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[2013] ZASCA 35
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Mashike and Ross NNO and Another v Senwesbel Ltd (253/2012) [2013] ZASCA 35; [2013] 3 All SA 20 (SCA) (28 March 2013)
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THE SUPREME COURT OF APPEAL OF
SOUTH AFRICA
JUDGMENT
Reportable
Case
No: 253/2012
In
the matter between:
JACOB MASHIKE and WILHELM CHRISTIAN ROSS NNO
................
First Appellant
TREACLE NOMINEES (PTY) LIMITED
.............................................
Second
Appellant
and
SENWESBEL LIMITED
......................................................................
First
Respondent
SENWES LIMITED
........................................................................
Second
Respondent
Neutral
citation:
Mashike and Ross NNO v Senwesbel
(253/2012)
[2013] ZASCA 35
(28 March 2013)
Coram:
Ponnan, Maya, Malan and Petse JJA and
Plasket AJA
Heard:
22 February 2013
Delivered: 28 March 2013
Summary: Section 38 of Companies Act 61 of 1973 –
financial assistance for the purpose of or in connection with
purchase of
company’s shares – s 85 – validity of
transactions – severability of purchase and subsequent cession
from
giving of financial assistance – joinder of vendors –
referral to evidence.
_________________________________________________________________________
ORDER
On appeal from:
the North Gauteng High Court,
Pretoria (Rabie J sitting as court of first instance):
The appeal is dismissed with costs including the costs
of two counsel.
___________________________________________________________________
JUDGMENT
Malan JA (Ponnan, Maya and Petse JJA and Plasket AJA
concurring):
[1] This is an appeal against the judgment and order of
Rabie J in the North Gauteng High Court, Pretoria, dismissing an
application
for relief based primarily on s 38 of the Companies Act
61 of 1973. The appeal is with his leave.
[2] The appellants, Jacob Mashike and Wilhelm Christian
Ross NNO and Treacle Nominees (Pty) Limited, originally applied for a
declaratory
order to the effect that the first respondent’s
(Senwesbel’s) acquisition of certain shares in the second
respondent
(Senwes) during the period 1 May 2003 to 30 April 2005
pursuant to the acceptance of two offers made to specific categories
of
shareholders was invalid. The relief was primarily based on s 85
of the Companies Act but to some extent also on a contravention
of s
38. The appellants further sought an order that the shares sold be
cancelled in accordance with the provisions of s 85; alternatively,
that Senwesbel return to the vendors the shares sold and that Senwes
rectify its register of members accordingly.
[3] During the hearing before the court below the
appellants amended the relief sought. The draft order proposed read
as follows:
‘
1 It is declared that the first
respondent’s acquisition of the 8 221 042 shares in
the second respondent (6 471 473
in terms of the First
Offer made to shareholders and 1 749 569 in terms of the
Second Offer made to shareholders) in
the period 1 May 2003 to 30
April 2005 is invalid and of no force and effect.
2 The second respondent is ordered to cancel 58 047 shares in
the second respondent which were purchased at an auction on
12
November 2004, in terms of the provisions of section 85 of the
Companies Act 61 of 1973; alternatively the issue whether the
58 047
shares in the second respondent which were purchased at an auction
sale on 12 November 2004 were purchased by the second
respondent or
by the first respondent is referred for the hearing of oral evidence.
3 The issue whether the 11 173 shares in the second respondent
which were purchased at an auction sale on 3 December 2004
and the
39 858 shares which were purchased at an auction sale on 18
January 2005, were purchased by the second respondent
or by the first
respondent, is referred for the hearing of oral evidence.
4 A rule nisi is issued (with a return date to be determined by the
Court) calling on all interested parties to show cause why
the second
respondent should not be ordered to rectify its share register by
removing the name of the first respondent as shareholder
of the
8 221 042 shares referred to in paragraph 1 above, and
replacing the first respondent’s name in respect
of those
shares with the names of the shareholders from whom the first
respondent acquired such shares (the “former shareholders”).
5 The first respondent is ordered to notify the former shareholders
of this order in the following manner:
5.1 By forwarding, by prepaid registered post, a copy of this order
to the addresses of the former shareholders to whom the offers
which
resulted in the acquisition of those shares, were originally
communicated;
5.2 By notifying the former shareholders, by prepaid registered post,
that paragraphs 1 and 4 of the order pertain to the shares
which were
acquired from them during the period 1 May 2003 to 30 April
2005;
5.3 Publication of the order in:
5.3.1
Die Beeld
newspapers;
5.3.2
Die Landbouweekblad
magazine;
5.3.3
The Farmer’s Weekly
magazine.
6 The respondents are ordered to pay the costs of the application,
jointly and severally, which costs are to include the following:
6.1 The costs of two counsel;
6.2 The costs of the urgent application which had been reserved;
6.3 The costs of the applicants’ expert forensic auditor, Mr D
Sabbagh.’
[4] In their heads of argument, the appellants abandoned
the relief sought in respect of the second offer. The case therefore
concerns
only the 6 471 473 shares acquired in terms of the
first offer. Whereas the relief originally sought was based primarily
on s 85 the cause of action relied upon in the replying affidavit in
respect of the disputed shares is based solely on a contravention
of
s 38.
[5] Senwesbel was registered as a public company on 11
December 1996 with the object of being the holding company of Senwes.
Senwes
was established in 1997 pursuant to a resolution to convert
the erstwhile Sentraal-Wes Koöperatief Beperk into a public
company.
During the period 2006 to 2008 the second appellant acquired
27 118 615 shares in Senwes. This constituted approximately 15 per
cent of the issued shares in Senwes. At the same time Royal Bafokeng
acquired approximately 17,5 per cent of the issued shares
in Senwes
from Senwesbel.
Terms of share purchase offers
[6] At their annual general meetings held on 3 October
2002 both Senwes and Senwesbel resolved to buy back their own shares.
The
shareholders of Senwes authorized the board of directors to
purchase its shares ‘in terms of legislation in order to
increase
the proportional value and net asset value of remaining
shareholders’ shares’. However, on 4 December 2003, the
Senwes
board resolved that Senwes would not purchase its own shares
but rather allow Senwesbel to do so. At its meeting on 4 December
2003 the financing of the Senwes share purchases was discussed and it
was resolved that Senwes would finance the purchases of both
its own
and Senwesbel’s shares. The resolution was apparently passed in
the belief that s 37 of the Act sanctioned a loan
to be made to
Senwesbel by the company. In accordance with these resolutions
Senwes’ auditors, Ernst and Young, noted in
their report of 21
January 2004 that ‘Senwes Limited will provide financial
assistance to Senwesbel Limited to repurchase
the shares’.
[7] The above resolutions led to the first offer dated
26 January 2004 being made to the relevant shareholders of both
Senwes and
Senwesbel. The shares to be purchased were held by
shareholders with less than 10 000 Senwes shares and less than 10 000
Senwesbel
shares, to shareholders who were older than 70 years of age
and to shareholders who were either deceased or insolvent estates. A
Senwes cheque for the purchase price was attached to every offer for
the unencumbered shares (‘vrye aandele’), that
is shares
that were not pledged or otherwise encumbered. The offer for
unencumbered shares could be accepted by depositing the
attached
Senwes cheque into the bank account of the vendor:
‘
If your shares are not encumbered, and you
are accepting the offer, you only have to deposit the crossed cheque
attached to the
offer into your bank account … However, if you
do not wish to accept the offer, you may ignore the offer and either
destroy
the cheque or return it to the Group Sectretary.’ (My
translation).
In the case of shares encumbered to Senwes, the offer
was accepted by not responding to the offer in which case the offer
was deemed
to have been accepted. The purchase price would then be
paid by setting off the debt owing to Senwes against the purchase
price
of the shares. If –
‘
[Y]our shares have been encumbered to
Senwes, and you wish to accept the offer, you need not react to the
offer in which event it
shall be deemed that you have accepted the
offer’. (My translation).
[8] As a result of the first offer 5 2264 556 shares
were transferred to Senwesbel and Senwesbel’s loan account with
Senwes
debited with an amount of R4 211 644,80 in respect of Senwes
shares, and R5 620 540 in respect of Senwesbel shares. The closing
balance of Senwesbel’s loan account on 30 April 2004 was
reflected as R13 949 254,22. After the closing date of the offer
was
extended to 20 June 2004, Senwesbel increased its shareholding in
Senwes by a further 1 206 917 shares. The loan account was
debited on
19 and 23 August 2004 with the amounts of R59 647,20 and R908 283,20
respectively. It was reported at the Senwes board
meeting of 2
December 2004 that an amount of some R17 million was owed by
Senwesbel to Senwes in respect of the buy-back transactions
financed
by Senwes.
[9] The second offer was made on 15 December 2005 with a
closing date of 25 February 2005. The terms of the second offer
differed
from those of the first in that the second offer was not
accompanied by a Senwes cheque in respect of the unencumbered shares
and
did not provide for set-off in respect of the encumbered shares.
As I have said, the validity of the transactions pursuant to the
second offer is no longer an issue between the parties. The two
offers were accepted by some 3
500
shareholders of which 300 were deceased or insolvent estates.
Section 38
[10] Section 38(1) provides that:
‘
No company shall give, whether directly or
indirectly, and whether by means of a loan, guarantee, the provision
of security or otherwise,
any financial assistance for the purpose of
or in connection with a purchase or subscription made or to be made
by any person of
or for any shares of the company, or where the
company is a subsidiary company, of its holding company.’
The purpose of this prohibition is the protection of
creditors and shareholders of a company by ensuring that purchasers
of shares
do so using their own resources and not those of the
company.
1
The rule was ‘introduced in order to prevent the
trafficking in its own shares by the Company by indirect means’.
2
The financial assistance is not confined to assistance
given to a purchaser; the subsection requires only that the financial
assistance
be given for the purpose of or in connection with the
purchase of shares.
3
Two aspects are of importance in determining whether a
contravention of the section took place: first, whether the
transaction resulted
in the company giving financial assistance for
the purchase of its own shares; and, second, whether the financial
assistance was
given for the purpose of or in connection with the
purchase of the shares.
4
[11] Both questions are factual, the second tends to be
problematic. The ‘giving of financial assistance’ is not
defined
and the words do not have a technical meaning. It was said
that:
‘
one must examine the commercial realities
of the transaction and decide whether it can properly be described as
the giving of financial
assistance by the company, bearing in mind
that the section is a penal one and should not be strained to cover
transactions which
are not fairly within it.’
5
To determine whether the assistance was given ‘for
the purpose of’ the purchase of its own shares regard must be
had
to the ‘direct object’ of the financial assistance
and not to its ultimate goal.
6
The object is that of the company giving the financial
assistance.
7
The words ‘in connection with’:
8
‘
appear to have been inserted in order to
cover a situation where, although the actual purpose of the company
in giving financial
assistance might not have been established, its
conduct nevertheless stood in such close relationship to the purchase
of its shares
that, substantially if not precisely, its conduct was
similar to that of a company which gave the forbidden assistance with
the
purpose described in the section.’
[12] The section strikes only at the financial
assistance, or agreement to provide it, and does not by implication
invalidate the
contract for the purchase of the shares.
9
Nor does it necessarily taint the real and abstract
agreement of cession in terms of which the shares are transferred to
the purchaser.
10
The purchase is invalid where it is inextricably
interwoven with the offending transaction or both form part of a
‘single
and indivisible contract’.
11
Where it is an entirely separate agreement
12
or the purchase can be severed from the offending
transaction it is not invalid.
13
But where the purchase cannot be severed from the giving
of financial assistance or the agreement to do so, it is struck with
the
same invalidity, whether or not the parties knew of the
invalidity.
14
[13] In the court below Rabie J dismissed the
application. He assumed that financial assistance had been given by
Senwes to Senwesbel
but found that the sales of the shares by the
vendors to Senwesbel were separate and distinct transactions and ‘no
part of
a single composite transaction with any alleged agreement to
provide financial assistance’. He emphasized that there –
‘
must be an integral, inextricable linkage
between the provision of the financial assistance and the share
purchase agreement and
that the provision of the assistance must in
fact be a component of the share purchase’.
Appellants’ contentions
[14] In terms of the first offer a Senwes cheque for the
purchase price was annexed to every offer for unencumbered shares,
which
was accepted by depositing the cheque into the bank account of
the vendor. In the case of shares encumbered to Senwes, the offer
was
accepted by not responding to the offer which was then deemed to have
been accepted. The purchase price was then paid by setting
off the
debt owed by the vendor to Senwes against the purchase price. It was
submitted on behalf of the appellants that in the
case of the
purchase of both the unencumbered and the encumbered shares the
provision of financial assistance was inextricably
linked to the
share purchase agreements. In the case of unencumbered shares the
provision of the financial assistance (the deposit
and payment of the
Senwes cheque) constituted acceptance of the offer to purchase. In
the case of encumbered shares payment of
the purchase price and the
provision of financial assistance would occur simultaneously on the
closing date of the offer when set-off
was to take place. The issue,
they submitted, was not whether the agreement to provide financial
assistance formed a single transaction
with the share purchase
agreement but whether the actual providing of financial assistance
and the share purchases formed part
of a single transaction. The
second offer differed from the first in that the second offer was not
accompanied by a Senwes cheque
and did not provide for set-off in
respect of the encumbered shares. The provision of financial
assistance pursuant to the second
offer, but not the first, could
thus be severed from the agreement of sale.
Respondents’ contentions
[15] In the urgent application that preceded the present
application the respondents conceded that s 38 had been contravened:
reference
was made to ‘technical contraventions’ of s 38.
The respondents were also in possession of legal opinions to that
effect.
In their answering papers, however, they not only disputed
that s 38 was contravened but also contended that, if there had been
a contravention, the agreements to buy and sell could be severed from
the agreement to provide (or the actual provision of) financial
assistance.
[16] The respondents contended that Senwes had resolved
as part of a ‘turnaround strategy’ to conclude a
transaction
allowing for the acquisition by a black empowerment
shareholder of shares in the company. To facilitate the proposed
restructure
Senwesbel had to acquire additional shares from other
shareholders so as to make them available to the empowerment
shareholder.
The shares acquired by Senwesbel during 2004 and 2005
were all obtained from third party vendors and not from the company.
Senwesbel
had to sell at least 25,1 per cent of its shareholding in
Senwes to the empowerment shareholder. Senwesbel thus undertook to
acquire
shares from third party vendors since it was obliged to
maintain a shareholding level of at least 35,1 per cent in the
company.
Shares were thus purchased with the purpose of selling them
to an empowerment partner so that the company could comply with
national
empowerment policy in this regard. In these circumstances
the submission was made that the
direct object
of the financial assistance was the restructuring of the
company’s capital to include an empowerment shareholder. In
this
respect, the deponent to the answering affidavit, Ms E M Joynt,
the company’s secretary, refered to the ‘declared
purpose’
of the share purchases as the conclusion of an
empowerment transaction. However, Mr F Strydom, the
managing director
of Senwes, referred to the ‘ultimate purpose’
of the loan facility granted to Senwesbel by Senwes as the
implementation
of the restructuring of the company which included the
conclusion of an empowerment transaction. It is not entirely clear
whether
a distinction is made between the
purpose
of the share purchases and the
reasons
for them.
15
[17] Senwesbel did not operate its own banking account.
It had a current loan account or loan facility with Senwes which
would be
debited and credited from time to time. Credits would arise
from the declaration of dividends and debits from the company making
payments on behalf of Senwesbel. Repayment of moneys paid on behalf
of Senwesbel would take place by set-off against credits entered
into
the account. The consideration for the shares purchased by Senwesbel
in terms of the first offer was paid by means of Senwes
cheques, the
amounts of which were debited to Senwesbel’s account. In other
words, Senwes advanced the full amount for the
share purchases under
consideration to Senwesbel.
[18] The respondents submitted that the agreements of
purchase and sale were factually and legally separated from the
provision
of financial assistance to the company. There was no
integral, inextricable linkage between the provision of financial
assistance
and the share purchase agreements. None of the vendors, so
the argument went, could or would have known whether the loan account
was in debit or in credit at the time the purchases were concluded.
It was argued that the fact that the company’s cheques
had been
attached to the offer did not amount to the provision of financial
assistance nor made payment by the company a term of
the sale
agreements: the company was not a party to the sale agreements and
the obligation to make payment for the shares rested
on Senwesbel,
not on the company. Although payment was made by Senwes it was
legally performance of Senwesbel’s obligation
to pay the price
to the vendors. It was submitted that any illegality that might have
affected the giving of the financial assistance
did not taint the
sale of share agreements or, one should add, the subsequent cession
of the vendors’ rights to Senwesbel.
In view of my conclusion
on the non-joinder by the appellants of the vendors of the shares in
question, I need not resolve the
above issues raised by the parties.
Joinder
[19] The relief sought by the appellants in paragraph 1
of the draft order is a declaration that the acquisition of certain
shares
by Senwesbel pursuant to the first offer was invalid and of no
force and effect. This relief is not dependent on the relief sought
in terms of paragraph 4 for rectification of the register in terms of
s 115 of the Companies Act. Paragraph 4, on the other hand,
is
dependent on the declaration as prayed for in paragraph 1. The
declaration sought in paragraph 1 is not without significance.
Should
it be made an order, the appellants (or at least the second appellant
and other shareholders) would have the required standing
to apply for
an order interdicting Senwesbel to vote at company meetings or
receive dividends.
16
The appellants, however, did not join the vendors in the
application. They sought a rule nisi only in respect of paragraph 4
of
the draft order.
[20] Where a party has a direct and substantial interest
in any order a court may make, or if such order cannot be sustained
or
carried into effect without prejudicing that party, the joinder of
that party is necessary unless the court is satisfied that that
party
waived his or her right to be joined or agreed to be bound by the
order.
17
The enquiry as to non-joinder is a matter of substance
and not of form:
18
‘
The substantial test is whether the party
that is alleged to be a necessary party for purposes of joinder has a
legal interest in
the subject-matter of the litigation, which may be
affected prejudicially by the judgment of the Court in the
proceedings concerned
. . . .’
And in
Amalgamated Engineering
Union v Minister of Labour
19
it was said:
‘
Indeed it seems clear to me that the Court
has consistently refrained from dealing with issues in which a third
party may have a
direct and substantial interest without either
having that party joined in the suit or, if the circumstances of the
case admit
of such a course, taking other adequate steps to ensure
that its judgment will not prejudicially affect that party’s
interests.’
A ‘direct and substantial interest’ in a
matter connotes ‘an interest in the right which is the
subject-matter
of the litigation and … not merely a financial
interest which is only an indirect interest in such litigation’.
20
[21] In the present matter it was argued on behalf of
the appellants that there was no need to have joined the vendors
because they
would not be bound by any judgment given in respect of
paragraph 1 of the draft order. While this is correct it is not the
end
of the matter. The facts in
Home Sites
(Pty) Ltd v Senekal
21
were that the seller of land had prior to the sale
verbally agreed to give a servitude to a third party. The purchaser
claimed specific
performance and the defendant pleaded that he had
given the purchaser notice of the agreement to grant the servitude
before the
sale was concluded. An exception was taken to the plea
which was upheld. However, on appeal it was said that the third party
had
a direct and substantial interest in the validity of the
servitude and should be given an opportunity to be heard. The
question
was whether a verbal agreement to grant a servitude was
valid. Schreiner JA said:
22
‘
[I]t is clear that in regard to the present
issue, the decision of which cannot be avoided, Mrs. Baumann’s
interest in the
validity of her servitude invites the question
whether she must not be given an opportunity of being heard on the
point; and once
the question is raised there can, I think, be only
one answer to it. It is true that if she remains outside the
litigation a decision
to the effect that no valid servitude had been
granted would be
res inter alios acta
as far as she is concerned and would not be binding by way of
res
judicata
upon her. But if such a
decision were given by this Court it would be an authority on the
legal issues which would be directly
in point and calculated to
operate with decisive effect upon her claim to be entitled to the
servitude. Accordingly it seems to
me that she has … a direct
and substantial interest in the results of the decision of this
issue, which cannot properly
be decided without her being joined as a
party.’
The present case is no different. It follows that every
vendor of shares in Senwes to whom the first offer was directed
should have
been joined in the application.
[22] Where there is a non-joinder the court may direct
that steps be taken to let the matter stand over until the interested
parties
have been joined or have indicated that they would be bound
by the judgment.
23
One way is to let the matter stand over until interested
parties have filed their consents to be bound. Another is to issue a
rule
nisi
rather than
compelling the applicant to start proceedings
de
novo
.
24
There is no application before us for an order
sanctioning either course.
The auction shares
[23] The appellants applied to have the question of
whether the so-called auction shares were purchased either for Senwes
or for
Senwesbel referred to evidence. If they were purchased for
Senwes they had to be cancelled in terms of s 85(8) of the Act:
‘
Shares issued by a company and acquired
under this section shall be cancelled as issued shares and restored
to the status of authorized
shares forthwith.’
Two groups of shares are involved: the first concerns
58 047 shares purchased on 12 November 2004; and the second
11 173
and 39 858 shares that were purchased at an auction
on 3 December 2004 and 18 January 2005 respectively. The court below
refused
to refer the matter to evidence. It found that there was no
reason to doubt the version of the respondents that Senwesbel
acquired
some of the shares directly from vendors at auctions and
that Senwes duly cancelled others in terms of s 85(8). The court
found
that the evidence presented on behalf of the respondents was
overwhelming. Because no rebutting evidence was offered by the
appellants,
it held that no real dispute of fact existed and stated:
‘
A matter cannot be referred for evidence
merely because an applicant believes that he might be able to extract
favourable evidence
during cross-examination.’
[24] The facts relied upon by the appellants are the
following. On 7 March 2003 the Senwes board resolved to authorize
Messrs Dique
and Gouws to purchase Senwes shares at auctions at a
price not exceeding 50 cents per share. Mr Riaan du Plessis, the then
senior
legal advisor of Senwes, was one of the employees delegated to
purchase the shares. The Senwes board resolution was ‘revoked’
by the Senwesbel board on 2 December 2004 when it resolved that
Senwesbel be authorized to purchase Senwes shares. On 19 November
2004 Mr Gouws, the former financial director of Senwes, sent an email
to inter alia Du Plessis recording the following:
‘
It came to my notice that all Senwesbel and
Senwes shares that [Du Plessis] ... bought at auctions, were
cancelled. We have to treat
them in the same manner as the buy back
transaction. When [Du Plessis] ... acts at auctions, he acts on
behalf of Senwesbel and
buys Senwesbel and Senwes shares for
Senwesbel.’
(My
translation).
The Senwesbel resolution authorizing Senwes employees to
purchase shares in Senwes was passed on 2 December 2004 and Du
Plessis
was only authorized to purchase Senwes shares on 19 November
2004. In these circumstances the submission was made that before 19
November 2004 the only mandate Du Plessis could have had was to
purchase auction shares on behalf of Senwes.
[25] The 58 047 shares purchased on 12 November
2004 were transferred to Senwesbel on 7 December 2004. In a note to
Ms Joynt
dated 23 November 2004 Du Plessis confirmed that he
purchased the shares on behalf of Senwesbel. The 11 173 shares
purchased on
3 December 2004 were transferred to Senwesbel on 7
December 2004. In a similar note to Ms Joynt dated 3 December 2004,
Du Plessis
confirmed that he had purchased the shares on behalf of
Senwesbel. Executed CM42 transfer forms accompanied the
documentation.
The 39 858 shares purchased on 18 January 2005
were erroneously, according to the affidavits filed on behalf of the
respondents,
put in a Senwes suspense account pending their
cancellation in terms of s 85(8). When it was discovered that the
shares were wrongly
held in the said account arrangements were made
for their transfer to Senwesbel. A note of 18 February 2005 by Du
Plessis confirmed
that he had bought the shares on behalf of
Senwesbel.
[26] The appellant submitted that the court below
incorrectly applied the
Plascon-Evans
rule
25
because, as distinct from that case, the appellants had
applied for a referral to oral evidence. A court has a discretion to
refer
a dispute to oral evidence. Although it is undesirable to
determine a genuine dispute of fact solely on the affidavits,
26
a court may, in the exercise of its discretion, refuse
to do so where the probabilities on the papers do not favour the
applicant.
27
To my mind, this is such a case. The application was not
only brought late,
28
but the allegations made were controverted by the clear
evidence of the respondents’ witnesses supported by
contemporaneous
documentation. On the papers, no non-compliance by
the company with s 85(8) of the Act was established. Even if the
dispute can
be characterised as a genuine dispute of fact, despite
the failure by the appellants to establish a factual basis for their
contentions,
the probabilities in view of the uncontroverted evidence
of the above witnesses are so overwhelmingly in favour of the
respondents
that a referral to evidence is not justified.
[27] In the result the appeal is dismissed with costs
including the costs of two counsel.
_____________
F R Malan
Judge of Appeal
APPEARANCES:
For Appellant: N G D Maritz SC and B H Swart SC
Instructed by:
Newtons
Nieuw Muckleneuck, Pretoria
McIntyre & Van der Post
Bloemfontein
For 1st Respondent: C M Eloff SC and A Ferreira
Instructed by:
Assheton-Smith Inc
C/o S G A Attorneys
Newlands, Pretoria
Symington & De Kok
Bloemfontein
For 2nd Respondent: A Subel SC
Instructed by:
Coetsee Van Rensburg Inc
C/o Rorich Wolmarans & Luderitz Inc
Brooklyn, Pretoria
Symington & De Kok
Bloemfontein
1
Lewis
v Oneanate (Pty) Ltd & another
[1992] ZASCA 174
;
1992 (4) SA 811
(A) at
818B-C;
Gardner & another v Margo
[2006] 3 All SA 229
(SCA) para 45.
2
Incorporated
Industries Ltd v Standard Finance Corporation Ltd
1961
(4) SA 254
(W) at 255D-E approved in
Sage
Holdings Ltd v The Unisec Group Ltd
1982
(1) SA 337
(W) at 349A-C.
3
Evrard
v Ross
1977 (2) SA 311
(D) at 317F-H;
Jacobson & another
v Liquidator of M Bulkin & Co Ltd
1976 (3) SA 781
(T) at
787H.
4
See
Lipschitz NO v UDC Bank Ltd
1979 (1) SA 789
(A) at 799D-E; A
N Oelofse ‘Artikel 38 van die Maatskappywet’ (1980)
TSAR
47; and J T Pretorius, P A Delport, Michele Havenga and Maria
Vermaas
Hahlo’s South African Company Law through the Cases
(1999) at 136-7.
5
Charterhouse
Investment Trust Ltd & others v Tempest Diesels Ltd
[1986] BCLC 1
(Ch D) at 10;
Lipschitz
at 797H-798A referring to R C Beuthin (1973) 90
SALJ
at
213 who suggested ‘a much narrower approach to the section’.
6
Gradwell
(Pty) Ltd v Rostra Printers Ltd & another
1959
(4) SA 419
(A) at 424G-H, 425F-H and 426D-E;
Lipschitz
NO v UDC Bank Ltd
1979 (1) SA 789
(A)
at 799E-800D;
Gardner & another v
Margo
[2006] 3 All SA 229
(SCA) para
47.
7
Lipschitz
NO v UDC Bank Ltd
1979 (1) SA 789
(A) at 800;
Gardner &
another v Margo
[2006] All SA 229
(SCA) para 47.
8
Lipschitz
NO v UDC Bank Ltd
1979 (1) SA 789
(A) at 804G-H.
9
See
Gower and Davies’
Principles of Modern Company Law
7 ed
at 271: ‘(b) However, the illegality of the financial
assistance given or provided by the company normally does not
taint
other connected transactions, such as the agreement by the person
assisted to acquire the shares; it would be absurd if,
for example,
a takeover bidder which had been given financial assistance by the
company, or by a subsidiary of the company, could
escape from the
liability to perform purchase contracts which it has entered into
with the shareholders’.
10
See
Botha v Fick
[1994] ZASCA 184
;
1995 (2) SA 750
(A) at 762E-F;
Kalil v
Decotex (Pty) Ltd & another
1988 (1) SA 943
(A) at
970I-971B.
11
Crowden
Products (Pty) Ltd v Gradwell (Pty) Ltd & another
1959
(1) SA 231
(T) at 233A-B. Cf Gower and Davies 371: ‘
(c)
This, however, may be subject to a qualification if the obligation
to acquire the shares and the obligation to provide financial
assistance form part of a single composite transaction. The obvious
example of this would be an arrangement in which someone
agreed to
subscribe for shares in a company (or its holding company) in
consideration of which the company agreed to give him
some form of
financial assistance. In such a case the position apparently depends
on whether the terms relating to the acquisition
of shares can be
severed from those relating to the unlawful financial assistance’.
12
As
in
Saambou Nasionale Bouvereniging v Ligatex (Pty) Ltd; Ex parte
Stuart: In re Saambou Nasionale Bouvereniging v Ligatex (Pty) Ltd
1976 (1) SA 868
(E) at 873A.
13
Lipschitz
NO v UDC Bank Ltd
1979 (1) SA 789
(A) at 807G-H;
Evrard v
Ross
1977 (2) SA 311
(D) at 315E-F;
Fidelity Bank Ltd v Three
Women (Pty) Ltd & others
[1996] 4 All SA 368
(W) at 382;
Vernon & others v Schoeman & another
1978 (2) SA 305
(D) at 307H-308B. Cf
Novick & another v Comair Holdings Ltd &
others
1979 (2) SA 116
(W) at 873A-B and see R C Beuthin ‘More
about Financial Assistance’ (1980) 97
SALJ
477.
14
Fidelity
Bank Ltd v Three Women (Pty) Ltd & others
[1996] 4 All SA
368
(W) at 382.
15
Brady
& another v Brady & another
[1988] 2 All ER 617
(HL) at
633. See M P Larkin ‘The Capital Maintenance Rule. Should it
be Maintained?’ (1988) 18
Businessman’s Law
59
and the Late Hon Mr Justice P M Meskin (former editor); the Hon Mr
Justice B Galgut (consulting editor), Jennifer A Kunst,
Professor
Piet Delport and Professor Quintus Vorster (eds)
Henochsberg on
the Companies Act
(1994) vol 1 at 75; M S Blackman, R D Jooste,
J L Yeats, F H I Cassim and R de la Harpe with contributions from M
Larkin and
C H Rademeyer
Commentary on the Companies Act
(2002)
vol 1 at 4-64.
16
Cf
Trinity Asset Management (Pty) Ltd &
others v Investec Bank Ltd & others
2009
(4) SA 89
(SCA) paras 22 and 43 and cf
Communicare
& others v Khan & another
(12/2012)
[2012] ZASCA 180
(29 November 2012) para 38.
17
Aquatur
(Pty) Ltd v Sacks & others
1989 (1) SA 56
(A) at 62.
18
Bowring
NO v Vrededorp Properties CC & another
2007 (5) SA 391
(SCA)
para 21.
19
Amalgamated
Engineering Union v Minister of Labour
1949 (3) SA 637
(A) at
659 and see
Transvaal Agricultural Union v Minister of
Agriculture and Land Affairs & others
2005 (4) SA 212
(SCA)
para 64.
20
Henri
Viljoen (Pty) Ltd v Awerbuch Brothers
1953 (2) SA 151
(O) at
169;
Aquatur (Pty) Ltd v Sacks & others
1989 (1) SA 56
(A) at 62D-E.
21
Home
Sites (Pty), Ltd v Senekal
1948 (3) SA 514
(A). See
Crowden
Products (Pty) Ltd v Gradwell (Pty) Ltd & another
1959 (1)
SA 231
(T) at 233H.
22
At
520. See
Rosebank Mall (Pty) Ltd & another v Cradock
Heights (Pty) Ltd
2004 (2) SA 353
(W) para 83.
23
Amalgamated
Engineering
at 663.
24
As
in
Ex parte Sengol Investments (Pty) Ltd
1982 (3) SA 474
(T)
at 477H ff and
Ex Parte Jacobson: In re Alec Jacobson Holdings
(Pty) Ltd
1984 (2) SA 372
(W) at 377F-H.
25
Plascon-Evans
Paints Ltd v Van Riebeeck Paints (Pty) Ltd
[1984] ZASCA 51
;
1984 (3) SA 623
(A)
634I-635C.
26
Trust
Bank van Afrika Bpk v Western Bank Bpk & andere NNO
1978
(4) SA 281
(A) at 294D-295A.
27
Kalil
v Decotex (Pty) Ltd & another
1988
(1) SA 943
(A) at 979G-J;
Lombaard v
Droprop CC & others
2010 (5) SA 1
(SCA) paras 25, 26 and 33.
28
Lombaard
v Droprop CC
para 53;
Law
Society Northern Provinces v Mogami
2010
(1) SA 186
(SCA) at 195C-D.