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REPUBLIC OF SOUTH AFRICA

IN THE HIGH COURT OF SOUTH AFRICA

GAUTENG DIVISION, PRETORIA

 

Case No: 3494/2014

&

Case No: 85824/2014

3/3/2020

 

In the matter between:

 

Case number: 51538/2014

 

UNICA IRON & STEEL (PTY) LTD                                                                           Plaintiff

 

and

 

SURESH CHANDERBHAN MIRCHANDANI                                                           Respondent

 

 

AND

 

 

Case number: 3494/2014

 

In the matter between:

 

SURESH CHANDERBHAN MIRCHANDANI                                                           Plaintiff

 

and

 
UNICA IRON & STEEL (PTY) LTD                                                                           Respondent

JUDGMENT

MNGQIBISA-THUSI J

[1]       Under case number 34944/2014, the plaintiff, Mr Suresh Chanderbhan­ Mirchandani ("Mr Mirchandani") is claiming from the defendant. Unica Iron & Steel (Pty) Ltd ("Unica"), payment of an amount of R431 ,833.00 , being an alleged shortfall of his profit-share in Unica in accordance with the contract concluded by the parties on 4 December 2006 (the accounting action).

[2]       As part of the-accounting action, the parties agreed that Mr Mirchandani could also include a claim for payment of R117,300.00 with regard to utilities he paid for the house he stayed in after he Joined Unica , but before the house was transferred to him. A further claim was· with regard to the difference between the bond repayments he made before the house was transferred to him and the rental stipulated in an alleged lease agreement.

[3]       Unica has raised the issue of whether the Supreme Court of Appeal in Unica Iron & Steel (Pty) Ltd v Mirchandani 2016 (2) SA 307 {SCA) dealt with the enforceability of a document signed by the parties on 15 April 2010.

[4]       As correctly pointed out by Mr Stoop, counsel for Mr Mirchandani, the SCA judgment was concerned with the agreement concluded by !he parties on 28 September 2010 concerning the terms of a severance package given to Mr Mlrchandanl when his relationship with Unica ended and not with the 15 April 2010 agreement. Any mention of the document signed on 15 April 2010 was, in my view, only in passing. The issue of the binding effect of this agreement is still alive and relatespertinen1ly to Mr Mirchandani's claim under case number 34944/2014.

[5]       In turn, Unica brought a counterclaim against Mr Mirchandani for payment of an amount of R316, 000.00 for an overpayment made by Unica to him.

[6]        Unica has also instituted a claim under case number 85824/2014, in which It is seeking payment from Mr Mirchandani of two claims: R5, 5 million in respect of a fine it paid for non-compliance With the National Environmental Management Act 107 of 1998("NEMA") (claim 1); and R 2, 018, 072 . 00 , arising from damages allegedly suffered as a result of the non-operation of its steelmaking factory during the period 23 November 2013 to 3 January 2014 (claim 2), (the NEMA action).

[7]        The parties agreed that both actions should be heard together.

[8]        There was further agreement that with regard to the Accounting action, Mr Mirchandani bore the onus of proving his claims and that Unica bore the onus of proving its claims in the NEMA action.

 

Factual Background

[9]       Mr Mohammed Asif Cassim ("Mr Cassim") and Mr lrshadul UI Haq ("Mr UI Haq") established Unica ("Unfca 1") as a steel-making business in Babelegi, Brits. Mr Mr Abu Ul Haq and Mr Cassim's father ("Mr Cassim senior") are equity shareholders in Unica. Unica's business consisted of the acquisition of scrap metal which is melted in order to produce what is known as ingots or billets. These ingots or billets are either sold or taken through a milling process from which other products, for Instance, palisade fencing, are produced and sold.

[10]     On or about 4 December 2006, Mr Cassim and Mr UI Haq on behalf of Unica and Mr Mirchandani concluded a written profit sharing agreement which reads as follows:

1.        That Mr Suresh Mirchandani will be working as a technical director· on profit sharing basis. He will be a key person and under his leadership and guidance, Unica will -source, commission and run the plant successfully.

2.         Mr Mirchandani will be entitled for 17% of the profits of Unica defined herein· as follows:

3.         Profits will be calculated before tax after providing for depreciation and interest on Shareholders loans.

4.         Mr Suresh will be drawing a salary of R4000,0 00 per month which will be deducted from his profit share at the end of the year. If Unica does not achieve profits It will carry to the next years until Unica achieves sufficient profits of which 17% is equal or higher than the total drawings till that date.

5.         As Mr Suresh Is sharing profits in Unica and his association with Unica will be on long term basis and unrestricted'.

 

[11]     Mr Cassim and Mr UI Haq were Mr Mirchandani's co-directors at Unica as managing director and financial director, respectively.

[12]     On or about 30 September 2010 Mr Mirchandani's association with Unica ended.

[13]     Subsequent to Mr Mirchandani cutting links with Unica, a second Unica plant ("Unica 2”) was established where an operation of manufacturing of 20ingots/billets was established. At the time the Unica 1 plant only operated as a rolling mill.

[14]       On or about 20 March 2014, Unica entered into a plea and sentence agreement with the Gauteng Department of Agriculture and Rural Development (“GOARD") and a fine of R5, 5 million was imposed for non-compliance with environmental legislation at its Unica 1 plant. Of this amount R2, 5 million was suspended for five years.

[15]       I do not intend dealing with the evidence presented during the trial in detail. However, all evidence presented has been considered.

 

The accounting Action

[16]       There is no dispute with regard to Unica's counter-claim for the overpayment made to Mr Mirchandani. The remaining issues to be decided is whether a lease agreement had been entered Into between Mr Mirchandani and Unica with regard to the house bought and initially registered under the name of Mr Cassim, which house Mr Mirchandani occupied when he joined Unica and which was ultimately transferred into his name. In the event it is found that a lease agreement was concluded between the parties, whether Un1ca was responsible for paying for Mr Mirchandan'is electricity, rates and taxes and municipal services during the lease period. Further, it needs to be determined whether a binding agreement was concluded by the parties on 15 April 2015 in which the percentage of wastage was supposed to be deducted from Unica's director's profit share.

[17]       The parties agreed that in the event that Mr Mirchandani succeeds in his claim in the accounting action with regard to the salary issue, the agreed amount of overpayment by Unica would be set-off from the amount· due to Mr Mirchandani.

[18]     Mr Mirchandani relies on a profit share agreement dated 4 December 2006 (as alluded to 1n paragraph 7 above) read with an alleged agreement reached at a directors' meeting on 15 April 2010. Unica concedes that such an agreement was reached. However, it contends that the lease agreement signed was not signed with an intention of giving it binding effect but merely to assist Mr Mirchandani in fulfilling the requirements of the Financial intelligence Centre Act 38 of 2001 (“FICA”).

[19]       Mr Mirchandani's evidence is as follows. After Unica and Mr Mirchandani signed the profit sharing agreement in 2006 and the relationship between Mr Mirchandani , Mr Cassim and Mr UI Haq had cemented, it became necessary for Mr Mirchandani to find permanent accommodation where he would live with his family. He and Mr Cassim looked for a house, initially to rent but later it was decided to buy. As Unica and Mr Mirchandani did not qualify for a bond, it was decided for the house to be registered in Mr Cassim's name. However. ii was agreed that Unica would pay the bond instalments until such time that Unica started making a profit, at which stage Mr Mirchandani would take over the bond repayments. The bond repayments were debited to Mr Mirchandani's loan account It was also agreed that when Mr Mirchandani started paying the bond instalments, the house would be transferred into his name.

[20]       Six or seven months into this arrangement, Mr Cassim informed Mr Mirchandani that his father (Mr Cassim senior) was not happy with the arrangement made with regard to the bond repayments and preferred that Mr Mirchandani should also sign a lease agreement until such time he was able to pay the bond instalments. As a result and on 26 November 2006, Mr Casslm made Mr Mirchandani signed a written lease agreement which provided in part that:

 

“16.2    It would be for -a period of three years;

16.3      The monthly rental would be R7. 000.00 for the period 1 December 2006 to 30 November 2007 , R7, 560.00 per month for the period 1 December 2006 to 30 November 2007 and for the period 1 December 2007 to 30 November 2008 the monthly rental would be R8, 165.00 .

16.4      Water, electricity and taxes would be for the lessor's account"

 

[21]     This lease agreement was signed by all directors of Unica.

[22]     When the period of the first lease agreement expired on 30 November 2009, a second lease agreement was signed, also for a duration of three years (1 December 2009 to 30 November 2012) and on the same terms except that the amount of the monthly rental was different. The second lease agreement was signed by Mr Mirchandani and Mr Cassim.

[23]     Despite the above agreements, Mr Mirchandani’s loan account continued to be debited with the total of the bond repayments covering the periods of the two lease agreements instead of the monthly rentals. Instead of his account being debited with the amount of R351, 300.00 (being the total amount for rent), Mr Mirchandani's account was debited with an amount of R540, 546.90, being the total amount of the bond repayments for the equivalent period.

[24]       It is Mr Mirchandani's contention that his loan account was not supposed to be debited with the amount· of the monthly bond repayments but should have been debited with the monthly rental payments for the period of the two lease agreements. The total amount Mr Mirchandani is claiming in this regard is R117 , 300 .00 .

[25]       With regard to the inclusion of the directors' salaries in the income statement, Mr Mirchandani testified that he had complained to the other directors that the percentage allowed for wastage could be manipulated in order to reduce the profitability of Unica, which would In tum reduce his share in the profits of the company. This culminated in a meeting of directors held on 15 April 2010. From the minutes of that meeting, prepared by Mr Mirchandani, it appears that what he recorded accords with his claim. In his evidence Mr Cassim conceded that Mr Mirchandani's record of the meeting was correct that the percentage of wastage would be capped at 5% , However, Mr UI Haq vehemently denied such an agreement was concluded-and asserted that a percentage of wastage at 5% was not viable. Mr UI Haq alleged that as the meeting progressed after agreement had been reached on the issue of the directors salaries and wastage, things soured and it became tense-as they could not agree on certain issues to the extent that Mr Cassim abruptly left the meeting.

[26]       Mr Mlrchandani further testified that another meeting was held on 28 September 2010 at which disputes between the directors were discussed and a severance package was agreed upon. He was thereafter served with a retrenchment notice on the basis that his services were no longer required as Unica had other people qualified to do his job at less cost to the company. The dispute relating to the agreement reached during the 28 September 2010 was finally determined in Mr Mirchandani's favour by the Supreme Court of Appeal.

[27]     Mr Cassim testifying on behalf of Unica admitted that the two lease agreements were concluded with Mr Mirchandani and on the terms as alleged. However, Mr Cassim· testified that the lease agreements were concluded, not for the purpose of having binding effect but in order to assist Mr Mirchandani with complying with the requirements of the FICA in obtaining electricity, a cell phone subscription, etc. Mr Cassim denied that there was agreement that Unica would pay for Mr Mlrchandani's electricity, rates and taxes and municipal services accounts when he was the user of those utilities.

[28]       Regarding the meeting of 15 April 2010, Mr UI Haq admitted that there was agreement with regard to the salaries and wastage issues. However, Mr UI Haq testified that in view of the disputes which arose with regard to Mr Mirchandani's moonlighting, the meeting disintegrated and Mr Cassim walked out. In his opinion the events of that meeting brought their relationship with Mr Mirchandani to an end to the extent that he and Mr Cassim decided to consult with lawyers to find a way to end Mr Mirchandani's relationship with Unica. Mr UI Haq testified that in light of the termination of their relationship, he believed that any agreement(s) reached at that meeting could not be effected.

[29]       Mr Cassim and Mr UI Haq further testified that In view of the fact that Mr Mirchandani had always paid for his utilities, he did not see any reason why Unica should reimburse him as he was enjoying the utilities.

[30]     In argument Mr Mirchandani's Counsel argued that in view of the fact that , with regard to the calculation of wastage, Mr. Cassim had corroborated the version of Mr Mirchandani on the agreements reached at the 15 April 2010 meeting, Mr UI Haq’s denial that such an agreement was not binding in view of the unhappy ending of the meeting is baseless. Counsel argued that on a balance of probabilities, and in view of the honesty with which Mr Mirchandani testified, his version on the agreement with regard to the calculation of the directors' salaries.

[31]     On behalf of, Unica, it was argued that Mr Mirchandani was not a credible witness and only made the claim with regard to land against the bond repayments debited to his loan account on account of his monetary greed. Counsel argued that it does not make sense for Unica to pay for services it did not enjoy.

[32]     The versions of Mr Mirchandani and Unica with regard to the issues ·relating to the accounting action are mutually destructive. In Stellenbosch Farmers' Winery Group Ltd and Another v Martell et Cie and Others 2003 (1) SA 11 (SCA), the court stated that:

 

"[5]      ... The technique generally employed by the courts in resolving factual disputes of this nature may conveniently be summarised as follows. To come to a conclusion on the disputed issues a court must make findings on (a) the credibility of various factual witnesses;(b) their reliability and (c) the probabilities. As to (a), the court's finding on the credibility of a particular witness will depend on its impression about the veracity of the witness. That in tum will depends on a variety of subsidiary factors, not necessarily in order of importance, such as (i) the witness's candour and demeanour in the witness-box, (ii) his bias, latent and blatant, (iii) internal contradictions in his evidence, (iv) external contradictions with what was pleaded or put on his behalf, or with established fact with his own extra curial statements or actions, (v) the probability or improbability of particular aspects of his version, (vi) the calibre and cogency of his performance compared to that of other witnesses testifying about the same incident or events. As to (b). a witness's reliability will depend, apart from the factors mentioned under (a) (ii), (iv) and (v) above, on (i) the opportunities he had to experience or observe the event in question and (ii) the quality. Integrity and Independence of his recall thereof. As to (c), this necessitates an analysis and evaluation of the probability or the improbability of each party's version on each of the disputed issues. In the light of its assessment of (a) (b) and (c) the court will t hen, as a final step, determine whether the party burdened with the onus of proof has Succeeded in discharging it. The hard case. which will doubtless be the rare one, occurs when a court's credibility findings compel it in one direction and its evaluation of the general probabilities in another The more convincing the former; the less convincing the latter. But when all factors are equipoised probabilities prevail[1]."

 

[33]     I find Mr Mirchandani's evidence with regard to the lease agreement to be clear and logical. On probabilities, I am of the view that Mr Mlrchandani’s version about the binding effect of the lease agreement to be believable. Further, it is clear that the agreement was binding due to the fact that all the parties signed the initial agreement and subsequent thereto, a similar agreement was signed in 2009 after the initial lease period expired. There is no explanation as to why the lease agreement would provide that the lessor so would be responsible for the payment of the utilities. From the tenor of the evidence of Mr Mirchandani, Mr Cassim and Mr UI Haq, it appears that Mr Cassim and Mr UI Haq were eager for the establishment of the steelmaking plant and for it to start making profits. This need would have precipitated Mr Cassim and Mr UI Haq's desire to keep the services of Mr Mirchandani. Mr Mirchandani had to pay full attention to Unica in order for it to become profitable, hence provision was made for his accommodation. It Is not in dispute that the lease agreement was concluded and therefore that its terms are binding.

[34]     With regard to the calculation of the directors' salaries, Mr Cassim corroborated Mr Mirchandani's evidence on the agreement reached. Mr UI Haq's explanation that because disagreements arose does not vitiate the fact that an agreement was concluded on this Issue.

[35]       I am therefore of the view that Mr Mirchandani has succeeded on a balance of probabilities in proving his claims in the accounting action.

 

The NEMA action

[36]     It was agreed that in the NEMA claim the only issue to be decided was liability. In the event of a finding that Mr Mirchandani was liable, the issue of quantum would be determined at later stage.

[37]       With regard to the NEMA action , Unica contends that Mr Mirchandani is liable to pay Its damages for having failed to discharge his obligations to Unica by failing to obtain timeous environmental approval for Unica to operate its steel melting and rolling plant, resulting in the fine of R5, 5 million being Imposed on Unica and loss of profits occasioned by Unica after having to sell steel billets at a reduced profit margin and having to shutdown its operations while complying with the notice issued by GOARD.

[38]     In his plea Mr Mirchandani alleged that Unlca's directors knew or reasonably ought to have known that Unica's operations may contravene environmental legislation.

[39]     Inthis regard Mr Cassim's evidence In brief is as follows. Around April 2006 he was introduced to Mr Mirchandani who was said was to be an e pert in steelmak1ng and had vast experience in the steel industry in India and other parts of Africa, Mr Mirchandani was requested by Mr Cassim and Mr UI Haq to prepare a business and feasibility plan to determine whether a steel making business would be viable. After the Unica plant was erected and commissioned, production started in April 2008. Mr Cassim denied that the three directors had at any stage discussed issues pertaining to environmental legislation in relation to the steel factory. According to Mr Cassim he for the first time got knowledge about environmental issues pertaining to a steel making factory in November 2011 when they were busy with building works for Unica 2. It was at that stage that they found out that they needed environmental authorisation for the new plant and that they were in contravention of the law with regard to the Unica 1 plant. Arrangements were made to meet with a consultant for advice on compliance with environmental legislation. They were advised to apply to the GOARD for a section 24G rectification with regard to operating Unica 1 without authorisation.

[40]     Mr Cassim testified that in compliance with NEMA public meetings were held where objections and comments from the public were received. It was at these meeting that an objection was receive from Mr Mirchandani against them being granted rectification. Mr Mirchandani alleged that promoters in the steel Industry have a long history of intentionally contravening the NEMA Act and that Unica intentionally did not apply for an environmental authorization as it had invested inadequately. Mr Cassim further testifed that Mr Mirchandani had disclosed the fact that Unica was using coal tar fuel to heat up the billets/ingots even though it was Mr Mirchandani's suggestion to use of coal tar fuel. In his objection Mr Mirchandani further requested that production at Unica be stopped and its equipment seized In line With the compliance notice issued on 18 June 2013. Further that Mr Mirchandani had advocated for an expedited prosecution of Unica and its promoters.

[41]     Mr Cassim testified that it was Mr Mirchandani who complained to the GOARD about Unica's non-compliance With environmental legislation which led to the Department investigating Unica and issuing a non-compliance notice after Unica's request for a variation and suspension of the compliance notice was rejected by the Department and the relevant MEC. As a result of the compliance notice, Unica had to shut down its operations during the period 23 November to 3 January 2014, in order to remedy the issues raised by the Department.

[42]     Mr Casslm testified that Unica was charged with non-compliance with environmental legislation and entered into a plea and sentence agreement in terms of the agreement. Unica was given a fine of R5, 5 million, R2, 5 million of which was suspended for five years on condition Unica is not convicted of the same offence. Unica paid R2, 5 million fine within the stipulated 8 months period. Mr Cassim testified as follows with regard to the balance of R3 million of Unica's claim, Unica was also fined an amount of R3 million as a remedial measure in terms of s 34(3) (b) of NEMA, payable in 10 months instalments. Unica paid this amount over a period of 20 months. Mr Cassim testified that the amount of R3 million was paid over and above the improvements Unica had to do implement and thereafter Unica obtained the necessary authorisation from the Department.

[43]     Mr Cassim further testified that they learned that the investigation by the Department was as a result of a complaint lodged by Mr Mirchandani that Unica was not complying with environmental legislation at its steel-making plant. Further that Mr Mlrchandani also complained to the Provincial Department of Water and Sanitation, the Department of Trad and Industry which had provided Unica with incentives for its start-up and to the Industrial Development Corporation ("the IDC") which had granted Unica a loan. He testified further that Mr Mirchandani had also urged the lDC to recall Its loans as Unica was operating without authorisation.

[44]     According to Mr Cassim, had he and Mr UI Haq been appraised of the need to comply with environmental legislation, they wold have complied, hence once they were made aware, Unica was shut down for a period In order to comply.

[45]     During cross examination Mr Cassim denied that as part of his functions he had to ensure that there was a sufficient supply of electricity to the plant. According to Mr Cassim, that was the task of Mr Mirchandani Mr Cassim testified that Mr Mirchandani was responsible for dealing with Eskom and that he only dealt with it during the period Mr Mirchandani had gone to India to source machinery. Although Mr Cassim admitted signing off on a quotation from Eskom, he alleged that he signed it without reading the whole document except the parts dealing with finance. He alleged that he did not read the part dealing with Eskom's condition that environmental legislation must be complied with.

[46]     Mr Casslm denied that he had sought from Mr F Geyser ("Mr Geyser"), a consultant at Formenco, a way out of complying with NEMA. He further denied that the board of directors had agreed that-to go ahead with operations without environmental approval and that they would apply for rectification when discovered.

[47]     With regard to the breakdown of the relationship between Mr Mirchandani and the two other directors of Unica, Mr Cassim testified as follows. When the two other directors discovered that Mr Mirchandani. besides being a technical director of Unica, responsible for the daily operations of the plant, was Involved in other business ventures, they called a meeting to discuss this issue. The discussions included the adjustment of the directors' salaries and the issue of wastage. When the issue was discussed the meeting became heated to the extent that it ended in an acrimonious fashion. At that stage it was clear to him and Mr UI Haq that they could not continue doing business with Mr Mirchandani hence the following day Mr Cassim and Mr UI Haq decided, after consultation with their lawyers to issue Mr Mirchimdani with a section 186 of the Labour Relations Act notice.

[48]     Unica's financial director, Mr UI Haq also testified. His evidence, on the whole, corroborated the evidence of Mr Cassim with regard to the genesis of their relationship with Mr Mirchandani, the working relationship between the parties as directors except that Mr UI Haq testified that he was responsible for human resource issues. Further Mr UI Haq corroborated the evidence of Mr Cassim with regard to the fact that there was never any discussions between the parties with regard to environmental legislation requirements and specifically denied that he was at-a meeting with the other two directors where Mr Cassim informed them that Mr Geyser had advised them that it would take a long time for environmental authorisation to be granted. He further denied that they had agreed as directors, with the knowledge that environmental approval was required, that they would start with operations without approval and would deal with the consequences when caught.

[49]       With regard to the use of coal tar fuel Mr UI Haq testified that at the beginning coal was used and later, because of the quality of coal they sometimes received, other options were considered and it was Mr Mirchandani who suggested that coal tar fuel should be used because In South Africa jobs were more important than the environment

[50]       Mr UI Haq denied that he had gone to India with Mr Mirchandani to familiarise himself with the production process of a steel plant. He testified that the reason for the trip to India was to sort out visa challenges. some of their technical staff were experiencing.

[51]       Unica also called Mr Johannes Wagner Jurgens, an architect, and Mr Edmund Jenkins. a civil engineer who testified that they were involved in one way or another with the construction of Unica 2.

[52]       With regard to the NEMA action, Mr Mirchandani's evidence1s as follows. He met Mr UI Haq in Mpumalanga in 2005/2006 whilst doing a due diligence exercise for certain two entitles. During their meeting they discussed the possibility of setting up a steel-making factory. He met Mr Cassim sometime in 2006 together with Mr UI Haq in Pretoria. Subsequently he was requested to commission a steel-making plant, run it and produce a product which Is acceptable to the market. Mr Mirchandani testified that although he was the technical director, with Mr Cassim the managing director and Mr UI Haq the financial director, in practice there were no defined responsibilities. However, Mr Mirctiandani changed his evidence and said only his duties which were defined.

[53]     Throughout his evidence Mr Mlrchandani admitted that he had extensive experience in the manufacture and marketing of iron and steel in India and was aware of the fact that in both India and South Africa environmental legislation had to be complied with. With regard to Unica not having complied with such legislation, he testified that after Mr Geyser had informed Mr Cassim of the need to comply with environmental legislation, the Unica board had decided to go ahead with operations despite Unica's non-compliance with the legislation. Pressed on the issue of Mr Geyser’s advice, Mr Mirchandani was incoherent in his responses. Mr Mirchandani conceded that operations could have proceeded parallel to an application in terms of s 24G being made. However, he could not explain why this was not done despite admitting that he was the key player at Unica and as a technical director. having the responsibility to making sure that the processes of Unica were properly done, including compliance with legislation. In his evidence he maintained that the whole board of directors was aware that environmental legislation had to be complied with and that all directors were responsible for non-compliance. Mr Mirchandani could not give an explanation about the furnace, essential with regard to dealing with pollution was not installed but found lying on the grounds of the plant even though he was responsible for the operations at the plant.

[54]     On the whole Mr Mirchandani admitted that he was aware from the beginning that Unica had to comply with environmental legislation for its steel-making factory. Mr Mirchandani further admitted that he was the one who complained to GOARD, the DTI, the IDC and to NUMSA about Unica's non-compliance with NEMA which led to Unica being Investigated, a compliance notice issued and Unica being charged and fined. Further under cross examination Mr Mirchandani admitted that he was a key role player with regard to !he operations of Unica 1, as ·set out in the 2006 agreement. With regard to the involvement of NUMSA, Mr M1rchandani conceded that he did inform NUMSA's then education officer, Mr Thulani Sydney Mfusi ("Mr Mfusi") about Unica's non­ compliance and the danger it posed to its members who were working for Unica.

[55]       Mr Mfuis, who was subpoenaed by Unica testified that Mr Mirchandani approached him and informed him that he was one of the directors at Unica. Mr Mirchandani further informed the union about Unica's non-compliance with environmental legislation, adding that the union could bring Unica 'to its knees'. He further testified that he learned that on 6 January 2014 Mr Mlrchandani had posted Unica's plea bargain agreement on WhatsApp and Viper.

[56]       In argument Mr Moosa, counsel for Unica submitted that Mr Mirchandani was a liar, a vindictive person whose actions against Unica was actuated by malicious intent to destroy Unica after their acrimonious separation, In this regard counsel referred to the objection Mr Mirchandani made in relation to L!nica's application for rectification, his complaints to GOARD, the DTI, the JDC and to the Water and sanitation department about Unica's non-compliance with NEMA well knowing that at the time of Unica's non-compliance he was also a Unica director and that his co-directors were not aware that Unica had to comply with environmental legislation for its Unlca1 plant.

[57]       Unica sues Mr Mirchandani for breach of contract on the bases of sections 281[2] read with s 76(2)[3] and s 77[4] of the Companies Act[5] ("the Act") and also on the common law for the loss it suffered when it had to pay the fine imposed by GOARD and the loss of profits suffered as a result of the closure of Unica In order to remedy Its non-compliance.

[58]     It isUnica's contention that Mr Mirchandani breached his contract in that, as the key person in the commissioning and operation of Unica 1, he was under a duty to inform his co-directors about the need to comply with environmental legislation. It Is further contended that his failure to do so resulted in Unica incurring loss as a result of paying the fine and losing on profits. Furthermore, it is Unica's contention that by failing to inform his co-directors leading to Unica's non-compliance, Mr Mirchandani was in breach of his fidu9iary duties to the company.

[59]     With regard to costs, counsel for Unica paid for costs on a punitive scale on the ground that, even though Mr Mirchandani was also a director of Unica at the time. It operated without approval, and even though he knew about the need to comply that neglected to either inform is called directors or make sure there was compliance, Mr Mirchandani was motivated by malice when he rep9rted Unica's non-compliance to authorities and to the union. In this regard, Unica called Mr Amarjit Singh Bachu ("Mr Bachu"), a director and equity shareholder at a company known as Das Steel as a witness to testify about Mr Mirchandani's dealings with Das Steel in order to show that his conduct at Unica was similar to how he dealt with Das Steel.

[60]     In brief Mr Bachu's evidence is as follows. Das steel had contracted Mr Mirchandani to set up a steel manufacturing plant on behalf of Das Steel in Cato Ridge, KZN. In terms of their agreement, Mr Mirchandani was offered a 24.9% interest in Das Steel and a salary of R50, 000.00 per month. Mer investing R2.6 million and long delays in securing environmental authorisation, a loan from the IDC and incentives from the DTI. All that Das Steel can show for its investment is an incomplete boundary wall. When Das Steel wanted to terminate its relationship with Mr Mirchandani in view of no progress being made with bringing Das Steel into operation, he demanded payment of 3.5 million in order to walk away. The parties are currently involved in litigation.

[61]     Although Mr Bachu's evidence was provisionally admitted, I am of the view taking into account the evidence before-me and in preparation of the witness for me, that it was nothing necessary for Mr Bachu to record as a witness.

[62]     It is not in dispute that during its initial stages before a compliance notice was issued that Unica was operating in contravention of environmental legislation. Although Mr Mirchandani was adamant that all the directors of Unica were aware that environmental legislation had to be complied with, but had agreed to proceed with production, despite noncompliance, I was not convinced. With regard to the issue of compliance I am of the view that Mr Mirchandani was not truthful and it was evasive in his responses. His evidence with regard to whether his co-directors and whose responsibility it was to make sure that Unica complied, he was inconsistent and to a large extent incoherent He was not an impressive witness. It Is inexplicable why Mr Mirchandani will lay a complaint about Unica's noncompliance when such noncompliance occurred during the period when he was also a director of Unica and the key person with regard to the processes of Unica.

[63]     I am satisfied that even though Mr Cassim and Mr UI Haq are experienced business people when they started Unica, it could not reasonably be expected of them to have known or to have been aware of environmental legislation relating to the running of a steel manufacturing plant. Taking into consideration that Mr Mirchandani had the knowledge and experience of the steel Industry and the regulatory framework applicable to such an Industry. he was aware that Unica had to comply with environmental legislation, but chose not to seek compliance or to inform his co-directors about the need to comply. I am therefore of the view .that Mr Mirchandani was in breach of his contract with Unica. Not only did Mr Mirchandani fail to fulfil his duties in terms of his profit sharing agreement with Unica.

[64]     In terms of clause 1 of the profit sharing agreement, Mr Mirchandani undertook to lead, guide and successfully run Unica. Encapsulated in his duties as technical director of Unica, arecommon law fiduciary duties and duties imposed by statute. As a key role player, Mr Mirchandani failed to inform the company about applicable environmental legislation, as he was enjoined to do so in terms of s76 (2) (b) of the Act, thereby causing Unlea to suffer loss or damage through the imposed fine, the remedial steps needed to be implemented and the loss of profits Unica could have earned had it not shut its operations.

[65]       Furthermore, Mr Mirchandani failed in his fiduciary duties to the company by causing it loss in that even though he was expected to lead, guide and successfully run the operations of Unica, he failed ·to act in the best interest of the company thr9ugh Unica's non-compliance in circumstances where he was aware or knew that environmental legislation had to be complied with in order to run a steel plant.

[66]     I am satisfied that Unica has proven on a balance of probability that Mr Mircahndani breached the terms of the profit sharing agreement which resulted in Unica suffering loss.

[67]     In the result the following orders are made:

Suresh Chanderbhan Mirchandani and Unica Iron & Steel (Pty) Ltd (3494/2014)

 

1.       The defendant is ordered to pay to the plaintiff the following amounts:

1.1     R125,101.00 (utilities and rental)

1.2     R394.400.00 (salary claim)

1.3     Interest on the amount of R519, 501 .00 at 15.5% per annum a tempore morae.

2.         An order is made in favour of the plaintiff with regard to the wastage claim.

3.         The defendant to pay the costs of suit, including costs of Senior Counsel.

 

Unica Iron & Steal (Pty) Ltd and Suresh Chanderbhan Mirchandani (85824/2014)

 

1.          With regard to claim 1 the defendant is ordered:

1.1        lo pay to the plaintiff the amount of R5, 6 million.

1.2        Interest on the amount of R5, 5 million at 9%per annum a tempore morae.

 

2.        With regard to claim 2 the defendant Is ordered:

2.1        To pay to the plaintiff the amount of R2. 018,071.00.

2.2        Interest on the amount of R2, 018,071.00 at 9% per annum a tempore morae.

3.         The defendant to pay the costs of suit on an attorney and client scale, including costs of Senior Counsel.

4.         The defendant to pay for the wasted costs of the adjournment of 31 July 2017.

5.          The defendant to pay the costs of the application to set aside the subpoena duces of Unica's auditor.

 

 

 

N P MNGQIBISA-THUSI J

JUDGE OF THE HIGH COURT

 

 

 

Counsel for Plaintiff/Defendant: Adv B C Stoop SC (instructed by Barnard Inc)

Counsel for the Defendant/Plaintiff: Adv O A Moosa-SC (instructed by Pather & Pather Attorneys)

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