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[2011] ZAGPJHC 12
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Mogale Alloys (Pty) Ltd v Nuco Chrome Bophuthatswana (Pty) Ltd and Others (2008/13094) [2011] ZAGPJHC 12; 2011 (6) SA 96 (GSJ) (11 March 2011)
SOUTH GAUTENG HIGH COURT,
JOHANNESBURG
REPORTABLE
CASE NO
:
2008/13094
DATE:
11/03/2011
In the matter between:
MOGALE
ALLOYS (PTY)
LTD
.......................................................................
Applicant
and
NUCO
CHROME BOPHUTHATSWANA (PTY) LTD
.........................
First
Respondent
DANIELINA
CORNELIA
BUTLER
...................................................
Second
Respondent
PHILLIPUS
ARNOLDUS
OLIVIER
......................................................
Third
Respondent
GERRIT
MARTHINUS VAN
ZYL
.......................................................
Fourth
Respondent
UTHANGO
MINING RESOURCES (PTY) LTD
..................................
Fifth
Respondent
MARTIN
ROSENBERG
........................................................................
Sixth
Respondent
PREMIER,
NORTH
WEST
..............................................................
Seventh
Respondent
______________________________________________________________
J U D G M E N T
______________________________________________________________
COPPIN, J
:
[1] This is a trial action in
which the plaintiff (“
Mogale
”)
is claiming specific performance of a written agreement (“
the
agreement
”)
entered into between itself, a Mr Butler
1
,
and the first defendant (“
Nuco
”)
and in terms of which Butler sold to Mogale 33 per cent of the
shareholding in Nuco which Butler held. The main claim is
for
delivery of the shares purchased. Mogale also claims, as alternative
relief, repayment of the amount of R3 million which it
paid for the
shares in terms of the agreement.
[2] It is not disputed that at
the time of the sale Butler owned at least 52 per cent of the issued
shares in Nuco. Notwithstanding
ambiguity in the wording of the
agreement it was common cause that the intention was that Mogale was
purchasing 33 per cent of
the shares in Nuco from Butler.
THE ISSUES
[3] Nuco and the second and
third defendants (“the executors”) are the only
defendants defending the action. The other
parties who have been
cited as defendants are not defending the action, or have elected to
abide the decision of the court. For
convenience I shall refer to
Nuco and the executors collectively as “ the defendants”.
[4] The defendants have relied on
several defences in their plea. However, at the hearing before me,
the defences were whittled
down to a denial that two suspensive
conditions in the agreement had been fulfilled, namely, a suspensive
condition relating to
ministerial approval for the disposal of a
controlling interest in a company as contemplated in s. 11(2) of the
Minerals and Petroleum
Resources Development Act 28 of 2002 (“
the
MPRDA
”), and a
suspensive condition relating to the pre-emptive rights of other
shareholders in Nuco as contemplated,
inter
alia,
in Article 64 of
the Articles of Association of Nuco (“
the
articles
”)
[5] The plaintiff contends, in
essence, that ministerial approval as contemplated in s. 11(2) of the
MPRDA was not required because
there was no change in the controlling
interest in Nuco as a result of the agreement and that the condition
relating to pre-emptive
rights had been fulfilled. In this regard the
issue was whether one of the shareholders in Nuco, namely the Royal
Bafokeng Nation
(“
the
RBN
”), had a
pre-emptive right. The plaintiff’s contention was that the RBN
did not have such a right. The plaintiff contended,
in the
alternative, that if RBN had such a right, the condition should be
held to have been fictionally fulfilled, because Butler
(and his
agents) deliberately prevented this condition from being fulfilled.
[6] In terms of clause 5.3 of
the agreement it was contemplated that if any of the suspensive
conditions in the agreement were
not fulfilled within a period of 180
days from the date of signature of the agreement, then the agreement
was to lapse and be of
no force and effect.
BACKGROUND
[7] It is common cause that Nuco
is a private company which has a prospecting right, in terms of the
MPRDA, to prospect for minerals
or precious metals, such as chrome
ore and platinum group metals, on certain farms in the North West
Province which fall within
the area of the RBN.
[8] It was also common cause
that in terms of its Memorandum of Association Nuco had an authorised
share capital of R50 000 divided
into 50 000 ordinary shares (par
value) of R1,00 and that immediately before the signing of the
agreement the shareholding was
as follows:
Butler – holder of 52 per cent of the shares.
Fourth defendant (“
Van
Zyl
”) –
holder of 12 per cent of the shares.
Fifth defendant (“
Uthango
”)
– holder of 26 per cent of the shares.
RBN – holder of 10 per cent of the shares.
[9] It was also common cause
that after the agreement was signed, a shareholders agreement (“the
Uthango shareholders’
agreement”) was entered into
between,
inter alia
,
Butler, Nuco, and Uthango (Pty) Ltd (“Uthango”) in terms
of which Butler sold 26 per cent of the shareholding in Nuco
to
Uthango; that the Uthango shareholders’ agreement was
subsequently cancelled and that the 26 per cent was restored to
Butler so that Butler’s shareholding in Nuco was increased to
78 per cent. It is common cause that Butler became ill and
that he
subsequently died.
[10] Mogale is a private company
and at the time of the signing of the agreement, one Johan Frederick
Oosthuizen (“
Oosthuizen
”)
was its managing director and represented Mogale in entering into the
agreement. It was not disputed that Oosthuizen subsequently
resigned
as the managing director of Mogale but is still a director of that
company.
THE EVIDENCE AND THE
ONUS
[11] The evidence tendered
consists mainly of documentary evidence. Oral evidence of Oosthuizen
was also led by the plaintiff and
the defendant called two witnesses,
namely Mr Van Niekerk (“
Van
Niekerk
”), an
attorney who assisted Butler with the agreement and who represented
Butler subsequently, as well as one Mr Rorke West-Evans
(”
West-Evans
”)
a chartered accountant, who acted at the time, and since about 2006,
as company secretary for Nuco.
[12] The oral evidence was
largely common cause or not seriously contested. I will discuss the
oral evidence to the extent that
it is relevant.
[13] As regards the
onus,
it was common cause that the plaintiff bore the
onus
including of proving that the conditions, which were in issue, had
been fulfilled.
ELABORATION ON THE ISSUES
The condition relating to ministerial consent
[14] Clause 5.1.2 of the
agreement provides that it is subject to “
the
approval of the Department of Mineral and Energy Affairs of the sale
equity to the purchaser, to the extent such approval is
required by
law
”.
[15] The parties were
ad
idem
that this clause
was a reference to s. 11(1) of the MPRDA. That section provides:
“
A
prospecting right or mining right or an interest in any such right,
or controlling interest in a company or close
corporation, may not be ceded, transferred, let, sublet, assigned,
alienated or otherwise
disposed of without the written consent of the
Minister
, except in the
case of a change of controlling interest in listed companies.
”
2
(emphasis added)
[16] It is common cause that
neither the Minister, nor the Department of Minerals and Energy, has
consented to the sale of the
shares from Butler to Mogale as
envisaged in the agreement and that Nuco is not a listed company.
[17] On behalf of the plaintiff
it was submitted that the Minister’s written consent was not
required. The contention was
that in terms of the agreement there was
no transfer of a controlling interest from Butler to Mogale. With
reference,
inter alia
,
to s.12(2) of the Competition Act
3
,
as well as the Diamonds Act
4
,
it was submitted on behalf of the plaintiff that the phrase,
“
controlling
interest
”, means
something other than a shareholding of more than 50 per cent. The
submission was further that “
controlling
interest
” in s.
11(1) of the MPRDA, could imply different things, depending on the
circumstances. The fact that Butler held 52 per
cent (or 78 per cent)
of the shares, according to this argument, did not necessarily make
his interest a “
controlling
interest
”.
Reliance was placed on the meaning given to the term “
control
”
in s. 12(2) of the Competition Act
5
.
That section lists different forms of control, including beneficial
holding of shares
6
;
entitlement to vote a majority of votes
7
;
ability to appoint or to veto the appointment of the majority of the
directors in a company
8
and being a holding company of a subsidiary firm in terms of s. 1 of
the Companies Act
9
.
[18] Section 1 of the
Diamonds Act
10
defines
the term ”controlling interest” ,as used in that Act, in
relation to a company as meaning:
“
(i) more than 50 per cent of the issued share capital of
the company;
(ii) more than half of the
voting rights in respect of the issued shares of the company; or
(iii) the power, either
directly or indirectly, to appoint or remove the majority of the
directors of the company without the concurrence
of any other
person.”
11
[19] Counsel for the plaintiff,
Mr Solomon SC, who appeared with Mr. K. N. Tsatsawane, submitted that
the different forms of control
had to be considered. To determine
whether Butler had control one had to consider whether he was
entitled to vote a majority of
votes, or whether he had the ability
to appoint a majority of directors. Since Butler did not have such
entitlement or ability,
he was not in control of Nuco (i.e. even
though he held 52 per cent (or 78 per cent) of the issued share
capital of Nuco). Furthermore
Butler only had the power to appoint
one director to the board of Nuco.
[20] Mr Solomon further
submitted that it was not Butler’s position after disposal of
the shares that had to be looked at,
but Mogale’s position upon
acquisition of the shares in terms of the agreement. According to
the argument, the 33 per cent
shareholding, acquired by Mogale from
Butler in terms of the agreement, was not the controlling interest.
Furthermore, Mogale could
only appoint a single director in terms of
clause 13 of the agreement, which provides for a voting pool, and
that did not have
the effect of vesting the controlling interest in
Mogale. In terms of clause 13 of the agreement Butler, Mogale and Van
Zyl each
only had one vote and Mogale had no veto. It was also
submitted that there was no evidence that Mogale was to be given
shares
of a class that would give it greater voting rights. The
submission was further that if one looked at the number of shares one
had to look at the number that were involved at the time of making
the application to the Minister for the necessary written consent.
The application to the Minister could have been made at any time
within the 180 days, i.e. from the date of signing the agreement.
The submission was that within that time Butler had 45 per cent of
the shares ( i.e. after the 26 per cent was taken back from
Uthango), Mogale was only going to have 33 per cent, and that 45 per
cent of the shareholding (i.e. Butler’s shareholding
after the
sale of the 33 per cent) was not a “controlling interest”.
[21] The defendants’
argument (presented by Mr. Brett SC, who appeared with Mr. N. Segal),
on this point, was briefly the
following. Clause 13 of the agreement
(i.e. the voting pool provision) had the effect of vesting control
over Nuco in Mogale and
so did clauses 7, 12.1 and/or 12.2 and/or
12.4 and/or clause 9.1.3 of the agreement. The submission was
further that s. 11(1)
of the MPRDA was not directed at the acquirer
of the interest, because if that was so, the section would have said
so expressly.
The argument was that the section instead focused on
the disposer of the interest. With regard to the meaning of the
phrase “
controlling
interest
” in s.
11(1) of the MPRDA, the defendant referred to a number of decisions
and statutes in support of its argument that the
Minister’s
consent was required for the disposal of the shares to Mogale as
contemplated in the agreement.
12
[22] Relying on the
aforementioned authorities the defendants submitted that the term
“
controlling
interest
” in s.
11(1) refers to a majority shareholding in a company which owns
prospecting or mining rights. At the date of the
agreement Butler
owned 52 per cent of the shares, i.e. the majority of the shares in
Nuco, and by selling 33 per cent to Mogale,
Butler was no longer
going to be the majority shareholder of Nuco and would no longer be
in control of that company. The voting
provision in clause 13 of the
agreement also had the effect of depriving Butler of control of Nuco.
Accordingly, so it was argued,
since the sale was going to have the
effect of removing the controlling interest from Butler, the
Minister’s written consent
was required.
[23] The issues raised calls for
an interpretation of s.11(1) of the MPRDA. It is trite that when
interpreting words in a statute
they must be interpreted within their
context. The “
context
”
refers not only to the language of the remainder of the statute but
also to the scope, purpose and background of the statute.
13
[24] The objects of the MPRDA
are set out in s. 2. Section 3 of that Act provides that mineral and
petroleum resources are the
common heritage of the South African
people and the State is the custodian thereof. The State,
represented by the Minister of
Minerals and Energy, may,
inter
alia
, “
grant,
issue, refuse, control, administer and manage
”
any prospecting or mining right. In terms of s. 3(3) the Minister is
obliged to ensure the sustainable development of South
Africa’s
mineral and petroleum resources within a framework of national
environmental policy norms and standards, while promoting
economic or
social development.
[25] Section 4 of the MPRDA
provides,
inter alia
,
that when interpreting a provision of that Act any reasonable
interpretation which is consistent with the objects of that Act
must
be preferred over any other interpretation which is inconsistent with
the objects of that Act.
[26] Chapter 4 of the MPRDA
deals with regulation. Section 9, which falls within that chapter,
deals with the processing of applications
for the rights envisaged
there. Section 10 deals with consultation with affected and
interested parties. Persons, have a right,
inter
alia
, to object to the
granting of a prospecting right and such objections have to be
considered by the Minister when deciding, in the
terms of s. 10(2)
read with section 17 of the MPRDA, whether to grant or refuse the
application for a prospecting right. ( I refer
here specifically to a
“prospecting right
”,
because Nuco had a prospecting right).
[27] Section 11 of the MPRDA has
a heading, “
Transferability
and Encumbrance of Prospecting Rights and Mining Rights
”.
In summary, the purpose of s. 11 appears to be for the regulation of
the transfer and encumbrance of those rights. Section
11(1) places,
inter alia
,
a prospecting right, and an interest in such a right, or “
a
controlling interest in a company or close corporation
”,
on the same footing. The section provides that such rights, or
interests, may not be disposed of, in effect, by any means
whatsoever, without the written consent of the Minister, unless the
company is a listed company.
[28] Section 11(2) gives an
indication, albeit indirectly, of the purpose of ss. (1). The
subsection provides that in the case
of the disposal of a right (i.e.
referred to in ss. (1)) the Minister must consent if the acquirer of
the right (be it the buyer,
cessionary, transferee, lessee, etc) is
capable of carrying out and complying with the obligations and the
terms and conditions
of the right in question and satisfies (i.e. in
the case of a prospecting right) the requirements in section 17 of
the MPRDA.
[29] Section 11(2) does not
expressly mention the “
controlling
interest
”
referred to in ss (1) and only expressly refers to “
the
right
”.
Reference to “
the
right
” in ss (2)
must include “
the
controlling interest
”
referred to in ss (1), otherwise there will be no apparent purpose,
or guideline for the Minister when dealing, not with
the disposal of
what is described as a right is ss (1), but with the disposal of the
“
controlling
interest in a company or close corporation
”.
However, in dealing with the latter the enquiry may of necessity be
slightly different because the right would vest in
the company or
close corporation and not in those who control the company or close
corporation. However, I do not make a finding
in that regard.
[30] Section 11(1) does not
specifically mention which kind of company or close corporation is
being referred to in that subsection,
but it seems obvious that
reference could only be to those companies, or close corporations,
which have any rights or interests
in the rights referred to in that
subsection (i.e. either (a) prospecting right(s) or (a) mining
right(s)).
[31] In my view the words
“
controlling
interest in the company
”
(or close corporation) ought to be interpreted as one composite
phrase
14
.
[32] The word “
interest
”
by itself has a number of meanings but the meaning that has to be
given to that word, as used in ss (1), depends on its
context
15
.
The “
interest
”
referred to there is the interest in the company, or close
corporation, that is either the holder of a prospecting right
or a
mining right or has an interest in such a right. The word
“
controlling
”
further qualifies the nature of that “
interest
”.
An “
interest
”
that is not a “
controlling
interest
” is not
covered by s. 11(1). The subsection only refers to “
a
controlling interest
”
in the company or close corporation. A disposal of a mere interest in
a company, or close corporation that has a prospecting
or mining
right, or an interest in such right, does not seem to require the
Ministerial consent envisaged in s. 11.
[33] The word “
interest
”
could refer to,
inter
alia
, a right,
particularly if one considers s. 11(2) where reference is made to a
right inclusive of an interest. But it means an interest
that is
capable of disposal by any of the means envisaged in s.11(1) and
includes a proprietary interest.
[34] In
Thorntons
Transportation (Rhodesia) Pty Ltd. v. Macauly No and Others NNO
16
it was held that the phrase “
controlling
interest in the company
”,
in the context in which that phrase was used in the legislation that
was being considered in that case, had the same meaning
as
“
controlling
interest in the business of a company
”
17
.
[35] In the
Stellenbosch
Farmers’ Winery
case
18
the court was dealing with the Liquor Act (30 of 1928) which defined
“
controlling
interest
” in
relation to a company, as “
shares
entitling the holders thereof to more than half its profits or
assets
”.
Hoexter ACJ considered that the definition merely referred “
in
abbreviated form to the proposition that a shareholder is entitled to
his dividends declared out of profits and to his aliquot
share of the
assets in liquidation
”.
19
In that definition, the fact that the shareholder by virtue of its
majority shareholding (i.e more than50%) was entitled to more
than
half the company’s assets or profits, denoted the “
control
”
envisaged there.
[36] Having said the above, the
“
interest
”
referred to in s. 11(1) of the MPRDA, is something that is capable of
being disposed of, be it by sale, cession, etc. It
includes shares or
rights. A share is an interest of the shareholder in a company and
that interest is composed of rights and
obligations in terms of the
Companies Act
20
and the Memorandum and Articles of Association of that company.
21
[37] The “
interest
”
must be one that controls the company (or close corporation). From a
review of the sources referred to above it is apparent
that the term
“controlling interest” cannot be confined to a single
characteristic, or criterion. It could mean, in
the case of a
company, more than 50% of the issued share capital of the company,
or more than half of the voting rights in respect
of the issued
shares of the company, or the power to either directly or indirectly
appoint, remove or veto the appointment of
the majority of the
directors of the company without the concurrence of another. This
list is not intended to be exhaustive, but
it certainly includes the
right of a shareholder, (even if notionally), to more than half of
the company’s profits or assets.
22
I say this for the following reasons. The ultimate purpose of s. 11
is to regulate the prospecting, or mining right that was
granted.
Section 11(2) makes it clear that one of the main purposes is for
vetting the intended acquirer of that right. The majority
shareholder, notionally at least, would be entitled by his majority
shareholding to,
inter
alia
, half of the
company’s assets, which include the prospecting right. Thus,
the acquirer, or intended acquirer, of such a
controlling interest in
the company would, have to be vetted for regulatory purposes.
[38] As I mentioned earlier,
disposal of the “
controlling
interest
” is
what is been regulated. What has to be determined is whether the
interest was a “controlling interest”,
at least, at the
time of the proposed disposal. If a majority shareholder intends to
dispose of his entire shareholding to another,
or others, the
Minister’s consent would clearly be required. If the majority
shareholder, with the controlling interest,
intends to dispose only
of a portion of his interest and the disposal will not result in a
change of control, i.e. the shareholder
will retain the controlling
interest, then the disposal would, in my view, not require the
Minister’s consent. If, however,
the effect of the disposal
would be that the holder of the controlling interest would lose such
control, then the disposal would
require the Minister’s
consent, even if no one else acquires that controlling interest. I
say that for the following reasons.
The Minister clearly has a
discretion in terms of section 11 to consent to the disposal, or not
to do so. If there is a disposal
of the controlling interest and an
acquirer thereof, the Minister must consent to the disposal if the
acquirer of the interest
meets the requirements set out in section
11(2). However, in other instances, the Minister has a discretion
which has to be exercised
in a lawful manner in the furtherance of
the objects and purposes of the Act. The fact that the disposal
would have the effect
that the controlling interest no longer vests
in the disposer thereof is a matter for the Minister’s
consideration. This
is consonant with the Minister’s regulatory
function. A change in control may hold implications for the
company’s
capabilities to comply with its obligations relating
to its prospecting, or mining right, (or interest in such a right)
and its
capacity to sustain compliance with the requirement of
section 17 of the MPRDA, in the case where the relevant right is a
prospecting
right.
[39] Butler was the holder of at
least 52 per cent of the shares in Nuco at the time of the agreement.
This shareholding would,
in my view, constitute a “
controlling
interest
” in
Nuco in the sense I held above. The fact that he did not sell the
entire 52 per cent to Mogale but only 33 per cent,
which would have
had the effect of reducing his interest to less than a “
controlling
interest
”, does
not mean that the Minister’s consent for the disposal to
Mogale, in terms of the agreement, was not required.
In my view the
Minister’s consent was indeed required.
[40] As the Minister’s
consent was not obtained to date, or within the 180 days allowed for
in the agreement, the suspensive
condition contained in clause 5.1.2
of the agreement was not fulfilled. In the circumstances the
agreement has lapsed as contemplated
in terms of clause 5.3 of the
agreement.
[41] That conclusion is decisive
of the plaintiff’s claim, including its alternative claim for
the return of the R3 million
that it paid in terms of the agreement,
since the agreement provides in clause 5.4 that if it fails because
the condition stipulated
in clause 5.1.2 is not fulfilled, Mogale
would have no right to recover the R3 million paid in accordance with
clause 4.1 of the
agreement (but shall have the right(s) envisaged in
clause 5.4). I shall, nevertheless, briefly traverse the question of
the fulfilment
of the second suspensive condition which was in issue,
namely that which is contained in clause 5.1.3 of the agreement.
THE FULFILMENT OF THE CONDITION IN CLAUSE 5.1.3
[42] It was common cause that
the RBN had not been given notice as contemplated in clause 64 of the
Articles of Nuco and that it
had not exercised, or given an
indication that it intended to exercise any rights of pre-emption it
may have in respect of the
shares offered by Butler to Mogale in
terms of the agreement. On the contrary, it was common cause that the
RBN had written a letter
to the attorneys of Mogale, apparently in
response to the letter sent to RBN on behalf of Mogale, in which they
intimate that they
have not consented to the proposed disposal of
shares by Butler to Mogale.
[43] As I mentioned at the
outset, the plaintiff submitted that the condition had been fulfilled
because the RBN did not have a
right of pre-emption in terms of the
Articles of Nuco (and everyone-else who had a right of pre-emption
had either waived, or had
agreed not to exercise such right),
alternatively, and should it be found that the RBN did have such a
right, that the condition
be held to have been fictionally fulfilled,
because Butler deliberately prevented its fulfilment.
Did the RBN have a right of pre-emption
?
[44] Plaintiff’s argument
in this regard is, to summarise, the following. Because the RBN was
not proved to be the holder
of A, B or C class shares as envisaged in
the Articles, it was not proved to have had a right of pre-emption in
terms of clause
64 of the Articles because article 64 only give such
right to the holders of A, B or C class shares. Furthermore, on
behalf of
Mogale, it was also submitted that the RBN did not have a
pre-emptive right in terms of the Uthango shareholders’
agreement,
because the RBN was not a party to that shareholders’
agreement and it did not recognise that the RBN had such a right.
[45] The share certificates and
extracts from the share register of Nuco, which were produced in
evidence, do not state that shareholders
were issued with either A
class, B class or C class shares. Instead they affirm that the
shareholders were issued with “
ordinary
shares
” in Nuco.
Similarly, the agreement does not describe the shares that formed
the subject of that sale as A, B or C class
shares. On the contrary,
the shares, which Butler sold to Mogale in terms of the agreement,
are described as “
ordinary
shares
”.
[46] The plaintiff’s
argument, as I understood it, was even though the Articles state that
the issued shares of Nuco comprise
A, B and C class shares
23
,
Nuco had the power to also issue ordinary shares by virtue of the
power mentioned in clause 3.2.1 to issue “
any
shares
”. The
plaintiff also produced and made submissions concerning a
shareholders’ agreement entered into between Butler,
Errol
Norman Keeton and Nuco (“
the
Butler/Keeton shareholder agreement
”)
on 17 July 1989, in which it is stated that Butler had 60 “
A
”
class shares and Keeton was the holder of 40 “
B
”
class shares in Nuco.
24
[47] Notwithstanding the
description in the Butler/Keeton shareholders’ agreement, no
mention is made of these classes of
shares in the extract of the
share register of Nuco pertaining to Butler’s shareholding.
West-Evans, who gave evidence concerning
Butler’s shareholding
in Nuco, was not questioned about classes of shares or the anomalies
that existed between the Articles,
the certificates and the
Butler/Keeton shareholder agreement in that regard. A share
certificate produced, for example, in respect
of Butler’s
shareholding, and dated the 24
th
of June 2005, states specifically that Butler is the registered owner
of 78 ordinary fully paid up shares in Nuco. The certificate
pertaining to the RBN and dated the 9
th
of November 1994, states that the Premier of the North West Province,
in his capacity as trustee of the Royal Bafokeng Nation (the
RBN) is
a registered owner of 10 ordinary fully paid up shares in Nuco.
Similarly, the share certificate produced in respect of
Van Zyl, the
fourth respondent, and which certificate is dated the 24
th
of June 2005, states that Van Zyl was the owner of 12 ordinary
paid-up shares in Nuco. No share certificates were produced in
evidence in which it is certified that any of the shareholders of
Nuco, at least at the time of the agreement (or at any time for
that
matter) held anything other than ordinary shares in Nuco. The
Articles do not preclude a holder of ordinary shares from being
a
member of Nuco.
[48] Article 64.1 of the
Articles contains the essence of the pre-emptive right. It makes no
express mention of any class of shares
but refers to “
a
member
”. The
Article provides as follows:
“
Notwithstanding
anything to the contrary contained in these articles, a member (‘the
offeror’) shall not be entitled
to sell, alienate or in any
other manner dispose of or transfer any share in the company unless
all the shares (‘the shares’)
beneficially owned by the
offeror and the whole of the offeror’s claim by way of loan
account (‘the loan account’)
against the company have
first been offered in writing (‘the offer’) to the other
member (‘the offeree’)
or if there is more than one
member, to the other members (‘the offerees’) pro rata to
their respective shareholdings
in the company
.”
[49] The Articles do not define
the term “
member
”.
There is no reason why its ordinary meaning in a company law
context, should not prevail. There is nothing in Article
64 that
confines the right of pre-emption to only holders of class A, B or C
shares.
[50] Uthango’s
shareholders’ agreement to which the RBN was not a party, did
not have the effect of depriving the RBN
of the pre-emptive right it
had in terms of Article 64. Clause 18 of the Uthango shareholders’
agreement does not expressly,
nor impliedly, regulate the RBN’s
rights in terms of Article 64. The Uthango shareholders’
agreement only dealt with
the rights of the shareholders who were
parties to that shareholders’ agreement.
25
[51] In my view no intention is
evinced in the Uthango shareholders’ agreement to amend the
Articles of Nuco to the extent
of depriving the RBN of the right of
pre-emption which it would have enjoyed in terms of Article 64 of the
Nuco Articles. The Uthango
agreement in my view clearly only
regulated the position of those that were party to it.
26
[52] It appears that the
plaintiff’s legal advisers were also of the view that the RBN
was not party to the Uthango shareholders’
agreement and that
it therefore did not have a right of pre-emption. This view was
wrong, because the RBN retained its rights in
terms of Article 64.
Oosthuizen also gave evidence that the RBN was subsequently notified
by Mogale’s attorneys about the
sale. The actual notification
was not produced in evidence but the RBN’s response, which I
have referred to earlier, was
produced. In it they,
inter
alia,
intimate that
they did not consent to the sale of the shares by Butler to Mogale.
There is no proof that the notification, that
Oosthuizen testified
was sent by Mogale’s attorneys to the RBN, complied with
Article 64. In my view, given all of the aforementioned,
the
condition stipulated in clause 5.1.3 of the agreement was not
fulfilled.
FICTIONAL FULFILMENT
[53] The plaintiff amended its
particulars of claim on the first day of hearing to include an
allegation that should it be found
that RBN had a right of
pre-emption in terms of either the Articles of Nuco, or the Uthango
shareholders’ agreement, the
condition contained in clause
5.1.3 ought to be held to have been fictionally fulfilled, because
Butler deliberately prevented
its fulfilment.
[54] To succeed with such a
claim the plaintiff must prove that the condition was not fulfilled
and that Butler had a duty regarding
the fulfilment of the condition
and that he breached that duty with the intention of frustrating or
preventing the fulfilment of
the condition.
27
[55] In terms of clause 10.5.2
of the agreement, the parties to the agreement bound themselves to
“
use their best
endeavours to procure the fulfilment of the conditions
”.
Thus both the plaintiff, Mogale, and Butler had a duty regarding the
fulfilment of the condition. It was not Butler’s
sole duty.
[56] As regards the issue of
intention, if a conditional debtor prevents the fulfilment of a
suspensive condition and he is guilty
of
dolus
in doing so, the
condition is deemed to have been fulfilled. What
dolus
entails has not been precisely delineated, but it is at least clear
that the debtor should have acted with the direct intention
of
preventing the obligation from becoming enforceable.
28
It is also accepted that negligence on the part of the conditional
debtor is not enough
29
.
[57] The plaintiff submitted
that at all material times Butler was aware of Article 64; that
Butler knew that RBN was a shareholder
in Nuco; that Butler knew that
RBN had pre-emptive rights in terms of Article 64 and that Butler
knew what his obligations were
in terms of that article and that it
was not for Mogale to offer the shares to RBN. The plaintiff, in
addition, submitted that
Oosthuizen had testified that had Mogale
known that RBN had pre-emptive rights it would have taken steps to
ensure that Butler
complied with Article 64 and made RBN aware of
such a right.
[58] I should also mention that
evidence was led, which was not contested, that Oosthuizen had
written a letter dated the 11
th
of October 2007 to Butler and that Butler did not respond to the
letter. In the letter Oosthuizen had said to Butler,
inter
alia
, the following:
“
We
understand that due notice to the other shareholders of Nuco of our
offer and the period for the exercise of the rights of pre-emption
by
the other shareholders has also lapsed.
”
The letter concludes with the following sentence:
“
If
our understanding of any of the above members is not correct, please
advise immediately.
”
[59] Evidence was also produced,
which was common cause or not disputed, that Van Niekerk had stated,
in writing, that Butler regarded
himself as bound by the agreement.
[60] The defendants submitted
that the plaintiff was not barred from gaining insight into Nuco’s
Articles. In terms of the
agreement the plaintiff was entitled to do
a due diligence investigation. The fact that it limited itself in
that regard, as testified
by Oosthuizen, cannot be blamed on Butler.
The defendants further submitted, that there was no evidence to show
that Butler deliberately
frustrated fulfilment of the suspensive
condition and that the claim for fictional fulfilment should fail.
[61] The plaintiff, curiously,
submitted that “
on
the evidence of Oosthuizen no absence of dolus can be shown on the
part of Butler. No evidence has been led in this regard by
the
defendants and it should be found that it was Butler who prevented
the fulfilment of such suspensive condition
”.
This submission is apparently based on the wrong premise that the
defendants bore an
onus
to disprove, as it were, that Butler acted deliberately or with the
requisite intention (
dolus
).
[62] On a conspectus of all the
evidence one cannot conclude, on a balance of probabilities, that
Butler acted intentionally with
regard to the non-fulfilment of the
condition under consideration, particular insofar as it pertains to
RBN. As the plaintiff
bore the
onus
of proof it cannot succeed with the claim in those circumstances.
The fact that Butler did not answer to the letter of Oosthuizen
does
not justify an inference of
dolus
.
It does not exclude the possibility that Butler genuinely, albeit
mistakenly, believed that RBN did not have a pre-emptive right.
Paradoxically, the reasonableness of such a mistake may be evident
from the fact that the plaintiff itself submitted in these
proceedings that RBN only had a pre-emptive right in terms of the
article if it had class A, B or C shares and that it did not
have a
right of pre-emption in terms of the Uthango agreement.
[63] I need not decide
hypothetical issues such as whether RBN would have consented, or
would have exercised its pre-emptive rights
if it was properly and
timeously informed of Mogale’s offer to Butler as evinced in
the agreement. Letters were admitted
in evidence that make it clear
that RBN did not consent to the sale of shares by Butler to Mogale in
terms of the agreement.
COSTS
[64] There is no reason why the
costs should not follow the result. The costs of two counsel is
justified.
I accordingly make the following order:
The plaintiff’s claims are
dismissed with costs (including the costs of two counsel).
_____________________________
P
COPPIN
JUDGE OF THE SOUTH GAUTENG
HIGH COURT, JOHANNESBURG
COUNSEL FOR THE PLAINTIFF R.A.
SOLOMON SC
K.N. TSATSAWANE
INSTRUCTED BY CLIFFE DEKKER
HOFMEYR INC
COUNSEL FOR THE DEFENDANTS J.J.
BRETT SC
N. SEGAL
INSTRUCTED BY GARY RACHPUCH
AND ASSOCIATES
JUDGMENT
DELIVERED ON 11
th
MARCH 2011
1
Mr Butler is since deceased and is represented by the second and
third defendants who are executors of his estate.
2
The “
Minister
”
is the Minister of Minerals and Energy.
3
No.89
of 1998
4
No.56
of 1986
5
No. 89 of 1998
6
S.12(2)(a)
7
S,12(2)(b)
8
S.12(2)(c)
9
S.12(2)(d). Reference is to the Companies Act 61 of 1973.
10
No.56
of 1986
11
The
Diamonds Act provides in s.34(1) that a natural person who desires
to transfer his license to a company or close corporation
shall
apply to the South African Diamond and Precious Metals Regulator, in
writing, for approval for the transfer. The Regulator
is not to
grant such approval if it is of the opinion, inter alia, that the
licensee concerned does not hold the controlling
interest in the
company or close corporation. Section 35 provides that no person
shall without the written approval of the Regulator
acquire an
interest in any company or close corporation after a license has
been issued or transferred to that company or corporation.
12
Thorntons
Transportation (Rhodesia) (Pvt) Ltd v Macauly NO and Others NNO
1962
(1) SA 255
(SR);
Stellenbosch Farmers’ Winery Ltd v Distillers Corporation (SA)
Ltd and Another
1962
(1) SA 459
(A) at 472.
The
definition of the term “
controlling
interest
”
as used in section 114(5)(b)(iv) of the repealed Liquor Act No. 30
of 1928 and section 1 of the Liquor Act No. 27 of 1989;
Klokow v Sullivan
2006
(1) SA 259
(SCA) at 262 (D);
section 12
of the
Competition Act No.
89 of 1998
;
Distillers Corporation (South Africa) Ltd and Another v Bulmer SA
(Pty) Ltd and Another
2002
(2) SA 346
(CAC) and
EE Sharp and Sons Ltd v MV Nefeli
1984
(3) SA 325
(C) at 326I-327A.
13
See for example
Jaga
v Dönges, NO and Another
1950 (4) SA 653
(AD) at 662.
14
Compare
Thorntons
case
supra
at 257D.
15
Compare
Stellenbosch
Farmers’ Winery
at 469F-G and the
Thorntons
case
supra
.
16
Supra. Footnote 8
17
See at 259D; compare the
Stellenbosch
Farmers’ Winery
case (
supra
)
at 472B-E.
18
See footnote 8
19
See at 472H-473A.
20
No. 61
of 1973
21
Commissioners of
Inland Revenue v Crossman and Others
[1936] 1 All ER 762
(HL).
22
Compare
Stellenbosch
Farmers’ Winery
supra
at 472H-473A.
23
In terms of the Articles the shareholding shall at all times be as
follows: At least 25% A shares, at least 25% B shares and
there
shall be an equal number of A and B shares.
24
Clause 1.3 of the Butler/Keeton shareholders’ agreement.
25
The Uthango shareholders’ agreement was subsequently cancelled
according to West-Evans because Uthango failed to pay for
the 26%
shareholding sold to it by Butler in terms of that agreement. The
plaintiff’s argument was that Uthango’s
shareholders’
agreement was divisible and that the termination could only have
related to the sale of shares and not to
the other aspects of the
shareholders’ agreement such as the agreement relating to
pre-emptive rights etc. I do not need
to decide that issue.
26
“
Shareholders
”
in the Uthango agreement is defined as “
Van
Zyl, Butler and BEE shareholders
”.
It does not include the RBN.
27
Scott v Poupard
1971 (2) SA 373
(A).
28
Whyte v Da Costa Couto
1985 (4) SA 672
(A) at 680.
29
Gowan v Bowern
1924 AD 550
at 553 and 572.