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[2010] ZAGPJHC 14
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Siyanda Resources (Pty) Ltd and Another v Moloto NO; Mashile-Nkosi and Others v Moloto NO and Others (5955/2010, 06013/2010) [2010] ZAGPJHC 14 (26 March 2010)
IN THE SOUTH GAUTENG HIGH COURT, JOHANNESBURG
(REPUBLIC OF SOUTH AFRICA)
CASE NUMBER :
5955/2010
In
the matter between
SIYANDA RESOURCES (PTY) LTD
First Applicant
FESI, NTLANGANISO
Second Applicant
and
LEBOGANG MICHAEL MOLOTO NO
First Respondent
WASSERMAN, J SC NO
Second Respondent
AND
CASE NUMBER : 06013/2010
In
the matter between :
DAPHNE MASHILE-NKOSI
First Applicant
BRIAN AMOS MASHILE
Second Applicant
KALAHARI RESOURCES (PTY) LTD
Third Applicant
and
LEBOGANG MICHAEL MOLOTO NO
First Respondent
JOHAN GEORGE WASSERMAN NO
Second Respondent
THE MASTER OF THE HIGH COURT
Third Respondent
JUDGMENT
Andr
é
Gautschi AJ
Introduction
On 23 February
2010 two applications came before me by way of urgency. I identify
them for the sake of convenience as the Siyanda
Resources
application (case number 5955/2010) and the Kalahari Resources
application (case number 6013/2010).
After hearing
argument, I made the following orders :
In the
Siyanda Resources application :
"It is ordered :
1. It is declared that the application is urgent and the
applicant's non-compliance with the Uniform Rules in respect of time
periods
and service is condoned;
2. The first respondent is ordered to, on or before 2
March 2010, deliver a copy of each of the notice of motion and
supporting
affidavits that were placed before his Lordship Mr
Justice Coppin on 3 February 2010 under case number 2010/3701, to
each of the
applicant;
3. The applicants may deliver supplementary founding
affidavits within 10 days of having received delivery of the notice
of motion
and affidavits referred to in the previous paragraph;
4. The respondents may deliver supplementary answering
affidavits within 15 days after delivery of any supplementary
founding affidavits
and the applicants may deliver supplementary
replying affidavits within 10 days after delivery of any
supplementary answering affidavits;
5. (Deleted)
6. Pending the final determination of the application
referred to in Part B of the applicants' notice of motion, the
Commission
of Enquiry into the affairs of Siyanda Mining Corporation
(Pty) Ltd held in terms of section 417 and 418 of the Companies Act,
1973, is stayed;
7. The costs of the appearance on 23 February 2010 are
reserved for determination in the application referred to in Part B
of the
applicants' notice of motion. "
In the
Kalahari Resources application :
"1. That the Applicants' non-compliance with the
rules of the above Honourable Court in regard to service and time
limits be
condoned and that this application be heard as one of
urgency in terms of the provisions of Rule 6(12).
2. That pending final determination of the application
in Part B, the commission of enquiry in terms of section 417 and 418
of the
Companies Act, 1973, into the affairs of Siyanda Mining
Corporation (Proprietary) limited (in liquidation)
("
the
section
417
enquiry
")
be stayed.
3. That the First Respondent be and is hereby ordered to
deliver to the attorneys of record of the Third Applicant, within
three
days from the date of this order, a complete copy of the
application papers in the
ex
parte
application launched
by the First Respondent (as applicant) in the above Honourable Court
under case number 2010/3701 pursuant to
which an order was issued,
inter alia,
that the section 417 enquiry be held, a copy of
which order in annexed to the Notice of Motion marked "XX".
4. That the Applicants be and are hereby granted leave
to file a supplementary founding affidavit not later than 10 days
after compliance
by the First Respondent with paragraph 3 above.
5. That the costs of the application in regard to the
relief claimed in Part A be reserved for determination at the hearing
of the
application for the relief claimed in Part B. "
I indicated
that my reasons would follow. These are those reasons.
The parties and the relevant facts
I shall
identify the parties before describing their inter-relationship.
The applicants in the Siyanda Resources application
are respectively
Siyanda Resources (Pty) Ltd ("Siyanda Resources") and
Ntlanganiso Fesi ("Fesi"). The respondents
are
respectively Lebogang Michael Moloto NO ("the liquidator")
and J Wasserman SC NO ("the commissioner").
The
applicants in the Kalahari Resources application are respectively
Daphne Mashile-Nkosi ("Nkosi"), Brian Amos Mashile
("Mashile"), and Kalahari Resources (Pty) Ltd ("Kalahari
Resources"). The respondents are respectively the
liquidator,
the commissioner and the Master of the High Court.
Kalagadi
Manganese (Pty) Ltd ("Kalagadi") holds potentially
lucrative mining rights to prospect for manganese over three
farms
in the Northern Cape. Kalagadi is owned by Kalahari Resources
(40%), Arcelor Mittal Limited ("Arcelor Mittal")
(50%) and
the Industrial Development Corporation ("the IDC") (10%).
Kalahari Resources is owned by Siyanda Mining
Corporation (Pty) Ltd
("SMC"), which holds 8.33% of the issued shares, and 17
other shareholders whose identities are
not relevant to these
applications. SMC in turn has three shareholders, namely Tshozi
Investments (Pty) Ltd ("Tshozi"),
an entity controlled by
one Sandi Majali ("Majali") (85%), Siyanda Resources (10%)
and Fesi (5%). SMC is currently
in liquidation, and Moloto is the
liquidator.
The articles
of association of Kalahari Resources provide
inter alia
for
the disposal of its shares by shareholders. Article 107 obliges a
shareholder which is desirous of disposing of its shares
(defined in
the articles as the "disposer") to a third party, to offer
such shares firstly to the initial shareholders
of Kalahari
Resources (as defined), thereafter to the subsequent shareholders
(as defined), thereafter to the remaining shareholders
(as defined),
and only in the event of the shares offered by the disposer not
being accepted by any of the aforesaid shareholders,
is the disposer
then entitled to offer its shares to the named third party.
SMC gave
notice to the Kalahari Resources shareholders in January 2009 of its
intention to dispose of its 8.33% shareholding to
NEHAWU Investment
Company (Pty) Ltd ("NEHAWU"). SMC subsequently contended
that it had acquired the right to dispose
of its shares to NEHAWU,
but that it had been prevented and frustrated from doing so by
"wilful delaying tactics, alternatively
a wilful refusal or
neglect to adhere to statutory and contractual obligations on the
part" of Kalahari Resources and its
shareholders. In June
2009, SMC launched an application against Kalahari Resources and 19
other respondents. Part of the relief
sought was that Kalahari
Resources be ordered to provide its audited annual financial
statements for the year ending 2008 to
SMC. This application was
resolved pursuant to various undertakings which were given to SMC by
Kalahari Resources. The detail
of that application is not relevant
to this application.
In November
2009 SMC launched a further urgent application against the same
respondents, triggered by a special resolution which
had been passed
at a general meeting of shareholders of Kalahari Resources, amending
article 107 by introducing a lock-in period
and thereby preventing
the sale of shares in Kalahari Resources within a certain period.
SMC sought
inter alia
an interdict to stop the resolution
being given effect to, and sought a copy of the shareholders'
agreement between Kalahari
Resources, Arcelor Mittal, IDC and
Kalagadi, as well as the audited annual financial statements of
Kalahari Resources for the
year ended 2009. This application was
apparently settled on the basis of certain undertakings given by
Kalahari Resources to
SMC, including,
inter alia
, not to give
effect to the special resolution adopted at the general meeting, and
to provide its financial statements to SMC.
On 18 December
2009 a meeting was held of the SMC shareholders (Tshozi, Siyanda
Resources and Fesi). At that meeting, Majali,
on behalf of Tshozi,
proposed to wind-up SMC voluntarily in terms of section 349 read
with section 350 of the Companies Act,
61 of 1973 ("the
Companies Act"). The special resolution was passed, despite
protest by the minority shareholders.
It was also resolved that
Moloto be appointed as the provisional liquidator.
The special
resolution was signed on 18 December 2009 and lodged with the
Registrar of Companies on 21 December 2009.
On 13 January
2010, Majali deposed to an affidavit in an apparent attempt to
comply with section 350 of the Companies Act. He
confirmed
inter
alia
that SMC had no debts, and attached what he said was a
certificate from the auditors of SMC. The "certificate"
is
simply a letter from chartered accountants Gobodo which does not
purport to be a certificate, i.e. it does not "certify"
any of the contents. It states (and I summarise) that to the best
of their knowledge and belief SMC's sole investment is an
8.33%
shareholding in Kalahari Resources, SMC received an amount of
R18 646 4000 from Kalahari Resources, and SMC does
not
have any debt. It does not state that it has no debts "according
to the records of the company", as is required
by section
350(1)(b)(ii)(bb). (It may be that the winding-up under section 350
is invalid as a result, and that the subsequent
steps invoking
sections 388 and 417 are similarly invalid, but I express no view on
these aspects.)
It appears that Moloto was appointed as liquidator of SMC on 1
February 2010, and within 24 hours launched an
ex parte
application in terms of section 388 read with section 417 of the
Companies Act, to convene a commission of enquiry in terms of
sections 417 and 418 of the Companies Act into the affairs of SMC
1
.
On 3 February 2010 Coppin J granted a order on the
ex parte
application, the relevant parts of which reads as follows :
"1. An order is granted in terms of the provisions
of Section 388 of the Companies Act, 61 of 1973 ("the Act")
that
the provisions of Sections 417 and 418 of the Act are made
applicable to the liquidation of Siyanda [SMC].
2. A commission of enquiry ("the enquiry")
into the affairs of Siyanda be held in terms of the provisions of
Sections
417 and 418 of the Act.
3. The scope of the enquiry shall be to investigate the
financial affairs of Siyanda, including its trade, dealings, affairs,
rights,
obligations, assets and liabilities and in particular all
matters relevant to any shareholding in Kalahari Resources (Pty) Ltd
… and the value of such shareholding.
4. Adv J G Wasserman SC ("the commissioner")
be appointed. …
…
"
Coppin J deleted from the draft order presented to him, the following
paragraph :
"7. That the record of this application shall be
kept private and confidential and shall not be disclosed without
prior leave
of the Court or the Commissioner having been obtained."
I shall deal later with this deletion.
Following the
order of Coppin J, no time was wasted, and on 8 February
2010 the commissioner signed subpoenas
duces tecum
(for all
intents and purposes identical) calling upon Nkosi and Mashile to
appear at the enquiry on Wednesday 24 February 2010
and to produce
the documents listed in annexures A and B attached to the subpoena.
Annexure A to the subpoena lists a host of
documents in relation to
Kalahari Resources, and annexure B the same documents in respect of
Kalagadi.
The intention
to hold the enquiry on 24 February 2010 and to call various
witnesses, including Nkosi and Mashile, to be interrogated
at that
enquiry, gave rise to the present applications.
Both
application
s were brought in two parts,
and in each case the main
application
(part B) sought a setting aside of the order granted by Coppin J,
alternatively (in the Siyanda Resources
application
)
a setting aside of the convening of the section 417 enquiry and (in
the Kalahari Resources
application
) that
the subpoenas against Nkosi and Mashile be set aside. The relief
sought in part A of each notice of motion, by way of
urgency, was
largely along the lines of the orders which I granted.
Locus standi
Mr
Potgieter
(who appeared with
Mr van der Merwe
for the
liquidator) attacked the
locus standi
of the various
applicants to seek to set aside the order of Coppin J. The
applicants may for this purpose be divided into
three categories.
First, Siyanda Resources and Fesi as members; second, Nkosi and
Mashile as witnesses
2
;
and third Kalahari Resources as the company whose affairs were to be
investigated to determine the value of SMC's shareholding.
The winding-up
of SMC occurred in terms of section 350 of the Companies Act (a
members' voluntary winding-up), which is an appropriate
procedure
where the company has no debts, or security has been furnished to
the Master for the payment of any debts. Section
388 of the
Companies Act allows for the provisions relevant to a compulsory
winding-up to be made applicable to a voluntary winding-up.
The
section reads :
"388.
Court may determine questions in
voluntary winding-up
(1) Where a company is being wound up voluntarily, the
liquidator or any member or creditor or contributory of the company
may apply
to the Court to determine any question arising in the
winding-up or to exercise any of the powers which the Court might
exercise
if the company were being wound up by the Court.
(2) The Court may, if satisfied that the determination
of any such question or the exercise of any such power will be just
and beneficial,
accede wholly or partly to the application on such
terms and conditions as it may determine, or make such other order on
the application
as it thinks fit."
It is this section which the liquidator invoked in order to seek the
convening of a section 417 enquiry.
I accept that
section 388 may appropriately be invoked to direct that there be a
section 417 enquiry, if the company which was
wound-up voluntarily
is unable to pay its debts
3
.
It will be
seen from section 388(1) that the application could be made
inter
alia
by any member of the company. Siyanda Resources and Fesi
would therefore have
locus standi
to bring an application of
the nature which served before Coppin J.
Mr Potgieter
also conceded (correctly in my view) that, had the members become
aware of the
ex parte
application before the order had been
granted, they would have been entitled to intervene and oppose.
Under those circumstances
I can see no merit in the submission that
the members do not have
locus standi
to seek to set aside the
order of Coppin J.
It was then
submitted that the members at best have a financial interest in the
enquiry, since they have an interest in the residual
value of the
estate which could be diminished by the costs of the enquiry. I do
not agree that this is a mere financial interest
and not a legal
interest. Their rights (to the residual value of the estate) are
directly affected by the order of Coppin J,
and they would therefore
fall within the class of persons who have a sufficiently direct and
substantial interest in the subject
matter of the judgment or
order
4
.
As far as the
witnesses are concerned,
Mr Potgieter
conceded that they
would have
locus standi
to attack the subpoenas issued
against them, and the enquiry insofar as it affected them, but
resisted the notion that they would
have the right to set aside
Coppin J's order or the entire enquiry. It is in my view little
comfort for a witness to be limited
to the setting aside of the
subpoena issued and served upon him or her, where the subpoena may
be technically in order but the
enquiry ought never to have been
authorised. Logically a witness would have
locus standi
to
have the convening of the enquiry set aside. As it happens, there
is ample authority that a prospective witness has
locus standi
to
oppose an
application
to have a section
417 enquiry convened, if he happens to learn of it, or to move to
have the order set aside once it has been
made
5
.
In
Friedland
v the Master
6
Stegmann J found that a proposed witness may only resist an order
which would subject him or her to an examination under section
417
and 418 of the Companies Act, on the following grounds, namely :
"(1) jurisdiction;
(2) oppression or hardship; and
(3) possible unusual, special or exceptional
circumstances which it may seem appropriate to entertain."
7
Although a witness therefore has limited
locus standi
, he or
she has
locus standi
nevertheless. The finding which I make
later in this judgment, regarding the object of the section 417
enquiry, would give the
witnesses
locus standi
under
ground (3), and possibly (2).
Kalahari
Resources is mentioned by name in Coppin J's order, and it is clear
that in terms of that order it is to be subjected
to scrutiny of its
books and records in order to determine the value of its shares.
Its rights are adversely affected by the
order, and it clearly has
locus standi
in this matter.
It was
submitted by
Mr Potgieter
that when a court orders an
enquiry, it does not determine the rights or obligations of any
party, and that the enquiry is ordered
at the court's own discretion
on information brought to it by interested persons. It was
contended that no rights and obligations
are determined other than
imposing the obligation on the party to attend the enquiry. The
function of the enquiry was simply
to allow the liquidator to obtain
information required by him to enable him to discharge his duties.
That in my view is too
simplistic an approach. Each of the
applicant's legal rights are affected adversely by the order.
Mr
Potgieter
went further to contend that, since the convening of
the enquiry had been authorised by a court order, the applicants
were bound
by that order and powerless to enquire into its validity.
That is a startling proposition. The order was obtained
ex
parte
and, as I have shown, adversely affects the rights of each
of the applicants. Our law makes ample provision for rescission of
an order obtained in the absence of a party. In addition recourse
may be had (in a suitable case) to rules 6(8) and 6(12)(c).
To say
that a party is bound by and powerless with regard to a court order
is to deny that party the right to rescind the order.
There is in my
opinion therefore no merit in the attack on the applicants'
locus
standi.
Liquidator had no authority
The applicants
contend that the liquidator had no authority to have brought the
ex
parte
application.
Section 350(3)
provides as follows :
"(3) Unless otherwise provided, in a members'
voluntary winding-up the liquidator may without the sanction of the
Court exercise
all powers by this Act given to the liquidator in a
winding-up by the Court, subject to such directions as may be given
by the
company in general meeting."
It is common cause that the liquidator did not obtain directions from
the company in general meeting before launching the
ex parte
application.
The failure by
the liquidator to obtain the requisite authority to litigate is not
fatal to proceedings brought by him against
a third party because it
is not open to the latter to challenge the liquidator's authority.
The provisions of section 386(4)(a)
were enacted for the protection
of creditors and members and to prevent the assets of the company
from being squandered in useless
litigation. If the liquidator acts
without authority then he may be made to bear the costs personally
8
.
It is however open to a third party to challenge the existence of
the liquidator's authority where such authority was required
to
exercise a particular power other than the power to litigate in the
name and on behalf of the company
9
.
In
Lok and
Others v Venter NO and Others
10
Goldstone J found that an application for an order under
section 417 fell within the rule enunciated in the
Waisbrod
case
11
,
and held that the authority of the liquidator could not be
questioned by parties affected by the order
12
.
Consequently he found that such parties did not have
locus
standi
to attack the validity of the proceedings initiated by
the liquidator where the liquidator was not properly authorised
13
.
This conclusion is undoubtedly correct.
However,
Goldstone J went further and found that the liquidator in that
matter had the implied authority of the court under
section 386(5).
That section provides :
"(5) In a winding-up by the Court, the Court may,
if it deems fit, grant leave to a liquidator to raise money on the
security
of the assets of the company concerned or to do any other
thing which the Court may consider necessary for winding up the
affairs
of the company and distributing its assets."
Goldstone J held as follows
14
:
"When he was approached for an order by the
liquidator, HUMAN J was satisfied that an order should issue under s
417. When
I was approached to extend the order, I was similarly
satisfied. In my opinion, the terms of those orders constituted
sufficient
authority from the Court under s 386(5), albeit implied
authority, and, notwithstanding that the necessity to confer such
authority
might not actually have been considered at the time the
orders were issued."
I respectfully disagree. Section 386(5) allows the court to grant
leave to a liquidator to do any thing the court may consider
necessary for winding-up the affairs of the company. I accept that
that may include seeking the convening of a section 417 enquiry.
However, the leave of the court must be sought. Section 350(3)
provides that the liquidator does not require the sanction of
the
court if he has directions given by the company in general meeting.
When he brings an application, as was done here, and does
not ask
pertinently for the leave of the court, that may be (and it may be
assumed by the court) because he has the necessary directions
given
to him by the company in general meeting. The court would only grant
him the necessary leave if he did not have the requisite
authority,
and then he must specifically ask therefor. In my respectful view,
the court cannot by default be assumed to have given
directions or
authority when such are not requested.
In my view
therefore the liquidator acted without authority, but that in itself
does not nullify the steps taken, nor does that
in itself give a
basis for the order of Coppin J to be assailed.
The object of the section 417 enquiry
The avowed
purpose of the section 417 enquiry is to ascertain the value of
SMC's shareholding in Kalahari Resources by delving
into the affairs
of Kalahari Resources and Kalagadi. That much is clear from Coppin
J's order (see paragraph 3 quoted in paragraph
above) and the
contents of the subpoenas served on Nkosi and Mashile. This amounts
to a shareholder demanding the right to delve
into the affairs of
the company in order to ascertain the value of its shares.
A director has
the right to inspect the accounting records of a company
15
.
This right exists for the benefit of the company and may be invoked
by the director only to enable him to discharge his personal
obligations
to the company and his
statutory
obligations
; the right
terminates on removal of the director from office
16
.
A member does not have the right to inspect the accounting records
of the company, unless the articles provide therefor
17
.
A member is entitled to receive copies of the company's annual
financial statements
18
and to obtain copies of the minutes of the company's general
meetings
19
,
but is not entitled to sight of the minutes of directors' and
managers' meetings maintained in terms of section 242
20
.
In other words, a member is not entitled to demand that the company
open its books and records to it.
In the
Clutchco
case
21
a 30%
shareholder
wished to sell his
shares to the majority
shareholder
. His
request for access to the company's books of first accounting entry
was denied. He sought such access in terms of section
53(1) of the
Promotion of Access to
Information Act, No 2 of
2000 ("PAIA"). The avowed purpose was to enable him to
determine the real value of his 30%
shareholding. After setting out
the different rights of directors and shareholders, and recounting
the myriad provisions designed
to protect the interests of
shareholders, Comrie AJA, who delivered the judgment of the court,
held as follows at 493C-F :
"[17] The machinery established by legislation and
the common law for the protection of
shareholder
s
is, in my opinion, not lightly to be disregarded. In enacting PAIA,
Parliament could not have intended that the books of a company,
great
or small, should be thrown open to members on a whiff of impropriety
or on the ground that relatively minor errors or irregularities
have
occurred. A far more substantial foundation would be required.
[18] In my view, the
respondent
failed to lay such a foundation. His complaints were not of a
serious nature and no detailed criticism of the auditors was
advanced.
In addition, the
respondent'
s
proposed
modus operandi
was lacking in specificity. He
claimed that access to the books of first entry would enable him to
"reconstruct" them
and that the reconstructed version would
enable him to place a proper value on his shares. These broad and
general assertions
were not supported by, for example, an
affidavit
by an experienced accountant and auditor. I conclude that the
respondent
failed to show that the access
which he sought was required for the exercise or protection of the
rights which he asserted. The
Court
a quo
should,
accordingly, have dismissed the
application
with costs."
At 492D-E, Comrie AJA said the following :
"Arguably – I express no views – there
may be special instances where a court could order some form of
access in
terms of s 252 (member's remedy in case of oppressive
or unfairly prejudicial conduct) but that section is not applicable
here. The position is, therefore, that the Companies Act does not
afford the
respondent
the right of
inspection or right to
information
which he
seeks."
Nor, in my
view, would the court have the power to demand such access on behalf
of a member, save possibly upon a proper case
made out reflecting
special circumstances. Take the example of a husband, who is a
minority member of a private construction
company, in the throes of
a divorce. His wife wishes to know what his shares in that company
are worth, and in order to determine
such value accurately, would
need access to the books and records of the company,
including
minutes of board meetings, in order to see,
inter alia
, what
work-in-progress there was, what contracts were in the pipeline, and
so on. In other words, matters not readily ascertainable
from the
statutory annual financial statements or minutes of general
meetings, to which a member is entitled. The wife accordingly
subpoenas the directors of the company (which may even include her
husband) to produce the books and records of the company at
the
trial. Unless the board of directors agrees to make such documents
available, such a subpoena could in my view be set aside
at the
behest of the company, since it amounts to granting the member
access to documents to which he would not otherwise have
been
entitled to have access
22
.
If a court
does not have the competence, in the absence of special
circumstances, to allow a member to delve into the affairs
of the
company, why should a liquidator have that power?
Mr Potgieter
submitted that the liquidator has far-ranging powers, and could
enquire into matters which the member could not. That may be
true
up to a point, but it does not in my view permit the liquidator to
enquire into the affairs of another juristic person on
behalf of a
member, if the member itself did not have that power and could not
have obtained the sanction of the court therefor.
The purpose of
a section 417 enquiry is to enquire into the affairs of the company
itself. That may involve identifying and valuing
assets of the
company. The commissioner would be entitled to subpoena witnesses,
for instance, to establish that a particular
motor vehicle or
immaterial property right belonged to the company, and to place a
value thereon. He or she may subpoena witnesses
to establish that
particular shares in the company are the property of the company in
liquidation, and to place a value on those
shares with reference to,
for instance, the annual financial statements to which the company
in liquidation as a member would
be entitled. But it is quite
another thing to delve into the affairs of that other company. I am
not aware of any authority
which permits this, nor were counsel able
to direct my attention to any. The asset is the shares, not the
company itself, which
is a separate and distinct juristic person.
In the present
application
s there is no attempt by the
liquidator to justify the invasive enquiry envisaged. It is said
that the liquidator is entitled
to determine the true value of SMC's
shares in Kalahari Resources. That is simply not sufficient. There
are no special circumstances
alleged, and on the strength of the
Clutchco
decision
23
even an
application
under PAIA would fail.
The entire
basis of the section 417 enquiry is therefore, in my view, flawed.
It sets out to enquire into the affairs of another
company, a
separate juristic person, on behalf of a member of that company,
which in my view is not authorised by the Companies
Act or any other
law. It amounts to an enquiry, not into the affairs of SMC, but
into the affairs of Kalahari Resources and
Kalagadi, for an improper
or impermissible purpose. It also could not be "just and
beneficial"
24
for the section 417 enquiry to be convened.
This finding
gives the applicants the
prima facie
right to have the
section 417 enquiry set aside, and entitles them in my view to a
stay of the enquiry in the interim.
Sight of the
ex parte
application
The applicants
complain that they have not been provided with a copy of the
ex
parte
application, despite having requested this.
The liquidator
relies on section 417(7), which provides :
"(7) Any examination or enquiry under this section
or section 418 and any application therefor shall be private and
confidential,
unless the Master or the Court, either generally or in
respect of any particular person, directs otherwise."
I must
immediately deal with the deletion by Coppin J to which I refer in
paragraph [13] above. It will be appreciated that
paragraph 7
of the draft order deleted by Coppin J was an attempt to enforce the
privacy and confidentiality embodied in section
417(7). I was not
informed why the paragraph was deleted by the learned Judge and no
explanation is proffered in the
affidavit
s.
All that the first respondent tells me in the
answering
affidavit
in the Kalahari Resources
application
is that :
"The Applicants' conclusions from the fact that
part of the draft order was deleted are incorrect."
It is tempting to read into the deletion the fact that Coppin J was
of the view that the record of the
application
should not be kept private and confidential. However, another
plausible inference is that this was a matter already catered for
by
section 417(7), and there was no need for such an order. The safest,
I believe, is that I should ignore the deletion, and draw
no
inference from it.
The applicants
point to the fact that the
ex parte
application was not
purely brought under section 417, but under section 388 read with
section 417. There is no secrecy, they
point out, inherent in
section 388. I think that is too simplistic an approach. Section
388 is simply a stepping stone to invoking
section 417. The thrust
of the
ex parte
application is to invoke section 417, and
accordingly due regard must be had to section 417(7).
Again, each
category of applicant must be considered separately.
Siyanda
Resources and Fesi as members could have brought the
ex parte
application themselves, as we have already seen. It is also said in
a letter addressed by the liquidator's attorney to Siyanda
Resources' attorney that "Your client, as 10% shareholder,
should presumably support an enquiry into the affairs of the
company.", and, "Your client, as member, is invited to
partake in the enquiry.". Given that attitude, there seems
to
be no good reason why the respondents should resist making the
ex
parte
application available to the members. Indeed, in the
correspondence the answer given in response to a request for such a
copy,
was simply that section 417(7) required a court order before
this could be done, and no reasons were given why the content of the
application could not be viewed by the members. I cannot perceive
of any reason why the members should not see that application.
Kalahari
Resources is, as I have shown, directly affected by the order, and
is about to have its affairs uncovered in order to
establish the
value of its shares. I equally see no reason to withhold the content
of the
ex parte
application from it. The liquidator did not
advance any reasons in the
answering
affidavit
why Kalahari Resources could not
have sight of the
ex parte
application
papers.
The two
witnesses, Nkosi and Mashile, are in a different position. The
ex
parte
application leading to the convening of an enquiry will
often contain an indication of what the enquiry is aimed at and what
is hoped to be achieved thereby. Should a witness have sight
thereof, the efficacy of the interrogation might be adversely
affected.
I would therefore ordinarily not permit a witness to have
sight of the
ex parte
application. No special circumstances
seem to be present in this case to deviate from that rule. Blackman
et al
25
state with reference to Australian authority that where a proposed
examinee seeks to have an order set aside, the court will
ordinarily
exercise its discretion in terms of section 417(7) to order
disclosure of material by the person seeking the order,
where the
justice of the case so requires it. The learned authors , with
reference to English and Australian authority, seem
to favour
allowing disclosure where the proposed examinee may by unfairly
prejudiced in his
application
to have the
order set aside if the content of the
application
is not disclosed to him. The onus would rest on the proposed
examinee to show why section 417(7) should be relaxed.
The applicants
have submitted that it is clear that there are matters in the
ex
parte
application deserving of investigation, and that they need
access thereto in order to attack it on its merits. They point out
that the voluntary winding-up was effected on the basis that the
company had no debts, and yet, inevitably, it had to be alleged
in
the
ex parte
application that the company was unable to pay
its debts and that therefore the enquiry was required. This was
confirmed in
a letter by the liquidator's attorney dated 10 February
2010, in which it was stated that SMC was indebted to SARS and was
unable
to pay its debts. That is remarkable given the content of
the affidavit of Majali to which I have referred above.
The witnesses
may therefore advance, as a reason to have sight of the
application
,
the about face in regard to whether SMC had debts or not, and
whether it was unable to pay those debts. I consider that in
itself
to be insufficient to tip the scales in favour of the witnesses.
The inference that an about face had occurred is one
which can be
drawn without sight of the
application
papers. It is also not necessary to have sight of the
application
papers if I am correct that the section 417 enquiry has been
convened for an improper or impermissible purpose. I am further
mindful of the fact that the witnesses are likely to have access to
the
application
papers by virtue of my
directing that they be made available to the other applicants. On
balance, I am not inclined to deviate
from what I consider to be the
usual and salutary rule that witnesses should not have sight of the
application
papers in the absence of
special circumstances.
Accordingly, I
ordered that the
ex parte
application papers be furnished to
the members and Kalahari Resources, but declined to make them
available to the witnesses.
Conclusion
For these
reasons, I gave the orders which I set out in paragraph 2 above.
________________________________
ANDRÉ GAUTSCHI
ACTING JUDGE OF THE HIGH COURT
Date of hearing
:
23 February 2010
Date of judgment
:
26 March 2010
For applicants in the Siyanda
Resources matter
:
Adv P F Louw
SC, with him
Adv M A
Chohan
(instructed by Webber Wentzel)
For applicants in the Kalahari
Resources matter
:
Adv J P
Daniels SC, with him
Adv P T Rood
(instructed by Edward Nathan
Sonnenbergs)
For first respondent in both
matters
:
Adv M V R
Potgieter SC, with him
Adv H A van
der Merwe
(instructed by Senekal Simmons
Inc)
No appearance for the other
respondent
s
1
Section 417 must be read with section
418, and it is in terms of the latter section that the court
delegates its powers under
section 417 to a commissioner (
Venter
v Williams
1982 (2) SA 310
(N) at 313). For convenience,
however, I shall simply refer to "the section 417 enquiry".
2
I use this term for convenience –
prospective examinee may be better.
3
Henochsberg of the
Companies Act
, 5
th
ed, Vol 1 p 833. Section 388 should be liberally construed
Re
Union Bank of Kingston-on-Hull
(1880) 213 ChD 808
;
Craig
v Formosa G.M. & Prospecting Co Ltd (in liquidation)
1917
WLD 111
at 112;
Henochsberg
supra
at 833; Blackman
et
al
Commentary on the Companies Act
Vol 3 p 14-366
4
Amalgamated
Engineering Union v Minister of Labour
1949 (3) SA 637
(AD)
5
Ex parte
Liquidators Ismail Suliman & Co (Pty) Ltd
1941 WLD 33
at 34;
Ex parte
Likwidateurs van Trust Staal (Edms) Bpk (in Likwidasie) : In re
Trust Staal (Edms) Bpk
1968 (2) SA 133
(O);
Friedland and Others v The Master
and Others
1992 (2) SA 370 (W)
6
Supra
7
Friedland v the Master
supra
at 379E-F
8
Henochsberg
supra
p821;
Tannenbaum's Executors and Tannenbaum v Quakley and the
Liquidator of Varachio Store (Pty) Ltd
1940 WLD 209
at 214;
Waisbrod v Potgieter and Others
1953 (4) SA 502
(W) at 507-8;
Patel v Paruk's Trustee
1944 AD 469
at 474-475;
Sifiris &
Miller NNO v Vermeulen Bros
1973 (1) SA 729
(T) at 730-731;
cf
Toubkin NO v Donges NO
1951 (3) SA 72
(T).
9
Ex Parte
Du Plessis
1965 (2) SA 438
(T) at 440;
Du Plessis v Protea Inryteater (Edms)
Bpk
1965 (3) SA 319
(T) at 320
10
1982 (1) SA 53 (W)
11
Supra
12
At 57A-B
13
At 57D-E
14
At 57H to foot
15
Section 284(3) of the Companies Act;
Wes-Transvaalse Boeresake
(Edms) Bpk
and Another v Pieterse and Another
1955 (2) SA 464
(T) at 467/8;
Clutchco (Pty) Ltd v Davis
2005 (3) SA 486
(SCA) at 492C-D
16
Conway and Others v
Petronius Clothing Co Ltd and Others
[1978] 1 All ER 185
(Ch) at 201-202
17
Henochsberg
supra
at
p546(1)
18
Sections 286, 302 and 309 of the Companies Act
19
Sections 204 and 206 of the Companies Act
20
Clutchco (Pty) Ltd v Davis
supra
at 492B-C;
Janit and Another v Motor Industry Fund Administrators
(Pty) Ltd and Another
[1994] ZASCA 110
;
1995 (4) SA 293
(A) at 303B-F
21
Clutchco (Pty) Ltd v Davis
supra
22
As indicated above, a director's right of access
to the accounting records of a company may only be exercised
qua
director, and not, in the example given,
qua
husband : see
Conway v Petronius
Clothing Co Ltd
supra
23
Clutchco (Pty) Ltd v Davis
supra
24
The wording of section 388(1)
25
Supra
Vol 3 p 14-476 and 477