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[2015] ZAGPJHC 99
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Von Siebel and Others v Accentuate Limited and Others (47008/13) [2015] ZAGPJHC 99 (13 March 2015)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
Case
No: 47008/13
DATE:
13 MARCH 2015
In
the matter between:
CRON
ROBERT VON
SIEBEL
....................................................................................
1
ST
APPICANT
LALIBELA
LIMITED
................................................................................................
2
ND
APPLICANT
WILLOW
SECURITIES
CC
.....................................................................................
3
RD
APPLICANT
THE
TRUSTEES OF THE ELM
TRUST
.................................................................
4
TH
APPLICANT
And
ACCENTUATE
LIMITED
.....................................................................................
1
ST
RESPONDENT
COMPUTERSHARE
INVESTOR SERVICES (PTY) LIMITED
.....................
2
ND
RESPONDENT
STANDARD BANK
NOMINEES (TRANSVAAL) (PTY) LIMITED
...............
3
RD
RESPONDENT
BNS NOMINEES
(PTY)
LIMITED
......................................................................
4
TH
RESPONDENT
JUDGMENT
Coram:
RE Monama, J
Introduction
[1]
On 13 December 2013 the Applicants launched an urgent interdict
application. The application was set down for 19 December 2013.
On
the later date the parties, without prejudice agreed to a draft which
was made an order of court.
[2]
The order provides that:
“
-1.
The application is postponed sine die to be heard in the ordinary
course, the costs to be reserved for determination in the
application. The Respondents reserve the right to argue urgency in
respect of the costs;
2.
The Respondents will deliver their answering affidavit by no later
than the 27
th
January 2014;
3.
Pending the hearing of the application and the handing down of
judgment and without prejudice to any of the parties’
contentions,
the Respondents undertake not to further implement or
act upon;
3.1
Ordinary Resolution Number 10 and Special Resolution numbers 1 to 4
passed at the annual meeting of the shareholders of the
First
Respondent held on 29 November 2013 and adjourned until 6 December
2013;
3.2
Articles 5c, 5e, 5f, 27c and 27d of the memorandum of incorporation
adopted by the First Respondent pursuant to Special Resolution
number
5 passed at the annual general meeting of the of the
shareholders of the First Respondent held on 29 November
2013 and
adjourned until 6 December 2013.
[1]
The
order is a sequel to the events of 29 November 2013 and 6 December
2013 at the annual general meeting of the first respondent.
The
factual matrix
[3]
The applicants are the beneficial holders of shares in the first
respondent. The first applicant’s shares are held by
the fourth
respondent. The second applicant’s shares are held by the third
respondent. The third applicant’s shares
are registered in the
name of the fourth respondent. Lastly, the fourth applicant’s
shares are registered in the name of
third respondent. Their total
beneficial shareholding is approximately 23% of the entire issued
share capital in the first respondent.
[4]
During 29 November 2013 and 6 December 2013 the first
respondent held its general annual meeting. The applicants and/or
their representative were invited and attended. On 29 November 2013,
they participated in the proceedings and voted in respect
of certain
transactions and resolutions. At the end of the meeting a certain Mr
Sack raised certain issues of proxies and letters
of representation.
The meeting was adjourned until 6 December 2013. When the meeting
resumed the applicants’ votes were excluded
. The votes were
alleged to have contravened the law. The relevant
Sections 56 and 58 of the Companies
Act, Act 71 of
2008
(“the
Act”)
[2]
.
[5]
The exclusion was based on two grounds. The first ground relates to
the proxies and letters of representation. The second ground
of
exclusion is based on the second applicant’s failure to
disclose the details of its beneficial shareholding.
[6]
The exclusion of the applicants’ votes enabled the passage and
adoption of certain crucial resolutions. These resolutions
are
incorporated in the draft order which was finally made an order of
court on 19 December 2013.
[7]
The applicants contend that that their votes were unlawfully and
unfairly excluded.
A
fortiori
they contend that the adoption of the resolutions were unlawful. In
the alternative they relied on Section 163 of the Companies
Act, No
71 of 2008 ( “the Act
[3]
”).
They argued that the conduct of the exclusion of their votes was
prejudicial and oppressive.
The
Issue
[8]
The first issue is the interim relief . his followed by b the
exclusion of the votes. Lastly , the final issue is
the
alleged oppressive or prejudicial conduct.
The
legal frame work
[9]
The respective parties rely on the provisions of two different
acts. The applicants relies on the provisions of
the
Financial Markets Act
[4]
“
(the
Markets
Act”),
and the directives
[5]
issued by
South African Central Depository (“Strate Limited”). On
the other hand the respondents relies
on the provisions of Sections
56 and 58 of the Act .
The
Finacial Markets Act and it scope
[10]
The preamble to the above Act is instructive. It set the tone for its
application and its ambit regulate exchanges, central
securities
depositories, clearing houses and trade repositories; to regulate and
control securities trading, clearing and settlement,
and the custody
and administration of securities; to prohibit insider trading, and
other market abuses, to provide for the approval
of nominees; to
provide for codes of conduct; to replace the
Securities Services Act,
2004
, as amended by the Financial Services Law General Amendment Act,
2008, so as to align this Act with international standards; and
to
provide for to license and matters connected therewith.” “-the
regulation of the financial markets;
The
relevant Sections of the
Companies Act
[11
]
The applicants are holders of beneficial interests in the
securities of the first respondent. Section 56 of the Act deals
with
beneficial interest and provides that:
“
-(1)
Except to the extent a company’s Memorandum of Incorporation
provides otherwise, the company’s issued securities
may be held
by and registered in the name of one person for the beneficial
interest of another person.
(2)
A person is regarded to have a beneficial interest in a security of a
public company if the security is held
nominee
officii
by another person on that first
person’s behalf, or if that first person:-
(a)
if married in community of property to a
person who has a beneficial interest in that security.
(b)
is the parent of a minor child who has a
beneficial interest in that security;
(c)
acts in terms of an agreement with another
person who has a beneficial interest in that security, and the
agreement is in respect
of the co-operation between them for the
acquisition, disposal or any other matter relating to a beneficial
interest in that security;
(d)
is the holding company of a company that
has a beneficial interest in that security;
(e)
is entitled to exercise or control the
exercise of the majority of the voting rights at general meeting of a
juristic person that
has a beneficial interest in that security; and
(f)
gives directions or instructions to a
juristic person that has a beneficial interest in that security, and
its directors or the
trustees are accustomed to act in accordance
with that person’s directions or instructions.
(3)
If a security of a public company is registered in the name of a
person who is not the holder of the beneficial interest
in all
of the securities so held, the number and class of securities held
for each person with a beneficial interest, and the extent
of each
such beneficial interest.
(4)
The information required in terms of subsection (3) must_
(a)
be disclosed in writing to the company within five business
days after the end of every month during which a change has
occurred
in the information contemplated in subsection (3), or more promptly
or frequently to the extent so provided by the requirements
of a
central securities depository; and formalities, except to the
extent that the Memorandum of Incorporation provides otherwise,
provided that-
(i)
every such person was present at the board
meeting when the matter was referred to them in their capacity as
shareholders;
(ii)
sufficient persons are present in their
capacity as shareholders to satisfy the quorum requirements set out
in section 64; and
(iii)
a resolution adopted by those persons in
their capacity as shareholders has at least the support that would
have been required for
it to be adopted as an ordinary or special
resolution, as the case may be, at a properly constituted
shareholder’s meeting;
and
(b)
when acting in their capacity as shareholders, those persons are not
subject to the provisions of
Sections
73 to 78
relating to the duties,
obligations, liability and indemnification of directors.”
Participation
at the annual general meetings in terms of the Act
[12]
The Act confers certain powers on the members in the general
meetings. The powers are contained in Section 58 of the
Act.
The section governs the right to participate at the meeting of the
company. It provides that:
“
-(i)
At any time, a shareholder of a company may appoint any individual,
including an individual who is not a shareholder of that
company, as
a proxy to-
(a)
participate in, and speak and vote at , a
shareholders meeting on behalf of the shareholder; or
(b)
give or withhold written consent on behalf
of the shareholder to a decision contemplated in
section
60
. [Subs.
(2)
A proxy appointment-
(a)
must be in writing, dated and signed by the shareholder; and
(b)
remain valid for-
(i)
one year after the date on which it was signed; or
(ii)
any longer or shorter period expressly set out in the appointment,
unless it is revoked in a manner contemplated in subsection
4(2), or
expires earlier as contemplated in subsection (8) (d).
Oppressive
or prejudicial conduct in terms of the Act
[13]
The Act has provisions which providea relief from oppressive or
prejudicial conduct or from the abuse by shareholders
or
directors of companies. The Act provides a mechanism to
deal with oppressive or prejudicial allegations. It
provides
that:
“
-A
shareholder or a director of a company may apply to court for relief
if
(a)
any act or omission of the company, or a
related person, has had a result that is oppressive or unfairly
prejudicial to, or that
unfairly disregards the interest of, the
applicant;
(b)
the business of the company, or a related
person, is being or has been carried on or conducted in a manner that
is oppressive or
unfairly prejudicial to, or that unfairly disregards
the interest of, the applicant; or
(c)
the
powers of a director or prescribed officer of the company, or a
person related to the company, are being or have been exercised
in a
manner that is oppressive or unfairly prejudicial to, or that
unfairly disregards the interest of, the applicant.”
[6]
The
court considering an application in terms of the above provisions,
may make any interim or final order which it deems fit.
[7]
The
formulation of the issues in this application
[14]
In terms of the order of 19 November 2013 the respondents undertook
not to further implement or act upon:
“
Ordinary
Resolution 10 and Special Resolution number 1 to 4 passed at the
annual meeting of the shareholders of the first
respondent………….;
and
Articles
5c,5e 27c and 27d of the memorandum of incorporation adopted
….pursuant to Special Resolution number 5…….”
The
restriction above was subject to or pending the hearing of this
application and handing down of the judgement . The proviso
was
an important element which should be taken account in the drawing of
the affidavits because the function of the affidavits
in motion
proceedings is trite.
[8]
[15]
In this matter the applicants maintain that they seek an interim
relief at this stage. Accordingly, they argued that the only
need to
prove a
prima facie
right to set aside the resolutions. They argued that I do not need to
decide
the difficulty question of law
.
The difficult question should be left for the subsequent final
relief.
[16]
The above arguments and submissions are straightforward
stand to be dismissed forthwith. They lack merit.
The
point is misconceived. The applicants have already obtain the
interim relief. The order of 19 December 2013 stand
as an
interim order. There is no such a relief as the interim relief on
interim relief.
[17]
The applicants contention that is still entitled to a further interim
relief is based on the wrong interpretation of
the authorities
relied upon.
[9]
The
concept of the
so-called
difficult question of law
has
received judicial attention in a series of cases. In the
Beechem
Group Limited v B-M Group (Pty) Ltd
[10]
the court opined that the grounds of objections
“
-raised
difficult question of law.”
This
statement was made during the hearing of an urgent temporary
interdict application. In
Johannesburg
Municipal Pension Fund v City of Johannesburg
[11]
the court held that:
“
-Impressive
and erudite arguments were addressed to me on all these grounds. I
cannot do justice to all the consideration referred
to. All the
issues referred to involve ‘difficult questions of law and none
of them can be described as ‘ordinary’,
nor is it
desirable to rule at this interim stage that there is no prospects
of success on any of these bases of review.
The issues are simply too
involved (a serious question to be tried’) and such gravity
that they cannot be, and should not
be disposed in this interim
proceeding”.
Finally
in
Geyser v Nedbank Ltd and
Others: In re Nedbank Ltd v Geyser
,
the court stated that
“
-Where
‘difficult question of law’ were raised they had to be
dealt with at trial and not the interlocutory stage of
the
proceedings”.
[12]
In
my view, all these decisions dealt with urgent applications.
The decisions reiterated the principle
that
in interim relief applications the test of
prima
facie right
is less stringent and
should be granted. The difficult question to be dealt with at late
stage. Therefore the so-called difficult
question means that and
nothing more. The emphasize is preservation.
[18]
As stated above, the application for that interim
relief must be dismissed.
[19]
I now turn to the interpretation of the acts to determine the
applicable act to the facts.
The
principal acts are the
Companies Act and
the Financial
Markets
Act. The latter act provides for the following, namely to:
.
“
-
(a) ensure that the South African financial markets are fair
efficient and transparent;
(b)
increase confidence in the South African financial markets by-
(
i) requiring that the securities services can be provided in a fair,
efficient and transparent manner; and
(ii)
contributing to the maintenance of stable financial
environment;
(c)
promote the protection of regulated person, clients and investors;
(d)
reduce systematic risk
(e)
promote the international and domestic competitiveness of the South
African financial markets and securities in the Republic’
There
is no provisions for the meetings of the companies and, beneficiaries
interests in this legislation. These issues
are provided for in
the Act.
[20]
The term
financial markets
is not defined . However, the phrase must be given the same meaning
as the defined phrase of
marke
t
infrastructure. The market
infrastructure
is defined to mean each
of the following; namely a licensed central securities on
depository, a licensed clearing house,
a licensed exchange;
and a licensed trade repository.
[21]
The Markets Act has a provision that provides that:
“
-Despite
any other law, other than the Financial Intelligence Centre
Act, if there is an inconsistency between any provision
of this act
and any other national legislation, this Act prevails”
[13]
This
provision must be seen on context. It relates to issues of financial
markets inconsistency. The submissions based on
the Markets Act
must fail. The applicants conflate the scope of the two legislations
which cater for different scenarios.
[
Annual
general Meeting
[22]
I turn to the provisions of the Act which confers
constitutional powers to the members to conduct the
affairs of the
company in the general meetings. The meeting has extensive powers.
It can alter the memorandum of incorporation
by special
resolution and can remove directors by ordinary resolution. The
meeting has the power to amend to amend the memorandum
of
incorporation regarding the authorisation and classification of
shares and the preferences, rights , limitations and other
terms associated with each class f shares. This power need special
resolution.
[23]
The applicants must make out the case sought in the final relief.
They alleged the exclusion of their votes was unlawful. The
respondents contends that the exclusion was justifiable because the
applicants did not comply with the provisions of the
Act . The
respondents submitted the applicants violated Sections 56
and 58 of the Act. These sections deal with the
issues of beneficial
interest in the securities and representation respectively by
proxy
[14]
.
[24]
The applicants do not dispute the allegation that they are all the
holders of beneficial interest in the listed
securities
of the first respondent. The essence of their case is that Section
58(2) of the Act does not apply to their case. The
subsection
provides that:
“
-A
proxy appointment –
(a)
must be in writing, dated and signed by the
shareholder; and
(b)
Remains valid for –
(i)
One year after the date it was singed; or
(ii)
Any longer or shorter period expressly set
out in the appointment; unless it is revoked in a manner contemplated
in subsection (4
)(c), or expires earlier as contemplated in
subsection (8)(d).
The
subsection is preceded by the provision which allows the
participation of the proxy. The applicants persist that the Act finds
no application in their case. They submitted the voting should be
held to be in terms of the
Markets Act
and not in terms of the
Act.
As stated earlier that argument is fallacious.
[25]
The fallacy emanates from thier interpretation of Section
56(9) to 56(11) of the Act. This section provides that
:
-Any
person who holds a beneficial interest in Any securities may vote in
a manner at a meeting of shareholders, only to the extent
that-
(a)
The beneficial interest includes the right
to vote on the matter; and
(b)
The person’s name is on the company’s
register of disclosures as the holder of a beneficial interest, or
the person
holds a proxy appointment in respect of that matter from
the registered holder of those securities.
([10)
The registered holder of any securities in which any person has
beneficial interest must deliver to each such person-
(a)
a notice of any meeting of a company at which those securities may be
voted on within two business days after receiving such
a notice from
the company; and
(b)
a proxy appointment to the extent of that person’s beneficial
interest, if the person so demand in terms of sub-section
(11).
(11)
A person who has a beneficial interest in any securities that are
entitled to be voted on at a meeting of a company’s
shareholders, may demand a proxy appointment from the registered
holder of those securities, to the extent of that person’s
beneficial interest, by delivering such a demand to the registered
holder, in writing, or as required by the applicable requirements
of
a central securities depository.
The
applicants failed to distinquish that scopes of the two legislation.
The
Companies Act is
the foundation legislation governing the
establishment, management of companies in the Republic of
South Africa. It
provides that if there is inconsistency
between any of its provisions and provisions of any other national
legislation then
its provisions prevail. It has identified the
Financial Markets Act as one such national legislation .
[15]
The failure led them to rely on the following provision, namely
“
Despite
any other law, other than the Financial Intelligence Centre Act, if
there
is
an inconsistency between any provision of this Act and a
provision of any other national legislation, this Act
prevails.”
[16]
The
object so this Act are clear. They are the following; namely to:
“ –
(a)
ensure that the South African markets are fair,efficient and
transparent;
(b)
increase confidence in the South African markets by-
(i)
requiring that the securities services be provided in a fair,
and transparent manner ;and
(ii)
contributing to the maintenance of a stable financial market
environment;
(c)
Promote the protection of regulated persons, clients
and
investors;(d)reduce systemic risk; and (e) promote
the
international and domestic competiveness of the South African
financial markets and of securities Services in the Republic.”
The
primary purpose of the above Act is the markets and the securities.
[26]
The provisions of Section 5(4) in the
Companies Act apply
in the
matters its scope. Similarly, the provisions of Section 3(3) of the
Markets Act apply to its scope of jurisdiction. The
submission that
the directives of Strate must prevail over the prescript of the
national legislation is untenable.
Prejudice
and Oppressive conduct in terms of Section 163 of the Act
[27]
The
Companies Act has
a provision dealing with the necessary relief
in the cases of oppressive, prejudicial conduct or abuse of separate
juristic personality
of company.
Section 163(1)
provides that a
shareholder may apply to court for relief if :
“
(
a)
any act or omission of the company, or related person,
has
had a result that is oppressive or unfairly prejudicial
to,
or that unfairly disregards the interest of, the applicant;
(b)the
business of the company, or related person, is being or has been
carried on or conducted in a manner that is oppressive or
unfairly
prejudicial to ,or that unfairly disregards the interests of,
the applicant: or…
Notwithstanding
the short life of the Section, it has already enjoyed the scrutiny of
our courts
[17]
. The applicant
must make out a case. In order to succeed. The section empowers the
court with wide discretion to restore fairness
and equity. The
discretion gives the court he power to stop and indeed to reign
in the tyranny of the majority. In the exercise
of this wide
discretion the court also balances the other important factor. The
other party’s right to exercise power. The
boardroom fight’s
always leave other parties unhappy. This is always the outcome of
democracy. It has been held that:
“
-
By becoming a shareholder in a company a person
undertakes
by his contract to be bound by the decisions
of
the prescribed majority shareholders, if those decisions
of
the company are arrived at in accordance with the
law,
even where they adversely affect his rights as a
shareholder.
That principle of the supremacy of the
majority
is essential for the proper functioning of companies.”
[18]
[28]
The applicants contend that the exclusion of their votes together
with the first respondent’s failure to inform them
of the legal
consequences of non- compliance with the requirements of proxies and
letters of representation constitute a conduct
which is prejudicial
in terms of the Act. There is no statutory obligations on the first
respondent to have given them the legal
opinion.
[29]
The respondent acted properly in excluding the votes. The empowering
legislation is peremptory. The applicants did not comply
therewith.
They also relied on the wrong legislation. Again their reliance on
the Strate directives was misconceived. The directives
do not apply
and in any event they cannot oust the application of the national
legislation.
Costs
[30]
The matter is complex. The issues raised are
res
nova
. They have never been raised in
terms of the new companies legislation. Therefore, the participation
and involvement of two counsel
was necessary. In the circumstances
they are entitled to the costs.
Order
[31]
In the circumstances I make the following order:
The
application is dismissed with costs which costs include the costs of
two counsel.
RE
MONAMA
JUDGE
OF THE HIGH COURT
GAUTENG
LOCAL DIVISION
Appearances
Counsel
for the applicant: Adv. B. Gilbert
Adv.
N. Muvangua
Instructed
by:
Counsel
for the respondent: Adv. Subel SC
Adv.
J Meiring
Instructed
by:
Date
of hearing: 5 November 2014
Date
of judgment: 13 March 2015
[1]
See
the Court Order of 19 December 2013.
[2]
The Act.
[3]
The
Companies Act, No 71 of 2008
.
[4]
Act
19 of 2012
[5]
Government
Gazette No. 33517 of 20 July 2012.
[6]
Section
163(1) of the Act.
[7]
Section
163(2) of the Act.
[8]
See Transnet Ltd v Rubenstein
2006 (1) SA 591
SCA at 600 and The
Civil Practice of the High Courts of South Africa 5
th
edition page 439.
[9]
Beecham
Group Limited v BM Group (Pty) Limited
1977 (1) SA 50
(T), Ward v
Cape Peninsula Ice Skating Club 1998(2) SA 487 (C), Johannesburg
Municipal Pension Fund v City of Johannesburg 2005(6)
SA 273(W) an
Geyser v Nedbank Limited and Others: in re Nedbank Limited v Geyser
2006(5) 355(W).
[10]
1977(1)
SA 50 (T).
[11]
2005(6)
SA 273(W).
[12]
2006(5)
SA 355 (W) at 359 H - J
[13]
Section
3(3) of Act 19 of 2012.
[14]
See Paragraphs 10 to 11 above.
[15]
See Section 5(4) (ff) of Act 71 of 2008
[16]
See
Section 3(3)
of the
Financial Markets Act, 19 of 2012
.
[17]
Grancy
Property Ltd v Manala and Others
[2013] 3All SA 111
SCA;
Kudumane
Investment Holding Ltd v Northern Cape Manganese Company (Pty) Ltd
[2012] 4All SA 203 GSJ;
[18]
Sammel and Others v President Brand Gold Mining Company Limited
1969
(3) SA 629
AD at page 678 H