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[2010] ZAECPEHC 40
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Fortuin v Cobra Promotions CC (1658/09) [2010] ZAECPEHC 40; 2010 (5) SA 288 (ECP) ; [2011] 2 All SA 225 (ECP) (17 June 2010)
IN
THE HIGH COURT OF SOUTH AFRICA
(EASTERN
CAPE, PORT ELIZABETH)
REPORTABLE
CASE
NO.: 1658/09
In
the matter between:
MOSES
FORTUIN Applicant
and
COBRA PROMOTIONS
CC Respondent
JUDGMENT
GROGAN
AJ:
[1] The applicant seeks
an order in terms of section 78 of the Promotion of Access to
Information Act 2 of 2000 (“the Information
Act”)
directing the respondent to furnish him with copies
inter
alia
of
its balance sheet, financial statements, asset register, VAT returns,
lists of debtors and creditors and current management
accounts.
[2] In support of his
claim to entitlement to this information, the applicant says he is a
member of the respondent, a closed corporation
that conducts business
as a building contractor, holding a 50% member’s interest which
he acquired from the other member,
Mr F G Cuthbertson in terms of an
agreement dated 20 February 2006 (“the agreement”), a
copy of which is annexed to
the founding affidavit. The applicant
also claims that Mr Cuthbertson reneged on the agreement to transfer
the member’s interest
to himself. In consequence of the alleged
breach of the agreement, the applicant says he is now considering
invoking
section 36
of the
Close Corporations Act 69 of 1984
, seeking
an order directing the respondent to transfer his member’s
interest to himself and thereafter the transfer thereof
to Mr
Cuthbertson against payment of an appropriate purchase price.
[3] After an exchange of
correspondence, the respondent through its attorneys disclosed
certain information, which the applicant
says, correctly, he could in
any event have obtained from the Register of Close Corporations.
Unhappy with this response, the applicant
has instituted the present
application.
[4] Mr Cuthbertson claims
that he is and has always been the respondent’s sole member.
While he admits that a draft agreement
was prepared in terms of which
the applicant would have obtained a 50% member’s interest, he
claims that he subsequently
learned that because of the applicant’s
“parlous” credit record certain suppliers would cease
advancing credit
to the respondent if he became a member. Mr
Cuthbertson claims further that after discussing the situation with
the applicant,
they agreed that the agreement would be cancelled and
that they would instead enter into a partnership to trade “on
an equal
basis” as a building contractor.
[5] Insofar as it may be
relevant to the present application, it appears common cause that the
relationship between the applicant
and Mr Cuthbertson did not prosper
after the agreement was concluded. The applicant claims that Mr
Cuthbertson “marginalised”
him by treating him as a “mere
employee” and finally purported to dismiss him. Mr Cuthbertson
claims in turn that the
applicant’s work was of unacceptable
quality, which led to difficulties with clients, and which in turn
caused Mr Cuthbertson
to accuse the applicant of breaching the
partnership agreement and to give notice of its termination. Mr
Cuthbertson alleges that,
notwithstanding these developments, he had
agreed to retain the applicant as a foreman until that relationship
was finally terminated
because of the applicant’s poor work. A
year after his alleged dismissal, the applicant through his attorneys
began pressing
the claim that he was a member of the respondent, and
as such entitled to information concerning the close corporation.
[6] The respondent now
seeks to resist disclosure on two bases. It alleges, first, that the
applicant failed to comply with the
procedural requirements
stipulated in the Act; second, that the record is not required for
the exercise or protection of any of
the applicant’s rights. I
deal with each of these grounds in turn.
[7] With regard to the
former point, Mr Cuthbertson contends that he is neither willing nor
obliged to comply with the applicant’s
request for information
because the notice in which it was conveyed was deficient in the
following respects: (i) the applicant’s
attorney, who completed
the request form, failed to state his capacity; (ii) the form does
not specify whether or how the requester
required the response to be
sent to him; (iii) the particulars of the right to be exercised or
protected and the purposes for which
the information is required is
left blank. Mr Cuthbertson contends that, in the face of these
deficiencies alone, he was entitled
to ignore the applicant’s
request, and that he remains under no legal obligation to satisfy it.
[8] The Information Act
requires both public bodies and private persons to disclose
information in specified circumstances. Section
50(1), which deals
with the right of access to records of private bodies, reads:
“A requester must
be given access to any record of a private body if—
that record is required
for the exercise or protection of any rights;
that person complies
with the procedural requirements in this Act relating to a request
for access to that record; and
access to the record is
not refused in terms of any ground for refusal contemplated in
Chapter 4 of this Part.”
[9] Section 53(1) reads:
“
A request for
access to a record of a private body
must
be made in the prescribed form to the private body concerned at its
address, fax number or electronic mail address.” (Underlining
supplied.)
[10] The information the
requester is required to provide is set out in section 53(2). This
reads:
“
The form for a
request for access prescribed for the purposes of subsection (1)
must
at least require the requester concerned—
To provide sufficient
particulars to enable the head of the private body concerned to
identify—
the record of records
requested; and
the requester;
to indicate which form
of access is required;
to specify a postal
address or fax number of the requester in the Republic;
to identify the right
the requester is seeking to exercise or protect and provide an
explanation of why the requested record is
required for the exercise
or protection of that right;
if, in addition to a
written reply, the requester wishes to be informed of the decision
on the request in any other manner, to
state that manner and the
necessary particulars to be so informed; and
if the request is made
on behalf of a person, to submit proof of the capacity in which the
requester is making the request, to
the reasonable satisfaction of
the head.” (Underlining supplied again.)
[11] Certain parts of the
form completed by the applicant’s attorney have not been filled
in. These include Parts A (which
requires the requester to declare
the capacity in which the request is made where, as in this case, it
is made on behalf of another
person), G (which requires the
requester to indicate the right to be exercised or protected and an
explanation for why the record
requested is required for the exercise
or protection of the “aforementioned right”) and H (which
requires the requester
to indicate how he/she would “prefer to
be informed of the decision regarding your request for access to the
record”).
[12] The applicant
contends that there has been at least substantial compliance with the
requirements of the Act and that, in any
event, the form must be read
in relation to the correspondence that preceded the transmission of
the form.
[13] The objection that
the applicant’s attorney failed to state his capacity seems
excessively technical. The designation
“Michael Randell
Attorneys” under the heading “Particulars of person
requesting access to the record” (Part
A of form C) leaves no
room for doubt that the “requester” is representing
“the person on whose behalf request
is made” (Part B). In
any event, the earlier correspondence had clearly alerted the
respondent to Mr Randell’s role.
[14] The same can be said
of the failure to specify the manner in which the requester required
the “necessary particulars”
to be provided (Part H). The
respondent did in fact fax such information as it was prepared to
disclose to the applicant’s
attorney. These objections
accordingly smack of opportunism.
[15] The applicant’s
failure to provide any detail at all in Part G is another matter. The
Information Act affords subjects
an extraordinary remedy, which could
be open to abuse. This is why the Legislature states in clear terms
that persons to whom requests
are addressed should be appraised, not
only of why the requester seeks the information, but should also be
given an explanation
for the request. Without this information, the
person to whom the request is addressed cannot evaluate whether the
requirements
of section 50(1), which obliges disclosure, have been
met. Like that provision, both subsections of section 53 are cast in
peremptory
terms. Failure to specify the right the requester seeks to
exercise or protect and to provide an explanation for why the
information
is required will generally be fatal to a request.
[16] I say “generally”
because, in my view, it is arguable, as the applicant argues, that
strict compliance with section
53 may not be required where, as in
this case, the formal notice succeeds an exchange of correspondence
in which the details specified
in the form have been made plain. The
question is whether a requester is entitled to omit that information
from the form because
it is in any event known to the respondent —
or, to put the same issue in other words, whether, as the applicant
contends,
a failure to state facts in the request of which the person
to which it is addressed is well aware constitutes substantial
compliance
with section 53.
[17] I can find no
authority on this issue. However, I think it appropriate to interpret
the procedural provisions of the Information
Act in accordance with
the settled law relating to non-compliance with the provisions of
statutes cast in linguistically peremptory
terms (see
Nkisimane
v Santam Insurance
1978
(2) SA 430
(A) at 433-434). I am prepared to accept in the
applicant’s favour that, in circumstances where it has been
made obvious
in previous correspondence why the information is
required, and for what purpose, a requester need not restate the
reasons in the
pro forma request notice. While the applicable
provisions are cast in peremptory form, I do not think it was the
intention of the
lawmaker that a “requester” should be
non-suited merely because the form is not completed. The question is
whether,
in the circumstances of the present case, it can be said
that the respondent was aware, or ought reasonably to have been
aware,
of the reasons for the request. This answer requires a sketch
of the developments preceding the lodging of the formal section 53
request.
[18] The request was
preceded by an exchange of correspondence between, in the first
instance, the parties’ former attorneys,
and then their current
attorneys of record. The first letter, dated 9 March 2007, advised
the respondent that it had failed to
comply with clause 3 of the
agreement relating to the sale of a 50% share of the membership
interest to the applicant, drew the
respondent’s attention to
sections 42
,
46
and
49
of the
Close Corporations Act, and
requested
inter
alia
an
income and expenditure statement for the period 1 March 2006 to 28
February 2007. In their lengthy reply to that letter, the
respondent’s then attorneys claimed that the agreement had been
superseded by a partnership agreement, and tendered to make
available
the relevant financial and bank statements and “all other
documentation relevant to its activities
qua
partner”
on reasonable notice. Notice was also given of the termination of the
alleged partnership.
[19] More than a year
later, on 28 May 2008, the applicant’s current attorney of
record entered the fray with a threat to
launch liquidation
proceedings against the respondent if the matter was not resolved
amicably. A month after receiving a letter
dated 29 May 2008
reserving the respondent’s rights pending further instructions,
the applicant’s attorney wrote a
further letter adverting to an
arrangement between the parties’ legal representatives that the
respondent “would be
furnishing an accounting of the current
financial circumstances of the Close Corporation so that
consideration can be given to
whether our client will approach the
court for a winding up order”.
[20] Four days later, on
4 July 2008, the applicant’s attorney wrote again, this time
stating that in the event of the respondent
failing to settle the
matter, he held instructions “to approach the court by way of
appropriate relief either by way of liquidation
proceedings or
alternatively, by way of proceedings in terms of
Section 36
of the
Close Corporations Act compelling
your client to firstly transfer the
relevant member’s interest to our client and thereafter
acquiring our member’s
interest against payment by your client
of an appropriate purchase price”. In the same letter, the
applicant’s attorney
indicated that he was “awaiting
receipt of accounting from your client”, including copies of
all financial statements
and bank statements in respect of the
corporation’s business affairs from inception to date hereof”.
This letter drew
a terse response from the respondent’s
attorney
inter
alia
denying
that the applicant is a member of the CC “in any form or
fashion”.
[21] Nine months later,
the applicant delivered his formal request for information in terms
of the Information Act. On 26 March
2009, the respondent, under a
cover of a letter denying yet again that the applicant was a member
of the CC, delivered a number
of documents “in accordance with
the provisions of the
Promotion of Access to Information Act&rdquo
;.
These were said to be “public documents”. They were
indeed. The documents delivered were copies of the CC’s
certificates of incorporation and of member’s interest, and the
founding statement. The final riposte of the applicant’s
attorney before launching this application was to point out that
these documents were unhelpful, that the Information Act did not
restrict requesters to public documents, and that the financial
records were required.
[22] Can it be said that
against the above background the failure to complete the sections of
form C requiring the requester to
identify the right the applicant
seeks to protect and the reasons for which the information is
required constitutes a defect sufficiently
material to entitle the
respondent to ignore the request? In my view, it is apparent from the
correspondence that the respondent
was at the very least aware that
the applicant required the financial statements for the purpose of
debating and fixing the amount
owed to him by the respondent as the
member’s interest transferred to him by virtue of the agreement
dated 20 February 2006.
So much is apparent from the respondent’s
vigorous denial that the applicant was in fact a member of the CC,
and from the
current submission that the applicant is merely seeking
the information to launch an application to wind up the CC. The
merits
of these claims are for present purposes beside the point.
Subject to what is said below, a court determining an application in
terms of section 78 of the Information Act is not required to
determine the ultimate dispute between the parties. For present
purposes, the sole issue is whether the respondent knew why the
applicant was seeking the information listed in the request for
information, and which right he sought to protect.
[23] In my view, the
correspondence outlined above makes it abundantly clear that the
right the applicant is seeking to enforce
is that emanating from the
agreement of 20 February 2006. This agreement entitles the applicant
on payment of R1000.00 to “50%
of all income and expenditure
and makes him 50% off [
sic
]
responsibilities
pertaining to the above cc”. The correspondence also explains
why the applicant needs the information ultimately
requested to
enforce his rights under this agreement. The mere fact that the
applicant kept open the options of applying for the
winding up of the
respondent and an action in terms of section 36 of the Closed
Corporations Act is not in my view material. I
accordingly find that
the respondent was not entitled to rely on the applicant’s
failure to fill in parts of the request
form to escape the obligation
imposed by section 50(1) of the Information Act.
[24] Mr
Dyke
,
who appears for the respondent, submits that this application should
fail for a further reason. This is that the common law, company
law
and the Insolvency Act all provide procedures for the winding up of
close corporations, and that the present application is
nothing more
than an abuse of the process provided by the Information Act, and a
mere “fishing expedition”. That submission
is too broadly
stated. The Information Act serves a purpose different from the
common law and company legislation. Its object is
to assist persons
to obtain information which they might otherwise be unable to
acquire. Requesters do not have to establish the
rights they seek to
exercise or protect; they need do no more than satisfy the court that
the information requested is for the
exercise or protection of the
right claimed.
[25] But that is not the
end of the inquiry. The information must indeed be “required”.
The meaning to be attributed
to the word “required” has
received judicial consideration. In
Cape
Metropolitan Council v Metro Inspection Services (Western Cape) CC &
others
2001
(3) SA 1013 (SCA) Streicher JA observed at para. [28] that
‘[i]information can only be required for the exercise of a
right if it will be of
assistance
[my emphasis] in the exercise or protection of the right”. In
Clutchco
(Pty) Ltd v Davis
2005
(3) SA 486 (SCA) the court accepted this observation, but refined the
notion of “assistance” in these terms at
para. [13]:
“
It seems to me
that Streicher JA’s choice of the words ‘assistance’
and ‘assist’ in the above passage
indicates that
‘required’ does not mean necessity, let alone dire
necessity. I think ‘reasonably required’
in the
circumstances is about as precise a formulation as can be achieved,
provided that it is understood to connote a substantial
advantage or
an element of need. It appears to me ... that this interpretation
correctly reflects the intention of the legislature
in s 50(1)(a).”
[26] The
Clutchco
judgment makes it clear that where other legislation (in that case
the Companies Act 61 of 1973) does not afford a party a right
to
information sought, that party may invoke Part 3 of the Information
Act, but only “where the circumstances warrant such
a course”
(see at 492E-F). The court noted that the Companies Act is replete
with the provisions designed to protect the
interests of
shareholders, and concludes (at para.17):
“
The machinery
established by legislation and the common law for the protection of
shareholders is ... not lightly to be disregarded.
In enacting the
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.”
[27] Two implications can
be drawn from this passage. The first is that the existence of
alternative remedies under the common law
or legislation is a factor
to be taken into account in assessing whether access to the
information required by a party invoking
the Information Act is
required for the exercise or protection of any of that party’s
rights. The second is that the requester
must lay a cogent foundation
for the request.
[28] In this case, the
right sought to be exercised or protected is that flowing from the
agreement of 20 February 2006, as read
with the applicable
legislation. If proved, that right will entitle the applicant to
claim a half share of the members’ interest
of the respondent
and to invoke the provisions of
section 36
of the
Close Corporations
Act or
seek its winding up. The applicant indicated that it is his
intention to approach the Court for one or other of these forms of
relief. The issue is whether the information requested is reasonably
required for those purposes. In my view, it is. As Mr
Niekerk
contends on the applicant’s behalf, the applicant is unable to
calculate the value of his 50% interest without access to
the CC’s
financial records. Such information would enable him to assess which
remedy to use, or whether to let the matter
rest.
[29] Apart from a general
allegation that the information requested is irrelevant for the
applicant’s purposes, the respondent
has not stated why it
resists disclosing the information, or whether it will suffer
prejudice by disclosure. I also note that at
one stage the respondent
was prepared to tender for inspection copies of the CC’s
financial and bank statements, a tender
withdrawn only after the
respondent changed its attorneys. In the circumstances, I am unable
to discern what prejudice disclosure
would cause the respondent,
since the applicant could in any event ultimately obtain the
information by means of the normal procedure
of discovery after
action is instituted, if indeed action is instituted. If it is not,
disclosure might encourage a process of
debatement and possible
settlement.
[30] In my judgment,
therefore, the respondent has failed to demonstrate why it is
entitled to ignore the applicant’s request
to disclose the
requested information.
[31] The Information Act
confers on the Court the discretion to make “any order that is
just and equitable” (section
82). I deem it just and equitable
to make the following order:
The respondent is
directed to make available for inspection by the applicant or his
legal representative copies of the following
documents:
its balance sheet from
inception of its activities to date;
its income and
expenditure statements from inception to date;
its asset register as
of the date of registration, including all amendments thereto to
date;
all VAT returns
submitted to the SA Revenue Services from inception to date;
its creditors’
list to date;
its debtors list to
date;
its latest management
accounts.
The above documents
shall be made available within six weeks of the date of this order.
The respondent is to pay
the costs of this application.
______________________
J
G GROGAN
ACTING
JUDGE OF THE HIGH COURT
17