The Western Cape High Court has ordered an independent investigation into governance and management disputes at Cape Town-based Gatti Ice Cream, after setting aside two resolutions passed by the company’s directors, reports the Cape Argus.

The case was brought by the Behnst Family Trust, which owns a 25% stake in the business, and director Basheer Harnekar.

It centres on allegations about company spending, financial controls and disciplinary proceedings involving senior managers.

The majority directors opposed the application and disputed the allegations.

In a judgment delivered on 5 October Judge Babalwa Mantame overturned two decisions taken by the directors of Gattis Ice Cream (Pty) Ltd following a dispute over financial and management practices at the Lansdowne manufacturer.

Gatti is the name behind Choc-oLina, Jolly Jelly and Surf Joy, ice lollies familiar to generations of Cape Town residents. The business began in 1965 when Essack Dawood Harnekar and his brother started making cold drinks and Playtime lollies in Lansdowne. The family later bought the Gatti brand.

Now the grandchildren are fighting over how the business is run, with the court ordering an independent investigator to examine the complaints.

The case was brought by the Behnst Family Trust, which holds a 25% stake in Gatti Ice Cream, and Basheer Harnekar, a director and former chairman of the company. The dispute involves allegations that a generator costing more than R3.6m and a R1.25m boiler were bought without the necessary board approval.

Harnekar also raised concerns about the company’s financial controls and decisions taken by senior managers.

The majority directors opposed the application and disputed his allegations.

Court papers also described disputes over disciplinary proceedings involving senior managers and an office camera installed by a family member that was subsequently removed.

Two resolutions adopted by the majority directors in January last year became central to the court proceedings.

One concerned the suspension of pending disciplinary proceedings against senior managers, while the other dealt with the appointment of a mediator, reports the Cape Argus. Mantame set aside both resolutions.

The judge found that Aiyoob Harnekar should have disclosed his interest and recused himself when the board discussed disciplinary action involving his son, Zameer.

Mantame found the resolution halting the disciplinary process was intended to protect Zameer and had been taken without following the required procedures. The judgment also revealed how the company was managed as control passed from the founders to their children and eventually to the third generation.

When younger family members assumed management responsibilities in 2019, the company had no formal governance framework or reporting structure between senior managers and directors.

The judge noted informal arrangements had worked when founder Essack Dawood Harnekar passed his knowledge and experience to his children. But the company had grown, and those arrangements were no longer suitable.

The majority directors argued the informal management system had been accepted by the family and that the business had operated successfully for decades. The court nevertheless found that the directors remained responsible for proper oversight of the company.

Although Mantame overturned the two board resolutions, she declined several other requests made by Basheer and the trust.

These included suspending senior managers, appointing Basheer as general manager and compelling a buyout of the trust’s shares. 

The judge also declined to appoint independent non-executive directors.

Full Cape Argus report