Brief Summary

Corporate Governance — Elections — Validity of AGM — Appellants sought to reinstate the Siwendu J order allowing their election as the Executive Board of Chess South Africa at the AGM held on 8 December 2018, which was contested by the respondents. The respondents argued that the Siwendu J order was invalid as it excluded members not in good standing, and they were not given proper notice of the proceedings. The court held that the Siwendu J order was valid, affirming the legitimacy of the AGM and the election of the appellants as the Executive Board, as the respondents had sufficient notice and opportunity to oppose the application.

Comprehensive Summary

Summary of Judgment

1. Introduction

The proceedings were an appeal to the High Court of South Africa, Gauteng Local Division, Johannesburg, against a rescission order granted by the court a quo (per Yacoob J) on 25 March 2019. The appealed decision had rescinded and set aside earlier urgent orders granted by Siwendu J on 6 December 2018, which compelled the holding of Chess South Africa’s elective Annual General Meeting (AGM) and regulated participation in that meeting.

The appellants were Chess South Africa and several individuals (who had been elected to office at the AGM held on 8 December 2018). The respondents were the opposing group who had served as an interim executive/management committee following earlier litigation. In the appeal, both sides abandoned the formal posture of acting “on behalf of Chess South Africa”, with the dispute effectively concerning which group was entitled to control and represent the organisation.

Procedurally, the matter arose from a sequence of urgent applications about the governance of Chess South Africa, including (i) an earlier order from the Western Cape High Court in August 2018 directing that a special general meeting be held to elect an interim committee, (ii) urgent proceedings in December 2018 compelling the organisation to proceed with its elective AGM on 8 December 2018, and (iii) subsequent urgent proceedings in February 2019 where the newly elected office bearers sought recognition, while the interim committee sought rescission of the December 2018 orders. The appeal concerned whether the rescission and invalidation of the AGM (and its elections and resolutions) were competent and justified.

The general subject-matter was the validity and consequences of urgent court orders affecting internal elections in a voluntary association, and specifically whether the interim committee could set aside (by reconsideration/rescission) the urgent orders that resulted in their exclusion from participation in the AGM and the election of a new executive.

2. Material Facts

A prior application brought in the Western Cape High Court in August 2018 resulted in an order on 17 August 2018 directing that a Special General Meeting (SGM) be held to elect an interim committee to govern Chess South Africa until elections could be held for a new executive board (Exbo). The respondents were elected to this interim committee.

An elective AGM was planned for 8 December 2018, but it was cancelled or postponed without a new date being set. Two urgent applications were then brought to compel that the AGM proceed as scheduled on 8 December 2018, resulting in the Siwendu J orders of 6 December 2018 under case numbers 44851/2018 and 45319/2018.

In particular, in case number 44851/2018, Gauteng Chess (a provincial structure) obtained an urgent order declaring it to be an affiliate in good standing, and the order further provided (in paragraph 5.4) that members of Chess South Africa who were reported as not in good standing (according to a report dated 8 November 2018) would not be entitled to participate in the election of office bearers, save for those declared by the court to be in good standing. The Siwendu J orders also directed that the elective AGM be convened and conducted on 8 December 2018.

The AGM proceeded on 8 December 2018 pursuant to the Siwendu J orders. Delegates from the Western Cape and Gauteng attended, while a Players’ Commission attended as a non-voting delegation. The interim committee (the respondents) did not attend, taking the position that the AGM was invalid because the constituent members were not in good standing and because, on their version, the meeting lacked a quorum. At the AGM, the appellants were elected to office without the participation of those who had been disqualified from voting by operation of the “good standing” position reflected in the relevant report and the court order.

On 1 February 2019, the appellants launched an urgent application seeking a declaration that they were the legitimate Exbo as elected at the AGM. The respondents counter-applied for the rescission of the Siwendu J orders (including the provision that excluded members not in good standing), contending principally that the December 2018 orders were granted in their absence and without notice of the exclusionary relief.

The court a quo (Yacoob J) rescinded and set aside the Siwendu J orders, declared the AGM invalid, and set aside all resolutions, elections, and decisions taken at the AGM. This appeal was directed at that rescission and its consequences.

Where the facts were disputed, the appeal court focused on the dispute concerning whether the respondents were truly “absent” in the relevant procedural sense, and whether the exclusionary relief had been adequately foreshadowed. The appeal court treated it as material that the amended notice of motion and supplementary founding affidavit in the urgent proceedings were served on the respondents on 4 December 2018, and that the respondents’ non-participation before Siwendu J was explained mainly by logistical and financial constraints rather than lack of notice.

3. Legal Issues

The central legal questions were whether the court a quo was correct to “reconsider” and rescind the urgent order under Uniform Rule 6(12)(c), and in particular whether the jurisdictional requirement that the order must have been granted “in the absence” of the affected party was satisfied on the facts.

A related question was whether the contentious part of the Siwendu J order—excluding members not in good standing from participating in the election—was relief that had not been foreshadowed and therefore justified reconsideration/rescission on procedural fairness grounds.

The dispute concerned a combination of procedural law (the scope and requirements of reconsideration/rescission mechanisms in urgent matters), and the application of law to fact (whether the respondents had notice and sufficient opportunity to participate, whether they elected to stay away, and whether the relief could reasonably have been anticipated from the papers and the nature of the proceedings). To a more limited extent, it also involved an evaluative assessment of how the urgent order operated in the context of the organisation’s governance arrangements and the “good standing” requirements.

4. Court’s Reasoning

The appeal court identified the key issue as who was entitled to run and represent Chess South Africa, but located the answer in the procedural correctness of the rescission granted by the court a quo. The court treated the validity of the reconsideration/rescission as turning on whether the respondents truly qualified as having been “absent” for purposes of Uniform Rule 6(12)(c), and whether the relief they complained of had been unforeseeable or sprung upon them without warning.

On the respondents’ procedural objections, the appeal court rejected the contention that an amendment to the notice of motion required compliance with Uniform Rule 28, holding that a notice of motion may be amended without resort to Rule 28. It further acknowledged that further affidavits require leave, but found that leave had in substance been sought in the supplementary founding affidavit.

The appeal court reasoned that, once Siwendu J ordered the AGM to proceed on 8 December 2018, it had to proceed in accordance with the previously agreed terms, which included that members not in good standing as at 8 November 2018 would not participate unless their standing had been regularised within the stipulated time period (the judgment refers to the need to regularise standing at least 48 hours before the AGM). On this approach, paragraph 5.4 of the Siwendu J order did not introduce a novel exclusion, but “merely confirmed” an operative position flowing from the report and the framework governing eligibility.

A central plank of the appeal court’s reasoning was that the respondents had received the amended notice of motion and supplementary founding affidavit on 4 December 2018, and notice of the order on 6 December 2018 compelling the AGM. The appeal court held that, in that context, the respondents knew or ought to have known that their exclusion from participation would follow if the AGM proceeded without their having regularised standing or obtained court relief. The court emphasised that the respondents did not allege that they lacked notice; instead, their stated reasons for not opposing related to short time periods, geography, full-time employment, and lack of funds. The court treated these reasons as insufficient to convert a conscious non-participation into the type of “absence” contemplated by the rules, particularly because urgent proceedings often involve truncated time periods and because a party who cannot file full papers can still appear to seek indulgences—something the respondents did not do.

In supporting its interpretation of “absence” and the consequences of deliberate non-participation, the appeal court relied on authority emphasising that a party who has notice of proceedings and the relief sought, but elects not to participate, cannot later claim rescission on the basis that the order was taken “in their absence” in the relevant legal sense. The court referred to Freedom Stationery (Pty) Ltd and Others v Hassam and Others 2019 (4) SA 459 (SCA) for the principle that relief that is explicit—or that can be anticipated from the nature of the proceedings and the issues—cannot later be attacked via rescission by a party who stood by despite awareness of the proceedings. The court also relied on Zuma v Secretary of the Judicial Commission of Inquiry into Allegations of State Capture, Corruption and Fraud in the Public Sector including Organs of State and Others (CCT52/21) [2021] ZACC 28; 2021 (11) CLR 1263 (CC) (17 September 2021) for the proposition that a litigant who had notice and opportunity but chose not to participate is not “absent” in the sense contemplated by rescission provisions, and that the later disclosure of submissions that could have been made does not render the original order “erroneously granted”.

The appeal court held that the court a quo’s discretion to rescind had been exercised on an erroneous basis, because it proceeded from an incorrect view of the jurisdictional requirement that the order had been granted in the respondents’ absence. The appeal court further stated that “absence” under Rule 6(12)(c) had to be construed consistently with the notion of “absence” as discussed in relation to Uniform Rule 42(1)(a).

On the respondents’ argument that the AGM was invalid due to lack of a quorum, the appeal court treated the point as peripheral to the matter before it. It held that the case was not concerned with a substantive defence about illegality of the AGM in that sense, and that the appellants were entitled to act on the basis of the 6 December 2018 order to which the respondents had effectively acquiesced. The appeal court added that the organisation’s constitution provided mechanisms for dealing with adjourned meetings where quorum requirements are not met.

5. Outcome and Relief

The appeal was upheld. The court set aside the order of the court a quo and replaced it with an order recognising the appellants (the persons elected on 8 December 2018) as the legitimate Executive Board (Exbo) of Chess South Africa, elected pursuant to the Siwendu J orders of 6 December 2018.

The counter-application by the respondents (seeking rescission) was dismissed. The court further interdicted the respondents from acting or holding themselves out as representing Chess South Africa or as the interim executive/management committee, and interdicted and restrained both the respondents and specified banks from accessing or permitting access to identified Chess South Africa bank accounts.

Costs were awarded against the respondents on multiple bases. The appeal was upheld with costs (joint and several liability). The counter-application was dismissed with costs (joint and several liability). In addition, the replacement order included a punitive costs order that the second to sixth respondents pay costs on the attorney and client scale (joint and several).

Cases Cited

Caledon Street Restaurants CC v D’Aviera [1998] JOL 1832 (SE).

Freedom Stationery (Pty) Ltd and Others v Hassam and Others 2019 (4) SA 459 (SCA).

Zuma v Secretary of the Judicial Commission of Inquiry into Allegations of State Capture, Corruption and Fraud in the Public Sector including Organs of State and Others (CCT52/21) [2021] ZACC 28; 2021 (11) CLR 1263 (CC) (17 September 2021).

Legislation Cited

Section 252 of the Companies Act (as referred to in the judgment).

Rules of Court Cited

Uniform Rule of Court 6(12)(c).

Uniform Rule of Court 28.

Uniform Rule of Court 42(1)(a).

Held

The court held that the court a quo erred in reconsidering and rescinding the Siwendu J order because the respondents were not “absent” in the sense required by Uniform Rule 6(12)(c): they had notice of the proceedings and the nature and consequences of the relief sought, and elected not to participate. The exclusion of members from participation in the AGM was not treated as an unforeseeable consequence of an unheralded order, but as flowing from the operative “good standing” framework (as recorded in the relevant report and the time-bound opportunity to regularise standing). On that basis, the rescission and the invalidation of the AGM and its elections could not stand.

LEGAL PRINCIPLES

A reconsideration or rescission mechanism premised on an order granted “in the absence” of a party requires more than the fact that the party did not appear; where a litigant had notice of the proceedings, knowledge of the relief sought (or relief that could reasonably be anticipated in context), and a sufficient opportunity to participate but chose not to, that litigant is not “absent” in the sense contemplated by the rules governing rescission or reconsideration in urgent matters.

Relief that is explicit on the papers, or that can be anticipated from the nature of the dispute and the issues raised, cannot later found a successful rescission application by a party who deliberately stayed out of the proceedings. The later assertion that the party could have advanced potentially relevant submissions does not render the original order “erroneously granted” where the order was procedurally competent and the party had a fair opportunity to be heard.

A notice of motion may be amended without following Uniform Rule 28, and while further affidavits generally require the court’s leave, the presence of a request for such leave in the affidavit is relevant to whether the procedural complaint is sustainable in the circumstances described in the judgment.

Chess South Africa and Others v Chess South Africa and Others (A5067/2019) [2022] ZAGPJHC 317 (10 May 2022)