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[2011] ZAGPJHC 240
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Clarke and Others v Kwezi Mining (Pty) Ltd and Others (2010/47125) [2011] ZAGPJHC 240 (17 June 2011)
NOT
REPORTABLE
SOUTH
GAUTENG HIGH COURT, JOHANNESBURG
CASE
NO: 2010/47125
DATE:17/06/2011
in
the matter between:
JEREMY
EDWARD
CLARKE
...................................................................
First
Applicant
MICHAEL
WILLIAM WRIGHT N.O.
DOREEN
VALERIE SALMON MO.
DAVID
ROBERT BUYS MO.
(in
their capacities as trustees of the
Wright
Family
Trust)
…........................................................................
Second
Applicants
GOLD-ROSE
INVESTMENTS (PTY)
LTD
..............................................
Third
Applicant
and
KWEZI
MINING (PTY)
LIMITED
............................................................
First
Respondent
KWEZI
GROUP (PTY)
LIMITED
......................................................
Second
Respondent
SADTU
INVESTMENT HOLDINGS (PTY) LIMITED
…....................
Third Respondent
NATIONAL
COUMCIL FOR PERSONS WITH
PHYSICAL
DISABILITIES IN SOUTH AFRICA
...............................
Fourth
Respondent
THE
TRUSTEES FOR THE TIME BEING
OF
THE NONHLANHLA CHILl FAMILY
TRUST
.................................
Fifth
Respondent
THE
TRUSTEES FOR THE TIME BEING OF THE
ABAQANDULI
WOMEN DEVELOPMENT TRUST
........................
Sixth
Respondent
DA
JO INVESTMENTS (PTY)
LIMITED
......................................
Seventh
Respondent
JUDGMENT
LAMONT,
J:
[1]
This is an application brought by the applicants as the minority
members of the first respondent ("the company”).
They seek
relief under section 252 of the Companies Act No. 51 of 1973 (“the
Companies Act'}. During the proceedings the
new Companies Act was
promulgated and came into force. This does not affect this
application. It must be determined as if the Companies
Act had not
been repealed (item 10 of Schedule 5 to the
Companies Act 2008
).
[2]
Since October 2010 the shareholders of the company have been the
applicants and the second to seventh respondents who hold their
shares as follows:
1.
The applicants - 16,76%.
2.
Second respondent - 52%.
3.
Third respondent - 10%.
4.
Fourth respondent - 6%.
5.
Fifth respondent - 5%.
6.
Sixth respondent - 5%.
7.
Seventh respondent – 5%.
[3]
The company conducts business as an investment-holding company in the
mining industry,
[4]
The relationship between the shareholders is regulated by the
articles and a shareholders agreement to which the company is
also a
party.
[5]
There are broadly speaking at present two factions of shareholders. A
faction comprising the applicants and a faction comprising
the
respondents save for the third respondent.
[6]
Until 11 December .2006 the applicants were represented on the board
by three directors Messrs Wright, Clarke and Abel. During
the period
those directors were represented on the board the company purchased
an investment which matured into an investment worth
some R74,5
million as at 23 February 2007; it also commenced negotiations with
Rio Tinto which later resulted in a joint venture
between the company
and Rio Tinto to exploit a coalfield in Limpopo through what has been
referred to as the Chapudi Coal Project.
[7]
Subsequent to the removal of the directors representing the
applicants, the applicants have been excluded from participation
in
the affairs of the company. The only rights they were permitted were
the rights conferred upon shareholders. In consequence
of this
exclusion the applicants became unable to obtain information
previously available to them concerning the affairs of the
company.
[8]
The applicants claim that the removal of the directors was the
evidence of the beginning of a protracted campaign of the second
respondent to secure the exit of the applicants as shareholders of
the company. The campaign comprised of conduct alleged to have
been
performed by the second respondent qua shareholder and by the second
respondent qua person able to direct affairs of the company
through
the board.
[9]
Insofar as the second respondent acted qua shareholder such acts are
not directly relevant save as evidence of motive for acts
of the
second respondent acting qua director and so able to manipulate
decisions of the board.
CONDUCT
ALLEGED BY APPLICANTS.
[10]
The company and the second respondent have brought two arbitrations
against the applicants. Those arbitrations were brought
solely for
the benefit of the second respondent with a view to the second
respondent acquiring the applicants' shares in the company.
The
company paid a s^hare of the costs due to the legal team employed by
the company and the second respondent in the pursuit of
that
litigation. Inasmuch as the litigation was solely for the benefit of
the second respondent (as the sole purpose of the litigation
was to
obtain the applicants’ shares in the company) payment made by
the company towards the costs of the company and the
second
respondent was improper.
[11]
The company borrowed more monies than were required to meet the
purchase price of shareholding it purchased as an investment
and used
the excess money to pay the second respondent. This act was improper.
[12]
The company borrowed monies from and paid monies to the second
respondent in amounts which were inappropriate and otherwise
then in
pursuit of the objectives of the company which was not a
money-lending company. These acts were improper.
[13]
The company failed to have regard to the provisions of the
shareholders agreement by repaying monies to the second respondent
at
the instance of the second respondent without following the procedure
laid down. This was improper.
[14]The
conduct of the company is largely common cause.
THE
ARBITRATIONS,
[15]
During March 2007 the second respondent’s attorneys addressed a
letter to the applicants and various other persons. That
letter was
the precursor of litigation (arbitration proceedings) brought by the
second respondent and the company against the applicants,
in the
litigation the second respondent and the company sought a declarator
that the applicants had diverted income due to the
company to
themselves; that such diversion constituted a breach of the
obligations under and in terms of the shareholders agreement;
that in
consequence of that breach there was a deemed offer by the applicants
of their shareholding and that the deemed offer had
been accepted, in
the litigation the company sought no relief to which it would be
entitled if succeeded in obtaining the declarator.
The only entity
seeking relief consequent upon the declarator was the second
respondent. The arbitrator held that while a few breaches
had been
established, the second respondent had not validly exercised its
rights to purchase the shares. He granted the declarator
in respect
of a limited number of the offences complained of and awarded the
company and second respondent the costs. The applicants
were
dissatisfied with the result and brought an application to review it.
Van Oosten j referred the matter back to the arbitrator
for
reconsideration of the costs order he had made. The basis upon which
that referral was made was that the second respondent
and company had
been unsuccessful in the arbitration in that the substantive relief
sought namely the delivery of the shares allegedly
purchased had been
unsuccessful. In the course of his judgment Van Oosten J held that
the declarator sought by the company and
the second respondent was
only necessary in the context of the claim fqr final relief for the
delivery of the shares. The final
relief sought concerning the
purchase of the shareholding had not been granted. Hence the company
and the second respondent had
been substantially unsuccessful. Hence
the costs should not have been awarded as the arbitrator had awarded
them.
[14]
The analysis of Van Oosten J reveals that the arbitration concerned
the affairs of the shareholder namely the second respondent
alone.
There was no claim of any consequence made by the company. The
company in particular did not ever claim payment of the amount
which
it claimed the applicants had wrongly appropriated.
[17]
On this analysis the company had no role to piay in the arbitration
and should not have been a party. By participating in the
litigation
the company incurred a liability to the successful party whose costs
it was ordered to pay in addition to the portion
of costs it had
agreed to pay its own legal team,
[18]
On 24 June 2009 the company resolved that shareholders were
N.
obliged
to contribute to monies which the company required as a loan, pro
rata to their shareholding in the company. The applicants
disputed
the right of the company to have passed the resolution. In
consequence the company and the second respondent instituted
proceedings against the applicants by way of arbitration claiming the
right to acquire the applicants' shares. The arbitrator dismissed
the
claims of the company and second respondent and in the course of
doing so held that the whole subject-matter of the arbitration
concerned shareholder issues and that ail other issues were ancillary
to that issue. Accordingly the company could as easily have
been
cited as a respondent. The ratio decidendi of the finding was that
the company had no role to play in a shareholders dispute.
[19]
There was other extensive litigation between the applicants, the
company and the second respondent arising out of the arbitrations.
St
is not necessary to detail that other litigation here.
[20]
Suffice it to say that in the course of the litigation including the
two arbitrations the company disbursed an amount of some
R3,5 million
in the form of costs of litigation which it paid to the legal
representatives of the company and the second respondent,
This amount
excludes the amount due under the costs order made against it.
[21]
It is apparent from the precis set out above that at best for the
second respondent; the company had no role to play other
than as a
necessary party to the litigation.
[22]
in these circumstances the company should not have been required to
fund litigation which was essentially that of the second
respondent
qua shareholder. The effect of this funding was that the value of the
applicant’s shareholding was reduced by
costs the company paid
and became obliged to pay in the course of the litigation.
COMPANY
DEBIT FOR MANAGEMENT FEES.
[23]
The shareholders recorded in the shareholders agreement that at ail
times during the subsistence of the agreement they would
act with the
utmost good faith towards each other (clause 21.1). They also
recorded that the second respondent as well as other
non-executive
shareholders had obligations in terms of clause 10,1 to perform
certain work for the company.
[24]
During May 2010 the company resolved to debit itself retrospectively
with an amount equal to some R4,5 million representing
management
fees in favour of and due to the second respondent. The causa for the
management fees was the obligation of the second
respondent in terms
of clause 10.1 of the shareholders agreement to have performed
certain work. The amount of the remuneration
had not prior to the
passing of this resolution been agreed. Suddenly during May 2010 this
amount was agreed and debited as being
the amount agreed to be due by
the company to the second respondent for the period March 2002 to
date. The work which had been
performed by other shareholders was not
recognised and no resolution in respect of monies due to them was
passed. The passing of
this resolution clearly constituted a benefit
calculated to accrue to the second respondent alone. It was not a
general resolution
dealing with the company’s obligation to pay
all persons who had been obliged to render services in terms of the
shareholders
agreement. There is no evidence that consideration was
given to whether or not the obligation of the company to pay had
become
prescribed or whether it was an opportune moment for the debit
to be raised, or whether other persons who rendered services should
be paid. On the face of it the resolution of the board of the company
was lawful. The arbitrator found it to be such during the
arbitration
concerning the obligation of shareholders to contribute to the funds
the company wished to raise. The timing of the
adoption of the
resolution was made at a time when in terms of the financial
statements ended 28 February 2009 the company had
made a loss of some
R45,9 million.
[25]
This was not an opportune moment for the company to have passed the
resolution in question.
[28]
On the probabilities while the resolution may well have been lawfully
taken by the company, the transaction was not commercially
in order.
There was no evidence that the second respondent was pressing for
payment. This debt was raised at a time when the second
respondent
was pressing rights it claimed by reason of the shareholders
agreement, to compel shareholders to contribute monies
to the
company. The greater the amount the company required, the greater the
contribution which could be levied, if the premise
was correct. The
second respondent gained an advantage by reason of the amount claimed
becoming identified and admitted. If it
had been correct in its
interpretation of the shareholders agreement it would have been able
to raise monies at the expense of
other shareholders. The resolution
results in a benefit accruing to the second respondent who at the
time controlled the board
of directors and was later made to deal
with the second respondents fees alone.
LOAM
ACCOUNT TRANSACTIONS.
[27]
The second respondent had a loan account in the company. From time to
time over the period debits and credits were made to
that loan
account with the consent of the company. During February 2007
according to the audited annual financial statements the
company was
indebted to the second respondent in an amount of some R4,1 million.
The loan account of the second respondent was
repaid in a large
amount.
[28]
The submission was that as the loan had been made by the second
respondent to the company and as the loan is reflected in the
financial statements as being the loan account of a shareholder, the
provisions of clause 23 of the shareholders agreement applied
to it.
[29]
Under and in terms of that clause money standing to the credit of a
shareholder could not be withdrawn without a procedure
being
followed. That procedure was not followed hence so the argument ran,
the monies could not be withdrawn. Under and in terms
of article 23
monies which stand to the credit of the loan account of the
shareholder are subject to its terms. These monies were
so recorded
and hence they are subject to the terms of article 23 as was
submitted. The second respondent submitted that the loan
had been
made otherwise than as a shareholders loan and hence that it was
entitled to repayment under and in terms of the contract
of loan. In
my view this argument must fail in the light of the ciear wording of
article 23 and the fact that the second respondent
accepted by
agreeing to the financial statements that the monies were standing to
the credit of its loan account as a shareholder.
[30]
In these circumstances the second respondent through the board of the
company manipulated the affairs of the company to obtain
a payment to
which it was not entitled as it had not followed the procedures set
out in article 23.
AFR1MAT.
[31]
A submission was made that the second respondent had conducted itself
in a manner to cause the company to expose itself to
the risk of the
loss of an asset which it acquired in Afrimat Limited. The submission
was premised upon the fact that the company
had borrowed an amount
greater than the amount required to obtain the asset and had pledged
the asset as security for the amount
it had borrowed. In consequence
of a fall in value of the asset a call had been made for payment by
the creditor, which the company
was unable to meet. Had the monies
not been borrowed the call wouid not have been made at the time when
it was and perhaps the
company could have saved the asset. The
evidence is in my view too speculative and there is no evidence to
demonstrate that the
transactions were anything but commercial.
[32]
The conduct of the second respondent towards the applicants as a
shareholder evidences that the second respondent had adopted
a fixed
and settled intention of in some manner acquiring the shares held by
the applicants. The provisions of
section 252
of the
Companies Act
with
which I shali deal more fully below deal with acts of the
company itself. In considering the acts of the company itself however
sight must not be lost of the general context in which the company
has acted. That includes consideration of the acts of the shareholder
qua shareholder which are relevant to colouring otherwise seemingly
innocuous acts.
[33]
Sections 252(1) and (3) of the Act read as follows: “252(1) Any
member of a company who complains that any particular
act or omission
of a company is unfairly prejudicial unjust or inequitable or that
the affairs of the company are being conducted
in a manner unfairly
prejudicial unjust or inequitable to him or to some part of the
members of the company, may, subject to the
provisions of subsection
(2) make an application to the court for an order under this section.
(3)
If on any such application it appears to the court that the
particular act or omission is unfairly prejudicial unjust or
inequitable
or that the company’s affairs are being conducted
as aforesaid and if the court considers it just and equitable, the
court
may, with a view to bringing to an end the matters complained
of, make such order as it thinks fit, whether, for regulating the
future conduct of the company’s affairs or for the purchase of
the shares or any members of the company by other members
thereof or
by the company and, in the case of a purchase by the company, for the
reduction accordingly of the company’s capital,
or otherwise"
[34]
The section is not available to a person who can by the exercise of
powers he has under the company’s constitution, articles
and
shareholders agreement or under the
Companies Act himself
put an end
to the prejudice.
[35]
The applicant in his application must make out a cause of action and
identify all the persons against whom relief is sought,
it must also
set out the case with sufficient clarity that the conclusion can be
drawn that the provisions of the section apply.
The applicant is
required to establish the particular act or omission or state of
affairs complained of, that the act, omission
or conduct of affairs
is unfairly prejudicial or unjust or inequitable to him or some part
of the members of the company, the nature
of the relief that is
sought to bring the matters complained of to an end and that it is
just and equitable that such relief be
granted. See Louw and Others v
Nel
2011 (2) SA 172
(SCA) para [23]. The conduct about which there is
complaint should at the lowest involve a visible departure from the
standards
of fair dealing and constitute a violation of the standards
of fair play on which every shareholder who entrusts his money to a
company is entitled to rely. See Elder v Elder and Watson Ltd
1950
(2) SC 49
at 55;
“
Although
fairness is a notion which can be applied to all kinds of activities
its content will depend on the context in which it
is being used.
Conduct which is perfectly fair between competing businessmen may not
be fair between members of a family. In some
sports it may require,
at best, obsen/ance of the rules, in others (Its not cricket’)
it may be unfair in some circumstances
to take advantage of them. All
is said to be fair in love and war so the context and background are
very important, in the case
of
section 459
(the English equivalent of
section) the background has the following two features. First a
company is an association of persons
for an economic purpose, usually
entered into with some legal advice and some degree of formality. The
terms of the association
are contained in the articles of association
and sometimes in collateral agreements between the shareholders. Thus
the manner in
which the affairs of the company may be conducted is
closely regulated by rules to which shareholders have agreed.
Secondly, company
law has developed seamlessly from the law of
partnership, which was treated by equity, like the Roman societas, as
a contract of
good faith. One of the judicial rotes of equity, as a
separate jurisdiction, was to restrain the exercise of strict legal
rights
in certain relationships in which it considered this would be
contrary to good faith. These principles have with appropriate
modifications
been carried over in company law.
The
first of these two features leads to the conclusion that a member of
a company will not ordinarily be entitled to complain of
unfairness
unless there has been some breach of the terms on which he agreed
that the affairs of the company should be conducted.
But the second
leads to the conclusion that there will be cases in which equitable
considerations make it unfair for those conducting
the affairs of the
company to rely upon their strict legal powers. Thus unfairness may
consist in a breach of the rules or in using
the rules in a manner in
which equity would regard as contrary to good faith.”
See
O’Neill v Phillips
[1999] 1 WLR 1092
at 1098/1099; LouwvNei
(supra) at paras [22] and [24],
[36]
While the section must be given a beneficial construction, courts
must be careful not to assume the management of companies.
When
consideration is given to the conduct in question the principle is
that a shareholder who has become a member of a company
undertook to
be bound by the decisions of the prescribed majority of shareholders
provided those provisions were arrived at in
accordance with the law,
even where they adversely affected his own rights as a shareholder or
otherwise prejudiced his interests.
See Sammel v President Brand
Gofdmining Co Ltd
1969 (3) SA 629
(A) at 878.
[37]
The courts accordingly will not normally intervene in internal
domestic affairs of a company and will not enquire into the
commercial wisdom of a particular transaction. Even a commercially
unreasonable approach to the making of profits will not normally
justify intervention in the absence of any suggestion of wilful
mismanagement or of impropriety in the conduct of the affairs of
the
company. See Thomas v H W Thomas Ltd
[1984] 1 NZLR 686
at 692 CA
(NZ). The majority is entitled to adopt policies and pursue them.
Their decisions are not impeachable merely because
the majority took
info account their own interests when they cast their votes. See
Sammel at 680. The fairness of conduct must
be judged in the context
of its entirety.
[38]
Fairness involves the balancing of all the interests involved in the
light of the history and structure of the company, the
policies
underlying the section and the
Companies Act, the
duties of
directors, the rights and duties of majority shareholders in relation
to minority shareholders and the agreements or
understanding which
shareholders have which give rise to legitimate expectation. See Reid
v Bagot Well Pastoral Co (Pty) Ltd
[1993] SASC 4323
;
[1993] 12 ACSR 197
at 212 SC (SA).
[39]
Consideration must be given to whether or not a minority shareholder
is seeking to use the section to escape being iocked into
a company
and to obtain a price which he considers would more realistically
reflect the value of the underlying assets attributable
to his
shareholding. Unless the company has performed an act or given rise
to a state of affairs even though trust and confidence
between
shareholders has been broken down it does not follow that a minority
shareholder is entitled to recover his stake using
the section.
[40]
The trigger which must be pulled to bring the section into play is
the unfair prejudicial unjust or inequitable conduct constituted
by
the particular act or omission or state of affairs.
[41]
It is a general principle that the money and assets of the company
should not be expended on disputes between shareholders.
A company is
separate from the shareholders and has no business whatsoever to be
involved in such disputes or to spend its money
in the pursuit of
such disputes. Should the company use funds to finance disputes
between shareholders such use constitutes a misuse
which confers a
distinct financial advantage on the majority and prejudices and
discriminates against the minority. This is both
unfair and infringes
the fundamental principle to which the parties subscribed at the time
of becoming members that the ties and
funds of the company be used
for the purposes of the company, See Blackman Commentary on the
Companies Act Volume
2 page 9-54-2; D G Brims and Sons (Pty) Lid
[1995] 16 ACSR 559
at 591/2.
[42]
It does not avaii the majority shareholder who has caused the company
to perform the conduct in question to raise any fault
on the part of
the minority. The dean hands doctrine is of no application. See
McMillan N.O. v Pott 2011 (
1) SA 515
(WCC) at 532B-533E. Binn’s-Ward
AJ held:
“
Having
regard to the equitable nature of the remedy, and the attendant wide
ambit of the judicial discretion to grant or withhold
it on terms
appropriate to the peculiar characteristics of the given case, there
is no compelling reason why fault on the part
of the applicant should
as a rule preclude the grant of relief in terms of
s 252.
There may
of course be cases in which the excluded member's fault might be so
gross, in the context of its effect on the company
or its other
members, as to render the member's exclusion without an offer of
redemption neither prejudicial, nor unjust nor inequitable;
or may
lead the court to conclude that it is not just and equitable to
afford a remedy, but those instances will, / would imagine,
be
exceptional.”
[43]
Similarly it does not avaii the majority shareholder to rely on the
fact that there is a pre-emptive clause within the matrix
of rules
governing the relationship between shareholders. The minority member
is not able to force the other members to purchase
the shares and the
machinery provided for in the pre-emptive provision does not provide
such a right on the minority. There are
risks involved in the
following of the pre-empire procedure as customarily there are
mechanisms for valuation involved. These mechanisms
may result in
values being ascribed to the shares which do not coincide with market
values. See Blackman (supra) at 9-40.
[44]
As appears from the facts set out earlier the company became
embroiled in a shareholders dispute and paid monies to the attorneys
promoting that dispute on behalf of the company and second
respondent. I was invited to find that the findings of the
arbitrators
and Van Oosten J in regard to the matter of costs and the
right of the shareholder to have participated therein were res
judicata
between the parties. Findings of fact in determinations of
law forming part of the ratio are binding upon the parties. See
Kommissaris
van Binnelandse Inkornse v Ahsa Bank Bpk
1995 (1) SA 653
(A) at 666, 671 and 676. The material facts relevant to the
arbitration insofar as the participation of the company is concerned
are the same before this Court as they were before the arbitration
(albeit to establish a different right). The findings made by
the
arbitrators and Judge were dependent upon the same findings which it
is necessary for me to make namely as to costs in the
first
arbitration, whether or not company was properly a party and in the
second arbitration also as to costs whether or not the
company was a
proper party. The costs being considered in the arbitrations were
costs which the minority would seek to recover
from the majority and
company. However this distinction makes no difference to the issue of
whether or not the company should have
paid costs to its attorney in
pursuing the arbitrations. In the circumstances it appears to me that
the parties are bound by the
result. However if I am wrong in this
finding it is my view that on the facts before me the company should
not have participated
in either of the two arbitrations in question.
In making this finding I am mindful of the fact that the time to
consider whether
or not the company should have become involved in
the litigation is immediately prior to its commencement, insofar as
the first
arbitration is concerned prior to its commencement the
majority shareholder was seeking relief from the minority shareholder
pursuant
to a letter which preceded the arbitration. The company
obtained no relief in the arbitration save in the form of a
declarator
which led to no secondary relief (payment of monies or
other relief). As far as the second arbitration is concerned it
concerned
what is patently a shareholding issue.
[27]
In my view the company should not have contributed to the costs of
the applicants in the arbitrations.
[28]
The company having contributed to those costs is bound by its
agreement to have done so. There is no way that contribution
can be
undone otherwise than by consent of persons some of whom are not
parties to the present litigation. The company cannot compel
repayment. The applicant a minority shareholder cannot compel
repayment. The second respondent does not seek to compel a repayment
either by compulsion or agreement. The second respondent for whose
benefit the money was expended does not seek to make good the
value
of the monies paid by the company from which payments it benefited.
The acts of the company in paying the costs it paid in
respect of the
two arbitrations performed constitute conduct actionable in terms of
section 252.
Other
unfair and prejudicial conduct of the company include:-
its
conduct in resolving to pay the second respondent’s management
fees when it did, its conduct in allowing funds to be withdrawn
by
second respondent in breach of the shareholders agreement, its
conduct in allowing the second respondent to withdraw a large
sum of
money when it was suffering losses and when such monies were not due
to the second respondent save as a loan newly created
by the company
to the second respondent, its conduct in adjusting its affairs
vis-a-vis the second respondent so as to reflect
in the financial
statements when the statements of one year are compared with another
a fairly static loan account in respect of
second respondent. The
payments made to and from the company are not apparent to
shareholders who do not have representation on
the board.
[47]
Jn my view the applicants have established that the company has both
performed particular acts which are unfairly prejudicial
but also
that the affairs of the company are being conducted in a manner which
is unfairly prejudicial unjust and equitable towards
themselves.
[48]
It was submitted that even if I reach this conclusion that it would
not be just and equitable to direct that the shares of
the applicants
be purchased. The submission was that the shares are difficult to
value and that it was unfair to compel the second
respondent to fund
an early exit for the applicants.
[49]
The second respondent had manipulated its own and the company’s
affairs since March 2007 to reduce the value of or compel
the safe of
the applicant’s shares. During March 2007and June 2009 it
initialled proceedings designed to result in the applicants
shares
being sold. During May 2009 and November 2010 it sought to initiate
steps which would have resulted in dilation of the applicant’s
shareholding.
[50]
The forced buyouts initialled by the second respondent must have
anticipated that it was possible to value the shares. The
second
respondent in my view cannot today set up a defence that the shares
cannot be valued and that the applicants seek an easy
exit.
[51]
Accountants are skilled in the art of valuation and are well able to
capitalize and adjust prices to take into account the
receipt of
early benefits and the uncertainty of the future. They are able where
necessary to obtain appropriate advice. The appropriate
date of
valuation is the date when the rights of applicants accrue, that is
the date of this order, The applicants should not acquire
an
advantage from the order. The shares remain a minority holding for
whatever reason the holing is sold. The valuation should
take this
into account. The second respondent should not be allowed to benefit
by its wrong doing with regard to requiring the
company to pay a
portion of the costs of the arbitrations. The debt the company
incurred pursuant to costs orders made against
it should similarly be
taken into account.
[29]
The reserved costs should be treated as if they had been directed m
the cause and be paid by the losing party.
[30]
The disclosures made to the valuing party should remain confidential
save in respect of necessary disclosers.
[31]
I make the following order.
1.
The second respondent is ordered to purchase from the applicants the
applicants' shares in the issued share capital of the first
respondent (‘the shares’) at a price to be determined by
independent auditors to be appointed by the President of the
Institute of Charted Accountants as being the fair and reasonable
value of the shares as at the date of this order (‘the
effective date”). The fair and reasonable value of the shares
shall be so determined as to ensure that it represents the
amount a
willing buyer would pay a willing seller for the shares on the terms
set out below.
2.
in determining the value of the shares as at the effective date the
auditors act as experts and will be entitled to take into
account
such facts, issues, circumstances and considerations as the auditors
consider appropriate, save that in determining such
valuation the
auditors shall in any event take into account:
2.1.
the value of all the first respondent’s assets including any
rights the first respondent has to exploit any prospecting
or mining
rights whether in its own name or otherwise and its shareholding in
Kwezi Mining Exploration (Pty) Ltd and Chapudi Coal
(Pty) Ltd.
2.2
insofar as the auditors may require expert assistance to make the
valuation; they shaii be entitled to employ persons with appropriate
expertise to advise them.
2.3.
the value of all the first respondent’s obligations, the amount
due by the first respondent (whether paid or not) to
any person for
costs arising from the arbitration* and related litigation lr shall
not be taken into account as an obligation.
2.4.
the fact that the shareholding constitutes a minority shareholding in
the company.
3.
The applicants, first and second respondents are ordered to take all
steps necessary to enable this order to be expeditiously
and
effectively implemented including:
3.1
co-operating with the auditors and furnishing the auditors both
orally and in writing with all information and all documents
of the
first respondent that the auditors may reasonably require for purpose
of the valuation, including but not limited to any
books of account,
management account, company records and documents.
3.2
compiling, furnishing and making available to the auditors such
information in relation to the first respondent as may be in
their
possession or under their control.
4.
The valuation of the auditors will be final and binding.
5.
The costs of the auditors in performing the valuation will be divided
equally between the applicants, on the one hand, and the
second
respondent, on the other hand.
6.
The auditors may call for such payment as they may require which
shall be borne by the applicant, and the second respondent,
in equal
portions and which shall be paid within five days of written request
by the auditors for such payment.
7.
The auditors shall finalise and present the valuation to the
applicants and the first and second respondents as soon as may be
practically possible, but not later than eight weeks from date of
this order.
8.
The auditors shall maintain confidentiality of all information
acquired by them in the course of implementing their duties.
9.
The second respondent will make payment for the shares within three
months of presentation by the auditors of their valuation.
10.
Delivery of the shares sha!i be effected by the applicants to the
second respondent against receipt of payment for those shares.
11.
The second respondent is ordered to pay the costs of this application
including the reserved costs and the costs consequent
upon the employ
of senior and junior counsel.
12.
The parties are afforded seven days from today to make submissions
regarding the form of this order.
C
G LAMONT
JUDGE
OF THE SOUTH GAUTENG HIGH COURT./JOHANNESBURG
Attorneys
for First Applicant : Brian Kahn Inc
Counsel
for First Applicant : Adv. Van Blerk SC
Adv.
B M Gilbert
Attorneys
for Firs! & Second Respondent : IVIhkabeia Huntley
Adekeye
Inc
Counsel
for First Respondent: Adv. Levin SC
Adv.
M. Maido© SC Date of hearing : 16 Play 2011
Date
of Judgment : 17 June 2011