Parry v Dunn-Blatch and Others

In 1996, Alice Mary Parry (the applicant) and Rosalene Sybil Dunn-Blatch (first respondent), who were friends, established two companies: TRADSA (Pty) Ltd (a private company to hold their intellectual property rights as co-authors of educational course materials) and ITRISA NPC (a non-profit company offering distance learning programmes in international trade). Both were equal shareholders and directors in TRADSA, and directors of ITRISA. They received salaries from ITRISA, with a portion meant to compensate them for intellectual property owned through TRADSA. However, ITRISA did not directly compensate TRADSA for using its intellectual property. In 2012, Parry resigned as director of ITRISA but remained director and co-shareholder of TRADSA. On 10 June 2015, Parry and Dunn-Blatch signed a licence agreement (affidavit in terms of s 26(12)(a) of the Copyright Act 98 of 1978), confirming they were joint authors of copyright works, assigning ownership to TRADSA, and confirming the exclusive licence ITRISA had to use the copyright works. The agreement was silent on payment of royalties or compensation to TRADSA for ITRISA's use of the intellectual property. After her resignation, Parry insisted TRADSA was entitled to compensation from ITRISA for using its intellectual property. A dispute arose, and the relationship between Parry and Dunn-Blatch deteriorated. Parry approached the Gauteng Division High Court seeking relief under s 163 of the Companies Act 71 of 2008 (oppression remedy), arguing that Dunn-Blatch's conduct in running ITRISA was oppressive or unfairly prejudicial, depriving TRADSA of compensation due for ITRISA's use of TRADSA's intellectual property. She sought to vary the licence agreement to include compensation terms. The High Court found in Parry's favor, granting relief but referring the royalty rate to trial. The respondents appealed to the Full Court, which reversed the High Court decision, finding Parry failed to establish oppressive or unfairly prejudicial conduct under s 163(1) and that the proper applicant was TRADSA itself (locus standi issue based on Foss v Harbottle rule). Parry then applied for special leave to appeal to the Supreme Court of Appeal.

• Whether the applicant had locus standi to invoke the remedy under section 163 of the Companies Act 71 of 2008, or whether the proper applicant was TRADSA itself (application of the Foss v Harbottle rule)
• Whether the applicant established any act or omission by the respondents that resulted in conduct that is oppressive, unfairly prejudicial to, or that unfairly disregards her interests as contemplated in section 163(1) of the Companies Act
• Whether the court could vary the terms of the licence agreement under section 163(2) in the absence of a clear common intention regarding payment of royalties
• Whether ownership of the copyright works remained vested in TRADSA despite adaptations and modifications to the course material by ITRISA
• Whether there were special circumstances warranting the granting of special leave to appeal

The application for special leave to appeal was dismissed with costs.

1. Section 163 of the Companies Act 71 of 2008 expressly grants shareholders and directors locus standi to invoke the oppression remedy. The rule in Foss v Harbottle does not operate as a blanket bar to such applications, as section 163 must be interpreted to advance rather than limit the remedy, consistent with the objectives in section 7 of the Companies Act. 2. To succeed in obtaining relief under section 163, an applicant must prove: (a) the existence of impugned conduct by way of a positive act or omission; and (b) that the relevant conduct was either oppressive, or unfairly prejudicial, or unfairly disregards the interests of the applicant. The applicant cannot rely on vague allegations but must adduce clear evidence to establish these elements. 3. Conduct that is oppressive involves something done against a person's will and despite their objection. It is not conduct done with the person's acquiescence, consent, or cooperation. A party who voluntarily enters into an agreement cannot later claim that the terms of that agreement are oppressive, unfairly prejudicial, or unfairly disregard their interests, particularly where the agreement was signed without objection and with knowledge of its content. 4. Assignment of copyright under section 22(3) of the Copyright Act 98 of 1978 must be in writing and signed by or on behalf of the assignor. Adaptations or modifications to copyrighted works do not, by virtue of the adaptation alone, transfer copyright ownership to another entity absent a proper written assignment. 5. Where material disputes of fact exist on the papers that are incapable of resolution without oral evidence, a court cannot grant relief under section 163 on motion proceedings.

1. The Court noted that the reference to "related person" in section 163(1) is disjunctive (using "or"), meaning an applicant can locate impugned conduct against various categories of persons mentioned in that subsection, or against a related person. The reference need not be based on the respondent being a related person. 2. The Court observed that section 163 remedy is available even in instances where equal shareholders exist (quasi-partnership companies), not only to protect minority shareholders. Nothing precludes the Court from assisting an aggrieved shareholder who shares voting control equally with another shareholder. 3. The Court stated that interests under section 163 are wider than rights and include equitable considerations. This is significant because it indicates that the oppression remedy extends beyond strict legal rights to encompass broader equitable interests of shareholders and directors. 4. The Court noted that it was unnecessary to decide the arguments regarding prescription, the appropriateness of varying the licence agreement terms, or whether payment of royalties would contravene item 1(3) of Schedule 1 of the Companies Act (prohibitions on non-profit company incorporators receiving dividends), given the finding that Parry failed to establish the substantive requirements under section 163. 5. The Court emphasized that varying the terms of an agreement must be approached carefully to ensure the court does not end up making a contract for the parties other than the one they in fact made. This can only be justified where there is clear evidence supporting such variation. 6. The Court observed that a businesslike approach to section 163 demands that the remedy be available to all companies, including quasi-partnership companies (small private companies where shareholders are all directors and participate in management). 7. The judgment noted that denying the oppression remedy to an aggrieved shareholder would have a chilling effect on the Companies Act's efforts to balance the rights and obligations of all stakeholders, and would be contrary to the objects of the Act.

This case is significant for clarifying the scope and application of section 163 of the Companies Act 71 of 2008 (the oppression remedy) in South African company law. Key significance includes: 1. Locus standi under section 163: The judgment confirms that shareholders and directors have express statutory standing to invoke the oppression remedy, and the Foss v Harbottle rule does not operate as a blanket bar to such applications. The Court emphasized that section 163 must be interpreted to advance, not limit, the remedy, consistent with the Companies Act's objectives of balancing stakeholder rights. 2. Substantive requirements: The case clarifies that to obtain relief under section 163, an applicant must prove both the existence of impugned conduct and that such conduct is oppressive, unfairly prejudicial, or unfairly disregards the applicant's interests. The applicant cannot rely on vague allegations but must adduce clear evidence. 3. Voluntary agreements: The judgment reaffirms that a party who voluntarily enters into an agreement cannot later claim oppression based on terms they agreed to, particularly where the agreement was signed without objection and with knowledge of its content. 4. Quasi-partnership companies: The case demonstrates the application of section 163 to small private companies with equal shareholding (quasi-partnership companies), where the remedy is available even to shareholders with 50% voting control. 5. Copyright ownership: The case confirms that under section 22(3) of the Copyright Act, assignment of copyright must be in writing and signed by the assignor. Adaptations or modifications to copyrighted works do not automatically transfer copyright ownership absent proper written assignment. 6. Factual disputes: The judgment illustrates that material disputes of fact on the papers will prevent the court from granting relief under section 163 where those disputes are incapable of resolution without oral evidence. The case provides important guidance on the scope, limitations, and evidential requirements of the oppression remedy in South African company law.