THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Reportable
Case no: 307/19
In the matter between:
JACOB RESETLHAKE DANIEL MODISE            FIRST APPELLANT
BATSOMI POWER (PTY) LTD                           SECOND APPELLANT
and
TLADI HOLDINGS (PTY) LTD

RESPONDENT

Neutral citation: Modise and Another v Tladi Holdings (Pty) Ltd (Case no
307/19) [2020] ZASCA 112 (29 September 2020)
Coram:
CACHALIA, WALLIS and NICHOLLS JJA and LEDWABA
and MATOJANE AJJA
Heard:
31 August 2020
Delivered: This judgment was handed down electronically by circulation to the parties'
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 10h00 on 29 September 2020.
Summary: Misappropriation of corporate opportunity by director of
company – principles of fiduciary duty restated and considered – Prescription
– whether amended claim for disgorgement of profits effected after
prescription has run substantially the same claim as one for damages.

_____________________________________________________________
ORDER
_____________________________________________________________
On appeal from: Gauteng Division of the High Court, Johannesburg (Weiner
J sitting as court of first instance):

The appeal by the first appellant (Mr Jacob Resetlhake Daniel Modise)
is dismissed with costs, including the costs of two counsel.
The appeal by Batsomi Power (Pty) Ltd is upheld with costs, including
the costs of two counsel.
The order of the court a quo is amended by deleting the reference to
Batsomi Power (Pty) Ltd and the phrase ‘jointly and severally’ in
paras 1-3 of the order, and also by adding the following para 4:
‘The claim against Batsomi Power (Pty) Ltd is dismissed with costs
including the costs of two counsel.’

_____________________________________________________________
JUDGMENT
_____________________________________________________________
Cachalia JA (Wallis and Nicholls JJA and Ledwaba and Matojane AJJA)
concurring)

Introduction
[1] To promote economic transformation and increased participation of
black people in the economy, the Broad-Based Black Economic

Empowerment Act was enacted in 2003 (the BEE Act).1 Businesses
complying with the BEE Act benefit by being afforded preference in the
adjudication of their bids to offer goods and services to government and large
corporates. It is a controversial law because it has had some unintended but
predictable consequences. One of these is that relationships between
individuals and entities brought together to pursue the objectives of the BEE
Act are often skin-deep and not sustainable. They frequently disintegrate and
lead to acrimonious disputes. This appeal epitomises this hard truth.

[2] The Gauteng Division of the High Court, Johannesburg (Weiner J),
found that the appellants, Jacob Modise and Batsomi Power (Pty) Ltd, of
which Modise was a director, had misappropriated a corporate opportunity to
buy shares in a company – ARB Electrical Wholesalers (Pty) Ltd (ARB) –
that properly belonged to the respondent, Tladi Holdings (Pty) Ltd (Tladi).
Modise was the chairman and a director of Tladi at the time. The appellants
take issue with this finding. They also challenge the dismissal of their special
plea of prescription concerning the claim against Batsomi Power.

The facts
[3] The dramatis personae in this tale are Jonathan Sandler and Modise,
who were the main witnesses for Tladi and Batsomi Power respectively. They
first met as board members of a listed company, Johnnic Holdings Ltd
(Johnnic), some two decades ago. Sandler left Johnnic around 2000 in order
to pursue other business opportunities. In December 2003 he acquired a
68 percent shareholding in Muvoni Contracting Services (Pty) Ltd (Muvoni),

1 Broad-Based Black Economic Empowerment Act 53 of 2003.

a small electrical company, through his family trust. Sandler was keen to
explore the economic benefits that would accrue from doing business with
state-owned entities and municipalities in the energy sector. Muvoni was the
ideal vehicle for this purpose. But first, it had to comply with BEE
requirements to become eligible to exploit whatever opportunities might
become available.

[4] This is where ARB became important. ARB was a major supplier of
electrical equipment to Muvoni. In early 2004, ARB began negotiating with
another entity to conclude a BEE transaction. Craig Robertson and Billy
Neasham were ARB’s chief executive and chief financial officers
respectively. They knew that Sandler had significant experience with
structuring BEE deals and sought his advice in this regard. They met with him,
according to Sandler, in May 2004. In their testimony they were unable to
recall much from the meeting – understandably, as they were testifying
14 years after the event.

[5] Sandler’s recollection of the meeting was that ARB had a 30 percent
stake allocated to a potential BEE partner, valued at R30 million, which
Nedbank would fund. The perception he had after the meeting was that ARB
had previously been unsuccessful with its BEE ventures, and that the deal it
was negotiating with an entity called Umbani Mentis Electrical (Pty) Ltd
(Umbani) would also unravel. If this happened, as he predicted, there would
be a potential opportunity for him to exploit with ARB.

[6] A few months later, in August 2004, ARB concluded its BEE
transaction with Umbani. Sandler was unaware of this development. In the

meantime, keen to develop Muvoni’s potential, he began researching
opportunities in the electrical field. One was ARB, another Cullinan Industrial
Porcelain (Pty) Ltd (Cullinan), which manufactured ceramic insulators, and a
third, Weltex, which did boring underneath roads. Weltex was not a tangible
opportunity and was not explored further.

[7] In September 2004, Sandler approached Sir Sam Jonah to discuss these
opportunities. Jonah was a Ghanaian businessman with whom Sandler had a
previous business relationship. Sandler made a written presentation to him
regarding an idea to create an electrical conglomerate. Its core assets would
include Muvoni, ARB (after the Umbani deal unravelled) and three other
entities: Aberdare, Altech and Cullinan, all also operating in the electrical
field. Jonah liked the idea. The two men agreed to form Empalane Investments
(Pty) Ltd and to invest R5 million each to exploit these opportunities.
Empalane ultimately became a shareholder in the soon to be formed Tladi.

[8] Having done this groundwork Sandler identified Modise as a key player
in the envisaged structure: Modise was a well thought of businessman. And
black, which Sandler needed for BEE compliance. Sandler invited him home
on 7 November 2004, and made the same presentation to him that he had made
to Jonah earlier. In addition to the synopsis of the various electrical
opportunities, including the potential ARB one, the presentation showed that
the 68 percent Muvoni shareholding would be held by an ‘Electrical Holding
Company’, which would be Tladi.

[9] This meeting became a bone of contention in the court a quo. Modise
disputed that there had been a discussion on the ARB opportunity. The

presentation, under the heading 'Electrical Opportunities, said the following
in relation to ARB:
'30% Available currently negotiations with consortium @ R30 Million Nedbank'
Sandler linked this to the discussion he had in May with Robertson and
Neasham and the probabilities were overwhelming that he could only have
obtained this detail from that source. This was unaffected by his suggestion in
evidence that the deal with Umbani had already unravelled, which was
factually incorrect. Instead Modise sought to suggest that the words ‘30
percent available [current] negotiations with [Umbani]’ with reference to the
ARB opportunity as it had appeared in the written presentation was not an
opportunity at all because the negotiations between ARB and Umbani, as far
as Sandler was aware, were ongoing and had not been concluded. There could
therefore not, he insisted, have been any available opportunity to consider.
But in his notes discovered for trial upon which he was cross-examined he
had to accept that he had drawn a circle around the words ‘ARB opportunity’
and had written the word ‘potential’ twice next to them on his copy of the
presentation. When asked to explain why he had done this, he floundered by
first suggesting that Sandler had stated categorically that this opportunity was
not available and secondly – quite implausibly – that ‘potential’ referred to
past, not future, potential. He was also unable to explain his counsel’s failure
to put this far-fetched version, which lay at the heart of his defence, to Sandler.
The evidence therefore established, as the court a quo correctly found, that
Sandler had drawn the potential ARB opportunity to Modise’s attention at
their meeting, and that Modise had noted it.

[10] In the days following the presentation, Sandler and Modise met on
numerous occasions to consider each opportunity, the strategy to pursue it, the

appropriate structure and the agreements that were required to give effect to
it. At Sandler’s request Modise also met with the other potential BEE partners,
Jonah and his son. The Jonahs’ attorney prepared the agreements thereafter.

[11] The initial draft agreements had a general and widely crafted ‘non-
compete clause’ prohibiting the parties from competing with one another. The
clause was removed from the final agreement because, as Sandler explained,
both he and Modise already had similar ventures of their own. But, he
elaborated, they also understood unmistakeably how the venture would
proceed in regard to the available opportunities. He explained it graphically
with reference to three boxes, one for each of them, in which they would
continue pursuing their own interests, and a third common box in which they,
through Tladi, the holding company, would pursue mutual opportunities. The
opportunities described in the presentation, including the ARB opportunity,
fell into the third box.

[12] The appellants sought to suggest that this three-box theory was a ‘legal
construct’ put up by Sandler to avoid the consequences of the removal of the
no-competition clause. But there was nothing implausible about Sandler’s
evidence in this regard. Modise did not controvert the three-box construct, nor
did he plead that it was understood that the parties could compete with each
other – even in relation to the four opportunities. Modise would have us accept
that despite Sandler’s vision of Tladi being an electrical conglomerate of
which he, Modise, would become both the chairman and a director, he could
still pursue his own interests and compete freely against it in respect of any or
all electrical opportunities of which he became aware. This proposition only
needs to be stated to expose its fallacy.

[13] Also in November 2004, Sandler’s family trust made a presentation to
Nedbank to obtain funding for BEE transactions. Among these were the
electrical opportunities of Muvoni, Arbedare, Cullinan and, importantly,
ARB. Tladi would be the holding company. Regarding the ARB opportunity,
what stands out as a golden thread was that since his meeting with ARB’s
representatives (Robertson and Neasham) early in 2004, where the idea of a
potential ARB opportunity began to germinate, and continuing through his
presentations to Jonah, Modise and Nedbank, the ARB opportunity had
consistently been one of the electrical opportunities that Sandler had
envisaged would become part of the new electrical conglomerate. And that
Modise’s inclusion and role was integral to its success.

[14] Modise joined Muvoni’s Board on 1 December 2004 and was appointed
Director and Chairman of Tladi on 14 December 2004. On the same day a
shareholders’ agreement was concluded. The parties to the agreement were
Empalane, Batsomi Investment Holdings (BIH), Hapang Business Solutions,
Lukhele, Bounomano and Boomerang Trading 4 (Pty) Limited, which was
renamed Tladi. Hapang later withdrew from the agreement and on
22 February 2005 a new agreement, effective from 14 December 2004, was
signed. The shareholding in Tladi was as follows: Empalane 26 percent,
Buonomano 14.5 percent, Kukhele 12 percent and Batsomi Power
47.5 percent of which 21.5 percent was held as nominee to be allocated to a
‘previously disadvantaged shareholder’. On 20 December 2004, a consultancy
service agreement was concluded between Empalane, Batsomi Management
Services (Pty) Limited and Tladi, then Boomerang. The parties had earlier
also signed an administration services agreement.

[15] Sandler testified that after the agreements had been concluded, he
communicated with Robertson to inform him that Modise was ‘on board’ –
something he was very proud of because it underlined the importance of their
BEE credentials. Sandler invited both Roberson and Neasham to Muvoni’s
Christmas party in December 2014, shortly after these agreements were
concluded. Robertson did not attend, but Neasham did and Sandler used the
occasion to introduce him to Modise. The fact that Modise was now chairman
of Tladi and on the board of Muvoni, which had a business relationship with
ARB, would not have been lost on either of them.

[16] It bears mentioning that in Modise’s written representations of
27 October 2006 in terms of s 220(3) of the Companies Act 61 of 1973, which
was a response to Tladi’s resolution that he be removed from the board for
breaching his fiduciary duties, he denied that Sandler had introduced him to
any member of ARB’s management team. But in his testimony many years
later he conceded that he may have met Neasham at Muvoni’s Christmas
Party. In his representations he was responding to an allegation that he had
diverted the ARB opportunity to Batsomi Power. It seems likely that he was
attempting to distance himself from the fact that he had been introduced to
Neasham, an encounter he would probably have remembered less than two
years after he had denied it.

[17] In February 2005 Tladi and Muvoni held a strategic planning meeting
at which their directors and shareholders were present. The Muvoni
transaction took up most of the meeting. Once the shareholders had left, those
remaining, including Sandler and Modise, briefly discussed Tladi’s business
strategy and related matters. Sandler testified that they flagged the ARB

opportunity because they were unsure whether the ARB-Umbani deal had yet
unwound. He also recalled discussing Cullinan and some other matters. The
Cullinan opportunity was more advanced and the ARB opportunity would be
pursued by Modise as and when it became available. Sandler was however
not able to find any notes for this part of the session.  Modise denied that there
had been any discussion regarding the ARB opportunity. However the court
a quo found that the probabilities supported Sandler’s version. I find no reason
to interfere with this finding.

[18] Thereafter, Sandler and Modise continued to execute Tladi’s strategy.
In March 2005 they made a presentation to Cullinan, one of the entities
earmarked as an opportunity, on behalf of Tladi. The presentation set out the
proposed structure with future acquisitions, including Cullinan becoming a
subsidiary. In April 2005 Modise made a presentation to Nedbank, at which
Sandler was present, on the proposed Cullinan transaction. The presentation
reflected the proposed structure showing Batsomi Power, Empalane,
Buonomano and Lukhele as shareholders in Tladi, which in turn would hold
shares in Cullinan. The Cullinan transaction was not finalised for reasons not
germane to this appeal.

[19] As Sandler had presciently predicted, in May 2005, nine months after
ARB had concluded its BEE transaction with Umbani, it became apparent that
their relationship was not working. ARB realised that it would need to
terminate its relationship with Umbani and find a new BEE partner. Modise
was again identified as the ideal candidate. Robertson called to invite him to
a meeting with Alan Burke, ARB’s chairman.

[20] The meeting took place on 9 May 2005 in Umhlanga, near Durban.
Robertson also attended. It is common ground that with the ARB-Umbani
transaction having unravelled, Burke offered Modise and his company,
Batsomi Power, a deal – the same one that Sandler had identified as the ARB
opportunity for Tladi – which Modise ultimately accepted. A few days later
ARB and Batsomi Power concluded a confidentiality agreement pertaining to
the scrutiny of their records for the purpose of assessing the efficacy of the
deal.

[21] One of the issues in this appeal is whether this deal was a corporate
opportunity available to Tladi at all. So, it is of some significance whether the
meeting traversed this issue. Robertson could not remember whether
Sandler’s name came up during the meeting, but it an interview with a
business program on radio ‘Moneyweb’ two years later, after the deal was
concluded, he said that both Burke and he had made it clear that they were
only interested in doing a deal with Batsomi Power, and no one else. This
suggests that it did.

[22] However, in his testimony Modise maintained that there had been no
discussion about Sandler and Tladi at the meeting. The court a quo, once
again, rejected his evidence, for good reason. It had been put to Sandler that
Modise’s evidence would be that Burke had made it clear at the meeting that
ARB did not wish to sell shares to Sandler or the companies with which he
was associated because he is ‘white’ and Burke wanted to deal only with black
persons. But in his testimony, Modise was unable to give a plausible
explanation for how the topic of the sale of ARB shares to Sandler arose at
the meeting. And the probabilities point to the fact that it would have arisen

precisely because they were aware that Sandler was also interested in pursuing
the opportunity.

[23] Against the background of how the ARB opportunity had arisen, as well
as Modise’s position, the Tladi issue must have arisen at the meeting, as the
court a quo correctly found. It’s conclusion in this regard was fortified having
regard to Burke’s position. Given Robertson’s inability to recall whether the
issue had been discussed, and the unreliability of Modise’s evidence, it was
incumbent upon the appellants to have called Burke to clarify the issue. They
elected not to do so and the court a quo was justified in drawing an adverse
inference from their decision not to call him.

[24] In the final analysis, as I will show with reference to the discussion on
the fiduciary duties of a director, it matters not whether the issue was
pertinently raised in the meeting, or even whether the ARB opportunity was
available to Tladi. Once it is accepted, as it must be, that Sandler had identified
the ARB opportunity as one that Tladi could potentially exploit, and of which
on the evidence Modise was aware, he had a duty to disclose this to Tladi and
obtain its consent to do the transaction through Batsomi Power. Instead, as the
evidence demonstrated, he withheld the information from Tladi and secured
his own deal with ARB.

[25] The process of unwinding the ARB-Umbani transaction began in about
July 2005. Sandler testified that one of the members of Muvoni’s management
team, who had close contact with ARB had informed him of this development.
He then telephoned Modise and told him to pursue the ARB opportunity for

Tladi. Modise denied this, but the call must have taken place because Modise
reported back to Sandler on what Burke had said to him.

[26] Sandler was taken aback by what Modise had told him was Burke’s
view of doing a deal with Tladi. It was that he was not prepared to ‘empower
another Jew’, referring to Sandler, who is Jewish. As offensive as this
obviously was, Sandler thought that this was not an anti-semitic remark; he
subsequently ascertained that Burke was also Jewish and probably
uninformed as to Tladi’s BEE credentials. So, he asked Modise to arrange a
meeting with Burke, Jonah and himself to clarify matters, which Modise
agreed to do, but never did. Significantly Modise made no mention of his
9 May meeting with Burke nor of the confidentiality agreement he had
concluded with ARB.

[27] Sandler’s enquiries to Modise thereafter were met with the refrain that
the ARB-Umbani deal had not yet unwound. Sandler accepted this in good
faith, accepting at the time that it was perhaps not quite right for the approach
to be made. However, on 1 December 2005, and unbeknownst to Sandler,
Batsomi Power concluded an agreement in terms of which it acquired a
26 percent shareholding in ARB.

[28] In the meantime Sandler became increasingly concerned that Tladi had
not yet appointed a chief executive officer and believed that Modise was
avoiding him. He therefore sought to arrange a meeting with him at Muvoni’s
Christmas party in December 2005. Mr Dumisani Muhlwa, a co-director of
Batsomi Power, was present and informed Sandler, after the latter had
enquired about Modise’s whereabouts, that he would arrive soon. According

to Sandler, he asked Muhlwa what was happening with the ARB transaction.
Muhlwa responded by saying that they were still talking to them, which was
untrue. Sandler understood this to mean that this interaction was on behalf of
Tladi. Modise never arrived at the party.

[29] On 23 December 2005 Sandler received a newspaper report of ARB’s
transaction with Batsomi Power. This was the first time that he became aware
that Modise had pursued the ARB opportunity for Batsomi Power. He tried,
unsuccessfully, to contact Modise. He also sent a letter to him inviting him to
a Tladi board meeting, but to no avail. Modise had apparently gone to ground.
On 3 January 2006, Tladi held its board meeting and concluded that Modise
had misappropriated the ARB opportunity in favour of his own company. It
resolved to take legal action to ensure that it suffered no commercial prejudice
because of this.

[30] In his testimony Modise denied all of this, insisting that he had
informed Sandler about his acquisition of the ARB shares long before the
transaction was concluded. Modise would have had the court believe that
Sandler was kept abreast of the process throughout. And what is more, he
incredulously testified, that when Sandler heard of this he accepted it
magnanimously and told him to go and speak to ARB on behalf of Batsomi
Power. When it was pointed out to him that such disclosures as he would have
made to Sandler would have breached his confidentiality agreement with
ARB, he adjusted his version. He then said that he had told him of this before
9 May 2005. This was false, as the meeting of 9 May with ARB was an
exploratory meeting; there had been no talk of any acquisition of shares before
this. None of this was put to Sandler when he testified.

[31] The appellants’ other factual defence was that Tladi’s object was to
hold shares in Muvoni, not to pursue its own opportunities. This defence was
also correctly rejected by the trial court. In contrast to his original plea filed
in April 2013, where it was common cause that Sandler’s presentation on
7 November 2004 was to entice him to become a BEE partner in Tladi, it was
only in an amendment on the eve of the trial that Modise introduced the
assertion that Sandler’s presentation was aimed at enticing him to invest in
Muvoni, to support his newly pleaded case. Modise’s own evidence was
however inconsistent with this suggestion. He accepted that the presentation
covered all four opportunities and said he had formed the opinion that three
out of the four were ‘pie in the sky’. There would have been no need for
Sandler to discuss all the opportunities, much less for Modise to have marked
‘potential opportunities’ if he was to have had no interest in them. In any event
it is also common cause that Modise did pursue the Cullinan opportunity on
behalf of Tladi, which also shows that the envisaged Tladi structure would
have included more than Muvoni. His notes on the various business
opportunities mentioned in the presentation showed that he took them
seriously.

[32] The court a quo was therefore entirely justified in rejecting his evidence
as not only improbable, but evasive, contradictory and untruthful.

Summary of factual findings
[33] In summary the following facts, as found by the court a quo, were
established:
(a)
Sandler met Robertson and Neasham from ARB in May 2004 where he
learnt that ARB was negotiating a BEE transaction with Umbani. He

concluded from the meeting that this transaction would ultimately unravel and
present a potential opportunity for him when this happened;
(b)
In September 2004 he made a presentation of his vision to create an
electrical conglomerate to Jonah. He identified four opportunities to be
pursued by the conglomerate, one of which was the ARB opportunity. They
formed Empalane and contributed R5 million each to it. The conglomerate
born out of this vision was Tladi;
(c)
Sandler believed that Modise would be interested in this vision. He
invited him home and made the same presentation to him. It was clear to
Modise then, and from further discussions between them, that the ARB
opportunity was one that Sandler wished to pursue through Tladi;
(d)
In December 2004 a shareholders’ agreement was signed and Modise
became a director and chairman of Tladi, the holding company. The
shareholders agreement permitted the shareholders to pursue their own
interests on the understanding that the four opportunities would be pursued
through Tladi;
(e)
In February 2005, where Tladi’s business strategy was deliberated
upon, the ARB opportunity was discussed again. More strategy meetings took
place after this, where Modise was mandated to pursue it, when it became
available;
(f)
In May 2005, at ARB’s invitation, Modise met with Burke and
Robertson, where he was personally offered the ARB opportunity because the
ARB-Umbani deal was about to unravel. Modise did not disclose this meeting
to Tladi;

(g)
About a month later Sandler enquired from Modise what had happened
with the ARB opportunity. Modise reported to him that Burke was not
interested in having any business relationship with Sandler. It appeared to
Sandler that Burke was misinformed about Tladi’s BEE credentials. He asked
Modise to arrange a meeting with Burke to clarify this, which he agreed to do,
but never did;
(h)
In December 2005 Modise, through Batsomi Power concluded his own
deal with ARB. He never disclosed this to Tladi either.

Modise’s Case
[34] Modise contended that he owed no fiduciary duty to procure the ARB
opportunity for Tladi and, either personally or through Batsomi Power, to
profit therefrom. This is because, so the argument proceeded, the opportunity
did not accrue to him by virtue of his association with Tladi, but despite it.
Furthermore, he contended that the opportunity was not available to Tladi
because ARB had made clear that it did not want to do a BEE deal with
Sandler, because he was white. Moreover, he continued, he did not use any
confidential information in which either Sandler or Tladi had a proprietary
interest. Before I consider these submissions, it is necessary to set out the law
as it pertains to the fiduciary duty of directors to their companies.

The ambit of the fiduciary duty
[35] At common law directors have an overarching and paramount fiduciary
duty to exercise their powers in good faith and in the best interests of the
company.2 Section 76(3)(c) of the Companies Act 71 of 2008 codifies this

2 Da Silva and Others v CH Chemicals (Pty) Ltd [2008] ZASCA 110; 2008 (6) SA 620 (SCA) para 18.

duty, but its content is still informed by the common law. The basic duty is
one of loyalty, which is ‘unbending and inflexible’ so as to ensure that it is
not abused.3 The duty encompasses at least three rules: Directors may not
place themselves in positions of conflicts of interest or duty (the no-conflict
rule); make secret profits (the no-profit rule); or acquire economic
opportunities for themselves (the corporate opportunity rule) that properly
belong to the company. The rules are distinct but are mutually reinforcing and
usually overlap.4

[36] The no conflict rule does not require an actual conflict to be established;
only that a reasonable person would think that there was a real sensible
possibility of conflict.5 In the same vein the no-profit rule applies even if the
company would not itself have made a profit, in other words, even if the
director has not profited at the company’s expense. Profit in this context is not
confined to money but includes every advantage or gain obtained by the
offending director.6 Similarly, the corporate opportunity rule is not confined
to assets or property only, but extends to confidential information that
directors use for their personal gain.7

[37] With reference to the prohibition on the acquisition of economic
opportunities with which we are primarily though not exclusively concerned

3 F H I Cassim ‘The duties and the liability of directors’ in F H I Cassim (ed) Contemporary Company Law
2 ed (2012) at 513 and 534.
4 Ibid at 536 and 547.
5 Ibid at 535 and the cases cited there.
6 Ibid at 536 and the cases cited there.
7 Ibid at 539 and the cases cited there.

in this appeal this court said the following in Da Silva and Others v CH
Chemicals (Pty) Ltd:8
‘A consequence of the rule is that a director is … obliged to acquire an economic
opportunity for the company, if it is acquired at all. Such an opportunity is said to be a
“corporate opportunity” or one which is the “property” of the company. If it is acquired by
the director, not for the company but for himself, the law will refuse to give effect to the
director’s intention and will treat the acquisition as having been made for the company.
The opportunity may then be claimed by the company from the delinquent director … [or
the company] … may in the alternative claim any profits which the director may have made
as a result of the breach or damages in respect of any loss it may have suffered thereby.
It is of no consequence that in the particular circumstances of the case the opportunity
would not or even could not have been taken up by the company. But the opportunity in
question must be one which can properly be categorised as a “corporate opportunity”.
While any attempt at an all-embracing definition is likely to prove a fruitless task, a
corporate opportunity has been variously described as one which the company was
“actively pursuing”; or one which can be said can be said to fall within “the company’s
existing or prospective business activities; or which related to the operations of the
company within the scope of its business” or which falls within its “line of business”.’

[38] Of particular importance in this case is that it is also irrelevant that the
corporate opportunity would not have materialised. The director remains
under a duty to disclose its existence and the information pertaining to it to
the company.9 Ultimately, as was pointed out in Da Silva:
‘[T]he inquiry will involve in each case a close and careful examination of all the relevant
circumstances, including in particular the opportunity in question, to determine whether
the exploitation of the opportunity by the director, whether for the director’s own benefit

8 Da Silva (above fn 2) paras 18 and 19. (References omitted.)
9 F H I Cassim (above fn 3) at 538; Compare Industrial Development Consultants Ltd v Cooley [1972] 2 All
ER 162, decided on the basis of the no-conflict rule though arguably concerning a corporate opportunity that
had come to the defendant while a managing director of the plaintiff company.

or that of another, gave rise to a conflict between the director’s personal interests and those
of the company which the director was then duty-bound to protect and advance.’10

[39] This much is clear from an analysis of the facts as found by the high
court and confirmed above. Sandler initially, and then Tladi, had actively been
pursuing the ARB opportunity as one of four opportunities. It was integral to
Tladi’s business strategy and Modise had expressly been mandated to pursue
it. When Burke discussed offering the opportunity to Modise in May 2005 the
latter must have realised immediately that there was a conflict between his
personal interest in pursuing the offer for himself and his duty to act in Tladi’s
best interests. Not only did he fail to disclose this conversation with Burke to
Tladi, but he concealed the fact that he was pursuing the opportunity in his
own interest. When he finally concluded the deal in early December 2005, he
avoided having any contact with Sandler. Sandler discovered through a media
release later on that the deal had been done. Instead of fulfilling his fiduciary
duty to act in good faith and in Tladi’s best interests he purloined the
opportunity for himself.

[40] Modise’s two remaining contentions are also without merit: First, it is
argued that the opportunity did not arise by virtue of Modise’s association
with Tladi and was, in any event not available to Tladi; and secondly, that the
information pertaining to it was not confidential because Tladi had no
proprietary interest in it. As has been mentioned earlier it is irrelevant that the
opportunity would not have materialised or for that matter that it had been
initiated by ARB. Once Modise was aware that Tladi was pursuing the
opportunity, and that he stood in a fiduciary relationship with it at the time

10 Da Silva (above fn 2) para 19.

when the opportunity became available to him, he was not entitled to secure
it in his own interest without disclosure to and approval by Tladi’s board.11
With regard to the second contention there is no legal requirement in the
corporate opportunity rule for a Company to have a proprietary interest in any
information. It is sufficient in the present circumstances that the acquisition
of the ARB opportunity was integral to Tladi’s business strategy for Modise
– as chairman and director – to be saddled with the fiduciary duty to act in its
best interests. Tladi thus established its claim against Modise.

Prescription
[41] In regard to Batsomi Power, the second appellant, it is contended on its
behalf that the claim had prescribed and also that the case against it, being a
separate legal entity, to account to Tladi, was not made. The court a quo
dismissed both contentions. I deal first with Batsomi Power’s appeal against
the dismissal of its special plea of prescription. If successful the second issue
falls away.

[42] The contention that the claim against Batsomi Power to disgorge its
profits and account to Tladi had prescribed was grounded squarely on this
court’s judgment in Symington and Others v Pretoria-Oos Privaat Hospitaal
Bedryfs (Pty) Ltd.12 There, the court accepted for the purposes of prescription
that a claim for damages and a claim for disgorgement of profits arising from
a breach of a fiduciary duty are different. Put differently, they are not the same
debt. This is because a claim for damages arises as soon as a fiduciary duty is

11 Philips v Fieldstone Africa (Pty) Ltd and Another 2004 (3) SA 465 SCA para 35.
12 Symington and Others v Pretoria-Oos Privaat Hospitaal Bedryfs (Pty) Ltd [2005] ZASCA 47; 2005 (5)
SA 550 SCA.

breached, whereas with a claim for disgorgement of a profit prescription
begins to run against the debt only after the payment giving rise to the profit
is made.13 The former is compensatory and arises regardless of whether or not
any profit was made. The measure of the damages suffered is the value of the
lost opportunity. The duty to account for profits on the other hand is aimed at
stripping the fiduciary of his ill-gotten profits and therefore only arises if and
when a profit is made. The court in Symington was required to decide whether
the particulars of claim disclosed a disgorgement claim or a damages claim.14
Having analysed the pleadings it concluded that the claim was only one for
damages and not for disgorgement of profits. It consequently upheld the plea
of prescription.

[43] Counsel for Tladi, Mr Bham, fairly accepted that Batsomi Power’s
special plea of prescription was therefore a difficult one for Tladi to overcome.
He nonetheless urged us to dismiss the appeal. He submitted that what
distinguished Symington from the present case was that the claim against
Batsomi Power was introduced by way of amendment to the particulars of
claim. And that the amended claim for disgorgement, introduced after the
prescriptive period had run, was substantially the same claim as the original
claim for damages – a submission the court a quo upheld.

[44] Now it is accepted that an amendment to a pleading, even if effected
after the period of prescription has run against the claim, shall generally be
permitted provided the debt claimed by way of amendment is the same or

13 Ibid paras 24, 27, 34 and 35.
14 Ibid para 28.

substantially the same debt as originally claimed.15 So, the question to be
decided is whether Symington may be distinguished, merely on the basis that
the claim for disgorgement, was effected through an amendment to the
particulars of claim, after the prescriptive period had run, and was at least
substantially the same as the original claim for damages. It is therefore
necessary to compare the original claim against Batsomi Power with the
amended claim against it.

[45] I do so bearing in mind that a debt as contemplated in the Prescription
Act is of wide import. As Harms JA put it in Drennan Maud & Partners
v Pennington Town Board16 one must ascertain what the ‘claim’ was in the
broad sense of the meaning of that word, before and after the amendment.
This is consistent with Constitutional Court’s characterisation of a debt in
Makate v Vodacom Limited17 as:
‘Something owed or due: something (as money, goods or services) which one person is
under an obligation to pay or render to another [or a] liability or obligation to pay or render
something; the condition of being so obligated.’

[46] Tladi originally sought inter alia a disgorgement of benefits, gains,
profits and dividends only against Modise, but not against Batsomi Power.
The alternative claim against Modise and Batsomi Power was for the payment

15 Rustenburg Platinum Mines (Ltd) v Industrial Maintenance Painting Services CC [2008] ZASCA 108;
[2009] 1 All SA 275 (SCA) para 13.
16 Drennan Maud & Partners v Pennington Town Board 1998 (3) SA 200 at 212F-H
17 See the minority judgment of Wallis AJ in Makate v Vodacom Ltd [2016] ZACC 13; 2016 (4) SA 121
(CC) para 187, referring to the definition of the term in the New Shorter Oxford English Dictionary 3 ed
(1993) vol 1 at 604, which accords with ‘[t]he meaning that has been given to the word “debt” since the
Prescription Act came into force’. See, in this regard, Electricity Supply Commission v Stewarts and Lloyds
of SA (Pty) Ltd 1981 (3) SA 340 (A) at 344E-G; Joint Liquidators of Glen Anil Development Corporation
Ltd (in Liquidation) v Hill Samuel (SA) Ltd 1982 (1) SA 103 (A) at 110A-B; and Cape Town Municipality
and Another v Allianz Insurance Co Ltd 1990 (1) SA 311 (C) at 330F-H.

of damages in the amount of R122 million jointly and severally. The damages
claim was not persisted with, but what was pleaded remains relevant to the
analysis as to whether the amended claim or debt is the same or substantially
the same claim or debt as pleaded in the original claim.

[47] In its original particulars of claim, and in relation to the alternative
damages claim, Tladi pleaded that through Modise, Batsomi Power acting in
concert with him and also being aware of the facts as pleaded giving rise to
the disgorgement claim, aided or induced Modise to breach his fiduciary duty
to it and deprived it of the corporate opportunity. But for their joint unlawful
conduct, the particulars continued, Tladi would have taken up the corporate
opportunity, as a consequence of which it suffered damages. Tladi thus
claimed damages, jointly and severally, against both of them. The claim
against Batsomi Power was based on the principle that a person who enables,
assists in or facilitates a breach of trust by another with knowledge that a
breach of trust is being perpetrated, is himself liable for damages flowing from
the breach of trust.18

[48] The amendment, granted on 9 September 2015,19 introduced allegations
that Modise used Batsomi Power as his conduit and alter ego to
misappropriate and receive the corporate opportunity. It also included a
paragraph that Batsomi Power was jointly and severally liable with Modise to
Tladi for the benefits, gains, dividends and profits referred to in its
disgorgement claim.

18 Yorkshire Insurance Co Limited v Standard Bank of SA Limited 1928 WLD 251; Gross and Others v Pentz
1996 (4) SA 617 (A) at 625E-H; Breetzke and Others NNO v Alexander NO and Others [2020] ZASCA 97.
19 See Tladi Holdings (Pty) Ltd v Modise and Others [2015] ZAGPJHC 331.

[49] It was thus contended on behalf of Tladi that the two claims were
substantially the same. In this regard reliance was placed on the following
passage from this court’s judgment in Phillips v Fieldstone Africa (Pty) Ltd:20
‘Counsel for the appellant emphasised that the particulars of claim contained no reference
in terms to a fiduciary duty. They submitted that the claim must be understood as a claim
based on breaches of the contractual terms which had been pleaded and said that that was
how they had understood and approached the case. If they did that, however, I think that
they placed far too restrictive an interpretation upon the claim. The contract of employment
(with its implied terms) is pleaded as a single element of a broader picture of why an
opportunity that arose out of the appellant’s employment properly belonged to the
respondents. The implied duties (ie duties which derive ex lege) are said to have arisen in
the context of a contract which defined the relationship between the parties …
There is no magic in the term “fiduciary duty”. The existence of such a duty and its nature
and extent are questions of fact to be adduced from a thorough consideration of the
substance of the relationship and any relevant circumstances which affect the operation of
that relationship … While agency is not a necessary element of the existence of a fiduciary
relationship … that agency exists will almost always provide an indication of such a
relationship. The emphasis in the particulars of claim upon the representative nature of the
appellant’s status in dealing with Safika and the duty to account for profits acquired by him
in that capacity should have been to counsel an unmistakeable beacon which marked the
claim as one in which the appellant stood towards the respondents in a position of
confidence and good faith which he was obliged to protect. No more was required to set
up a case on a fiduciary duty. It is true that the amount claimed was said to be the value of
the benefit which the respondents would have derived from the lost opportunity rather than
a simple disgorgement of profits made by him, which would have been a more appropriate
measure. But the method of calculation, ie the value of shares taken up less the price paid
for them, was in essence the measure of the appellant’s profits.’ (Counsel’s emphasis
added.)

20 Philips v Fieldstone Africa (Pty) Ltd and Another 2004 (3) SA 465 (SCA) para 27. (References omitted).

[50] Phillips involved a claim by a company against its employee to account
to his employer for shares he had acquired from an opportunity arising in the
course of his employment. The claim was based on an ‘obligation to account’
for the benefit. One of the issues that arose there was whether the company’s
claim as pleaded was limited to breach of contract and not breach of a
fiduciary duty. The court held that the employment contract had been pleaded
as a single element of why the opportunity had arisen and did not preclude the
existence of a fiduciary duty, even though this was not specifically pleaded.
In other words once the employment contract was pleaded no more was
required to set up a claim based on a fiduciary duty even though, as the court
observed, the value of the benefit the respondents would have derived from
the lost opportunity, rather than a simple disgorgement of profits made by
him, would have been a more appropriate measure.

[51] As I understand the submission Tladi thus contends that damages and
disgorgement claims were broadly pleaded as a single element of why the
opportunity had arisen. The fact that the disgorgement was not initially
pleaded as the more appropriate measure should not matter. In short, they
should be treated as substantially the same claim – or, as the court a quo found,
‘substantially the same debt’.

[52] I do not think that Phillips is of any assistance to Tladi. Prescription
was not in issue there. It is also apparent that the issue was whether the
company was required to specifically plead in terms that the employee had a
fiduciary duty to the company to set up the claim to account for the shares.
That is why the court said that once the employment contract was pleaded no
more was needed to set up the case on a fiduciary duty. And that the value of

the loss of the benefit from the lost opportunity to the company from the
employee’s acquisition of the shares for himself and the value of the benefit
to be derived from a disgorgement of profits made by him was in essence the
same. There was, unlike in this case, thus no claim for damages.

[53] It is, however, clear from the facts here that a claim for disgorgement
of profits arose upon the breach of the fiduciary duty and not when each of
the dividends from the ARB shares were ultimately paid to Batsomi Power.
This debt quite clearly arose more than three years before the amendment was
granted on 9 September 2015. In this regard it is apposite to refer to what
Corbett JA said in Evins v Shield Insurance Co Ltd:21
‘Where the plaintiff seeks by way of amendment to augment his claim for damages, he will
be precluded from doing so by prescription if the new claim is based upon a new cause of
action and the relevant prescriptive period has run, but not if it was a part and parcel of the
original cause of action and merely represents a fresh quantification of the original claim
or the addition of a further item of damages …’

[54] In my view Tladi has not demonstrated that the amended disgorgement
claim against Batsomi Power was ‘part and parcel’ of the original cause of
action or substantially the same claim as the claim for damages. The claim, or
debt, is based on an entirely different cause of action and the prescriptive
period had run. Accordingly Batsomi Power’s appeal against the court a quo’s
finding on prescription must succeed.

[55] The following order is made:

21 Evins v Shield Insurance Co Ltd 1980 (2) SA 814 (A) at 836D-E.

The appeal by the first appellant (Mr Jacob Resetlhake Daniel Modise)
is dismissed with costs, including the costs of two counsel.
The appeal by Batsomi Power (Pty) Ltd is upheld, with costs including
the costs of two counsel.
The order of the court a quo is amended by deleting the reference to
Batsomi Power (Pty) Ltd and the phrase ‘jointly and severally’ in
paras 1-3 of the order, and also by adding the following in para 4:
‘The claim against Batsomi Power (Pty) Ltd is dismissed with costs
including the costs of two counsel.’

__________________
A CACHALIA
JUDGE OF APPEAL

Appearances

For appellant:
L Harris SC (with him A Botha)
Instructed by:
Tshisevhe Gwina Ratshimbilani Inc, Sandton

Matsepes Attorneys, Bloemfontein

For respondent:
A E Bham SC (with him T Dalrymple)

Instructed by:
Knowles Husain Lindsay Inc, Sandton

McIntyre Van der Post, Bloemfontein
THE SUPREME COURT OF APPEAL OF SOUTH AFRICA

MEDIA SUMMARY – JUDGMENT DELIVERED IN
THE SUPREME COURT OF APPEAL

Modise and Another v Tladi Holdings (Pty) Ltd (Case no 307/2019) [2020]
ZASCA 112

From:
The Registrar, Supreme Court of Appeal
Date:
29 September 2020
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 judgment of the Supreme Court of Appeal

Today the Supreme Court of Appeal (SCA) handed down judgment in an appeal against an
order of the Gauteng Division of the High Court, Johannesburg (Weiner J, sitting as court of
first instance). The matter concerned the appropriation of a corporate opportunity to buy shares
in a company, ARB Electrical Wholesalers (Pty) Ltd (ARB), by the first and second appellants,
respectively Mr Jacob Modise and Batsomi Power (Pty) Ltd, of which Modise was a director.

In 2004 ARB had been negotiating a transaction with a potential BEE partner (Umbani),
intending to allocate a 30 percent stake to this entity. In this regard ARB’s chief executives
sought advice from Mr Jonathan Sandler, the majority shareholder of a company to which ARB
supplied electrical equipment, mindful of his experience in the structuring of BEE deals.
Sandler predicted that the envisaged deal would unravel, and moved to set up a company with
another businessman in order to exploit the ARB opportunity once negotiations with Umbani
had proved unsuccessful. Modise, a black executive whose business acumen was held in high
regard, was identified as the most appropriately situated person to chair the envisaged electrical

conglomerate. This structure would eventually become Tladi Holdings (Pty) Ltd, the
respondent.

Sandler thereafter met with Modise in order to introduce to him the proposed venture. Part of
the presentation involved a synopsis of the various electrical opportunities, including ARB,
that Sandler had identified as viable and which he intended to pursue. Sandler and Modise
would also meet on a number of occasions in the days that followed, to discuss each of the
opportunities and to devise strategies for pursuing the same.

In May 2005, when it became apparent that ARB’s relationship with Umbani was not without
issue, ARB realised that it would need to terminate its relationship with the latter and find a
substitute BEE partner. Modise was again headhunted for this purpose. After meeting with the
ARB chairman, he and his company (Batsomi Power) were offered the deal – the same
opportunity that he had been consistently instructed to exploit on behalf of Tladi, not least when
Sandler was informed of the ARB-Umbani scheme beginning to unravel, and of which Modise
was aware. He did not disclose this meeting to Tladi and ultimately accepted the deal. A few
days later, ARB and Batsomi Power concluded a confidentiality agreement pertaining to the
scrutiny of their records for the purpose of assessing the efficacy of the deal.

No disclosures were made to Tladi concerning the ARB chairman’s offer, or Modise’s
acceptance, of the ARB opportunity either. Sandler’s inquiries in relation to the ripeness of
Tladi’s approach were met with the refrain that ARB’s existing deal had not yet unwound.
Nonetheless, on 1 December 2005 Batsomi Power concluded an agreement with ARB in terms
of which it acquired a 26 percent shareholding. Sandler became aware of the transaction on 23
December 2005. He made various abortive attempts to contact Modise and an invitation to a
Tladi board meeting was left unanswered.  At a meeting of the board on 3 January 2006, Tladi
resolved to institute legal proceedings in response to Modise’s usurping of the ARB
opportunity in favour of his own company.

Modise attempted to deny the allegations of Sandler not being informed at all times of his
movements and agenda. He insisted that he had kept Sandler abreast of the process throughout.
ARB’s chief executive officer at first denied any recollection of Sandler or Tladi being
mentioned or discussed at the meeting between the ARB chairman and Modise. When he
participated in a radio interview two years later, however, he noted that both him and the ARB
chairman were only interested in doing a deal with Batsomi Power – not anybody else. This
suggested that Sandler’s name had indeed been referred to during discussions. Modise
thereafter testified that there had been no discussion of Sandler or Tladi at the meeting. The
high court rejected this evidence. Due to ARB’s chief executive officer not being able to recall
whether the issue had been discussed, it was incumbent upon the appellants to call Burke, the
ARB chairman, to provide clarity. The appellants chose not to do so and the SCA found that
the high court’s decision to draw an adverse inference from this decision was certainly justified.

The high court found that Modise and Batsomi Power had misappropriated a corporate
opportunity, to buy shares in ARB, that properly belonged to Tladi. Modise and Batsomi Power
took issue with this finding. They also challenged the dismissal of their special plea of
prescription in respect of the claim against Batsomi Power.

The SCA began with an analysis of the fiduciary duty resting on all directors to exercise their
powers and perform their functions in good faith and in the best interests of the company. This
duty was held to encompass at least three rules – the no-conflict rule; the no-profit rule; and
the corporate opportunity rule. On the last-mentioned rule, it was held that a consequence of
the rule is a director being obliged to obtain such opportunities for the company if anyone is to
obtain it. A ‘corporate opportunity’ was one which the company was actively pursuing, or
which could be said to fall within the company’s existing or prospective business activities; or
that is related to the operations of the company within its scope of business; or which fell within
its line of business.

Modise argued that the opportunity had not arisen by virtue of his association with Tladi, and
that the opportunity was in any event not available to Tladi. He argued further that the
information pertaining to it was not confidential because Tladi had no proprietary interest in it.
The SCA held that it mattered not whether, in the circumstances of a particular case, the
opportunity would not – or even could not – have been taken up by the company. Also
irrelevant was whether the corporate opportunity would indeed have materialised. A director
remained under a duty to disclose its existence, and the information pertaining to it, to the
company. The SCA confirmed the high court’s finding that Modise’s evidence was not only
improbable, but evasive, contradictory, and untruthful. He was held not to have fulfilled his
fiduciary duty to act in good faith and in Tladi’s best interests. Instead, it was found that Modise
surreptitiously and mala fide purloined the opportunity for himself. He had not been entitled to
secure the ARB opportunity in his own interest without disclosure and approval of Tladi’s
board. The SCA found that Tladi had established its claim against Modise.

As to the contention that the claim against Batsomi Power had prescribed, the SCA found that
Tladi had not demonstrated that the amended disgorgement claim against Batsomi Power was
‘part and parcel’ of the original cause of action, or substantially the same claim as the claim for
damages. It was based on a different cause of action and the prescriptive period had run. The
SCA accordingly upheld Batsomi Power’s appeal against the high court’s finding on
prescription.

In the result, the appeal by Modise was dismissed with costs; and the appeal by Batsomi Power
was upheld with costs.

________________________________________