does not amount to res judicata.
The reference to that meeting and the issue of 5% is irrelevant and of no
consequence. This Court’s reference to that meeting and the 5% wastage was in
any event in passing, as the real issue to be determined was whether the document
signed by the parties constituted an agreement or not. It was an obiter statement,
which does not affect the issues in the present case. Mr Ul Haq’s statement that
the issue of wastages was not agreed to, on the basis of the previous court
decision, cannot therefore be upheld. In any event, should he not have agreed to
this, the other two co-directors, who were in the majority, agreed on the 5%
wastages. The agreement is therefore binding on him. The agreement of
Mr Mirchandani and Mr Qasim is thus the decision of Unica. His dissatisfaction
in this regard is irrelevant and of no consequence.

[28] In the pre-trial minutes, the parties agreed on the quantum of damages due
to Mr Mirchandani with regard to his accounting claims. It was on this basis that
the high court, after finding in favour of Mr Mirchandani, ordered that the agreed
amount be paid to him.

[29] In the high court and in this Court, Unica submitted that the lease
agreements were a sham and that no legal consequences should flow therefrom.
Furthermore, it contended that the lease agreements were concluded solely to
enable Mr Mirchandani to comply with the FICA requirements. The onus to
prove these allegations rested on Unica.

[30] In the main, Unica, in attempting to discharge its burden of proof, and in
substantiation that the lease agreements were a sham, contended that the lease

agreements referred to two addresses, which were different to the property in
which Mr Mirchandani resided.

[31] Unica’s contention in this regard is far from the truth. It is undisputed that
the property purchased by Mr Qasim is 30 Blesbuck Avenue, Eldo Manor,
Centurion. The two lease agreements concluded between the parties, described
the house to be rented as ‘No 30 Blesbuck Avenue, Eldo Manor Centurion’. That
this was the house acquired by Mr Qasim for Mr Mirchandani to live in, and to
which the two lease agreements relate, is more than clear. For Unica to contend
that the house being rented, as described on page 2 of the lease agreements, being
8 Jackal Street, Eldo Manor, Centurion, is nothing but disingenuous. It is common
cause that the house purchased by Mr Qasim and rented to Mr Mirchandani was
30 Blesbuck Avenue, Eldo Manor, Centurion and not 8 Jackal Street.

[32] The sensible interpretation of the lease agreements, on the authority of this
Court, in Natal Joint Municipal Pension Fund v Endumeni Municipality5, is that
the house rented to Mr Mirchandani, to which he would ultimately acquire, was
30 Blesbuck Avenue, Eldo Manor, Centurion and not 8 Jackal Street. It appears
to me that the description of the house let as 8 Jackal Street, Eldo Manor,
Centurion, is nothing but a common error, which could easily have been rectified.

[33] The contention that the lease agreements were concluded for the purposes
of FICA also appears to be untrue, or at least, improbable. If the agreements were
indeed concluded for the purposes of FICA, on Unica’s evidence, which of the
two houses was to be regarded as by the authorities as Mr Mirchandani’s proof
of residence? Why then, if the agreements were solely for FICA purposes,
backdate them? If the agreements were a sham and were concluded for the

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

purposes of FICA, there is no logical basis for them to have been backdated. It is
undisputed that the house purchased for Mr Mirchandani, which was rented to
him pending transfer into his name, and which house was for the purposes of
FICA to be regarded by the authorities as his residence, was 30 Blesbuck Street
and not number 8 Jackal Street. Unica’s contention that the lease agreements were
a sham and were not to be relied on is nothing else but a diversion. The lease
agreements were therefore correctly found by the court a quo to be legal and
binding.

[34] In this Court, Unica argued that the rental amount for the second year being
less than the first and third year is further proof that the agreements were a sham.
Again, this contention is also untenable. There is a myriad of reasons why the
parties agreed to the renewal amount as they did. It is therefore not for this Court
to second-guess the reason why the parties concluded the lease agreements as
they did. It is impermissible for this Court to interpret the lease agreements on the
basis as to what is reasonable, as to do so, the Court would be making the
agreements for the parties. See Endumeni referred to above.

[35] The conclusion reached is that Unica failed to discharge its onus of proof
regarding the accounting claims. In the result, the appeal on the accounting issue
must fail.

[36] The following order is made:
Case no: 802/2020
The appeal is upheld with costs including costs of senior counsel.
The judgment of the court a quo is set aside and replaced with the following
order:
2.1
‘Plaintiff’s claim 1 is dismissed with costs.
2.2
Defendant to pay the wasted costs of adjournment of 31 July 2017.

2.3
Defendant to pay the costs of the application to set aside the subpoena
duces tecum of the Plaintiff’s auditor.’
Case no: 813/2020
The appeal is dismissed with costs including costs of senior counsel.

________________________
M TSOKA
ACTING JUDGE OF APPEAL

Appearances:

Case no: 802/2020
For appellant:

B Stoop SC
Instructed by:

Hajibey-Bhyat Inc, Johannesburg
Van
der
Merwe
&
Sorour
Attorneys, Bloemfontein

For respondent:

OA Moosa SC
Instructed by:

Pather and Pather Inc, Durban
Claude Reid, Bloemfontein.

Case no: 813/2020
For appellant:

OA Moosa SC
Instructed by:

Pather and Pather Inc, Durban
Claude Reid, Bloemfontein.

For respondent:

B Stoop SC
Instructed by:

Hajibey-Bhyat Inc, Johannesburg
Van der Merwe & Sorour
Attorneys, 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:

22 APRIL 2022
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
Mirchandani v Unica Iron & Steel (Pty) Ltd and Unica Iron & Steel (Pty) Ltd v Mirchandani (Case no
802/2020 & 813/2020) [2022] ZASCA 58 (22 April 2022)
Today the Supreme Court of Appeal (SCA) handed down judgment on two appeals, namely SCA case
no 802/2020 and SCA case no 813/2020. In the former case, it upheld, with costs including the costs
of senior counsel the decision of the Gauteng Division of the High Court of South Africa, Pretoria (the
high court). In the latter case, it dismissed, with costs including costs of senior counsel the appeal
against the decision of the same court.
The facts in SCA case no 802/2020, Mirchandani v Unica Iron & Steel (Pty) Ltd were as follows: in
terms of a written Profit Share Agreement (the profit agreement) concluded between Mr Suresh
Chanderbhan Mirchandani (Mr Mirchandani) and the respondent, Unica Iron & Steel (Pty) Ltd (Unica),
on 21 May 2007, which profit agreement was backdated to 4 December 2006, the former agreed to
work for the latter as a technical director on a profit sharing basis. In the agreement, it was recorded
that Mr Mirchandani will be a key person under whose leadership and guidance, Unica would source,
commission and run its plant (Unica 1) in Babelegi, Hammanskraal, successfully. It was common cause
that pursuant to the profit agreement, Mr Mirchandani sourced, commissioned and ran Unica’s plant
successfully until his association with Unica 1 was mutually terminated on 30 September 2010. Mr
Mirchandani upon leaving Unica, reported the company to the Gauteng Department of Rural
Development (GDRD). In the report, he alleged that in establishing Unica 1, the directors deliberately
breached the applicable environmental laws, in particular, the provisions of the National Environmental
Management Act 107 of 1998 (NEMA), in that Unica 1 operated without ensuring that the provisions of
NEMA were duly complied with and that the operation of the company would not endanger the
environment. As a result of the complaint that Mr Mirchandani laid against Unica with the GDRD, Unica
was charged in terms of the Criminal Procedure Act 51 of 1977 (the CPA) for the contravention of the
provisions of NEMA. In terms of s 105A of the CPA, a Plea and Sentence Agreement (the plea
agreement) was concluded between Unica and the GDRD in terms of which the former was fined a R5
million penalty, half of which was suspended, plus R3 million in respect of the rehabilitation of the
environment.
Unica argued that the profit agreement concluded between it and Mr Mirchandani in 2006 was that the
parties, agreed that Mr Mirchandani, as the technical director and the responsible person for ensuring
the commissioning of Unica 1, would ensure that Unica complied with the provisions of NEMA. He,
however, failed to do so. His failure, so the argument went, was in breach of the profit agreement. The
co-directors of Unica, namely Mr Irshad Ul Haq (Mr Ul Haq) and Mr Mohammed Asif Qasim (Mr Qasim)
then gave a contradictory testimony and said that they were unaware of the applicability of the
provisions of NEMA when the profit agreement was concluded between the parties. The appellant (Mr
Mirchandani) on the other hand contended that the provisions of NEMA were not complied with as a
result of a deliberate and conscious decision of the board of directors of Unica not to comply with the
provisions of the Act, as to do so, would delay the coming into operation of the plant for a period of 18-
24 months, which delay the company could ill-afford as the company was eager to commence its

operations and start generating income. The SCA held that, Mr Mirchandani’s evidence that the
provisions of NEMA were deliberately not complied with was more probable than the contradictory
denial of both Mr Ul Haq and Mr Qasim. According to the Court, the inevitable conclusion reached was
that the three directors, with their eyes open, took a conscious decision not to comply with the provisions
of NEMA. In these circumstances, it was inexplicable why one director should take the blame while the
other two were absolved. In the circumstances of that matter, non-compliance with the provisions of
NEMA should have been shouldered by Unica and its three directors. Unica further claimed for
damages on the basis of breach of fiduciary duty in terms of the common law. The SCA held that this
claim was also unfounded and untenable. Reasoning that the evidence on record revealed no such
breach. It further held that it was undisputed that Mr Mirchandani, as the technical director of the
company, complied diligently with the terms of the profit agreement. And because of him being a diligent
technical director, at the time of termination of his relationship with Unica, the plant was operational and
profitable. During his tenure as the technical director of the company, he pursued the interests of the
company rather than his own. As a result, the appeal was upheld by the SCA.
In the SCA case no 813/2020, Unica Iron & Steel (Pty) Ltd v Mirchandani the central issue was the
accounting action relating to the rental charges and bond repayments raised against Mr Mirchandani’s
loan account in Unica. Mr Mirchandani testified that the parties agreed to buy a house for him to live in
it with his family. At the beginning, the parties agreed that Mr Mirchandani would service the bond used
to acquire the house. But this did not meet the approval of Mr Qasim’s father who suggested that Mr
Mirchandani should rather rent the house until the purchased house was transferred into his name. It
was on this basis that the two lease agreements were concluded. On expiry of the first lease agreement,
which was for a period of three years, a second lease agreement, also for a three-year period, was
concluded. The parties to the lease agreements agreed that Mr Mirchandani would pay rental while the
charges for utilities such as water, electricity and taxes would be for the lessor’s account. That was to
say the utilities were to be paid by Unica and not by Mr Mirchandani. Contrary to the agreements
concluded, Mr Mirchandani’s loan account in Unica, was, however, debited with the bond repayments
instead of the rental charges due and payable by him as well as the charges relating to water, electricity
and taxes, which in terms of the lease agreements, as pointed above, were to be for the lessor’s
account. That resulted in Mr Mirchandani’s loan account being debited with bond charges, which were
higher instead of the rental amounts which were lower. The net effect was that Mr Mirchandani’s share
profit was adversely affected. This was the amount which Mr Mirchandani instituted an action for and
succeeded in the high court. In addition, Mr Mirchandani claimed for his director’s salary as well as
wastages, which according to him, were agreed to be capped at 5% to maximise the profitability of
Unica 1. This, in turn would, inevitably have no material effect on his 17% share profit in terms of the
profit agreement concluded with Unica.
Unica contended that the issue of salaries and wastages was not resolved at the meeting of the directors
on 15 April 2010. The SCA disagreed with Unica’s contention and reasoned that in both Mr Mirchandani
and Mr Qasim’s evidence the issue of wastages was resolved in that meeting of 15 April 2010. It referred
to the record, where Mr Qasim confirmed the said agreement. The Court further stated that in the pre-
trial minutes, the parties agreed on the quantum of damages due to Mr Mirchandani with regard to his
accounting claims. It was on that basis that the high court, after finding in favour of Mr Mirchandani,
ordered that the agreed amount be paid to him. In the high court and in the SCA, Unica submitted that
the lease agreements were a sham and that no legal consequences should flow therefrom.
Furthermore, it contended that the lease agreements were concluded solely to enable Mr Mirchandani
to comply with the FICA requirements. The onus to prove these allegations rested on Unica. The SCA
held that Unica failed to discharge its onus of proof on both the accounting claims and that the lease
agreements were a sham, and as a result ordered that the appeal should fail.
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