Bayly and Others v Knowles

The respondent, Knowles, and the first appellant, Bayly, jointly acquired a controlling shareholding in South African Electronic Tracking Systems Ltd under a shareholders’ agreement which envisaged equal participation in management. Bayly was managing director and Knowles sales and marketing director. Their relationship deteriorated over time, culminating in Bayly excluding Knowles from management, cancelling his company benefits, and proposing to buy out Knowles’s shares for R2 million. Knowles rejected the offer without giving substantive reasons and counter‑proposed a mechanism aimed at enabling him to acquire Bayly’s shares or, failing that, liquidation. Knowles then applied to the High Court under s 252 of the Companies Act 61 of 1973 alleging unfairly prejudicial conduct and seeking orders regulating the disposal of shares, including compelling Bayly to sell his shares to him. The High Court granted relief in Knowles’s favour. Bayly and other shareholders appealed to the Supreme Court of Appeal.

The appeal was upheld with costs. The High Court’s order was set aside and replaced with an order dismissing the application, with Knowles ordered to pay the costs of the first to fifth respondents, including the costs of two counsel.

The case is a leading South African authority on shareholder oppression under s 252 of the Companies Act 61 of 1973. It establishes that a fair buy‑out offer made before or during litigation can defeat a claim of unfair prejudice, and it emphasises that courts must consider the interests of the company and all shareholders when crafting remedies. The judgment aligns South African law with English jurisprudence on unfair prejudice and discourages the use of oppression proceedings to force control of a viable company.