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[2010] ZAECPEHC 53
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Louw and Others v SA Mohair Brokers Ltd and Others (3682/09) [2010] ZAECPEHC 53 (19 August 2010)
IN THE
HIGH COURT OF SOUTH AFRICA
(EASTERN
CAPE HIGH COURT, PORT ELIZABETH)
CASE NO: 3628/09
Date heard: 13 August 2010
Date delivered: 19 August 2010
In the
matter between:
DOUGLAS
CHRISTOPHER LOUW First Applicant
ANDRE
HERMANN DANKWERTS Second Applicant
ARTHUR
OLIVER RUDMAN Third Applicant
GEOFFREY
GEORGE VAN COLLER Fourth Applicant
JOHANNES
THEUNIS VILJOEN Fifth Applicant
BKB
LIMITED Sixth Applicant
RONALD
JOHN SMITH Seventh Applicant
and
SA
MOHAIR BROKERS LIMITED First Respondent
THE
REGISTRAR OF COMPANIES Second Respondent
OOS
VRYSTAAT KAAP OPERATIONS LIMITED Third Respondent
CMW
OPERATIONS (PROPRIETARY) LIMITED Fourth Respondent
ARTHUR
MARTIN SHORT Fifth Respondent
IGNATIUS
ROTHNER BEKKER Sixth Respondent
JAN
MARAIS VAN DER WESTHUISEN Seventh Respondent
PETER
LOGIE CAWOOD Eighth Respondent
THEUNIS
MARTHINUS LAAS Ninth Respondent
HERMANUS
WILHELM BOTHA Tenth Respondent
ARTHUR
BLAKE HOBSON Eleventh Respondent
FRANCOIS
MICHAU Twelfth Respondent
PIERRE
DU PLESSIS VAN DER VYVER Thirteenth Respondent
NIGEL
CLINTON HAMILTON SMITH Fourteenth Respondent
______________________________________________________________________
JUDGMENT
Y
EBRAHIM J:
The first respondent seeks leave to appeal to the Supreme Court of
Appeal against the whole of the judgment of this Court, and
the
order issued in terms thereof, delivered on 24 June 2010. For the
sake of convenience I refer to the parties as they have
been cited
in the main application.
The notice of application for leave to appeal enumerates ten grounds
of appeal but in argument Mr Buchanan SC encapsulated these
in three
main grounds. These were that the Court erred: (1) in holding that
the directors of the first respondent had a fiduciary
duty towards
the shareholders of the company; (2) in finding that the applicants
were entitled to relief pursuant to the provisions
of s 252(1)
of the Companies Act;
1
and (3) in failing to apply the law of meetings in determining the
issues in dispute in relation to the first applicant.
Mr Buchanan confirmed that the allegation that the Court had
determined the issues in terms of the Promotion of Administrative
Justice Act was misguided and was not being pursued. Further, the
first respondent was no longer seeking leave to appeal the
costs
order against the second to fourteenth respondents as the applicants
had abandoned the order for costs granted in their
favour. This was
confirmed by Mr Rorke. Even though this issue has been
resolved some comment is necessary. It is evident
that the Court
inadvertently awarded costs against the second respondent. However,
this could have been rectified had the Court
been approached within
a reasonable time after judgment was delivered.
2
The Court’s decision to award costs against the third to
fourteenth respondents, jointly and severally, was due to the
fact
that in their affidavits the stance adopted by them was that they
were associating themselves with the first respondent’s
answering affidavit. They had therefore joined issue with the
applicants and had not stated that they would abide the decision
of
the Court.
It was submitted by Mr Buchanan that the only fiduciary duty the
directors had was to the company.
3
The simple question was whether the articles of association, which
was a contract between shareholders and the company, had
been
enforced properly in relation to the sale of shares by certain
shareholders. In the absence of any fiduciary duty to the
shareholders, the enquiry as to whether 252(1) was breached or not
was entirely different. In view of what had been stated in
Booysens
4
there was a reasonable prospect another Court would differ from the
conclusion of this Court that the applicants were entitled
to relief
pursuant to the provisions of s 252(1).
In respect of the applicability of the law of meetings, Mr Buchanan
contended that our Courts, albeit in a different context,
had come
to the same conclusion and applied the same principles espoused in
numerous English cases. The Court should have considered
whether it
was probable that the exclusion of the first applicant’s votes
would have affected the final result. It was
clear that the outcome
would have been the same even if his votes had been included. There
was a reasonable prospect, therefore,
of another Court reaching a
different conclusion on this issue.
Mr Buchanan submitted that within the context of the facts of this
particular case many of the issues were unique. The issues
raised
more than arguable points of law and impacted directly on whether or
not the relief should have been granted to the applicants.
In
addition, this matter was of considerable importance to the
respective parties. He accordingly requested that the first
respondent be granted leave to appeal.
Mr Rorke opposed the application for leave to appeal and submitted
that the Court did not err in determining the issues. The
directors
of the company had conducted themselves in a manner which was
unfairly prejudicial, unjust or inequitable. It was
clear from the
authorities that the Court had a wide discretion in this regard
5
and a higher court would not readily interfere on appeal with the
exercise of that discretion. The company acted in a manner
which
did not enable a shareholder to enjoy a fair participation in the
affairs of the company.
6
The question was not whether the directors owed a fiduciary duty to
the company’s shareholders as opposed to the company.
There
had been a lack of probity or fair dealing or a visible departure
from the standards of fair dealing and the Court had
concluded on
the largely undisputed facts that the exclusion of the first
applicant from the AGM was manifestly unlawful. Section
252
provided a statutory remedy and the Court had to interpret the
statutory requirements, which it did. The suggestion that
the law
of meetings somehow altered the plain statutory requirements of the
section was untenable. The contention that the applicants
needed to
demonstrate that there would have been a different result had the
proxy grantors participated in the general meeting
was not the
enquiry relevant to s 252 but applied to the law of meetings.
After due consideration of the respective submissions, I accept that
the issues in this matter are complex and unique and raise
important
questions of law. I am accordingly of the view that there is a
reasonable prospect that another Court may reach
a different
conclusion regarding the various issues. In the circumstances, I am
persuaded that the first respondent should be
granted leave to
appeal.
In the result, there is an order in the following terms:
The first respondent is granted leave to appeal to the Supreme Court
of Appeal against the whole of the judgment of this Court,
and the
order issued in terms thereof, delivered on 24 June 2010; and
The costs of this application shall be costs in the appeal.
______________________
pp
Y EBRAHIM
JUDGE OF THE HIGH COURT
18 August 2010
Louw & Others v S A Mohair
Brokers Limited.LAPJ
1
No. 61 of 1973
2
See
Firestone South
Africa (Pty) Ltd v Genticuro A.G.
1977
(4) SA 298
(A) at 306F-307G; Herbstein and Van Winsen,
The
Civil Practice of the Supreme Court of South Africa
4
th
Ed.
3
Smuts v Booysens; Markplaas (Edms) Bpk en ʼn Ander v Booysens
2001 (4) SA 15
(SCA) at para [17]
4
See fn 3
supra
5
Livanos v Swartzberg and Others
1962 (4) SA 395
(W) at 396;
Donaldson Investments (Pty) Ltd v Anglo Vaal Collieries Ltd
1979 (3) SA 713
(W)
(1980 (4) SA 204
(T) at 209)
6
Aspek Pipe Co (Pty) Ltd and Another v
Mauerberger and Others
1968 (1) SA 517
(C)