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[2022] ZAECQBHC 41
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Wait v Marais and Others (1707/2021) [2022] ZAECQBHC 41 (1 November 2022)
IN
THE HIGH COURT OF SOUTH AFRICA
(EASTERN
CAPE DIVISION, GQEBERHA)
CASE
NO: 1707/2021
In
the matter between:
MARIUS
WAIT
Applicant
and
JAN
JOHANNES
MARAIS
First Respondent
ZAHED
RASSOOL
Second Respondent
CREMATION
AUTHORITY (PTY)
LTD
Third Respondent
COMPANIES
AND INTELLECTUAL PROPERTY
COMMISSION
Fourth Respondent
REPORTABLE:
YES/NO
OF
INTEREST TO OTHER JUDGES: YES/NO
REVISED.
JUDGMENT
POTGIETER
J
Introduction
[1]
The applicant, who is a former director of the third respondent, is
seeking
the following relief in terms of section 71(5) of the
Companies Act, 71 of 2008 (“Act”):
“
1. Declaring invalid,
alternatively, reviewing and setting aside, the decision of the board
of directors of the third respondent
purporting to remove the
applicant as a director of the third respondent taken at the meeting
of the board held on 26 May 2021;
2. Declaring the applicant to be a
director of the third respondent, alternatively reinstating the
applicant as a director of the
third respondent;
3. Directing the first respondent
to amend its records to reflect that the applicant is a director of
the third respondent;
4. Directing that the first and
second respondents pay the costs of the application on the scale as
between attorney and client;
5. Further and/or alternative
relief.”
[2]
The fourth respondent has been joined because of its interest in the
matter and is not participating in the proceedings. The
first, second
and third respondents are opposing the application. Their interest in
the matter appears from what is set out below.
They have raised and
since abandoned a point
in limine
that the applicant failed to
comply with rule 41A which deals with the referral of disputes to
mediation. They were well advised
in this regard. Peculiarly, they
themselves failed to comply with rule 41A as they were obliged to do.
Nothing further needs to
be said about this aspect.
Background
[3]
The applicant and his father-in-law had started conducting a
crematorium business during 2002 in the town of Despatch, under
the
name Despatch Crematorium. The business was operated through a
partnership between the two owners for approximately 16 years
until
the applicant’s co-owner wanted to retire from the business and
offered to sell his share in the partnership to the
applicant. The
latter was unable to afford the purchase price resulting in the
co-owner endeavouring to find alternative purchasers.
[4]
Ultimately the first and second respondents (“the respondents”)
agreed to purchase the co-owner’s 50% share
of the business on
condition that the business be incorporated as a private company with
the respondents each receiving 25% of
the shares and the applicant
the remaining 50%. In execution of the agreement, the third
respondent was incorporated. The applicant
and the respondents were
made directors of the third respondent on 16 July 2018.
[5]
The relationship between the respondents on the one hand and the
applicant on the other became strained over time as more fully
set
out below. On 4 February 2021 the respondents held an urgent meeting
of the board of directors of third respondent without
notice and
resolved to remove the applicant as a director. The respondents
subsequently had a change of heart and accepted that
this decision
was irregular and decided against implementing the same. In
correspondence from their attorneys dated 5 March 2021
addressed to
the applicant’s attorneys, it was recorded that the respondents
would not proceed with the applicant’s
removal as a director
and that a subsequent meeting will be convened on adequate notice
where the matter would be dealt with.
The
impugned decision
[6]
On 13 April 2021 the applicant was notified via correspondence that:’
(a) a meeting of the board of
directors of the third respondent would be held on 26 May 2021 at
10h00 at the premises of the third
respondent’s registered
secretary for the purpose of adopting a resolution to remove the
applicant as a director of the third
respondent;
(b) the statement prepared by the
board which was annexed to the notice would serve as the grounds upon
which the board desired
to adopt a resolution for the applicant’s
removal;
(c) the applicant would have an
opportunity to make representations to the board at the meeting,
setting out the reasons in opposition
to the proposed resolution,
whether in person or through a representative.
[7]
In terms of the statement in support of the proposed resolution to
remove the applicant as a director, the respondents averred,
inter-alia,
that:
(a) “
the agreed-upon most
imperative duties for you to hold the position of director of the
Company, amongst the other more general duties
reasonably expected of
a director of a Company, are as follows-
i. continued support to the Company
when required;
ii. provision of advice during
meetings;
iii. client liaison and emergency
assistance when required;
iv. weekly interaction with
directors in connection with the carrying on of the Company, which
includes site visits;
v. Fiduciary duties and compliance
which includes compliance with the South African Revenue Service
concerning the Company and also
ensuring registration for Value Added
Tax;
vi. financial assistance to the
Company in times of emergencies. The Directors of the Company have
individually loaned approximately
R280 000.00 (Two Hundred and
Eighty Thousand Rand) over the period of the past three months to the
Company by reason of the
fact that an overdraft facility cannot be
arranged due to your absence from the country;
vii. administrative duties which
included signatures required for application of services in
connection with refrigeration containers,
tool and generator rentals,
vehicle rentals and/or purchase and Telkom accounts. In respect of
the aforementioned administrative
duties the Company requires
signatures of all three of its directors. Accordingly, as a
consequence of your absence, the Company
was forced to facilitate
transactions through our corporate structures.”
(b) since 17 February 2020 the
applicant had not fulfilled any of the above-mentioned duties;
(c) the applicant left South Africa
“
without adhering to any required procedures or providing
the board with the required proper notice of your absence required by
the
Act”;
(d) the board did not have knowledge
as to whether the applicant was ever out of the country, and if the
applicant was, for how
long the applicant was out of the country for;
(e) the premises of the company caught
on fire and suffered damages;
(f) the services of the previous
manager had been terminated and a new manager appointed, whose
signature needed to be added to
the bank account of the Company as a
matter of urgency to limit the company’s damages;
(g) the board had determined that the
removal of the applicant as a director was imperative for the proper
functioning of the company;
(h) that the applicant never showed
any interest to act as a director or communicated such interest to
the board of directors;
(i) the board assumed that the
applicant had forgone his duties as a director by choosing to leave
the country;
(j) due to the applicant’s
delinquency the company could not employ the services of the bank to
open an overdraft facility
and to conclude imperative transactions
for the carrying on of the business in the absence of the applicant’s
signature;
(k) the applicant breached his duties
under
section 76
of the
Companies Act in
that the applicant did not
act in good faith and for a proper purpose and failed to act in the
best interests of the Company;
(l) the applicant’s
‘
neglectedness and derelictness’
consequently
warranted the applicant’s removal as a director.
[8]
A copy of the resolution did not accompany the statement provided by
the first and second respondents.
[9]
The proposed resolution was eventually provided to the applicant on 7
May 2021.
[10]
On 18 May 2021, the applicant, through his attorneys of record,
informed the respondents that the applicant intended to make
representations to the board in opposition to the proposed
resolution, however, due to the vagueness of the allegations, which
were lacking in specificity, the applicant requested that the
following information be provided to him to reasonably permit him
to
prepare and present a response:
(a) copies of minutes of all meetings
and resolutions of directors during the period February 2020 to April
2021;
(b) copies of the third respondent’s
annual financial statements for the periods 2018 to 2021 as
contemplated in
section 24(3)(c)(ii)
of the
Companies Act;
(c
) copies of all accounting records
of the third respondent for the current and previous financial years;
(d) records of all distributions made
by the third respondent as contemplated in terms of
section 46
of the
Companies Act;
(e
) in respect of the alleged loans
referred to in paragraph 5.f of the statement, copies of the relevant
loan agreements, proof of
the amount so loaned, and a full financial
disclosure of the transactions made in respect of such loans;
(f) records of any and all financial
assistance provided by the third respondent to the first and second
respondents or to any directors
of related or interrelated companies,
or to a member of any related or interrelated company, or to any
persons related to any of
the aforementioned parties as contemplated
in
section 45
of the
Companies Act, and
all documentation in support
of and authorising the provision of such financial assistance;
(g) records pertaining to the change
in signatories of the third respondent’s bank account and the
resolution adopted in support
thereof;
(h) copies of all communications
requesting compliance by the applicant with respect to the duties
that he allegedly breached;
(i) reasons for the termination of the
previous manager’s services as alleged, and an explanation of
the basis upon which
the new manager was added to the bank account as
referred to in paragraph 8 and 19 of the Statement;
(j) a list of the ‘
administrative
problems’
alleged in paragraph 14 of the Statement.
[11]
In the aforesaid letter, it was also enquired whether the first and
second respondents would be amenable to holding a without
prejudice
meeting to pursue an amicable resolution to the situation.
[12]
On 19 May 2021, the respondents advised the applicant that the first
and second respondents were amenable to holding the proposed
meeting
on 21 May 2021, and that in the event that no amicable resolution to
the matter could be achieved at the meeting, then
the first and
second respondents would provide the applicant with the requested
documents and information by no later than 24 May
2021.
[13]
No amicable resolution was achieved at the without prejudice meeting
held between the parties.
[14]
On 25 May 2021, the day prior to the proposed meeting, the
respondents reneged on the undertaking to provide the applicant
with
the requested information and advised that the meeting would proceed
nonetheless.
[15]
On 26 May 2021 the applicant attended the meeting under protest,
without having been furnished with the documents and information
required to prepare his presentation.
[16]
At the meeting held on 26 May 2021 the first and second respondents
resolved that the applicant be vacated from the office
of director.
The
applicant’s case
[17]
The applicant contends that the decision to remove him as a director
was substantively and procedurally unfair and was taken
in a manner
inconsistent with the provisions of
section 71(4)
of the
Companies
Act. Accordingly
, the applicant seeks that the court review the
decision in terms of
section 71(5)
of the
Companies Act and
direct
that the applicant be reinstated as a director of the third
respondent.
[18]
The applicant further contends that the information requested was
crucial to enabling him to explain why, in the circumstances,
he
could not be regarded as having neglected or been derelict in his
duties as a director.
[19]
The applicant indicated that since being appointed as directors, it
has been the
modus operandi
of the first and second
respondents to refuse to provide salient financial information to the
applicant, and to keep him in the
dark in respect of the reasons for
the financial decisions regarding the company. When the directors
were to vote on financial
matters the first and second respondents
would simply outvote the applicant and push their decisions through
as the majority.
[20]
A significant example of this was the decision of the first and
second respondents to change the distribution of profits from
monthly
distributions made to the shareholders, proportionate to their
respective shareholding, to payments of directors’
salaries in
equal proportion. It was contended by the applicant that the decision
evidenced the intention of the first and second
respondents to serve
their personal interests as the main priority. The respondents sought
to rely on objectionable hearsay evidence
for the basis of the
decision to remove him and have not provided a cognizable ground for
how the decision would serve the company
any better than the
status
quo ante.
[21]
The applicant furthermore indicated that the reduction in the income
that he received as a result of the decision to alter
the
remuneration structure, placed him in an unsustainable financial
position.
[22]
In April 2020, the first and second respondents decided to stop
paying a monthly remuneration to the applicant at all. This
is
admitted by the respondents.
[23]
As a consequence of the decisions of the first and second
respondents, the applicant contended that he was forced out of
desperation
to seek alternative employment to provide for himself and
his family. He thus took an appointment in the United States during
2020.
The applicant returned to South Africa in October 2020.
The
respondents’ case
[24]
The respondents contend that they complied with the obligations to
provide the applicant with a copy of the proposed resolution
to
remove him as a director and a statement setting out the reasons with
sufficient specificity for the proposed resolution. Furthermore,
the
applicant was given a reasonable opportunity to make representations
to the board before the resolution was put to a vote.
The applicant
elected not to make representations but rather to request documents
and information to prepare the presentations.
The board refused to
provide these documents or information because they were irrelevant.
[25]
According to the respondents it is not clear what would constitute
sufficient specificity as envisaged in section 71(4)(a)
of the Act.
They submitted, relying heavily on the decision of the Western Cape
High Court in
Pretorius v PB Meat (Pty) Ltd
[2013] ZAWCHC 89
,
that a director is only entitled to “
limited information”.
[26]
They expressed the tentative view that the review of the board’s
decision provided for in section 71(5) which is at issue
in this
matter, is limited to “
enquiring into the procedural
correctness of the decision and not the substance of the decision”.
They concede, however, in the same breath that “
an argument
may be made that a court reviewing the decision of the board of
directors under
section 71(5)
of the
Companies Act would
… be
empowered to consider both the merits and the procedural aspects of
the decision”.
[27]
They submitted that the applicant has failed to make out a case for
the relief being sought and that the application should
be dismissed
with costs.
The
Companies Act
[28
]
It is necessary to consider the relevant provisions of the
Companies
Act.
(i)The
ambit of
section 71
[29]
Section 71
of the
Companies Act introduced
an innovation which
permits the board of directors to remove a director from office under
certain specified circumstances. The
section provides as follows in
relevant part:
“
71. Removal of director
…
(3) If a company has more than two
directors, and a shareholder or director has alleged that a director
of the company-
…
(b) has neglected or been derelict
in the performance of, the functions of director,
the board, other than the director
concerned, must determine the matter by resolution, and may remove a
director it has determined
to be ineligible or disqualified,
incapacitated, or negligent or derelict, as the case may be.
(4) Before the board of the company
may consider a resolution contemplated in subsection (3), the
director concerned must be given-
(a) notice of the meeting,
including a copy of the proposed resolution and a statement setting
out the reasons for the resolution,
with sufficient specificity to
reasonably permit the director to prepare and present a response; and
(b) a reasonable opportunity to
make a presentation, in person or through a representative to the
meeting before the resolution
is put to a vote.
(5) If, in terms of subsection (3),
the board of the company has determined that a director is ineligible
or disqualified, incapacitated,
or has been negligent or derelict, as
the case may be, the director concerned, or a person who appointed
that director as contemplated
in
section 66(4)(a)(i)
, if applicable,
may apply within 20 business days to a court to review the
determination of the board.
(6) If, in terms of subsection (3),
the board of the company has determined that a director is not
ineligible or disqualified, incapacitated,
or has not been negligent
or derelict, as the case may be-
(a) any director who voted
otherwise on the resolution, or any holder of voting rights entitled
to be exercised in the election
of that director, may apply to a
court to review the determination of the board; and
(b) the court, on application in
terms of paragraph (a), may-
(i) confirm the determination of
the board; or
(ii) remove the director from
office, if the court is satisfied that the director is ineligible or
disqualified, incapacitated or
has been negligent or derelict.
(7) An applicant in terms of
subsection (6) must compensate the company, and any other party, for
costs incurred in relation to
the application, unless the court
reverses the decision of the board.
(8) If a company has fewer than
three directors-
(a) subsection (3) does not apply
to the company;
(b) in any circumstances
contemplated in subsection (3), any director or shareholder of the
company may apply to the Companies Tribunal,
to make a determination
contemplated in that subsection; and
(c) subsections (4), (5) and (6),
each read with the changes required by the context, apply to the
determination of the matter by
the Companies Tribunal.
(9) Nothing in this section
deprives a person removed from office as a director in terms of this
section of any right that person
may have at common law or otherwise
to apply to a court for damages or other compensation for-
(a) loss of office as a director;
or
(b) loss of any other office as a
consequence of being removed as a director.
(10) This section is in addition to
the right of a person, in terms of
section 162
, to apply to a court
for an order declaring a director delinquent, or placing a director
on probation.”
[30]
It is readily apparent from the architecture of the section that the
process of removal is triggered by an allegation of a
shareholder or
director warranting the removal of the affected director. The board
of directors is then obliged to determine the
matter by resolution. A
determination is required of the factual situation and the objective
veracity of the allegation. A formal
process applies where the
affected director enjoys various safeguards. The director must be
given notice of the meeting, must be
provided with a copy of the
proposed resolution as well as a statement setting out sufficiently
specified reasons for the proposed
resolution so as to reasonably
permit the director to respond. The director is entitled to provide
the board with relevant information
and a response and to a
reasonable opportunity to make a presentation to the meeting before
the resolution is put to a vote. These
requirements are set out in
peremptory terms in
section 71(4).
The protections provided to the
director in this regard are imperative where the resolution or
statement is couched in vague and
general terms. This is so given
that the board has to make a proper objective factual determination
on cogent grounds, for example,
that the affected director neglected
or was derelict in the performance of the functions of a director.
(ii)
The offending conduct
[31]
The wording of some of the parts of
section 71
gives rise to a
measure of confusion. This is particularly so in respect of the use
of the terms ‘
neglect’
and ‘
negligence’
in subsection (3). The offending conduct set out in subsection (3) is
that the affected director allegedly “
has neglected …
the functions of a director”.
At the same time a
determination that the director was “
negligent”
is
required for his or her removal. The latter is confirmed by
subsections (5) and (6). The terms ‘
neglect’
and
‘
negligence’
are not synonymous. In the context of
subsection (3) the word ‘
neglect’
is used as a
verb. Negligence on the other hand is an element of fault. It is not
immediately apparent whether the term ‘
negligence’
imports a further jurisdictional fact for removal into
section 71
thus requiring the board to determine firstly, whether or not the
director neglected his or her functions and secondly, whether
or not
this was due to negligence on his or her part. The alternative is
that these two terms refer to the same state of affairs
in that
neglect incorporates an element of negligence and that the board is
only required to undertake one determination to ascertain
whether the
director’s neglect was blameworthy.
[32]
Similar conundrums arise with regard to the requirement that the
director should have “
been derelict in the performance of
the functions of director”.
The term “
derelict”
is not defined in the Act. It is also not immediately apparent in
this regard what degree of fault is required in order for conduct
to
amount to being ‘
derelict’
in this context. Is
negligent conduct sufficient or is a higher degree of fault required
such as intent or recklessness. Some authors
suggest that if
negligence would suffice it is superfluous to refer to both
negligence and dereliction of duties in section 71.
This implies that
a higher form of fault than negligence is required in respect of
dereliction of duties (cf
Henochsberg on the
Companies Act 71 of
2008
General note on
s71).
[33]
In view of the conclusion to which I have come in this matter, it is
not necessary for purposes of this judgement to make a
final
determination in respect of the above issues which were also not
fully argued before me. I therefore refrain from doing so.
(iii)
Reasons for proposed removal
[34]
There is a dispute between the parties whether or not the respondents
complied with the obligation in terms of
section 71(4)(a)
to furnish
the applicant with reasons for the proposed resolution to remove him
as a director “
with sufficient specificity to reasonably
permit the director
[applicant]
to prepare and present a
response”.
[35]
The short answer is that the respondents undertook to provide the
applicant with the requested documents and information to
enable him
to prepare and present a response. It is common cause, however, that
the respondents reneged on this undertaking after
the parties could
not come to an agreement at the meeting of 21 May 2021. The board
meeting was convened for 26 May 2021 and the
respondents initially
undertook to provide the requested documents and information by no
later than 24 May 2021. However, on 25
May 2021 the defendants had a
volte face
and reneged on this undertaking. They now belatedly
averred during argument that the applicant had sufficient opportunity
to obtain
the documents and information from the company’s
auditor and that they were not legally obliged to provide the same to
the
applicant.
[36]
The respondents do not suggest in their papers that they have already
provided reasons with sufficient specificity. In any
event, they
would have been hard pressed to do so given their earlier agreement
to provide the documents and information thereby
accepting that it
was reasonably required by the applicant to prepare and make a
presentation at the board meeting. The respondents
instead indicated
that the applicant should have obtained the documents and information
from the auditors therefore they are not
legally obliged to provide
the same. The respondents’ argument is flawed.
Section 71(3)
and the relevant provisions that follow, undoubtedly introduce a
process where the board is required to take the initiative to
remove
the director. The duty to provide a statement setting out the reasons
rests on the board and not the auditors. It was therefore
not open to
the respondents to attempt to circumvent their earlier undertaking by
shifting their duty to the company’s auditors.
They were
legally obliged to provide the documents and information to the
applicant, as they had undertaken to do.
[37]
The respondent’s failure to provide the applicant with the
requested documents and information amounted to a breach of
their
duty in terms of
section 71(4)(a).
The applicant was entitled to
receive the relevant documents and information despite the
respondents’ belated argument that
he did not and that they
have provided sufficiently specified reasons. A cursory look at the
reasons provided show that they were
vague, general and unspecified.
By way of example, the applicant was entitled to any documentary or
other proof and relevant information
substantiating the allegations
by the board that he failed to fulfil his duties since 17 February
2020 and had left South Africa
without adhering to any required
procedures; that his removal was imperative for the proper
functioning of the company; that he
never showed any interest to act
as a director; that he breached his duties under
section 76
and did
not act in good faith, for a proper purpose or in the best interests
of the company; and that his ‘
neglectedness and
derelictness’
warranted his removal as a director.
Whichever way one looks at the term “
sufficient
specificity”,
these “
reasons”
in my view
fell far short of this standard.
[38]
In the matter of
Pretorius v PB Meat supra
relied upon by the
respondents, the court concluded that “
sufficient
specificity”
would mean “
sufficiently detailed
reasons to mount a response”.
I am in respectful agreement
with that conclusion. Naturally, whether or not there was compliance
with this requirement is be determined
in the light of the particular
facts and circumstances of the case at hand. In
Pretorius
the
court concluded that in the circumstances of that matter sufficiently
specified reasons, as well as a response to the director’s
request for particulars, had in fact been provided to the director.
That decision is accordingly of no direct assistance to the
respondents in this matter who had reneged on their undertaking to
provide the requested particulars.
(iv)
Right of the director to review the determination
[39]
Section 71(5)
applies in the present matter. It empowered the
applicant to bring the present proceedings to review the board’s
determination
on 26 May 2020 to remove him as a director. This much
is not in issue between the parties. The respondents, however,
contend albeit
somewhat tentatively that the review is limited only
to a determination whether there were any procedural irregularities
which
vitiated the board’s decision. I do not agree.
[40]
The term ‘
review’
does not have a fixed or
singular meaning. In the time-honoured classification in
Johannesburg
Consolidated Investment Company v Johannesburg Town Council
1903
TS 111
, Innes CJ distinguished 3 forms of review that the court might
be concerned with, namely: firstly, review of inferior courts,
secondly,
common law (inherent) review of administrative authorities,
and lastly, a statutory review in terms of which “
the
legislature has from time to time conferred on this Court or a judge
a power of review which in my opinion was meant to be far
wider than
the powers which it possesses under either of the
[first two]
review procedures”
(at 116).
[41]
Professor Baxter points out that the terms ‘
review’
and ‘
appeal’
have at the best of times been
ambiguous or even confusing. In some instances, concerning decisions
of statutory tribunals “
one ‘appeals’ to the
tribunal to ‘review’ or ‘revise’ a previous
decision” (Administrative
Law pp256 & 706).
The same
author states that in the context of statutory redress ‘
review’
means ‘
judicial scrutiny’
the scope whereof
depends on the wording of the statute (
op. cit. p707).
Furthermore, as was pointed out, “
every appeal is in the
nature of a review” (
per De Villiers CJ in
Klipriver
Licensing Board v Ebrahim
1911 AD 458
at 462). The term ‘
appeal’
is often used in instances of statutory ‘
reviews’
to indicate the courts wider jurisdiction, which differs from
‘
ordinary’
judicial review in the administrative
law sense. This may vary from statute to statute. In order to capture
the range of this jurisdiction,
3 broad categories have been
identified which are most usefully set out in the following
formulation found in
Tickly v Johannes NO
1963(3) SA 588 (T):
“
(i) an appeal in the wide
sense, that is, a complete re-hearing of, and fresh determination on
the merits of the matter with or
without additional evidence or
information;
(ii) an appeal in the ordinary
strict sense, that is, a re-hearing on the merits but limited to the
evidence or information on which
the decision under appeal was given,
and in which the only determination is whether that decision was
right or wrong;
(iii) a review, that is, a limited
re-hearing with or without additional evidence or information to
determine, not whether the decision
under appeal was correct or not,
but whether the arbiters had exercised their powers and discretion
honestly and properly.”
[42]
Professor Hoexter indicates that the “
legislature may and
often does confer on the courts a statutory power of view. This is
‘special’ because it differs
from ‘ordinary’
judicial review in the administrative-law sense (as now governed by
the PAJA). It is sometimes a wider
power than ordinary review, and
thus more akin to an appeal; but may well be narrower, with the court
being confined to particular
grounds of review or particular
remedies. While Innes CJ spoke of the statutory review power as being
‘far wider’ than
the first two kinds of review mentioned
by him, it is clear that the precise extent of the power always
depends on the particular
statutory provision concerned
(Administrative Law in South Africa
(2ed) p
.
113 para 5)”
.
[43]
The
New Shorter Oxford English Dictionary
vol1 (1993) p 2582
gives the meaning of ‘
review’
as “
the act
of looking over or through (a book etc) for the purpose of correction
or improvement; a reconsideration of some subject”.
[44]
In
Williams v Workmen’s Compensation Commissioner
1952(3)
SA 105 (C) at 108 the court held with reference to dictionary
definitions that in the context of the then applicable Workmen’s
Compensation legislation ‘
review’
means “
the
act of looking over something (again) with a view to correction or
improvement. The Commissioner looked over his decision …
again
in the light of fresh evidence supplied and … he confirmed …
his existing decision.”
[45]
In
President of the Republic of South Africa v Gauteng Lions Rugby
Union
2002(2) SA 64 (CC) para [13] the Constitutional Court
stated that “
it is settled law that when a court reviews a
taxation it is vested with the power to exercise a wider degree of
supervision identified
in the time-honoured classification of Innes
CJ in Johannesburg Consolidated Investment Company v Johannesburg
Town Council
1903 TS 111
”.
[46]
In my view, the sense in which the term “
review”
is
used in
section 71
must be determined by means of applying a
purposive interpretation having due regard to its context in the Act.
Regard must also
be had to the dictum in
Nel & Another NNO v
The Master
2005 (1) SA 276
(SCA) paragraph [25] that “…
it is important to have regard to the nature of the functions
entrusted to the person whose decision is under review”.
[46]
Applying the above approach, it is of note that section 71(3) and (4)
entrust a novel power to the board of directors of companies
to
remove a director after having followed a peremptory formal process.
The removal patently has potentially far-reaching consequences
for
the affected director such as an affront to integrity and dignity;
reputational harm; impairment of standing and future prospects
of
acquiring directorships; adverse financial consequences and the like.
The potential for abuse of the power must also be factored
in. The
decision-maker is often not endowed with the requisite adjudicatory
skills to properly make a determination which requires
that complex
factual and legal conclusions must be drawn in respect of complicated
questions, for example, whether or not negligence,
neglect or
dereliction of duties have been established on the part of the
affected director.
[47]
The need, identified in section 5(1), to give effect to the purposes
of the Act set out in section 7 when interpreting the
provisions of
the Act must be borne in mind. In this regard the purposes of
encouraging transparency and high standards of corporate
governance
(section 7(b)(iii))
as well as encouraging the efficient and
responsible management of companies
(section 7(j))
, are
particularly pertinent. Also of importance is the underlying purpose
of providing adequate safeguards for the rights of the
affected
director. This is illustrated by the rights to adequate notice,
sufficiently specified reasons for the proposed resolution
to
reasonably permit the director to prepare and present a response, and
a reasonable opportunity to make a presentation to the
meeting before
the resolution is put to a vote.
[48]
Taking all the above considerations into account, a proper
interpretation of the term “
review”
in section
71(5) requires the court in my view to undertake a complete
reconsideration, in the wide sense, of the board’s
determination as envisaged in the above authorities. This conclusion
also gives due weight to the need to provide adequate protection
to
the rights of the affected director. I accordingly adopt this
approach to the present application.
Assessment
[49]
As indicated, the failure of the respondents to provide the requested
documents and information to the applicant as they had
undertaken to
do, constitutes a breach of the duty in terms of section 71(4)(a) and
rendered the determination made at the board
meeting of 26 May 2021
to remove the applicant as a director, fatally flawed. The “
reasons”
provided for the proposed resolution were vague, couched in general
terms, and lacked sufficient specificity as required by section
71(4)(a). The respondents accordingly also failed to comply with the
prescripts of the latter section in this respect. The applicant
was
therefore fully justified to request and entitled to obtain the
relevant documents and information from the board, which was
in
effect constituted by the first and second respondents. He was under
no duty to undertake the task to prepare and present a
response to
the “
reasons”
under the circumstances and was
equally justified to attend the board meeting “
under
protest
” as he did.
Conclusion
[50]
Having undertaken a reconsideration of the determination by the
board, I am satisfied that the applicant has made out a proper
case
for the determination to be reviewed and for the relevant relief
being sought to be granted to the applicant. The application
should
accordingly succeed.
[51]
It is of note that in terms of section 70(2) no vacancy has as yet
arisen on the board of the third respondent, but the applicant
is
currently suspended from his office as director by operation of law.
This situation must be reversed.
[52]
Furthermore, it is not justified in my view to grant a punitive costs
order against the respondents in the circumstances of
the case.
[53]
In the result I make the following order:
1. The determination of the board of
directors of the third respondent made at the meeting of the board
held on 26 May 2021 to remove
the applicant as a director of the
third respondent, is reviewed and set aside;
2. The applicant is forthwith
reinstated as a director of the third respondent;
3. The fourth respondent is directed
to amend its records, if necessary, to reflect that the applicant is
a director of the third
respondent;
4. The first and second respondents
are directed to pay the costs of the application on the party and
party scale.
D.O.
POTGIETER
JUDGE
OF THE HIGH COURT
APPEARANCES
For the
applicant:
Adv J.M Ramsay, instructed by Nelson Attorneys, 60A Worraker Street,
Newton Park, Gqeberha
For the first to third respondents: Mr
H.M Huisamen, instructed by Bezuidenhout Attorneys, 12 Buckingham
Road, Mill Park, Gqeberha
Date
of hearing:
04 August 2022
Date
of delivery of judgment: 01
November 2022