Chang Sing Chung v Kim Koon and ors (MC 4 of 2020) [2022] SCSC 803 (19 September 2022)

R GOVINDEN, CJ

The Pleadings

1. The Petitioner avers in her Petition that she is an employee and a shareholder of Kim Koon & Co (Pty) Ltd a minority shareholder of the 3^rd Respondent in which she holds 10.22% of the shares. The remainder of the shares of the 3^rd Respondent are held by 1^st and 2^nd Respondent who are the registered Directors of the 3^rd Respondent. Other share are also held by the heirs Kamline Kim Koon, Shiokline Kim Koon, Towline Kim Koon, Miyive Kim Koon, Choung Yive Kim Koon, Semline KimKoon, Kamline, Sionline Kim Koon, Kamline Kim Koon and Shiokline Kim Koon.
2. The 3^rd Respondent carries on business as an importer and general merchant. The 1^st and 2^nd Respondent have for several years been deducting a sum of money from the dividends, payable to the Petitioner by the 3^rd Respondent, as school fees repayments for the education of her children in a manner which has never been formally approved or authorised by the Company at any general meeting or at all.
3. The late Mr J. R Kim Koon the founder of the 3^rd Respondent, herein after also referred to as” the  founder”  had always wanted his grandchildren to have a good education so he arranged payment for covering their school fees but he never associated such payments from the business of the 3^rd Respondent as being a loan to the recipients.
4. Mr Kameline Lee Kim Koon one of the former shareholders and directors of the 3^rd Respondent passed away in 2002. Following this death, the Company, under the stewardship of the 1^st Respondent, activated a loan repayment mechanism for the school fees and the Petitioner has with some shareholders been made the target of a repayment of school fees arrangement until this day.
5.  The loan repayment arrangement above mentioned commenced on or about the year 2003 when the 1^st Respondent took charge as the Director of the Company. He started charging the Petitioner and two other siblings to pay back school fees despite not having a loan agreement to back up the unlawful retention and withdrawal of divided payments due to these members of the company. It only came about to the Petitioner’s attention on the 12^th October 2004 when she received a copy of the financial statement dated year end 31^ST December 2003.
6. The said 1^st Respondent has exempted one of the siblings from paying back the school fees.
7. Whenever a dividend is declared the Petitioner does not receive anything but instead the Company offsets it from the alleged school fees that it allegedly owed to the Company.
8. The Petitioner goes on to aver that this unlawful retention of funds due to her has now reached the sums set out in the attached breakdown in the schedule and that the said retention is fraudulent and without legal foundation or substance. The Schedule is as follows:

BREAKDOWN OF FUNDS RETAINED

The amounts owing to my client set out in the table below.  These monies include but not limited to the following:

9. The Petitioner avers further that she has tried to resolve the matter without having to seek the legal route by amicable settlement and discussion. However, these attempts have yielded no results. She also avers that to date, she has not received any response from the Respondents regarding this matter despite having voiced her disagreement personally and through her proxies and finally by a letter of 9 October 2019. The Petitioner also avers that it was agreed, at the last AGM held on 22 December 2018, that there was no loan agreement in the first place.
10. She further avers that as a result of the unfair, oppressive and fraudulent nature of the actions of the 1^st and 2^nd Respondents jointly and severally in retaining dividends due to her and nor responding to her requests she is forced to proceed with taking legal action against the Respondents. As a result of this it is claimed that the 1^st and 2^nd Respondents have acted in breach of their duties as Directors of the 3^rd Respondent and as a result thereof she has suffered loss and damages as set out and tabulated in the attached Schedule which the Respondents are bound to make good jointly and severally.
11. Accordingly, with immediate effect she request that  the alleged loan agreement for the school fees waived and nullified. Moreover, she asks that all the dividends and other funds used to set off against the school fees be refunded back to her with interest at commercial rates from the date of the first deduction from dividend payment until to date.
12. She finally request that this court orders the Respondents to jointly and severally:-

1. Regularise all the matters set out in the Petition at the expense of the Respondents and a refund of all the funds deducted from the dividends due;

2. Cancel all reference to any alleged loan agreement in the records and books of the 3^rd Respondent as a result of the regularisation above and to enter correct records of the dividends due to the Petitioner;

3. To pay damages to the Petitioner in the capital sum of Rs 200,000;

4. To pay the Petitioner all the above with interest at commercial rates continuing until full payment of all sums claimed with effect from the date of the first deductions made from the due dividends;

5. To pay the costs of this suit.

13. The Petition is supported by the affidavit of the Petitioner.
14. In their answer to the Petition, the Respondents do not dispute the different shareholdings of the parties in the Respondent Company.
15. The 3^rd Respondent goes on to admit that the 1^st and 2^nd Respondents have been, for several years, deducting a sum of money from dividends payable to the Petitioner as school fees repayments for the education of their children. However, they aver that it was approved to deduct a sum of money from the dividend payable to shareholders who were lent money to pay for the education of their children.
16. The Respondents refute the averments in the Petition regarding the altruistic intention of the late Mr J. R . Lee Kim Koon towards his grandchildren. They aver instead, that whether or not the late Mr. J. R. Lee Kim Koon wanted his grandchildren to have a good education, the use of company assets cannot be used for payment of private purposes.
17. Regarding the alleged change of circumstances following the death of Mr Kameline Lee Kim Koon, the activation of the loan repayment mechanism for the school fees and the targeting of the Petitioner and other shareholders, the Respondents aver that that the Petitioner and three other shareholders were not ‘made the target’ but they we