Mirchandani v Unica Iron & Steel (Pty) Ltd and Unica Iron & Steel (Pty) Ltd v Mirchandani

Mr Suresh Chanderbhan Mirchandani and Unica Iron & Steel (Pty) Ltd concluded a written profit share agreement in 2006 (backdated from 2007) in terms of which Mirchandani acted as technical director and shared in profits from Unica’s steel plant (Unica 1). He successfully commissioned and ran the plant until termination of the relationship in September 2010. After termination, Mirchandani reported Unica to authorities for non-compliance with the National Environmental Management Act 107 of 1998 (NEMA), leading to criminal charges and a plea and sentence agreement under which Unica paid penalties and rehabilitation costs. Unica sued Mirchandani for damages, alleging breach of the profit share agreement and breach of fiduciary duties (including reliance on s 218 read with s 76 of the Companies Act 71 of 2008). Mirchandani counterclaimed for accounting relief, alleging that contrary to lease agreements, Unica had debited his loan account with bond repayments and utilities instead of rental, thereby reducing his profit share, and further claimed unpaid salary and agreed wastage allowances. The High Court partially upheld Mirchandani’s claims and Unica’s damages claim. Both parties appealed.

In case no 802/2020, Unica’s appeal was upheld: the High Court’s judgment was set aside and Unica’s damages claim (claim 1) was dismissed with costs, including senior counsel, with additional costs orders against Unica. In case no 813/2020, Unica’s appeal against the accounting claims was dismissed with costs, including senior counsel.

The judgment clarifies the strict pleading requirements for claims under s 218 of the Companies Act and confirms that statutory liability cannot be relied upon if not properly pleaded. It reinforces the distinction between breach of fiduciary duty and mere incompetence, reaffirming that fiduciary breach requires disloyalty or infidelity. The case also underscores principles of contractual interpretation (Endumeni) and evidentiary burdens in alleging sham transactions.