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[2020] ZAWCHC 36
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Marble Head Investments (Pty) Ltd and Others v Niveus Investments and Another (22760/2019) [2020] ZAWCHC 36 (28 April 2020)
IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
CASE
NO
:
22760/2019
In
the matter between
:
MARBLE
HEAD INVESTMENTS (PTY)
LTD
First Applicant
NPORT
INVESTMENT HOLDINGS (PTY)
LTD
Second Applicant
ESTELLE
WASSERFALL
Third Applicant
And
NIVEUS
INVESTMENTS
LTD
First Respondent
HCI
NIVEUS HOLDCO 1 (PTY)
LTD
Second Respondent
And
FERBROS
NOMINEES (PTY) LTD
First Intervening Applicant
STANDARD
BANK NOMINEES (RF) (PTY) LTD
Second Intervening Applicant
JUDGMENT
DELIVERED 28 APRIL 2020
SIEVERS
AJ
INTRODUCTION
[1]
The present application is brought in
two parts
.
This
judgment concerns
the
relief
sought
in part A of the notice of motion
in which the applicants seek leave in terms of section 115 (6)
,
read with section 115 (3) (b)
,
of the Companies Act 71 of 2008 (
"
the
Act") to
apply
for
the review of three resolutions passed at a meeting of the
shareholders of the first respondent on 4 December 2019 ("the
Resolutions
"
)
.
In part B the applicants ask that the
Resolutions be set aside.
[2]
The respondents oppose the relief sought
in part A on four grounds.
[3]
Firstly
,
respondents contend that the applicants
lack
locus standi
as
they are not the shareholders who
"
voted
against
"
the
Resolutions
,
within
the meaning of section 115 (3) (b) of the Act.
[4]
Secondly, it is contended that the
relief sought in prayers 1
.
2
and 1
.
3 of
part A of the notice of motion (the ordinary resolution authorising
the directors of the first respondent to implement the
special
resolution approving the scheme of arrangement and the ordinary
resolution to delist the first respondent from the JSE)
is
incompetent as the setting aside of these two resolutions does not
fall within the purview of section 115 (3)
(b) of the Act.
[5]
Thirdly, it was submitted that the
applicants were not acting in good faith in relation to this
application
,
within
the meaning of section 115 (6) (a) of the Act.
[6]
Fourthly
,
no facts were alleged in the founding
affidavit, which if proved, would support the order sought in terms
of section 115 (7) of
the Act as required by section 115 (6) (c) of
the Act.
LOCUS
STANDI
[7]
The first applicant holds a beneficial
interest in 900 116 ordinary no par value shares in the first
respondent. The shareholder
registered in the first respondent's
securities register in respect
of
these
shares is a nominee company
,
Standard
Bank Nominees (RF) (Pty) Ltd (
"
SB
Norn
"
).
[8]
The second applicant holds a beneficial
interest in 2 830 552 ordinary no par value shares in the first
respondent. The shareholder
registered in the securities register in
respect of these shares is also a nominee company
,
Ferbros Nominees
(
Pty)
Ltd (
"
FB
Norn").
[9]
The third applicant holds a beneficial
interest in 30 000 ordinary no par value shares in the first
respondent. The shareholder
registered in the securities
r
egister
in respect of these shares is FB Norn
.
[10]
SB Norn and FB Norn have brought
applicat
i
ons
to intervene
.
[11]
Section 112 (2) (a) of the Act provides
that a company may not dispose of all or the greater part of its
assets or undertaking unless
the disposal has been approved by a
special resolution of the shareholders
,
in accordance with section 115
.
[12]
Section 115 (1) of the Act provides that
a company may not implement a scheme of arrangement unless it has
been approved in terms
of section 115.
[13]
Section 115 (2) requires that the
proposed transaction must be approved by a special resolution adopted
by persons entitled to exercise
voting rights on such a matter
at a meeting called for
that purpose and by the court
,
to
the extent required and in the circumstances and manner contemplated
in subsections (3) to (6)
.
[14]
Section 115 (3) (b) provides that
despite a resolution having been adopted as contemplated in
subsection (2)
,
a
company may not proceed to implement that resolution without the
approval of a court
,
if
the court
,
on
an application within 10 business days after the vote by any person
who voted against the resolution
,
grants
that person leave in terms of subsection 6
,
to apply to a court for a review of the
transaction in accordance with subsection (7)
.
[15]
Section 1 of the Act defines -
15.1
"
voting
rights" as
"
the
rights of any holder of the company's securities to vote in
connection with that matter
,
in
the case of a profit company.
"
15.2
"
shareholder
"
is defined as
"
the
holder of a share issued by a company who is entered as such in the
certified or uncertified securities register
."
[16]
Section 115 (3) (b) provid
e
s
for a person who voted against the resolution to be granted leave to
apply to a court for a review of the transaction
.
In order to have voted against the
resolution the person must have had voting rights
.
To do so the person must be the holder
of the company's securities. To be such a shareholder the person must
be registered in the
securities register.
[17]
It is common cause that the applicants
are all beneficial owners of their shares in the first respondent.
The
r
egistered
shareholders are their nomine
e
s
,
SB Norn and
F
B Norn.
[18]
When the resolutions were put to the
first respondent's general meeting on 4 December 2019 it was the
registered shareholders who
exercised their voting rights
,
namely SB Norn and FB Norn.
[19]
In
Standard
Bank Nominees (RF)
(Pty)
Ltd
and Others v Hospitality Property Fund Ltd
[2019]
4 All SA 561
(GJ) a dissenting shareholder
,
for the purposes of section 164 of the
Act, applied to court for a determination of fair value in respect
off its shares. The court
held that it is the registered shareholder
who may exercise its right of approval and not the beneficial holder
of the shares.
[20]
In this regard it
is
to be noted that section 115 (8) of the
Act provides that the holder of any voting rights in a company is
entitled to seek relief
in terms of section 164 if that person (a)
notified the company in advance of the intention to oppose a special
resolution contemplated
in s 115 and (b) was present at the meeting
and voted against that special resolution.
[21]
In
Smyth
and Others v Investec Bank Ltd and Another
2018
(1) SA 494
(SCA)
the beneficial owner of shares brought an application under section
252 of the Companies Act 61 of 1973 which provided for members
of a
company to apply for relief. The court held that the purposive
interpretation of section 252 favoured by the beneficial owners,
that
given that it was the beneficial owner who sustained the prejudice
sought to be redressed by the section
,
such beneficial owner should be
considered a member for purposes of that section
,
could not be accepted. Such an
interpretation,
it
was held would do violence to the language of the provision by
placing upon it a meaning of which it was not reasonably capable.
In
conclusion Petse
JA noted that:
"
[55]
It was a simple matter for the appellants, if they wished to avail
themselves of the remedy provided for in s 252 of the Act
in their
own names
,
to
terminate the nomination of their respective nominees so as to
procure the entry of their names in the register of Randgold members
.
Instead
,
they obdurately elected
'
to
saddle what has proven to be an unruly horse
'
by seeking to invoke the s 252 remedy in
their own names as beneficial owners
.
They were ill-advised in doing so. As I
see it
,
for
as long as the nominees
'
names
remained in the register of members
,
the
beneficial owners lacked a legal
i
nterest
in the subject-matter of the litigation. (Compare
Bowring
NO v Vredendorp Properties
CC
and
Another2007
(5) SA 391 (SCA) ([2007]
ZASCA 80) paras 19-20
.
)
This is all the more so when regard
i
s
had to the fact that in any event the nominees are in truth advancing
the interests of the beneficial owners
.
In particular
,
they also act subject to the latter
'
s
instructions.
"
[22]
The applicants are accordingly not
persons who voted against the resolutions and accordingly do not
qualify to bring an application
in terms of section 115 (3) read with
115 (6).
THE
INTERVENTION APPLICATIONS
[23]
SB Norn and FB Norn have applied for leave to intervene as applicants
in order that, in the event that the applicants are held
to lack
locus standi
,
they might in their name be granted
the same relief as that sought by the applicants
.
[24]
On 19 December 2019 the beneficial
interest holders (
"
the
applicants
"
)
launched the main application in terms of section 115 of the Act for
leave to apply to court for a
review of
the three resolutions passed at a general meeting
of
first respondent's shareholders on 4
December 2019.
[25]
On 14 February 2020 FB Norn
in
its capacity as nominee shareholder for
second and third applicants launched an application in which it seeks
leave to intervene
as fourth applicant in the main application; to
the extent necessary condoning its non-compliance with the ten day
period provided
for in section 115 (3) (b) of the Act and its delay
in bringing the intervention application; and that in the event of
the relief
sought in the main application by the second and third
applicants being declined on the grounds that they lack
locus
standi,
that FB Norn be granted an
order on the same terms as that sought by the applicants. It was
lastly asked that any respondent who
opposes the intervention
application pay the costs thereof.
[26]
In
the
affidavit filed in support of the intervention it is recorded that
the intervening party, on the instructions of the beneficial
shareholders, seek the same relief which they seek on the same basis
upon which they
rely.
[27]
On 18 February 2020 SB Norn brought an
identical application in respect of first applicant in which it seeks
to be joined as the
fifth applicant
in
the main application.
[28]
The applicants filed confirmatory
affidavits in support of the intervention applications.
[29]
The respondents oppose
the
intervention applications. In their
heads
of
argument,
they submit that they should be dismissed on the following three
grounds.
[30]
The
first
ground
of
opposition to the intervention
applications is that
they
were
instituted out of time, that the
court
has no power to condone non-compliance
with the
time period in section 115 (3)
(b) of the Act
,
and
that no proper case has been made
out
for condonation
.
[31]
The intervention applications were
instituted well after the expiration of the ten business day period
in
section
115
(3) (b)
.
The
beneficial shareholders
,
who
lacked standing
,
had
timeously brought their application
.
[32]
The intervening app
l
icants
correctly submitted that the term
locus
standi
is used in two senses
.
(See
Herbstein
& Van Winson
,
The
Civil Practice of the High Courts and the Supreme Court of Appeal
,
5
th
edition
,
Vol 1 at 143-144). The first is the
capacity of a person to institute and defend legal proceedings
,
namely the capacity to litiga
t
e
,
whilst the second relates to a person
'
s
right to claim the relief sought.
[33]
In the present matter the applicants
have legal capacity to litigate but do not have the right in terms of
section 115 (3) (b) to
claim the relief sought. As a result
,
one
i
s
not dealing with a matter in which proceedings were a nullity from
inception
.
The
intervening parties are thus seeking to intervene in an application
that was brought timeously but in which the applicants cannot
succeed.
[34]
In any event
,
I am of the view that a court does have
the power to condone non compliance with the ten-day
t
ime
period. In
Toyota So
u
th
Africa Motors (Pty) Ltd v Comm
i
ssioner
,
SARS
2002
(
4) SA 281
(SCA) Howie JA stated as follows:
"
These
conclusions based
on
interpretation
are strengthened
,
of
course
,
by
the separate consideration that the High Court has inherent
jurisdiction to govern its own procedures and
,
more particularly
,
the matter of a
c
cess
to it by litigants who seek no more than to exercise their rights
.
It has been held that this
jurisdiction
pertains
not only to condonation of non-compliance with the time limit set by
a Rule but also a statutory time limit:
Phillips
v Direkteur van Sensus
1959 (3) SA
370
(A) at
374G-in fine
."
[35]
Thereafter in
Samancor
Group Pension Fund v Samancor Chrome
2010
(
4) SA 540
(SCA) it was held that:
"[19]
As stated earlier
,
the
High Court granted Samancor condonation for the late launching of the
application. Section 30P (1) of the Act stipulates that
any party
aggrieved by the determination of the adjudicator may apply to the
High Court for relief
,
within
six weeks after the date of the determination
.
The adjudicator
'
s
determination was made on 15 February 2005 and Samancor launched the
application only on 12 May 2008
.
Samancor launched their application
almost three and a half years after the date of the determination by
the adjudicator
.
[20]
The High Court
,
because
of its inherent jurisdiction
,
has
powers to govern its own procedures. The said jurisdiction pertains
not only to non-compliance with the Rules of Court
,
but also to statutory time limits-see
Toyota South Africa Motors (Pty) Ltd
v Commissioner
,
South
African Revenue Service.
In this
matter the High Court was entitled to deal with Samancor
'
s
application for condonation. As will appear hereunder
,
the High Court should not have granted
condonation because of prejudice to the Pension Fund and the fact
that the appeal was perempted."
[36]
This principal is given constitutional
recognition by s 173 of the Constitution. An obiter observance to the
contrary by Didcott
J in
Mohlomi v
Minister of Defence
[1996] ZACC 20
;
1997 (1) SA 124
(CC) at 133C-D
,
without
referral to authority, was referred to by Snyckers
AJ
in
Vlok NO v Sun International SA Ltd
2014 (1)
SA
487
(GSJ). Snyckers AJ
held
that:
"[54]
I believe that the role played by the
authority
apparently favouring the existence of
the free-floating power
,
and
by s 173
,
in
the interpretive process
,
apart
from adding the bias conceded by SISA
,
is this
:
when it comes to statutory provisions
that relate to what someone must do to engage the jurisdiction of the
court, all else being
equal
,
the
jurisdiction of
the
court
will tend to include the jurisdiction to condone non
-
compliance
with time periods for engaging it. The bias in favour of construing a
statutory time limit as providing for
,
or allowing
,
a power to condone is most compelling
when the provision in question deals with the subject's engaging the
courts to enforce rights
.
[101]
Critical is
Mr Trengove
'
s
submission that, if a condonation
power were to be read into s 124 (2)
,
relatively radical engineering would be
required to be effected also to other parts of the section
-
especially ss (5)
.
Reading a condonation power into ss (2)
would in effect require relegislating the transaction mechanism set
out in the section
.
[110]
I am therefore of the view that
,
despite
the power of the principles relied upon by the plaintiffs, and
despite the fact that the words of the subsection itself
are
concededly neutral and contain no express exclusion of a power to
condone
,
the exclusion of a power to condone must
be implied into the subsection by way of necessary construction
."
[37]
In the present matter a condonation
power would not require any engineering to be effected to other parts
of
Section
115
and thus
the
exclusion
of a power to condone need not be implied into the subsection by way
of necessary construction. To do so would preclude
a person from
pursuing a remedy before a court. To imply such an
inclu
sion
would be
to
adopt
an approach contrary to that prescribed in section 5 (1) of the
Act,
which requires the Act to be interpreted and applied in a manner
which gives effect to the purposes set out in section 7.
[38]
Accepting that the court has the power
to do so the next issue is whether a basis has been established to
grant condonation? An
applicant for condonation must show good cause.
This requires
,
firstly
,
an affidavit explaining the delay which
furnishes a sufficiently full explanation of its default to enable
the court to understand
how it really came about and to assess its
conduct and motives (see
Laerskool
Generaal Hendrick Schoeman v Bastiaan Financial Services (Pty) Ltd
2012 (2) SA 637
(CC) at 640 H-1)
.
Secondly
,
the
applicant must satisfy the court that its action is clearly not ill
founded (see
Dalhouzie v Bruwer
1970
(4) SA 566
(c) at
571 F
,
572
C). Thirdly
,
the
grant of the indulgence sought must not prejudice the other parties
in a way that cannot be compensated for by a suitable order
as to
postponement and
costs.
[39]
In each intervention application a
detailed and manifestly honest explanation
is
given as to why the nominee shareholders were not initially cited as
the applicants
.
Neither application is ill founded
and
the respondents
are not prejudiced.
The
intervention
applications have been
enrolled with the main application to ensure that there will be no
delay
in
the
finalisation of the matter
.
[40]
The second ground upon which the
respondents oppose the intervention application is that the founding
affidavits in the intervention
applications fail to aver that the
registered shareholders have their own direct and substantial
interests in the main application
and fail to make out a
prima
facie
case
.
It is submitted by the
respondents
that the intervening parties merely
piggyback on the alleged interest of parties who lack
locus
standi
and on the averments made by
those parties in the main application.
[41]
An applicant who seeks leave to
intervene in terms of Uniform rule 12 must demonstrate a direct and
substantial interest in the
subject matter of the application. In
Sarda v Land Claims Commissioner
2017
(1)
SA 1
(CC)
Jafta
J stated as follows:
"
[9]
It
is now
settled that an applicant for intervention must meet the direct and
substantial interest test in order to succeed
.
What constitutes a direct and
substantial interest is the legal interest in the subject-matter of
the case which could be prejudicially
affected by the order of the
court. This means that the applicant must show that it
has
a right adversely affected or likely to
be affected by the order sought. But the applicant does not have to
satisfy the court at
the stage of intervention that
it
will succeed
.
It is sufficient for such applicant to
make allegations which, if proved
,
would
entitle it to relief.
[10]
If
the applicant shows that it has some
right which is affected by the order issued
,
permission to intervene must be granted.
For it is a basic principle of our law that no order should be
granted against a party
without afford
i
ng
such party a predecision hearing. This is so fundamental that an
order is generally taken to be binding only on parties to the
litigation
.
[11]
Once the applicant for intervention shows a direct and substantial
interest in the subject-matter of the case, the court ought
to grant
leave to intervene. In
Greyvenouw
CC this principle was
formulated in these terms:
'
In
addition
,
when,
as in this matter
,
the
applicants base their claim to intervene on a direct and substantial
interest in the subject-matter of the dispute, the Court
has no
discretion: it must allow them to intervene because it should not
proceed in the absence of parties having such legally
recognised
interests."
'
[42]
The notices of motion in the
intervention application contain a prayer that in the event that the
court decides to grant the relief
sought in the main application to
the first three applicants in the main application, on the grounds
that they lack
locus standi
,
that the intervening parties be
granted an order in the same terms as that sought by the said
applicants in part A of the main application.
[43]
It
is
the
respondent's case that the beneficial shareholders lack the necessary
locus standi
to
bring an application in terms of section 115 (3) and that it is the
registered shareholders who must do so
.
The intervening parties are thus seeking
to do so in their capacity as nominees for the beneficial
shareholders, and on their instructions.
They would not have been non
suited had they brought the main application in their own names from
the outset. They are advancing
the interests of the beneficial owners
as envisaged by Petse JA in
Smyth and
Others
supra
.
They thus clearly have a direct
legal interest.
To
require them to
set
out
the detail of the merits of the main application in their
intervention application would serve no useful purpose and result
in
unnecessary duplication.
[44]
The third ground upon which the
respondents oppose the intervention applications is that it has not
been established that the applicants
'
attorneys of record have the authority
to represent the intervening parties or that the deponents to the
founding affidavits in
the intervention applications have authority
to represent the intervening parties in these proceedings
.
[45]
In
Eskom
v Soweto City Council
1992 (2) SA
703
(WLD) Flemming DJP held
at
705 C as follows
:
"
I
find the regularity of arguments about the authority of a deponent
unnecessary and wasteful.
"
[46]
He continued at 705 E to I that:
"
The
care displayed in the past about proof of authority was rational. It
was inspired by the fear that a person may deny that he
was party to
litigation carried on
i
n
his name. His signature t
o
the
process
,
or
when that does not eventuate
,
formal
proof of authority would avoid undue risk to the opposite party
,
to the administration of justice and
sometimes even to his own attorney
.
(Compare
Viljoen
v Federated Trust Ltd
1971 (1
)
SA 750
(
O)
at 752D-F and the authorities there q
u
oted
.
)
The
developed view
,
adopted
in Court Ru
l
e
7(1)
,
is
that the risk is adequately managed on a different level. If the
attorney is authorised to bring the application on behalf of
the
applicant
,
the
application necessarily is that of the applicant. There is no need
that any other person
,
whether
he be a witness or someone who becom
e
s
involved especially in the context of authority
,
should additionally be authorised. It is
therefore sufficient to know whether or not the attorney acts with
authority
.
As
to when and how the attorney
'
s
authority should be proved, the Rule-make made a policy decision
.
Perhaps because the risk is minimal that
an attorney will act for a person without authority to do so
,
proof is dispensed w
i
th
except only if the other party challenges the authority
.
See Rule 7(1). Courts should honour that
approach. Properly applied
,
that
should lead to the elimination of the many pages of resolutions
,
delegations and substitutions still
attached to applications by some litigants
,
especially certain financial
institutions
.
(See
further
Ganes & Another v Telekom Namibia Ltd
2004 (3) SA
615
(SCA) para 19)
[47]
In the present matter respondents
delivered Rule 7
(
1)
notices in respect of the intervention applications dated 24 February
2020
.
Resolutions
passed by the intervening parties were thereafter filed ratifying all
actions taken by their representatives and attorneys
were then filed
together with a power of attorney
.
There
is thus no merit in this ground of opposition
.
[48]
As a result FB Norn and SB Norn have
sat
i
sfied
the requirements for leave to
i
ntervene
and to join the main application as fourth and fifth ap
p
l
i
cants
.
THE
BASIS FOR THE RELIEF SOUGHT IN
T
HE
MAIN APPLICATION
[49]
Section 115
(
6)
and (7
)
of
the Act provide that:
"(6)
On an application contemplated in subsection (3) (b)
,
the court may grant leave only if it is
satisfied that the applicant-
(a)
is acting in good faith;
(b)
appears prepared and able to sustain the
proceedings
;
and
(c)
has alleged facts which, if proved
,
would support an order in terms of
subsection (7)
.
(7)
On reviewing a resolution that is the
subject of an application in terms of subsection (5) (a), or after
granting leave in terms
of subsection (6)
,
the court may set aside the resolution
only if-
(a)
the resolution is manifestly unfair to
any class of holders of the company
'
s
securities; or
(b)
the vote was materially tainted by
conflict of interest
,
inadequate
disclosure
,
failure
to comply with the Act, the Memorandum of Incorporation or any
applicable rules of the company
,
or
other significant and material procedural irregularity."
[50]
In the main application the applicants
seek leave in terms of sections 115 (3) (b) and 115 (6) of the Act
for leave to apply to
court for a review of three resolutions of
first respondent passed at a general meeting of shareholders on 4
December 2020.
[51]
At the meeting the following resolutions
were passed:
(1)
a special resolution approving a scheme
of arrangement in terms of section 114 (1) of the Act proposed by the
board of directors
to its shareholders
;
(2)
an ordinary resolution author
i
sing
the directors of first respondent to implement the company's
resolutions; and
(3)
an ordinary resolution to delist the
first respondent's shares from the main board of the securities
exchange operated by the Johannesburg
Securities Exchange.
[52]
The passing of the resolutions
constituted the shareholders
'
acceptance
of an offer by the second respondent to acquire for R2.40 per
share
all the
issued
shares save for those held by two
excluded shareholders
,
Hosken
Consolidated Investments Ltd and Johnnie Holdings Management Services
(Pty) Ltd
.
[53]
The respondents contend that the relief
claimed in the notice of motion is overbroad and incompetent as
section 115 (3)
(b)
authorises
the review
inter alia
of
special resolutions approving schemes of arrangement and other
fundamental transactions. It does not authorise a review of the
implementat
i
on
and the delisting resolutions.
[54]
The applicants contend that on a proper
construction of section 115 (7
)
any
resolution may be set aside if an applicant has demonstrated what is
contained in
s
115
(7) (b)
.
This
not correct. Part A of Chapter 5 of the Act (which includes s 115)
provides for the approval for certain fundamental transactions.
This
is reflected in section 115
(1)
of
the Act. It is accordingly only the relief sought in respect of the
special reso
l
ution
approving the scheme of arrangement that is competent.
[55]
There remain the three requirements set
out in section 115 (6) of the Act
,
namely that the court is satisfied that
the applicant-
(a)
is acting in good faith;
(b)
appears prepared and able to sustain the
proceedings
;
and
(c)
has alleged facts which
,
if proved
,
would support an order in terms of
subsection (7).
GOOD
FAITH
[56]
The respondents contend that the
applicants have failed to discharge the onus with regard to the
requirement that the court be satisfied
that they are acting
i
n
good faith by virtue of the following submissions.
(1)
The central complaint in the applicants
'
founding affidavit is that the offered
price for shares was too low
.
But
the appropriate remedy for this complaint would be to assert a
dissent
i
ng
shareholder
'
s
appraisal rights under section 164 of the Act
,
not to seek to apply for leave to review
a fundamental transaction in terms of section 115(3)(b)
.
(2)
The first and second applicants have not
successfully triggered section 164 by virtue of the same deficiency
that has beset their
attempt to seek leave to review the transaction
under section 115
,
namely
an incompetent initiation by the beneficial interest holders rather
than the registered shareholders
.
Their
failure to trigger section 164 does not mean that they may
bona
fide
pursue relief under section
115. Nor can the first and second applicants legitimately claim that
they have
"
no
option but to seek the relief n
o
w
s
ough
t
in the
a
pplic
a
ti
o
n
"
.
That assertion is in any
e
vent
belied by the
fact that, in the same
breath, the first and second applicants persist in an attempt to
trigger section 164 in parallel to the main
application.
(3)
A shareholder who has sent a demand in
terms of sections 164(5) to (8)
"has
no further rights in respect of
those shares
" .
Since
the first and second applicants adopt the position that they sent a
lawful demand in terms of sections 164(5) to (8), they
have no
further rights
in
respect
of the shares
.
They have nevertheless sought to exercise their rights in the shares
by bringing this application in terms of section 115(3)(b).
(4)
The first and second applicants are thus
playing fast and loose with two discrete remedies under the Act
,
as well as motivating these actions with
inconsistent and implausible averments. That is not consonant with
good faith. Their conduct
is
,
consistent
with
,
and
best explained by, a concerted effort on the part of the applicants
to scupper the corporate reforms properly and lawfully proposed
by
the circular and adopted at the general meeting
.
The applicants have failed to explain how their conduct could be
construed otherwise
,
or
thus
rebut
the inferences raised. They have accordingly not established their
good faith
,
as
section 115(6) requires
.
[57]
By virtue of this court's finding above
that the first three applicants backed
locus
standi
to apply
in
terms of section
115
(3) the competent relief
(in
respect of the special resolution) is
now sought at the instance of SB Norn and FB Norn who have been given
leave to intervene as
fourth and fifth applicants
.
As they never sent a demand in terms of
sections 164
(5)
to
(8) of the Act they cannot be hit by the bar in section 164 (9) of
the
Act. They are not acting in bad
faith, nor
i
s
there evidence of bad faith on behalf of
the first two
app
lica
nts
which can be imputed to them. The
requirement section
115 (6) (a)
is
accordingly met.
[58]
With regard to the requirements of
section
115 (6) (b)
,
the first and second applicants are
companies of means who are prepared and able to sustain the
proceedings. The same applies
to
the
third applicant. Their nominees are
thus
clearl
y
in
a
position to do so
.
[59]
Have there been facts alleged
which
,
if proved
,
would support an order in terms of
section 115
(7)?
The
facts alleged to support an order under section 115
(7)
must demonstrate that
(i)
the resolution is manifestly unfair to
any class of holders of the company
'
s
securities
;
or
(ii)
the
vote was materially tainted by conflict of interest
,
inadequate disclosure, failure to comply with the Act, the Memorandum
of Incorporation or any applicable rules of the company,
or
other
significant and material procedural
irregu
la
rity.
[60]
The word
"
or
"
in section 115 (7) means that an
applicant need only demonstrate
one
of
either
(i)
or
(ii)
above.
[61]
It
is
common cause that Section
115
(7) (a)
is not applicable in the present
matter as there
is
only
one class of
sha
reholder
.
[62]
The stated grounds for
the
review
proposed are the low scheme
consideration and the discounted net asset value
(NAV)
of the first respondent.
[63]
The applicants allege the following
:
(1)
The applicants dispute
the
fairness of the low scheme
consideration, offered at a deep discount to NAV to shareholders
under the scheme.
(2)
They wish to be paid fair value for
their shares and contend that the current offer does not remotely
represent fair value.
(3)
Th
i
s
is
because
,
they contend
,
the NAV of La Concorde Holdings
must
be taken into account when calculating
the value of the shares
,
in
light of first
respondent's
majority
stake in La Concorde Holdings
.
(4)
This NAV can be determined with
reference to the La Concorde interim financial statements
,
which reflect an NAV of R224 000 000
.
Artworks to the
(conservative)
value of R41 000 000 must
be added back
,
and
the value of the Paarl Valley Bottling plant must be adjusted
,
by adding back another R9 000 000. These
additions/adjustments substantially increase the NAV - without even
taking into account
the addi
ti
onal
fact that fixed properties reflected in the interim financial
statements are probably worth far more
.
(5)
Also significant is that the Hosken
Consolidated Investments Ltd (
"
HCI
"
)
offer to minority shareholders of La Concorde Holdings da
t
ed
20 November 2019 was for R3
.
25
a share
.
(6)
Moreover
,
the scheme circular reflects the value
per share as R3
.
28
,
which includes cash of R2.14
,
at least. This is calculated as follows
:
mid-year
results
reflect cash of approximately R215 000 000
,
to which must be added the R40 000 000
proceeds from a transaction concerning Alphawave
,
bringing cash or cash equivalents to
R255 000 000, which equates to R2.14 per share.
(7)
This
,
it
is submitted, clearly demonstrates how manifestly untenable was the
offer of R2.40 per share; it implies that a mere R0.26 per
share is
the value of the remaining assets. This is clearly inconsistent with
HCl
'
s own
offer made to the La Concorde Holdings minorities.
(8)
First respondent has also sought to
value its interest in Betcoza at R25 000 000, even though it has
received independent third
party offers for Betcoza in the region of
R50 000 000.
(9)
If first respondent was adopting a fair
market value approach to the presentation of its interim balance
sheet in September 2019
in order to justify the write down of Paarl
Valley Bottling
,
then
it is inconsistent that the value of Betcoza would not have been
increased to the value of the independent third party offers.
(10)
There is also an unaudited deferred tax
error in respect of which no information
i
s
provided.
(11)
Thus
,
the
R3
.
28 per
share referred to in the circular should clearly be increased in
light of what is stated above regarding the higher NAV of
La Concorde
Holdings coupled with the higher value of Betcoza.
(12)
The only inference
that
can plausibly be drawn is that the first
respondent
i
s
aware that the scheme consideration is
well below true market value
,
and
so is actively blocking any interrogation of the issue
;
if it were confident that the scheme
price was fair to shareholders
,
it
would not have hesitated
to
make an offer to the dissenting shareholders for their shares in
terms
of
s164(11) as part of the appra
i
sal
process
,
accompanied
by a statement showing how the value is determined.
It
elected not to do so.
(13)
The first respondent was called on to
disclose the valuation methodology and calculat
i
ons
used to arrive at the scheme consideration
,
with a view to
refuting
the inference that the first
respondent has concerns as to the scheme consideration but has not
done
so.
(14)
In the premises
,
this artificially low scheme
consideration alone warrants the grant of the relief sought.
[
64]
These allegations
,
if
proved
,
would
support an order in terms of section 115 (7)
as
the vote was clearly tainted by
inadequate
disclosure
.
The requirements of section 115(6)(c) of
the act are accordingly satisfied
.
[65]
I
t
is
accordingly ordered that:
(a)
Ferbros Nominees
(Pty)
Ltd is granted leave to intervene as the
fourth
applicant
;
(b)
Standard
Bank Nominees
(RF) (Pty)
Ltd
is
granted
leave to intervene as the fifth applicant
;
(c)
the
fourth and fifth applicants are granted leave in terms of
section
115 (6)
read
with section 115
(3)
(b)
of the Companies Act
,
71
of 2008
to apply to court for a review of the special resolution of the
shareholders of the first respondent on 4
December
2019 approving the
scheme
of arrangement in terms of
section
114
(
1)
read with section 115 of the Companies Act
;
(d)
the
fourth and fifth applicants
are
permitted to apply on the same papers,
duly supplemented within 15 days of this order for the relief sought
in
part B.
(e)
in
respect of the costs
of
part
A of this application:
(i)
the
first
,
second and
third
applicants
,
jointly and severally
,
shall pay the respondents' costs
incurred in opposing their applications
;
(ii)
the
respondents jointly and severally
,
shall
pay the fourth and fifth applicants
'
costs, including the
costs
of the
intervention
applications
;
(iii)
each
award of costs shall
include
the
costs of two counsel
,
where
briefed
.
SIEVERS
AJ
JUDGE
OF THE HIGH COURT