Smyth v Mew

Coco Haven 1325 CC was a close corporation operating a pub in Randburg, with Richard James Smyth and Bernard Darren Mew as its only members, each holding a 50% interest. Mew invested R200 000 to acquire his interest and was a ‘sleeping partner’, while Smyth managed the business. Serious disputes arose when Smyth allegedly excluded Mew from access to financial records, failed to pay agreed monthly amounts, incurred unauthorised capital expenditure, conducted the business through a bank account in his daughter’s name, failed to register for statutory taxes, and used corporate funds for personal expenses. The relationship between the members broke down irretrievably. Mew applied for winding-up of the close corporation under s 68(d) of the Close Corporations Act 69 of 1984, while Smyth counter-applied under s 36 for termination of Mew’s membership and a compulsory buy-out of his interest. The High Court ordered final winding-up and dismissed the counter-application, prompting the appeal.

The appeal was dismissed with costs, and the final winding-up order of Coco Haven 1325 CC was confirmed.

The case clarifies the interaction between s 36 and s 68(d) of the Close Corporations Act and affirms that courts retain a wide discretion when deciding between winding-up and compulsory buy-out remedies. It underscores the evidentiary burden on a member seeking relief under s 36 and confirms that courts are not bound by contractual valuation mechanisms if insufficient information is provided.