Summary of Judgment

1. Introduction

The proceedings took the form of an application in the Gauteng Division of the High Court, Pretoria, in which the applicants sought declaratory and consequential relief concerning an alleged entitlement to a minority shareholding in a private company associated with the operation of the National Lottery.

The applicants were Zolani Kgosiestile Matthews (in his personal capacity), and Zolani Kgosiestile Matthews N.O. together with Vimtha Amichano Rajbansi N.O., both cited in their capacities as trustees of the VK Family Trust. The respondents were Ituba Holdings (RF) (Pty) Ltd (first respondent), Charmaine Mabuza (second respondent), Boy Erick Mabuza (third respondent), and the National Lotteries Commission (fourth respondent). The second and third respondents were referred to collectively as the Mabuzas.

The application was launched on 28 November 2018. The matter was heard on 16 February 2022, and judgment (handed down remotely) was deemed to have been delivered on 22 August 2022.

The general subject matter concerned an alleged donation or promised allocation of 1% shareholding connected to the consortium/company that secured the third National Lottery licence, and the consequent question whether that claim could still be enforced given the statutory defence of prescription.

2. Material Facts

Ituba Holdings (RF) (Pty) Ltd was described as a ring-fenced company as contemplated in section 15(2)(b) of the Companies Act 71 of 2008, with restrictions in its Memorandum of Incorporation. Among the restrictions noted by the court were that Ituba’s board could not issue shares unless, inter alia, the issue was approved by Zamani Gaming (Pty) Ltd, and that there could be no dilution of government entities’ 20% shareholding.

On 11 June 2013, the Department of Trade and Industry issued a request for proposals for the third National Lottery licence, with a timetable that included (among other milestones) submission of fit-and-proper and declarations of interest by 31 August 2013, submission of applications by 30 November 2013, completion of adjudication by 30 June 2014, announcement of successful applicants by 31 August 2014, and commencement of operations by 1 June 2015.

It was not in dispute that when Ituba submitted its completed application by 30 November 2013, neither Mr Matthews nor the VK Family Trust formed part of Ituba’s shareholding structure. It was likewise not in dispute that when the Minister announced Ituba as a successful applicant on 23 October 2014, the applicants were still not listed as shareholders. The licence agreement contemplated by that announcement was concluded on 24 November 2014.

It was also part of the background that the prior operator, Gidani, challenged the Minister’s licensing decision in court on 25 June 2014, and that the outcome of that challenge was delivered in November 2015, when a court order by Tuchten J still resulted in the licence being granted to Ituba. The court recorded that, by that stage too, the applicants were not listed as shareholders.

The applicants’ case (as advanced by Mr Matthews) was that, in approximately March 2013, the Mabuzas (said to have been representing Ituba) made a verbal offer to donate to him a 1% shareholding in Ituba. The asserted basis of this offer was that Mr Matthews would undertake hard work, endeavours, and provide future assistance to Ituba in its efforts to obtain the licence and operate the National Lottery, including by using his international network to facilitate technical service-provider engagement in the bidding process. The applicants alleged that despite this, Ituba and/or the Mabuzas failed to deliver the 1% shareholding to him via the Trust.

During the hearing, material concessions were made on behalf of the applicants. Mr Matthews conceded that Ituba was ring-fenced and that, as a result, he sought no relief against Ituba. He also conceded that the Mabuzas were not shareholders in Ituba. His position then became that the court should pierce the corporate veil in relation to Zamani Gaming (Pty) Ltd and Paytronix (Pty) Ltd (entities said to be shareholders in Ituba), notwithstanding that those companies had not been joined in the proceedings, with reference being made to Rule 10(3).

The court considered certain communications relied on in the founding papers as relevant to when the applicants had the essential knowledge for their claim. In the founding affidavit, Mr Matthews alleged that he reminded the second respondent electronically that the Mabuzas had given him the shareholding, and that on 25 October 2014 the second respondent confirmed via WhatsApp that he “deserved” the shareholding. On the founding papers, the court noted an absence of allegations explaining what occurred between 25 October 2014 and 1 June 2015.

In response, the respondents advanced the position that the identity of shareholders should have been finalised by 31 August 2013 for pre-screening purposes, and that in early August 2013 Mr Matthews was identified as a potential shareholder but could not qualify due to alleged political connections (including connections attributed to the Trust). The court recorded that Mr Matthews only raised, for the first time in reply, reliance on the licensing litigation and a contention that the share allocation was subject to a suspensive condition tied to final approval of the bid by the Minister.

3. Legal Issues

The central question the court was required to determine was whether the applicants’ claim for a declaration of entitlement to a 1% shareholding (and consequential transfer) had become extinguished by prescription by the time the application was launched in November 2018.

This dispute turned primarily on the application of law to facts, namely the interpretation and application of section 12(3) of the Prescription Act 68 of 1969 to determine when prescription began to run. That required an evaluative determination of when the applicants had (or were deemed to have had) knowledge of the identity of the debtor and the material facts giving rise to the alleged debt, and whether their asserted reasons for delay could postpone commencement of prescription.

While issues such as ring-fencing restrictions, corporate veil piercing, and non-joinder were raised in the course of the argument, the judgment’s dispositive reasoning focused on prescription, with the effect that the prescription finding determined the outcome.

4. Court’s Reasoning

The court approached the matter by first addressing the respondents’ defence of prescription, with reference to section 12(3) of the Prescription Act 68 of 1969. The court treated the operative inquiry as being when the applicants became aware of their claim, or at least when they had the minimum facts necessary to institute proceedings.

On Mr Matthews’ version, he contended that the debt commenced from the date the licence was granted in June 2015, a date he linked to the eventual outcome following the legal challenge to the licensing process. However, the court measured that contention against the allegations in the founding affidavit and the annexures referenced there. On the applicants’ own account, the Mabuzas were supposed to transfer the shares in 2014, and when this did not occur, Mr Matthews did not take action at that time.

The court identified the 25 October 2014 communication as significant on the applicants’ own pleaded case. It reasoned that Mr Matthews’ founding affidavit alleged that the second respondent confirmed then that he “deserved” the shareholding. In the court’s view, that showed that by October 2014 Mr Matthews regarded the entitlement as having crystallised, at least to the extent necessary to assert and seek enforcement of the claim. The court considered that his subsequent inaction was inconsistent with an argument that the claim only became due in 2015.

The applicants attempted in reply to place weight on the litigation challenging the licence award (from October 2014 to June 2015), and to advance an argument about suspensive conditions (namely that allocation of the share was subject to final ministerial approval). The court held that these points were raised for the first time in the replying affidavit, and applied the principle that in motion proceedings a party stands or falls by its founding affidavit, with late reliance on new matter in reply being impermissible to cure foundational deficiencies.

In addition, even assuming the licensing litigation point had been properly raised, the court relied on authority (quoted in the judgment) emphasising that prescription begins to run once a creditor has the minimum facts to institute action, and that it is not delayed until a creditor appreciates the full extent of its legal rights or the legal consequences of the known facts. The court treated the applicants’ reliance on the conclusion of the licensing challenge as an impermissible basis to postpone prescription, because on the applicants’ own allegations they had sufficient factual knowledge to pursue the claim earlier.

The court further reasoned that, on Mr Matthews’ own account of his contribution to Ituba’s bid and his asserted entitlement to the 1% share in exchange for his hard work, nothing prevented him from instituting proceedings once he knew the shares had not been transferred when they were supposed to be. The court concluded that there was no legal basis on the facts pleaded for waiting for the conclusion of the licensing litigation before enforcing the alleged share entitlement.

On that basis, the court held that by the time the application was launched on 28 November 2018, the claim had already prescribed, and the special plea of prescription was upheld.

5. Outcome and Relief

The court dismissed the application.

The court ordered the applicants to pay the costs of the application, including the costs of two counsel.

Cases Cited

Johannes G Coetzee & Seun and Another v Le Roux and Another (969 of 2020) [2022] ZASCA 47 (08 April 2022).

Minister of Finance and Others v Gore NO (full citation not provided in the judgment text).

Claasen v Bester (full citation not provided in the judgment text).

Truter and Another v Deyse (full citation not provided in the judgment text).

Yellow Star Properties 1020 (Pty) Ltd v MEC, Department of Development Planning and Local Government, Gauteng [2009] 3 All SA 475; [2009] (3) SA 577 (SCA).

Legislation Cited

Companies Act 71 of 2008, section 15(2)(b).

Prescription Act 68 of 1969, section 12(1)–(3).

Rules of Court Cited

Uniform Rules of Court, Rule 10(3).

Held

The court held that the applicants’ claim to enforce an alleged entitlement to a 1% shareholding had prescribed by the time the application was instituted in November 2018. On the applicants’ own pleaded version, they had the minimum facts necessary to institute proceedings by at least 25 October 2014, when the second respondent allegedly confirmed that Mr Matthews “deserved” the shareholding and when, on their case, the shares had not been transferred as anticipated. The applicants could not rely on later developments, including the licensing litigation and asserted suspensive conditions raised only in reply, to delay the running of prescription.

The application was accordingly dismissed with costs, including the costs of two counsel.

LEGAL PRINCIPLES

Prescription under section 12(3) of the Prescription Act 68 of 1969 begins running when the creditor has knowledge of the identity of the debtor and the facts from which the debt arises, or is deemed to have such knowledge if it could have been acquired by reasonable care. The running of prescription is not postponed until the creditor appreciates the full legal consequences of those facts or becomes aware of the full extent of legal rights.

In motion proceedings, litigants are required to stand or fall by their founding affidavits, and attempts to introduce new bases for relief or material new allegations in a replying affidavit do not ordinarily cure defects in the founding papers.

Where the material facts establishing the basis for enforcement are known, a creditor cannot postpone institution of proceedings on the basis that related processes or disputes (such as separate litigation affecting the broader background) are ongoing, if those processes do not deprive the creditor of the minimum factual basis required to sue.