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[2012] ZAGPJHC 130
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Kalahari Resources (Pty) Ltd v ArcelorMittal SA and Others (12/16192) [2012] ZAGPJHC 130; [2012] 3 All SA 555 (GSJ) (26 June 2012)
REPORTABLE
SOUTH
GAUTENG HIGH COURT,.JOHANNESBURG
CASE
NO: 12/16192
DATE:26/06/2012
In
the matter between:
KALAHARI
RESOURCES (PTY)
LIMITED
..................................................................
Applicant
and
ARCELORMITTAL
S.A.
....................................................................................
First
Respondent
INDUSTRIAL
DEVELOPMENT CORPORATION
OF
SOUTH AFRICA
LIMITED
.....................................................................
Second
Respondent
KGALAGADI
MANGANESE (PTY)
LIMITED
.................................................
Third Respondent
JUDGMENT
COPPIN,
J:
"
[1] The applicant ("Kalahari'), the first respondent ("AMIT')
and the second respondent ('the IDC") are shareholders
in the
third respondent (Kgalagadi) and their relationship is governed by a
shareholders' agreement that they entered into in about
August 2008
('the shareholders' agreement").
[2]
This matter involves an urgent application brought by Kalahari,
relying on, in particular, clause 24.1.3 of the shareholders'
agreement. It claims in the terms of its amended notice of motion,
and particularly against AMIT, in addition to orders that the
rules
regarding forms and service be dispensed with, the following relief:
"1.2
Declaring that the First Respondent is obliged to discharge its
obligations under the provisions of clause 24.1.3 of the
shareholders
agreement (a copy of which is annexed to the founding affidavit
herein marked 'DMN3'); (the 'shareholders' agreement')
with immediate
effect.
1.3
Final relief
1.3.1
That, in terms of the provisions of clause 24.1.3 of the
shareholders' agreement-
1.3.1.1
The First Respondent shall, within 5 days of the date of this order
(or within such other period as this court may deem
meet), pay to the
applicant the sum of R285 024 005.50 in respect of the funding which
was required by the company between 1 July
2011 and 31 January 2012
which the First Respondent was obliged to pay but which was paid in
its stead by the Applicant;
1.3.1.2
(Deleted)
1.3.1.3
The First Respondent shall, within 5 days of the date of this order
(or within such other period as this court may deem
meet), pay to the
Third Respondent a contribution in the sum of R241 325 471 in respect
of the funding which is required by the
company between 1 February
2012 and 31 May 2012;
1.3.1.4
indefinitely as from 1 June 2012, and on a monthly basis within 5
days of the receipt of the notification referred to further
below,
the First Respondent shall pay to the Third Respondent 50% of the
funding requirements of the Third Respondent, if any,
as duly
determined and notified in writing by the Chief Financial Officer of
the Third Respondent.
1.3.2
That the Applicant be granted further or alternative relief.
1.3.3
That the costs of this application be paid by the First Respondent.
1.4
Interim relief: In the alternative to prayer 1.3 hereof and in the
event that this court should decline to grant the final relief
therein sought:- that, pending the determination of arbitration
proceedings to be instituted by the First Respondent under the
provisions of clause 39 of the shareholders' agreement within 30 days
of the granting of this order: -
1.4.1
The First Respondent shall, within 5 days of the date of this order
(or within such other period as this court may deem meet),
pay to the
Applicant the sum of R285 024 005.50 in respect of the funding which
was required by the company between 1 July 2011
and 31 January 2012
which the First Respondent was obliged to pay but which was paid in
its stead by the Applicant;
1.4.2
(Deleted)
1.4.3
The First Respondent shall, within 5 days of the date of this order
(or within such other period as this court may deem meet),
pay to the
Third Respondent a contribution in the sum of R241 325 471 in respect
of the funding which is required by the company
between 1 February
2012 and 31 May 2012;
1.4.4
As from 1 June 2012, and on a monthly basis within 5 days of receipt
of the notification referred to further below, the First
Respondent
shall pay to the Third Respondent 50% of the funding requirements of
the Third Respondent, if any, as duly determined
and notified in
writing by the Chief Financial Officer of the Third Respondent;
1.4.5
It is noted thai the Applicant's loan account against the First
Respondent, quantified as at 30 April 2012 in the sum of R1
102 211
043 and less any Amount that is refunded to the Applicant by way of
payment from the First Respondent under prayers 1.4.1
and 1.4.2
hereof, has been tendered by the Applicant as security to the First
Respondent for any toss which it may ultimately suffer
as a result of
the granting of the aforegoing interim relief and if it is ultimately
found in the aforegoing arbitration proceedings
(when any other
proceedings) ' that the Appficant was entitled to the relief herein
sought;
1.4.6
The Applicant shall not sell, dispose of, encumber, cede when any
other way deal in or with the secured portion of its loan
account as
at 30 April 2012 against the Third Respondent save:
1.4.6.1
To discharge its own obligations under the provisions of clause
24.1.3 of the shareholders' agreement vis-a-vis the funding
requirements of the Third Respondent.
1.4.6.2
Or otherwise with the written consent of the First Respondent.
1.4.7
The Applicant be granted further or alternative relief.
1.4.8
The costs of this application be reserved for determination in the
aforesaid arbitration proceedings, or, failing that, by
this court
upon the request of any of the patiies hereto with reasonable notice
to the other party;
1.5
That, failing the institution by the Third Respondent of the
arbitration proceedings within the time period as provided for
in the
preAMlTble to prayer 1.4 above:
1.5.1
The relief set out in prayers 1.4.1 to 1.4.4 hereof shall ipso facto
become final;
1.5.2
The relief as set out in prayers 1.4.5 and 1.4.6 hereof shall ipso
facto lapse and be of no force and effect;
1.5.3
The First Respondent shall pay the costs of this application
including those covered by any earlier order of reserved costs."
[3]
This application was opposed by AMIT and it has brought a
counter-application on an urgent basis in terms of section 131 of
the
Companies Act 71 of 2008 ("the New
Companies Act') to
place
Kgalagadi under supervision and to commence business rescue
proceedings. The counter-application is opposed by Kalahari.
No other
affected parties have filed papers.
[4]
The esse of the applicant, briefly stated is the following. That all
funding required by Kgalagadi is to come from three sources
as
provided for in clause 24 of the shareholders' agreement and more
particularly in the following order: Firstly, from Kgalagadi's
own
cash resources. Secondly, if Kgalagadi's cash resources are
insufficient for its requirements, and subject to clause 24,5 of
the
shareholders' agreement, from third party sources by way of debt
funding on commercially reasonable terms. Thirdly, if Kgalagadi
is
unable to secure third party funding on terms acceptable to it, the
funding is to come from its shareholders on loan account
pro rata to
their respective shareholdings. Kalahari contends that since the
first two sources of funding were not available the
third tier, or
source, became applicable and shareholders were accordingly obliged
to provide funding to Kgalagadi in accordance
with its requirements
on loan account and pro rata to their respective shareholdings.
[5]
It is common cause that Kalahari holds 40% of the shares, the IDC 10%
and AMIT holds 50% of the shares in Kgalagadi. Kalahari
contends that
it and the IDC have met their funding obligations to Kgalagadi, but
that AMIT has, since January 2011 to date, refused
to contribute its
share to the required funding of Kgalagadi. Kalahari also contends
that it has not only paid its share but has
also paid the share that
AMIT had to contribute. If is accordingly seeking to recover the
excess payment from AMIT and for declaration
that AMIT is obliged to
provide Kgalagadi with funding with immediate effect in circumstances
where the other tiers of funding
are not available.
[6]
The relief sought by the applicant is crafted in the form of final,
alternatively, interim relief. The final relief it seeks
is the
declarator I referred to, as well as the order that AMIT repay to
Kalahari the excess that Kalahari paid on its behalf to
Kgalagadi. In
respect of this latter claim, Kalahari relies on a tacit term that it
wants the court to infer, namely, that in circumstances
where one
shareholder overpaid on its contribution and the other shareholder
failed to pay its share to Kgalagadi, the shareholder
that overpaid
is entitled to a contribution from the defaulting shareholder for the
excess paid in. As an alternative to seeking
an outright payment from
AMIT to it, Kalahari seeks, what it terms "interim relief, which
is payment of the aforesaid amount
against the tender by it of
security in the form of its loan account in Kgalagadi.
[7]
Kalahari submits that AlvllT's obligation to provide funding to
Kgalagadi in terms of clause 24.1.3 of the shareholders' agreement,
is not subject to the performance by Kalahari of any obligations in
terms of that agreement including the obligation to register
the
mining right, which was in its name, into the name of Kgalagadi and
to comply with corporate governance recommendations set
out in the
King II Report, as provided for in the shareholders' agreement. The
argument being that the performance of the latter
obligations were
not reciprocal to AMIT's obligation in terms of clause 24,1.3, so
that even if the obligations relating to the
registration of the
mining right and corporate governance have not been performed - that
did not constitute, a bar to requiring
and compelling AMiT to perform
in terms of clause 24.1.3.
[8]
AMIT raised various grounds in its opposition to the application.
Briefly stated they are the following. The agreement contains
an
arbitration clause (clause 39) and the kind of dispute raised by the
applicant in these proceedings is subject to arbitration.
The
submission was that even though clause 39 contains a proviso (clause
39.1.2) that allows the parties to the shareholders' agreement
to
obtain relief by way of motion proceedings on an urgent basis, or to
obtain any interdict, in conjunction or any similar proceedings,
in
any court of competent jurisdiction in order to preserve the subject
matter of the arbitration, as effective relief pending
the decision
in the arbitration, the present relief sought by Kalahari is not
interim (i.e. pending the decision in an arbitration)
but is final in
effect. Further, that the relief sought is not to preserve the
subject matter, or the status quo. AMIT contends,
in effect, that
courts will enforce the arbitration provision and will readily order
a stay of the court proceedings, unless it
is shown that the
arbitration provision is not applicable to the dispute, or that there
are exceptional circumstances for the court
not to order a stay. AMIT
contends that the applicant has not made out a case as to why the
application should not be stayed pending
the arbitration proceedings.
[9]
AMIT further submits that the final relief sought cannot be granted
because on Kalahari's version, insofar as it is not contested
by
AMIT, and AMIT's version, Kalahari has not made out a case for the
relief sought. In this regard it is contended by AMIT, firstly,
that
Kalahari has not made out a case that the third tier of funding has
been reached, i.e. that third party funding could not
be assessed on
terms acceptable to Kgalagadi. It is contended in this regard that
there is enough third party funding available
(i.e. on AlvllT's
version) but it cannot be accessed because Kalahari breached its
obligation to secure registration of the mining
licence in the name
Kgalagadi. All funders, so it is averred by AMIT, insist on the
registration of the mining licence in Kgalagadi's
name. AMiT also
contends that the principle of reciprocity applies in that Kalahari's
obligations to secure registration of the
licence in Kgalagadi's name
and compliance with acceptable corporate governance procedures, are
due for performance before AMIT's
obligation to provide loan funding
to Kgalagadi as contemplated in clause 24.1.3 of the shareholders'
agreement. It is further
contended by AMIT that there is no room in
the shareholders' agreement for inferring a term that a shareholder
who has paid, on
loan account, more to Kgalagadi than its pro rata
share (i.e. based on its shareholding) and where another shareholder
has not
paid, that the former is entitled to contribution of the
excess from the non-paying shareholder. AMIT contends that the
agreement
contains specific provisions regarding the repayment by
Kgalagadi of loan accounts. Further, that there are provisions that
regulate
the consequence of paying an excessive amount to Kgalagadi
and submits that Kgalagadi's claim that AMIT be ordered to pay it
directly
in the amount of R285 024 005,50, is ill-conceived and that
the tacit term Kalahari contends for in that regard cannot be
inferred,
given the circumstances and the express wording of the
shareholders' agreement.
[10]
AMIT further contends, in essence, that insofar as Kalahari seeks an
order that AMIT pay money to Kgalagadi, Kalahari has no
locus standi
to do so. it is further contended that the relief, which Kalahari
claims under the heading; "interim relief'
and, more
particularly, for an order that AMIT make further payments by certain
dates on the request of the CFO of Kgalagadi, is
also not competent,
because, inter alia .future funding may not necessarily be required
from the third tier because funds from
the other tiers is available.
[11]
. Before I deal with these arguments I shall give some context to the
dispute between the parties by briefly traversing the
nature and
importance of Kgalagadi to the shareholders and the broader public.
[12]
It is common cause and not disputed that Kalahari, that held a mining
right to mine for manganese, and the \DC, engaged AMIT,
as a joint
venture partner, in order to assist with development funding and
management of a three-in-one project which would consist
of a mine
and a sinter in the Northern Cape Province and a smelter in the
Eastern Cape Province. In terms of the shareholders'
agreement AMIT
agreed to assist Kalahari and the IDC as stated and they jointly
agreed to conduct the project through Kgalagadi.
In order to do so
AMIT agreed to subscribe to 50% of the entire issued ordinary share
capital of Kgalagadi. In terms of the shareholders'
agreement
Kalahari, the IDC, AMIT and Kgaiagadi agreed, that the terms and
conditions stipulated in that document would apply to
their
relationship. Certain conditions precedent were agreed to which are
not particularly relevant to the issues to be decided
here save that
one of the conditions was that Kgalagadi would declare a dividend to
Kalahari and the IDC in an amount equal to
the then Rand equivalent
of US
S222
500
000
,
00
(Two Hundred and Twenty Two Million Five
Hundred Thousand United States Dollars) less applicable statutory
deductions. Project
commencement dates are stipulated and in the
shareholders' agreement it is further agreed that a project budget
and implementation
plan was to be developed by Kgalagadi.
[13]
It is not in issue or disputed that the mine and sinter is to be
developed and then the smelter. It was also not in issue that
this
project was an important project and would provide much needed job
opportunities for the populations, particularly, in the
provinces
where mine, sinter and smelter would be situated. The project and, in
particular, Kgalagadi was also created as a vehicle
for Broad Based
Black Economic Empowerment; to give Black people and women much
needed skills and opportunities.
[14]
The shareholders' agreement, inter alia, provides that cancellation
is not a remedy available to the parties under the shareholders'
agreement, but that any party shall be entitled to bring an action
for specific performance of the provisions of the shareholders'
agreement (clause 38). It is further provided in that regard, that
the parties waive their rights to claim, or raise as a defence,
that
an alternative adequate remedy exists in law.
ARBITRATION
ISSUE
[15]
Clause 39(1) of the shareholders' agreement provides that, save in
respect of those provisions which provide for their own
remedies and
which would be incompatible with arbitration, a dispute which arises
in regard to the
interpretation
of, or carrying into effect, or relating to any parties' rights and
obligations arising from the shareholders' agreement,
or the
termination, or purported termination of, or arising therefrom, or
from the rectification, or proposed rectification of
the
shareholders' agreement, shall be submitted and decided by
arbitration. However, in terms of a proviso in that clause, an
interdict may be sought, or urgent relief may be obtained, from a
court of competent jurisdiction.
[16]
Clause 39(12) provides specifically as follows:
"This
clause 39 shall not preclude any party from obtaining relief by way
of motion proceedings on an urgent basis or from
instituting any
interdict, injunction or any similar proceedings in any court of
competent jurisdiction in order to preserve the
subject matter to the
arbitration of the availability of effective relief pending decisions
of the arbitrators."
It
was common cause that clause 39(12) contains typographical errors and
that corrected that clause should read:
"Shall
not preclude any party from obtaining relief by way of motion
proceedings on an urgent basis or from instituting any
interdict
injunction or similar proceedings in any court of competent
jurisdiction in order to preserve the subject matter of the
arbitration or the availability of effective relief pending the
decision of the arbitrators."
[17]
It was submitted on behalf of AMIT that this clause only meant that a
party could approach a court by way of motion proceedings
for urgent
relief in order to preserve the subject matter of the arbitration,
pending a decision in the arbitration, i.e., for
urgent interim
relief to preserve the status quo. It was submitted in support of
this interpretation of the clause, that the word
"or"
appearing after the words "on an urgent basis" was not
disjunctive and that the lack of a comma between
the words "effective
relief and the word "pending" was of no significance. I do
not agree, in my view there is merit
in Kalahari's submission that
the word "or" is disjunctive in this context and that it
conveys that a court may be approached
either where urgent relief is
being sought or where an interdict or interim interdict is being
sought to preserve the subject matter.
Clause 39(1) uses the word
"or" in the same way it provides that an interdict "of
urgent relief may be obtained
from a court of competent jurisdiction.
[18]
in my view it is enough if the relief that is being sought is urgent.
It is common cause that the application is urgent and
that the matter
was also entertained by my predecessor on that basis. In my view
clause 39(1) and 39(12) of the shareholders' agreement
recognise that
urgent relief may be required including urgent relief for specific
performance of an obligation under the shareholders'
agreement. That
is, over and above relief of an interim, preservatory nature. Since
the arbitration envisaged in the agreement
is through the
international Court of Arbitration, the parties must have appreciated
that obtaining urgent relief, be it interim
or final, may not be
readily possible and that an exception ought to be made for such an
eventuality.
[19]
in any event, part of the relief sought by Kalahari can be-considered
to be for the preservation of Kgalagadi, even though
it is not to
maintain a status quo. In my view AMIT's reliance on the arbitration
clause to stay, or resist the applicant's claims,
is not
well-founded.
FINAL
OR INTERIM RELIEF?
[20]
The declarator that Kalahari seeks, namely that AMIT is obliged to
discharge its obligations under the provisions of clause
24.1.3 of
the shareholders' agreement with immediate effect, is final relief.
So is the claim that AMIT pay to Kalahari on the
basis of a tacit
term the amount of money claimed. Kalahari's alternative claim is one
in which the latter claim for payment is
made subject to its loan
account in Kgalagadi serving as security. It is worded as interim
relief, but in my view it is final in
its effect. Similarly, its
claim that AMIT make further payments to Kgalagadi is final in its
effect.
[21]
It is trite that where final relief is claimed on motion and there
are factual disputes that cannot be resolved on the papers,
the
approach to be followed is as set out in Stettenbosch Farmers' Winery
Ltd v Stelienvale Winery (Pty) Ltd
1
.
This approach is also commonly referred to as the application of'the
"Plascon-Evans rule".
THE
DECLARATORY RELIEF
[22]
As I mentioned above, Kalahari seeks a declarator that AMIT is
obliged to make a funding contribution to Kgalagadi, as contemplated
in clause 24.1.3 of the agreement, within immediate effect. There is
a dispute as to whether AMIT is obliged, at this juncture
to make
such a contribution or payment.
[23]
Clause 24(1) of the shareholders' agreement provides that all funding
required by Kgalagadi shall come from the following sources
and in
that order, namely, from Kgalagadi itself and if it is unable to
provide the funding, from outside sources ('third parties")
by
way of debt funding on reasonable terms, and only if such funding
cannot be sourced by Kgalagadi on terms acceptable to it -
shall the
funding "be provided on ban account by the shareholders pro rata
to their respective shareholdings".
[24]
It was submitted on behalf of AMIT that the third tier funding source
has not been reached as yet, because there are third
parties willing
to fund but are not able to do so because of material breaches by
Kalahari of the shareholders' agreement, particularly
in that
Kalahari has failed to secure the registration of the mining licence
in the name of Kgalagadi despite reasonable time having
elapsed
within which it could and ought to have done so. Secondly, that there
were serious corporate governance issues that were
not being attended
to by Kgalagadi, or by the Executive Chairperson of Kgalagadi (who
also happens to be the chairperson of Kalahari)
and that this was a
concern to funders, including the Standard Bank. In this regard
reference was made, inter alia, to a document
annexed to the papers
and marked "SM55"
2
,
prepared by the bank's attorneys setting out the bank's concerns. The
main concern raised relates to the fact that Kgalagadi was
not the
holder of the mining right and that it could not lawfully conduct
mining operations until it was the holder of such a right.
Further
that there had (i.e. at that stage and up to about 23 May 2012) not
been a notarial cession of the mining right by Kalahari
in favour of
Kgalagadi followed by registration of the right in Kgalagadi's name.
There is also an indication in that document
that if the mining title
was registered in Kgalagadi's name it would serve as security for any
loan advanced to it and that security
would take the form of a
mortgage bond. (However, this document does not state that funding is
being withheld, or that it is being
withheld for the reasons stated
in the document).
[25]
Kalahari, in its founding papers, avers that AMIT has refused to
agree to the raising of external (or third party) funding.
It is also
averred that an agency appointed by Kalahari to raise capital for
Kgalagadi was successful in that it was able to secure
in-principle-commiiments from a number of funders led by Standard
Bank of South Africa, but that AMIT has failed to support the
appointment of the agency as a representative of Kgalagadi (headed by
a certain Mr Motau) and that AMIT has not agreed to such
funding. It
is also averred in the founding affidavit, that the process of
raising external funding has been "a long and complicated
one".
Ms Mashile-Nkosi, Executive Chairperson of Kgalagadi, who also
deposes to the founding affidavit of Kalahari, states
that Kalahari
no longer has the cash resources to continue with the three-in-one
project; that such funding had been exhausted
because it had to pay
more than its pro rata share to Kgalagadi in circumstances where AMIT
failed to make a payment. With reference
to third party funding, she
states that Kgalagadi had, for over a year, been in negotiation with
a number of potential funders,
including but not limited to the
Development Bank of South Africa and Standard Bank Ltd. Standard Bank
has performed the role of
lead fundraiser for Kgalagadi and the
funders, whom it represents, and Standard Bank, are in a position to
advance portions of
the funding required by Kgalagadi provided
certain conditions are met. She refers to a letter, "DMN6"
dated 30 April
2012, from the Standard Bank which sets out the
position of the lead funding negotiator with regard to funding which
is available
to Kgalagadi. Ms Mashile-Nkosi goes further to also
refer to an Annexure "DMN7" which contains the terms and
conditions
which Standard Bank wanted Kgalagadi to comply with. In
"DMN6" the Director: Mining and Metals Finance of Standard
Bank,
on 30 April 2012, advises the Chairperson of Kgalagadi, inter
alia, that it has approached various banks and institutions for
funding
proposals and that those listed have obtained credit
approvals through allocated participation in the funding. A total
funding
of the equivalent of R4 billion, was approved for the mine
and sinter plant and the further equivalent of R2:5 billion was
approved
for the smelter. However, and more importantly, the
chairperson is also advised that the allocations of funds (as set out
in the
letter) "would be made avaiiabie subject to finalisation
of the various legal agreements as well as the completion of the
technical and legal due diligences all these processes have been
commenced, with an initial due diligence report having been received
from the technical consultants and draft legal agreements having been
reviewed by all parties". "DMN7" appears to
be a
document emanating from Kgaiagadi.
[26]
it is also important to note from letters written by individual
funders that are listed on "DMN6", including Investec,
and
Rand Merchant Bank that the financing they were prepared to provide
was subject to the completion of documentation and the
fulfilment of
certain conditions precedent. All these commitment letters are
pre-December 2011.
[27]
In its answer to the aforesaid averments AMIT denies that it did not
support Mr Motau's appointment to Kgalagadi and says that
he was not
appointed because Ms Iviashtie-Nkosi was not prepared to pay him the
salary which he demanded and it was at the insistence
of Ms
Maashile-Nkosi that the Board decided against employing Mr Motau.
Further, inter alia, the deponent to AMIT's answering affidavit
states the following in response to funding not being immediately
available:
"The
company requires funding. The reason why the leading fundraiser
cannot immediately (and could not before now) advance
the funding
required by the company, is because the applicant made it impossible
for the conditions for such funding to be met
What the funders
understandably require is security over a mining tight, which mining
right must, of necessity be an asset"
(i.e. of Kgalagadi and not
of Kalahari),
[28]
It is common cause that a notarial cession of the mining right from
Kalahari to Kgalagadi, at best for Kalahari, only occurred
on or
about 23 May 2012 and that the actual registration of the mining
right into the name of Kgalagadi only occurred or not about
6 June
2012 when the matter was already being argued before me. I take the
latter fact into account because it appeared to be common
cause and
was not disputed.
[29]
On the facts one can reasonably find that even if the terms and
conditions of the banks were acceptable to Kgalagadi it could,
not
objectively, comply with the condition that the mining right; which
was still in the name of Kalahari, serve as security for
any funding.
From the version of AMIT, the registration of the right in the name
of Kgalagadi was crucial for third party funding.
If Kgalagadi did
not have any resources of its own and if it could not access third
party funding, because of its inability to
meet conditions stipulated
by third party funders, then the third tier of funding clearly became
applicable.
[30]
So even on AMIT's version, namely, that third party funding was not
forthcoming, because conditions stipulated by third party
funders had
not been met, made the third tier of funding applicable.
[31]
The question that arises is whether AMIT is justified in refusing to
provide funding to Kgalagadi in circumstances where there
are
outstanding corporate governance issues and the mining right was not
registered in the name of Kgalagadi? it is noteworthy
that it is not
Kgalagadi seeking to compel AMIT to fund it, but it is Kalahari which
is seeking an order that AMIT provide the
requisite funding to
Kgalagadi. It is common cause that the relief sought is an order for
specific performance. In accordance with
the general principles that
apply to reciprocal obligations, a party that claims specific
performance must perform, or tender to
perform its own reciprocai
obligations. In BK Tooling (Eclms) Bpk v Scope Precision Engineering
(Edms) Bpk
3
the court reviewed the history, nature and scope of the principle of
reciprocity and the exceptio non adimpleti contractus. AMIT
is
relying on the latter defence in this matter. The principle of
reciprocity recognises that there must be an exchange of performances
and that a party may raise the exceptio as a defence to a claim
brought by a party who has not performed or tendered to perform
its
obligations.
[32]
On behalf of Kalahari it was submitted that the principle of
reciprocity does not apply in this instance. It is submitted that
compliance with the corporate governance requirements and the
registration of the mining licence in the name of Kgalagadi, are
not
obligations which are reciprocal to AMIT's obligation to provide
funding to Kgalagadi as and when such funding is required
by
Kgalagadi. On the other hand, it is submitted on behalf of AMIT that
those obligations are indeed reciprocai and unless they
have been
performed it is not obliged to fund Kgalagadi. It is further
submitted that it would be unreasonable to expect AMIT to
fund
Kgalagadi before those obligations are met.
[33]
In the circumstances it is necessary to determine whether the
principle of reciprocity applies in this situation. This is mainly
a
question of interpretation. However, interpretation is assisted by a
presumption that in every bilateral or synallagmatic contract
- that
is a contract where the parties undertake obligations towards each
other - the intention of the parties is that one party
would not be
entitled to enforce the contract, unless it has performed (or tenders
to perform) its obligations
4
.
[34]
Reference was also made in argument to what Corbett J stated
regarding reciprocity in ESE Financial Services (Pty) Ltd v Cramer
5
.
There Corbett J gave examples where performance of obligations may be
simultaneous or consecutive. What is important, however,
is that it
was pointed out there, that reciprocity does not depend merely upon
the time stipulated for performance of an obligation.
Corbett JA also
went on to state:
"For
reciprocity to exist there must be such a relationship between the
obligation by the one party and that due by the other
party as to
indicate that one was undertaken in exchange for the performance of
the other,' in cases where the obligations are
not consecutive, vice
versa (see De Wet and Yates, Kontraktereg, p 138; Myburgh v Central
Motor Works'
1968 (4) SA 864
(T) at p 865; Anastasopoulos v
Gelderbtom
1970 (2) SA 631
(N) at p 636)"
[35]
While the obligation to fund as contemplated in clause 24.1.3, on the
face of it, appears to be an obligation toward Kgalagadi,
it is, in
essence, also an obligation shareholders owe to each other. If the
other sources of funding are not available and a shareholder
does not
provide funding as contemplated in clause 24.1.3 it could impact
negatively, not only on Kgalagadi, but the other shareholders.
They
may either have to pay more than their pro rata share of the funding
to Kgalagadi, or suffer the consequences that no, or
insufficient
funding, may bring about. It is for that reason, in my view, that
Kalahari would have the requisite interest to compel
compliance.with
clause 24.1.3 of the shareholders' agreement. Furthermore, in my view
the obligations that are relevant are not
only those to be performed
by Kalahari and AMIT, but also those of Kgalagadi.
[36]
In terms of clause 12.9 of the shareholders' agreement it is, inter
alia, agreed that the Board of Kgalagadi shall "insofar
as
reasonably and practically possible" adopt and apply the
recommendations of the King Commission on Corporate Governance
(save
those provisions that relate to the appointment of non-executive
directors); a code of conduct dealing with all empowerment
issues; as
well as a progressive policy. No time is expressly stipulated for the
adoption and application of the aforesaid, but
it is clear from the
context that it was to be adopted and applied as far as is reasonable
and practically possible. The complaint
of AMIT relates mainly to the
adoption and application of the corporate governance recommendation.
[37]
In terms of clause 35.2 of the shareholders' agreement, Kalahari
warranted to AMIT and the IDC inter alia, that "the mining
right
will be duly and properly issued' to Kgaiagadi "on the basis of
facts and representations which were, and remain, true
and correct.
Clause 2.40 of the shareholders' agreement defines "mining right
as the mining right that was granted by the
Minister to Kalahari on 5
December 2007 in terms of section 23 of the Minerals and Petroleum
Resources Development Act 28 of 2002
("the MPRDA").
[38]
In terms of clause 35.5, Kalahari undertakes in favour of AivIlT - to
ensure that a lawfully appropriate rectification or amendment
to the
mining right - is affected notarially and registered at the Minerals
and Petroleum Titles Registration Office in terms of
section 5(1 )(d)
and section 15(2) of the Mining Titles Registration Act 16 of 1967,
as amended, "as soon as may be reasonably
possible after the
fulfilment of the condition in clause 3.1.4 above". It is
further specifically recorded that clause 35.5
is a material term of
the shareholders' agreement.
[39]
It is common cause that at the time when Kalahari launched this
application (i.e. 1 June 2012), the mining right had not as
yet been
registered in the name of Kgalagadi and that Kalahari only averred in
its replying affidavit that there was a consent
to the cession of the
right, from it to Kgalagadi
6
.
In its founding affidavit, Kalahari merely mentions that due to a
typographical error in the application for the mining title
the title
was registered in the name of Kalahari rather than that of Kgalagadi
and that the problem was in the process of being
attended to by the
DMR. AMIT in turn contends that Kalahari's explanation was false and
that it only became aware in December 2011
that Kalahari did not do
the cession and transfer the mining title tc Kgalagadi as warranted
in the shareholders' agreement.
[40]
As I mentioned above, on or about 7 June 2012 counsel for Kalahari
tendered an affidavit and proof from the Bar that the mining
right
was registered on 6 June 2012 in favour of Kgalagadi. AMIT's counsel
objected to the admission of this affidavit. I reserved
my ruling in
that regard. No prejudice can be suffered by AMIT if I take into
account the fact that the mining right was indeed
registered in the
name of Kgalagadi on 6 July 2012. In my view, it is very necessary
for the proper determination of the issues
in this case.
[41]
The shareholders' obligation to fund Kgalagadi, which is contained in
clause 24.1.3, does not expressly state that the funding
is subject
to the prior or simultaneous performance by Kgalagadi, or any
shareholder, of their respective obligations. Ex facie
the clause, if
Kgalagadi requires funding and funding from the other sources is not
available, then the third tier, shareholder
funding contemplated in
clause 24.1.3, becomes operative. In terms of ESE Financial Services
(supra), the relationship between
the obligations of the respective
parties is important as it may indicate the sequence in which they
ought to have been performed.
[42]
That the mining right or title was ceded to and registered in the
name of Kgalagadi was no doubt material. In the absence of
such right
any mining related operations performed by Kgalagadi would have been
legally questionable. An objection to fund Kgalagadi
in respect of
the performance of mining related operations that require a mining
title, or licence, would of necessity only be
enforceable if
Kgalagadi has such a mining title and could legally conduct such
operations and incur costs in relation thereto.
However, funding
obligations that related to activities that Kgalagadi could have
performed legally i.e. prior to having the mining
title, would not be
reciprocal to it having the mining title. In any event, in terms of
the shareholders' agreement, AMIT was,
from the outset, aware that
the mining title was registered in the name of Kalahari and that a
cession and registration into the
name of Kgalagadi was required;
that this would entail a process and that pending such a process,
costs would nevertheless be incurred
by Kgalagadi in relation to its
project(s). Notwithstanding such knowledge, the cession and
registration of the mining title, even
though recorded to be a
material term, was not made a condition precedent and AMIT was
willing to purchase a 50% shareholding in
Kgalagadi. Since June 2011
until about January 2012 AMIT approved payments by Kgalagadi. In
March 2012 AMIT made a payment of R86
million in respect of
Kgalagadi's obligations. AMIT, on its own version, only got to know
in December 2012 that the cession of
the mining title had not
occurred despite the term that this had to occur as soon as
reasonably possibly after the fulfilment of
the condition precedent
in clause 3.1.4 of the shareholders' agreement. AMIT's refusal to
fund Kgalagadi was not really on the
basis that the mining title had
not been ceded, or registered, but on the misconception that the
third tier of funding had not
become obligator/ or applicable.
[43]
The obligation of Kgalagadi's board to adopt and apply, insofar is as
reasonably and practically possible, inter alia, the
recommendations
of the King Commission on Corporate Governance are, in my view, not
reciprocal. What is reasonable and practical
in any particular
situation and at a particular point in time, may be a matter of
differing opinion, if this obligation is reciprocal
to the obligation
of shareholders to fund Kgalagadi when it requires funding, in
circumstances where no other funding is available,
the excuse that
corporate governance principles were not adopted in a particular
situation, could be used as a means of avoiding
funding. That could
not have been the intention. Whether or not the corporate governance
recommendations ought to be applied in
any particular situation,
ought to be a matter of decision by Kgalagadi, failing which, would
be a subject for arbitration. It
could not have been the intention of
the parties to the shareholders' agreement that their disagreement as
to what was reasonable
and practical regarding the adoption of
corporate governance recommendations, could be used as a reason for
not funding Kgalagadi.
[44]
Accordingly, in my view, AMIT was to provide funding to Kgalagadi
since Kgalagadi could not access the required funding either
from its
own sources or from third party sources. Having said that, I am not
of the view that it can be said that AMIT is in the
future
necessarily obliged to fund Kgalagadi, particularly now as the mining
licence has been registered in the name of Kgalagadi.
Whether or not
AMIT has such an obligation in future depends on whether or not
Kgalagadi requires funding, either because it has
no funds of its
own, or it cannot access funds of third parties on terms acceptable
to it.
Re:
THE CLAIM THAT AMIT BE ORDERED TO PAY DIRECTLY TO KALAHARI WHAT AMIT
OUGHT TO HAVE PAID TO KGALAGADI
[45]
As I pointed out earlier, the agreement contains no express term that
gives one shareholder a right to claim from another shareholder
its
pro rata share of the funding in circumstances where the former
shareholder has paid more than its pro rata share and the latter
has
not paid its share or a portion thereof.
[46]
Kalahari contends as follows:
"It
is an obvious proposition that compliance by one of the shareholders
with its payment obligation to the company according
precisely to its
pro rata shareholding inures for the benefit of all the shareholders
visa-vis the company's fottunes and overall
value; a fortiori, the
payment by a shareholder in excess of its pro rata obligation not
only benefits the other shareholders (and
of course the defaulting
shareholder) in the sense that it fulfils the same function
preserving or enhancing the state of the company,
but also in the
sense that the defaulting shareholder obtains a positive advantage
and savings for as long as the other shareholder
continues to pay and
the defaulting shareholder continues to default.
That
beino so, if follows that there is a tacit term contained in the
agreement that, to the extent that one shareholder should
discharge
the obligation of another to the company in excess of the former's
own liability and for the joint benefit of those shareholders,
the
over-paving shareholder has a right to recover from the defaulting
shareholder such excess payment." [emphasis added]
[47]
In City of Cape Town (CMC Administration) v Bourbon-Leftley and
Another NNO
7
Brand JA summarises the position regarding tacit terms as follows:
"[19]
A discussion of the legal principles regarding tacit terms is to be
found in the judgment of Nienaber JA in Wilkins NO
v Voges
[1994] ZASCA 53
;
1994 (3)
SA 130
(A) at 136H-137D. These principles have since been applied by
this Court, inter alia, in Botha v Coopers & Lybrand
2002 (5) SA
347
(SCA) at paras [22]-[25] and in Consol Ltd t/a Consol Glass v
Twee Jonge Gezellen (Pty) Ltd and Another
2005 (6) SA 1
(SCA) ([2004]
1 All SA 1)
at paras [50]-[52]. As stated in these cases, a tacit
term is based on an inference of what both parties must or would
necessarily
have agreed to, but which, for some reason or other,
remained unexpressed. Like all other inferences, acceptance of the
proposed
tacit term is entirely dependent on the facts. But, as also
appears from the cases referred to, a tacit term is not easily
inferred
by the courts. The reason for this reluctance is closely
linked to the postulate that the courts can neither make contracts
for
people nor supplement their agreements merely because it appears
reasonable or convenient to do so (see eg Alfred McAlpine &
Son
(Pty) Ltd v Transvaal Provincial Administration
1974 (3) SA 506
(A)
at 532H). It follows that a term cannot be inferred because it would,
on the application of the well-known 'officious bystander'
test, have
been unreasonable of one of the parties not to agree to it upon the
bystander's suggestion. Nor can it be inferred because
it would be
convenient and might therefore very welt have been incorporated in
the contract if the parties had thought about -it
at the time. A
proposed tacit term can only be imported into a contract if the court
is satisfied that the parties would necessarily
have agreed upon such
a term if it had been suggested to them at the time (see eg Alfred
McAipine (supra) at 532H-533B and Consol
Ltd t/a Consol Glass (supra)
at para [50]). If the inference is that the response by one of the
parties to the bystanders question
might have been that he would
first like to discuss and consider the suggested term, the
importation of the term would not be justified.
[20]
In deciding whether the suggested term can be inferred, the court
will have regard primarily to the express terms of the contract
and
to the surrounding circumstances under which it was entered into. It
has also been recognised in some cases, however, that
the subsequent
conduct of the parties can be indicative of the presence or absence
of the proposed tacit term (see eg Wilkins NO
v Voges (supra) at
143C-E; Botha v Coopers & Lybrand (supra) at para [25])."
[48]
it was held inter alia in Robin v Guarantee Life Assurance Co Ltd8
that where parties have in clear and unambiguous terms dealt
with a
subject matter there may be no room for importing a tacit term
dealing with such matter into the contract. Trengove JA there
specifically stated:
"A
tacit term cannot be imported into a contract in respect of any
matter to which the parties have applied their minds and
for which
they have made express provision in the contract. As was said by Van
Winsen JA in SA Mutual Aid Society v Cape Town Chamber
of Commerce
1962 (1)SA 598(A)at615D:
'A
term is sought to be implied in an agreement for the very reason that
the parties failed to agree expressly thereon. Where the
parties have
expressly agreed upon a term and given expression to that agreement
in the written contract in unambiguous terms no
reference can be had
to surrounding circumstances in order to subvert the meaning to be
derived from a consideration of the language
of the agreement only.
See Delmas Milling Co Ltd v Du Piessis
1955 (3) SA 447
(A) at 454.'
(See
also Mullin (Pty) Ltd v Benade Ltd
1952 (1) SA 211
(A) at 215D-H; Pan
American Vs/orld Airways Incorporated v SA Fire and Accident
Insurance Co Ltd
1965 (3) SA 150
(A) at 175C; Cape Town Municipality
v Silber
1971 (2) SA 537
(C) at 543A-D; Christie The Law of Contract
in South Africa (1981) at 156-158.)"
9
[49]
It was submitted on behalf of AMIT that there was no room in the
agreement for importing the tacit term contended for by Kalahari,
particularly in the light of the extensive provisions in clause
24.1.3, read with clause 24.3, which contains the terms and
conditions
that are applicable to loan accounts of the shareholders.
Clause 24.3.1.1 provides that the loan accounts shall bear interest
at
the prime rate. Clause 24.3.1.2 provides that, subject to clauses
24.3.1.3 and 24.3.1.4 and subject to the availability of funds
and
the obtaining of the relevant regulatory approvals required for
repayment, the loan account shall be repaid as may be agreed
from
time to time between Kgalagadi and the shareholders. Clause 24.3.1.3
provides that the loan account shall in any event be
repaid upon the
grant of a provisional or final order placing Kgalagadi under
judicial management or in liquidation. Clause 24.3.1.4
provides that
repayment by Kgalagadi to the shareholders shall be made pro rata to
their respective loan accounts, but to the extent
that any
shareholders' loan accounts exceeds its pro rata share based on Its
shareholding in Kgalagadi such excess shall first
be repaid. In
clause 24.3.2 it is provided that for as long as funding required by
Kgalagadi is not provided by shareholders pro
rata to their
respective shareholdings, interest shall accrue and be payable
monthly in arrear on any amount by which the shareholders'
account
exceeds such shareholders' pro rata share of ail loan accounts at the
prime rate of 2% (percent).
[50]
In its original notice of motion Kalahari, in essence, sought an
order that AMIT be directed to pay over the money to Kgalagadi
which
Kalahari had overpaid i.e. on behalf of AMIT and that Kgalagadi, in
turn, be ordered to immediately pay over that amount
to Kalahari. In
its answering affidavit, AMIT, inter alia, raised the argument that
this was tantamount to Kalahari being repaid
a portion of its loan
account contrary to the express provisions of the shareholders'
agreement, in particular, the provisions
of clause 24.3. in response
Kalahari amended its notice of motion and now it seeks an order that
AMIT pay the amount directly to
it.
[51]
Over and above the fact that the shareholders' agreement seems to
deal extensively and unambiguously with the issues of overpayment
and
underpayment and non-payment, the difficulty with the order sought by
Kalahari is that Kgalagadi is not obliged to recognise
the payment
which AMIT is required to make directly to Kalahari. Kgalagadi is not
required to credit AMIT's loan account with such
payment and to
reduce Kalahari's loan account with such payment. In those
circumstances, in my view, if one applies the bystander
test, the
inference is that the response by AMIT, or any other shareholder,
would in ail probability have been that it would like
to discuss and
consider the suggested term, in all probability the shareholder would
have wanted answers to those questions in
particular whether
Kgalagadi is in those circumstances to credit its loan account with
the payment and it would not have necessarily
agreed with the
proposed term had it been suggested to the shareholder at the time
when the shareholders' agreement was entered
into.
[52]
In my view the applicant's reliance on Koornktip Beleggings (Edmsj
Bpk v Allied Minerals Ltd
10
is misplaced. In any event the applicant relies on the proposed tacit
term for its cause of action. Accordingly, in circumstances
where the
term proposed cannot be inferred, the applicant must fail in its
claim that AMIT pay directly to it what it alleges it
paid in excess
of its pro rata share of the required funding.
COUNTER-APPLICATION
FOR BUSINESS RESCUE
[53]
AMIT in its counter-application seeks an order that Kgalagadi be
submitted to business rescue as contemplated in section 131
of the
New
Companies Act on
the grounds that Kgalagadi is financially
distressed and that it is otherwise just and equitable to do so.
Kalahari is opposing
the counter-application on several grounds.
Before dealing with the merits of the counter-application at the
hearing, I requested
counsel for AMIT to address me on whether there
had been compliance with
Regulation 124
of the Regulations made under
the new
Companies Act and
in particular whether the application as
required by
Regulation 124
was served on the creditors of Kgalagadi.
Creditors are "affected persons" as defined in the new
Companies Act. In
terms of
section 131(2){b)
each affected person
must be notified of the application in the prescribed manner.
Regulation 124
of the new
Companies Act Regulations
11
{"the Regulations") provides that:
"An
applicant in court proceedings who is required, in terms of either
section 130(3)(h)
or
131
(2)(b)r to notify affected persons that an
application has been made to court, must deliver a copy of the court
application, in
accordance with
Regulation 7
to each affected person
known to the applicant" [emphasis added]
[54]
Regulation 7
of the Regulations provides that a notice or document to
be delivered for any purpose contemplated in the new
Companies Act or
the Regulations must be delivered in a manner contemplated in
section
6(10)
or (11) or set out in Table CR3 of that Act.
[55]
Section 6(10) of the new
Companies Act provides
:
"If,
in terms of this Act, a notice is required or permitted to be given
or published to any person, it is sufficient if the
notice is
transmitted electronically directly to that person in a manner and
form such that the notice can conveniently be printed
by the
recipient within a reasonable time and at a reasonable cost."
[56]
Section 6(11)(b), which is relevant in the circumstances, provides:
"If,
in terms of this Act, a document, record or statement, other than a
notice contemplated in subsection (10), is required
-
(b)
to be published, provided or delivered, it is sufficient if-
(i)
an electronic original or reproduction of that document, record or
statement is published,
provided or delivered by electronic
communication in a manner and form such that the document, record or
statement can conveniently
be printed by the recipient within a
reasonable time and at a reasonable cost; or
(ii)
a notice of the availability of that document, record or statement,
summarising its content and satisfying an prescribed requirements,
is
delivered to each intended recipient of the document, record or
statement, together with instructions for receiving the complete
document, record or statement"
[57]
it was common cause that the counter-application, including the
affidavits in support of it, was not delivered to creditors,
but that
notice was sent to creditors by electronic means (i.e. by email) in
which creditors were Inter alia informed that AMIT
was launching
application proceedings against Kgalagadi in which it was seeking an
order placing Kgalagadi under supervision and
subjecting it to
business rescue as contemplated in section 131(1), read with section
131(4), of the new
Companies Act. The
notice stated that it was a
notice in compliance with
section 131(2)(b)
of the new
Companies Act
read
with the provisions of
Regulation 7
Annexure 3 Table CR3;
Further that the notice of counter-application relating to these
proceedings, was annexed to that notice,
and that the affidavits and
related documents relevant to the counter-application, being
voluminous, were not annexed to the notice,
and that any party
requiring a copy of the founding affidavit in the counter-application
was invited to inform AMIT's attorneys
of that fact by email
communication, at a given address.The notice also stated that any
party requesting a copy of AMIT's founding
affidavit will be
forwarded a copy thereof by email. In the notice intended recipients
are also informed that as affected parties
they are entitled to take
part in the hearing of the above application in terms of
section
131(3)
of the new Act; that a counter-application for business rescue
is being brought as a matter of urgency and is enrolled for hearing
on 22 May 2012 and that if they intend opposing the application they
are required to notify AMIT's attorneys in writing on or before
17h00
on Friday 18 May 2012 and to file answering opposing affidavits on or
before 14h00 on Monday 21 May 2012. The notice is dated
17 May 2012.
According to the affidavit of service, the notice was transmitted to
creditors.
[58]
It was submitted on behalf of AMIT that the notice accompanied by a
copy of the notice of motion in the counter-application,
was
substantial compliance with section 131(2)(b) read with Regulations 7
and 124. It was further submitted with reference to the
decision in
Cape Point Vineyards (Pty) Ltd v Pinnacie Point Group
12
that Regulation 124 went too far in providing that the affected
person should also be served with a copy of the application. It
was
further submitted that, in any event, there has been substantial
compliance as contemplated in section 6(11 )(b) of the new
Companies
Act and
section 6(10)
of that Act.
[59]
On behalf of Kalahari it was submitted that there has been no
compliance with the service requirements of section 131(2)(b)
read
with Regulations 7 and 124.
[60]
I am of the respectful view that the court in Cape Point Vineyards
was probably justified in its criticism of Regulation 124,
namely,
that it went beyond what might lawfully be prescribed under section
131(2)(b) of the new
Companies Act, insofar
as it required service of
the whole application and that such service in most instances would
not be practically feasible. However,
the requirements of
Regulation
124
cannot just be ignored, or be regarded as pro non scripto. Until
declared invalid and set aside the requirements of that regulation
would have to be complied with. Fortunately
section 6(11)(b)
of the
new
Companies Act does
provide a solution when it is not practically
feasible to deliver the whole application because of its bulk. That
section provides
that it is sufficient delivery if a notice is
delivered to each intended recipient making known the document that
is to be delivered
is available, contains a summary of the contents
of the document, complies with any prescribed requirements and gives
instructions
to the intended recipients as to how to get access to
the document.
[61]
The question that arises is whether the notice, that was submitted in
this instance on behalf of AMIT and referred to above,
is a notice
that complies with
section 6(11
)(b)? If it is, then there has been
substantial compliance as envisaged in
section 6(11)(b)
of the new
Companies Act.
[62
]
The notice that AMIT's attorneys transmitted to intended recipients
(i.e. creditors) does not make mention that it is a notice
as
contemplated in
section 6(11)(b)
, but it purports to be a notice as
envisaged in that section. Although it may arguably comply with
certain of the requirements
in
section 6(11)(b)
, it certainly does
not comply with the requirement that the document intended to be
delivered, i.e. the application, be summarised
therein. While the
notice of counter-application gives an indication of, inter alia, the
relief sought and the dates and times
for delivery of the notice of
opposition and answering and opposing affidavits, it does not contain
a summary of the application.
The grounds upon which the relief is
being sought are not discernible from either the notice, or the
accompanying notice of counter-application.
If the document which is
required to be delivered by the new
Companies Act as
per the wording
of
section 6(11)(b)
, then there has been no compliance with that
section.
Section 6(11)(b)
provides that the notice complying with the
requirements stated in that section will be sufficient if uin terms
of this Act, a
document, record or statement, other than a notice
contemplated in subsection (10) is required' [emphasis added], in
section 1
of the new
Companies Act the
phrase "this Act' is
defined as including the schedules and regulations. The term
"regulation" is defined as meaning
"a regulation made
under this Ac?. The Act is the new
Companies Act and
Regulation 124
,
which requires that the application be delivered to affected persons,
is a regulation made under the new
Companies Act. For
substantial
compliance with
Regulation 124
- which is regarded as part and parcel
of the new
Companies Act
- as contemplated in
section 6(11)(b)
, the
notice has to contain a summary of the content of the application, if
it does not comply with that requirement of
section 6(11
)(b.) then
it cannot be said that there has been substantial compliance with the
new
Companies Act regarding
the delivery of the application or
counter-application. In my view, there has, accordingly, not been
compliance with the delivery
requirements stipulated in
section
131(2)(b)
read with
Regulation 124
and
Regulation 7
read with
section
6(11)(b)
of the new
Companies Act.
[63]
Insofar as counsel for AMIT also relied on sub-section 6(10) of the
new
Companies Act reliance
is clearly not appropriate, because
section 6(10)
only pertains to a "notice".
[64]
Counsel for AMIT however also relied to a limited extent on
section
6(9)
of the new
Companies Act and
submitted that in terms of the
provisions of that section there is substantive compliance. The
section provides:
"(9)
If a manner of delivery of a document, record, statement or notice is
prescribed in terms of this Act for any purpose
-
(a)
it is sufficient if the person required to deliver such a document,
record, statement or notice does so in a manner that satisfies
all of
the substantive requirements as prescribed; and
(b)
any deviation from the prescribed manner does not invalidate the
action taken by the person delivering that document, record,
statement or notice, unless the deviation -
(i)
materially reduces the probability that the intended recipient will
receive the document, record, statement or notice; or
(it)
is such as would reasonably mislead a person to whom the document,
record, statement or notice is, oris to be, delivered."
[65]
In my view section 6(9) of the new
Companies Act is
not applicable to
the present situation. It deals with the manner of delivery as
opposed to what has to be delivered. It provides
that if a person is
required to deliver a document, record or statement in respect of
which the manner for delivery is prescribed
in terms of the Act, it
is sufficient if that document, etc, is delivered in "a manner
that satisfies all the substantive
requirements as prescribed".
Section 6(9)(b) provides that any deviation from the prescribed
manner does not invalidate the
action taken by the person delivering
the document, etc, unless the deviation reduces the probability of
the intended recipient
receiving it, or would reasonably mislead the
person to whom the document, etc, is to be delivered.
[66]
Accordingly, in my view, the counter-application is not properly
before me as there has been no compliance with the service
provisions. In those circumstances it cannot be granted in these
proceedings.
[67]
In any event and even if I am wrong in my conclusion that there has
been no substantial compliance with the service requirements
of the
new
Companies
Act I
am of the view that the business rescue application cannot
succeed.
[68]
Section 131(4)
of the new
Companies Act provides
that after
considering an application in terms of subsection (1) the court may
(a) make an order placing the company under supervision
and
commencing business rescue proceedings if the court is satisfied that
- (i) the company is financially distressed; (ii) the
company has
failed to pay over any Amount in terms of an obligation under or in
terms of a public regulation or contract with respect
to employment
related matters; or (iii) it is otherwise just and equitable to do so
for financial reasons, and there is a reasonable
prospect for
rescuing the company or (b) dismiss the application, together with
any further necessary and appropriate order, including
an order
placing the company under liquidation. In terms of
section 131(5)
the
court that makes an order in terms of subsection (4)(a) may make a
further order appointing as interim practitioner, a person
who
satisfies the requirements of
section 38
and who has been nominated
by the affected person who brought the application subject to
ratification by the majority of the independent
creditors voting
interests at the first meeting of creditors, as contemplated in
section 147
of the new
Companies Act. In
this matter AMIT has
nominated a business rescue practitioner, Gerhard Holtzhauzen
("Holizhauzen") for appointment.
[69]
It was submitted on behalf of AMIT that because of a lack of funding
Kgaiagadi was financially distressed and that it was facing
the
prospect, expressly alluded to by Kalahari in its founding papers in
the application of being liquidated by one or other of
its creditors
and that business rescue was the ideal via media which would enable
Kgalagadi to be nursed back to financial health.
It was furthermore
submitted on behalf of AMIT that it was also just and equitable for
financial reasons to subject Kgalagadi to
business rescue. The
submission in this regard was that with an impartial business rescue
practitioner supervising the management
of the business there was a
very strong likelihood that the corporate governance issues would be
resolved and that funds from third
parties would also flow in. It was
submitted that Kalahari's fears that this was merely a ploy by AMIT
to achieve its own ends
and change the very objectives that inspired
the formation of Kgalagadi, were unfounded. AMIT submitted that if
Kgalagadi was subjected
to business rescue it was prepared to inject
the sum of R100 million and a further R400 million, once the mining
right had been
"regularised" in the name of Kgalagadi, for
the development of the mine and sinter. This tender by AMIT was on
the basis
that in the hands of a business rescue practitioner AMIT's
concerns, which it alleges has caused Kgalagadi's financial distress,
will be relieved.
[70]
Kalahari submits that the remedy of business rescue is completely
inappropriate and destructive of the best interests of Kgalagadi
and
that it is also not just and equitable to subject Kgalagadi to
business rescue. Kalahari blames AMIT for the financial difficulties
in which Kgalagadi was finding itself in. It contends that AMIT has
refused to provide the necessary funding to Kgalagadi since
July 2011
with the exception of an amount of about R86 million which was paid
on 13 March 2012. Kalahari submits that AMiT deliberately
refused to
enable third party funders to provide the required funding. Further
that AMIT is not even prepared to commit itself
beyond the R500
million, which it is tendering on the basis aforementioned, although
no such limitation is stipulated in the shareholders'
agreement.
According to Kalahari, if the tender was bona fide, AMIT would have
committed itself to continue contributing in accordance
with the
shareholders' agreement. Kalahari also objected to the appointment of
Hoitzhauzen on two bases, namely, firstly, that
he was a male and,
secondly, that he had no qualifications or experience of running a
mining company. According to Kalahari, his
appointment would
unjustifiably increase Kgalagadi's costs burden and also undermine
the very important objectives of establishing
Kgaiagadi, particularly
the empowerment of women. Kalahari also referred to concerns raised
by some of Kgalagadi's service providers
and employees, if Kgaiagadi
should be placed under business rescue.
[71]
While the latter issues raised by Kalahari are not significant and
might be dismissed on the basis of a lack of understanding
of the
process of business rescue, the concern is AMIT's attitude. As I
found with regard to the claim, AMIT had an obligation
to fund
Kgaiagadi in terms of the shareholders' agreement if Kgaiagadi did
not have funds and could not have access to funds from
third parties
on terms that were acceptable to it. AMIT does not say that it could
not fund Kgaiagadi because it did not have the
necessary means,
instead it appears that AMIT deliberately withheld funding from
Kgaiagadi, because (so it avers) it had no obligation
to fund
Kgaiagadi as third party funders were willing to fund, but for the
fact that the mining licence had not been registered
in Kgalagadi's
name and because of specific concerns regarding corporate governance
issues. Beside the fact that the parties had
entered into mediation,
AMIT apparently did very little, if anything, to provide for the
funding needs of Kgalagadi. It did not
institute arbitration
proceedings to obtain specific performance of the alleged breaches it
was raising as a reason why funds were
not being accessed by
Kgalagadi. Instead it deliberately withheld funding, seemingly
knowing that Kgalagadi would, as a result,
experience financial
distress which would render it vulnerable to attack by disgruntled
creditors; That by balancing its fate,
of either being liquidated,
or"rescued1, there would be an opting-of the latter, which would
enable AMIT to achieve possibly
more than what it could have achieved
by an order for specific performance. The consequence of business
rescue is that the business
rescue practitioner takes over the full
management control of the company
(section 140(1)(a)).
While a
director continues to exercise the functions of a director
(section
137(2)(a))
he or she is subject to the authority and control of the
practitioner
(section 137(2)(a)
and
section 140).
[72]
There is ample authority that an applicant who relies on the ground
that it was just and equitable to liquidate a company,
(i.e. under
the previous
Companies Act), must
come to court with clean hands. In
other words, it must not itself have been wrongfully responsible for,
or have connived at bringing
about the state of affairs, which it
asserts results in it being just and equitable to wind up the
company.
13
There is no reason why the same principle cannot also apply in the
case of business rescue proceedings.
[73]
This is not a case where Kgalagadi was previously generating profits
and has now fallen upon bad days financially. Kgalagadi's
business is
in a developmental phase. A mine and sinter is to be developed before
it can be profitably exploited. A smelter is
also to be developed
before profitable exploitation can occur. This was all known to AMIT
from the outset. Funding has always been
required for this
developmental phase. This is also apparent from the shareholders'
agreement. The mining right has now been registered
in Kgalagadi's
name and that can no longer be a factor when it comes to third party
or shareholder funding. AMIT is not deprived
of its remedies in terms
of the shareholders' agreement. It can obtain relief by way of an
order for specific performance. If AMIT
meets its funding
obligations, as was agreed to in the shareholders' agreement, there
is no reason why Kgalagadi should be under
financial distress. The
shareholders' agreement contains adequate remedies, if obligations,
emanating from the shareholders' agreement,
are not performed.
[74]
The parties sought the costs of three counsel, where three counsel
were employed. In the result I make the following order
with regard
to the application and the counter-appiication:
74.1
it is declared that the first respondent (Arcelormitta! SA) is
obliged to discharge its obligations as shareholder under the
provisions of clause 24.1.3. of the shareholders' agreement (a copy
of which is annexed to the applicant's founding affidavit marked
"DMN3") in circumstances where the third respondent
(Kgalagadi Manganese (Pty) Ltd) requires funding and does not have
such funding and cannot obtain the necessary funding from a third
party on terms acceptable to it.
74.2
The first respondent is ordered to pay the third respondent within 10
days of this order a contribution in the sum of R241
325 471,00 in
respect of the funding which the third respondent required for the
period 1 February 2012 to 31 May 2012.
74.3
The first respondent is directed to comply with its obligations in
terms of clause 24.4 of the shareholders' agreement.
74.4
The first respondent is ordered to pay the costs of the application,
including the costs previously reserved. Such costs to
include the
costs of three counsel, where three counsel were employed.
74.5
The counter-application, to place the third respondent under business
rescue, is struck from the roll with costs, such costs
to include the
costs of three counsel, where three counsel were employed.
---
P
COPPIN
JUDGE
OF THE SOUTH GAUTENG HIGH COURT, JOHANNESBURG
COUNSEL
FOR THE APPLICANT:BOKABA SC AND L MORISON SC
(HEADS
OF ARGUMENT HAVING BEEN DRAWN BY IVY MALEKA SC, L MORISON SC AND B M
SLON)
INSTRUCTED
BY
BRIAN
KHAN INC ATTORNEYS
COUNSEL
FOR THE FIRST RESPONDENT
F
A SNYCKERS SC AND K SERAFINO-DOOLEY
(HEADS
OF ARGUMENT HAVING
BEEN
DRAWN BY S F BURGER SC,
F
A SNYCKERS SC AND K SERAFINO-DOOLEY
INSTRUCTED
BY
CLIFFE
DEKKER HOFMEYR INC.
1
1957
(4) SA234 (C)
2
This
is an extract from a report prepared by Webber Wenteei Attorneys
that was presented at a meeting attended by representatives
of AM at
the Offices of Edward Nathan and Sonnenberg on 27 March 2012 and it
alleged to set out the position of the banks.
3
1979
(1)SA 391 (A).
4
See
Hamman
v Norije
1914
AD 293
at 300;
Nesci
v Meyer
1982
(3) SA 498
(A) at 513F.
5
1973
(2}SA 805 (C) at 808-9.
6
The
OMR's consent to the cession was apparently granted on or about 3
April 2012.
7
2006
(3} SA 488
(SCA) at paras [19]-[20].
9
Ses
also
Ashcor
Secunda (Pty) Ltd v Sasol Synthetic Fuels (Pty) Lid
[2011]
JOL 27883
(SCA) especially paras [12] and [13].
10
1970
(1) SA 674
(C) at 677F-67SA,
11
GNR
351 of 26 April 2011; Companies Regulations, 2011, Government
Gazette No. 34 23(9).
12
2001
(5) SA 600
(WCC) para [16] at 6058-E.
13
See
example
Apco
Africa incorporated v Apco Vtforldwide (Pty) Ltd
[2008]
4 All SA 1
(SCA) at 9. For other authorities see Henochsberg on the
Companies Act by
P M Meskin Volume 1 Commentary under
section 344
where authorities are listed including
Wackrili
v Sandton international Removals (Pty) Ltd
1984
(1) SA 282
(W) at 292,
Lawrence
v Lawrich Motors (Pty) Ltd
1948
(2) SA 1029
(W) at 1032-1033 and
Marshall
v Marshall (Pty) Lid
1954
(3) SA 571
(N) at 579.