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[2022] ZAECMHC 11
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Meel and Others v Life St Mary's Private Hospital (2833/2016) [2022] ZAECMHC 11 (10 May 2022)
IN
THE HIGH COURT OF SOUTH AFRICA
(EASTERN
CAPE LOCAL DIVISION – MTHATHA)
CASE
NO.: 2833/2016
Date
of argument:
08 October 2021
Date
delivered: 10 May 2022
In
the matter between:
PROFESSOR
B L MEEL
First Plaintiff
PROFESSOR
K S GAIRE
Second
Plaintiff
PROFESSOR
VERENA KARAIRE-MUSHABE
Third
Plaintiff
PROFESSOR
A B NGANWA-BAGUMAH
Fourth
Plaintiff
PROFESSOR
A B KAFUKO
Fifth
Plaintiff
DOCTOR
M EJUMU
Sixth
Plaintiff
DOCTOR
P M MAFUYA
Seventh Plaintiff
DOCTOR
F J MAYANJA
Eighth Plaintiff
And
LIFE
ST MARY’S PRIVATE HOSPITAL
Defendant
JUDGMENT
MAJIKI
J:
[1]
In July 2016 five medical doctors and shareholders (first to fifth
plaintiff) of St
Mary’s Private Hospital (Pty) Ltd (the
defendant company) initially launched an urgent application against
the defendant.
The plaintiffs sought an order declaring the 2002
shareholder’s agreement (2002 agreement) invalid, of no force
and effect
ab initio
and that it be set aside. Further, that
the defendant be interdicted from seeking to compel the plaintiffs to
dispose of their
shares from the defendant on the basis of the said
agreement, pending the finalisation of the matter. The defendant
opposed the
application. On 28 July 2016 an interim order was agreed
to by the parties, in the main, prohibiting the defendant, its
directors
from taking possession of, alienating or encumbering the
plaintiffs’ shares. The defendant filed a counterclaim seeking
an
order declaring the 2002 agreement to be valid, of full force and
effect and binding on the first to fifth plaintiffs, alternatively,
that the said plaintiffs do what was necessary to give effect to and
sign all necessary documents to give effect to the 2002 agreement.
[2]
Subsequently, the matter was referred to trial for the applicant to
be plaintiffs
and respondent to be defendant and;
‘
(a)
The notice of motion and founding affidavit stand as a simple summons
and the
answering affidavit as respondent’s notice of intention
to defend;
(b)
The applicants will deliver a declaration by no later than 31 March
2017;
(c)
The respondent will deliver a plea and counterclaim by no later than
7
April 2017;
(d)
The applicants will deliver a plea to the counterclaim and a
replication
(if any) by no later than 28 April 2017.
2.
The parties will discover only documents not already part of the
papers in the application. Their discovery affidavits together with
discovered documents will be delivered by no later than 19 May
2017.
The provisions of rule 35 shall apply to the party’s
discoveries;
3.
Request for further particulars, if any will be delivered by no later
31 May 2017 and answered by no later 9 June 2017.
4.
All deponents to any affidavit in the application may be called as
a
witness without further notice. Any party who intends to call a
witness, other than a witness that deposed to an affidavit in
the
application, must give notice to the other party (or parties) no less
than ten (10) days before trial – trial date and
in the notice,
must provide the name of the witness, to be called.
5.
The provisions of rule 36 (9) (a) and (b) will apply, to the extent
that any party may wish to call an expert witness.
6.
The parties will hold a pre-trial conference on 20 June 2017, at a
time to be arranged.
7.
The costs incurred to date are reserved for decision by the trial
court’.
[3]
Thereafter the sixth to the eighth plaintiffs, by agreement, joined
in the proceedings.
All eight plaintiffs will be referred to as
plaintiffs hereunder. The sixth respondent has since died, he was
substituted by the
representative of his estate. All other plaintiffs
sue in their personal capacities.
[4]
As at the stage of trial plaintiffs had filed an amended declaration
and the defendant
had filed an amended plea and counterclaim. The
defendant’s counterclaim in turn attracted a plea from
plaintiffs.
BACKGROUND
[5]
It is common cause that the defendant company was registered on 22
December 1992.
Further, plaintiffs at different times bought and
acquired shares from the defendant company, from the time of its
registration.
Thereafter, plaintiffs as shareholders entered into
shareholder’s agreement on 01 August 1996 (the 1996 agreement).
In 2002
another agreement was drafted, presented and discussed at
various board meetings, with a view to have it signed and entered
into
by the shareholders. The said agreement is the subject of the
dispute between the parties, in particular whether the agreement was
validly concluded and replaced the 1996 agreement. For purposes of
the judgment the numbering of the 2002 agreement will be referred
to
in accordance with the pagination in the agreement.
PARTIES
VERSIONS
[6]
According to plaintiffs, the board’s attempt to have the 1996
agreement replaced
by the 2002 agreement was unsuccessful. The only
validly concluded agreement between the shareholders and the
defendant company
is the 1996 agreement. The said agreement was not
terminated by the shareholders.
[7]
Plaintiffs rely on clause 7 of the 1996 agreement (clause 7) which
provides:
‘
no variation of this agreement
shall be valid unless reduced to writing and signed by all
shareholders’
They
say the said agreement was not varied, in writing. In the plea to the
defendant’s counterclaim they say, In order for
the 2002
agreement to come into existence it needed to be signed by all
parties.
[8]
Furthermore, plaintiffs aver that the 2002 agreement is not binding
on them it because
it was not adopted at any shareholder’s
meeting, the directors of the defendant were never authorised by the
shareholders
to adopt it on their behalf.
[9]
All plaintiffs except for fifth and seventh plaintiffs said they were
not presented
with and did not sign the 2002 agreement, the
signatures on two pieces of paper (pages 11), attached to the copy of
the disputed
2002 agreement were not for the acceptance of the said
agreement. The pages 11 were fraudulently annexed to the 2002
agreement
in order to misrepresent that the aforesaid plaintiffs
signed the said agreement. The fourth plaintiff later stated that he
never
signed at all, what appeared at the first page 11, annexed to
the 2002 agreement, was not his signature. The sixth plaintiff had
said he was neither presented with the 2002 agreement nor did he sign
it. The said plaintiff was already deceased during the hearing
of the
matter.
[10]
Seventh plaintiff did not testify. She had pleaded that a one page
document, with a heading,
St Mary’s Private Hospital
Shareholder’s Agreement was transmitted to her via facsimile,
directing her to sign and
send it back. She was not presented with
the 2002 agreement.
[11]
According to the defendant the 1996 agreement was terminated upon
conclusion of the 2002 agreement.
The 2002 agreement was presented to
the shareholders and was signed at various locations during May and
June 2002. In instances
where shareholders acquired shares only after
the dates of signature of the 2002 agreement, those shareholders
agreed in writing
to be bound to and accepted the terms of the said
agreement.
[12]
Furthermore, the 2002 agreement was validly concluded, it was reduced
to writing in terms of
clause 7 of the 1996 agreement and remains of
force and effect. It was not a requirement that in order for the 2002
agreement to
be valid it had to be adopted by either shareholders or
directors of the defendant whether at a meeting or otherwise. On 24
July
2002 seventh respondent was presented with the document annexed
as ‘CC1’ constituting the entire 2002 agreement, she
agreed in writing to be bound by the said agreement. She did not in
July 2002 or at any stage thereafter, dispute being so bound.
[13]
The defendant avers that on 2 April 2002 in a shareholders’
meeting, the defendant advised
that a new shareholders’
agreement would be distributed for comment. Subsequently on 16 May
2002, in a director’s meeting,
the 2002 agreement was tabled.
Fourth plaintiff was personally present, first to third plaintiffs
and the fifth, sixth and eighth
plaintiffs and other doctor
shareholders were represented, the attention of the meeting was drawn
to the proposed clause 9, which
was inserted into the 2002 agreement.
Fourth plaintiff and other representatives of doctor’s
shareholders did not object
to the intended conclusion of the 2002
agreement or to clause 9 of the said agreement. In subsequent
directors’ meetings
on 5 September 2002 and 9 December 2002,
the doctor shareholders who were represented were informed that only
two doctors, Drs
Mushabe and Surka did not sign the 2002 agreement.
They are not among plaintiffs. Fourth plaintiff was personally
present in the
meeting of 9 December 2002. None of the doctor
shareholders denied that the 2002 agreement had been signed. They
also did not dispute
that doctor Mushabe would not be entitled to
representation, as a shareholder on the board, until he signed the
2002 agreement.
[14]
Further, it averred that it, acting on the strength of plaintiffs’
representations, the
defendant conducted itself in accordance with
the 2002 agreement and accepted that the said agreement was of full
force and effect.
It also permitted appointment of further doctor
shareholders ostensibly in terms of 2002 agreement, in doing so it
acted to its
detriment. The defendant pleaded that the plaintiff was
therefore estopped from disputing the validity of the 2002 agreement.
[15]
In its counterclaim the defendant pleaded that plaintiffs’
conduct among others, that of
disputing the validity and existence of
the 2002 agreement is a clear and unequivocal intention to no longer
be bound to the 2002
agreement. Therefore, such constituted
repudiation of the 2002 agreement, which repudiation is not accepted
by the defendant.
[16]
Clause 9.3 provides:
‘
In the event of the retirement
(in this regard, within six months of reaching the age of 70 years),
any doctor emigrating, relocation
of practice to a position 100 km
away from Umtata, death or incapacity of any of the Doctor
shareholders, he or his estate shall
be required by the St Mary’s
board of directors to sell all of his St Mary’s units of equity
to the other Doctor shareholders
on the basis set out in clauses 9.2
and 9.6.’
Clause 9.4 provides:
‘
In the event that a Doctor
shareholder, in the opinion of the board of directors of St Mary’s
is not adequately supporting
St Mary’s, or has conducted
himself in such a fashion so as to bring disrepute on St Mary’s,
he may be required by
the St Mary’s board of directors to sell
all or some of his St Mary’s units of equity to the other
doctor shareholders
on the basis set out in clauses 9.2 and 9.5’.
[17]
On 7 August 2017 the defendant requested admissions from plaintiffs.
The response thereto was
filed on 26 January 2018, amongst those
first, second, third, fifth to seventh plaintiffs admitted that they
signed page 11 for
attendance in some meeting and not for accepting
2002 agreement. Their signatures were not forged but the pages were
not authentic.
[18]
In relation to the claim in convention regarding the declaratory of
1996 agreement, plaintiffs
bear the onus of proof and the duty to
begin. Plaintiffs led evidence of five (5) witnesses, doctors
Ngwane-Bagumah, Gaire, Meel,
Mushabe and Mayanja.
PROFESSOR
NGWANA-BAGUMAH
[19]
He said he became a shareholder from inception of the defendant in
1992. He also became a director.
He said he recalled discussions at
the meeting of 16 May 2002 about shareholding. His stance had always
been that of disagreeing
with the 2002 agreement, in particular with
regard to elevation of the status of Afrox, the proposal regarding
retirement, emigration,
relocation of practice and the defendant’s
perverse incentive above the interests of patients. He had insisted
that the shareholders
be consulted. Mr Garwood was to obtain the
shareholders’ signatures. There was no interaction about the
2002 agreement or
signature thereof. During his informal engagements
with the shareholders he gathered that some were not against the
agreement whilst
others were against it.
[20]
He accepted that in the affidavits it was stated that he had signed
page 11 attached to the 2002
agreement but for other purposes and not
the 2002 agreement. It was further stated, he did not know why he
signed but probably
it was for shares. He said at that stage the
signature looked like his. However, as the case progressed and upon a
closer look,
he realised that the said signature was not his. He said
he would remember if he had signed the 2002 agreement. His signature
was
forged, anyone who would have done so would be from the
defendant’s camp. This was consistent with what he stated after
he
had been granted leave to withdraw his prior admission that he had
signed page 11. He was taken through the minutes of directors’
meeting of 9 December 2002. He accepted the contents thereof, even
though he said he did not have independent recollection of
discussions at the meeting. Therein, it was recorded that Drs Kali,
Mushabe and Surka had not signed the 2002 agreement, Doctor
Kali had
since signed. He said he did not remember why he did not indicate
that he had not signed, even after he received a copy
of the minutes.
He also did not recall receiving the minutes but accepted that as a
matter of course the minutes ought to have
been sent to him.
DOCTOR
GAIRE
[21]
He testified that he first obtained shares in 2001. He signed page 11
but had no recollection
of when and how he signed it. Further, he had
never seen the 2002 agreement. He first became aware that he was said
to have signed
the 2002 agreement when he received the letter of 5
April 2016, advising that he had to sell his shares. He was disturbed
when
he learnt about having signed for the sale of shares as
suggested in the said letter. He said page 11 was probably an
attendance
register at one of the annual general meetings or special
meetings. He discussed the issue about signing of the shares with
other
shareholders and none had a clue of having signed for such.
They also thought page 11 was some attendance register. He only
learnt
of the actual terms of the agreement after the commencement of
the litigation, Mr Garwood never interacted with him regarding the
procurement of his signature. Regarding Drs Stofile and Mbambisa’s
evidence that they would say they signed 2002 agreement,
he said they
may have, but he did not sign the 2002 agreement. He also said he
never paid attention to the fact that page 11 had
a provision for
signature of witnesses, nevertheless, none so witnessed.
PROFESSOR
MEEL
[22]
Professor Meel testified that he first became a shareholder in the
defendant in 2001. He never
saw or signed any shareholder’s
agreement. He was not aware of any agreement. He just applied for
shares as he would in entities
like Telkom, without more. He said the
signature at page 11 was his, in its short form. However, he did not
recall the circumstances
under which he signed it. He never met
Doctor Garwood. In cross examination it was suggested that in the
replying affidavit it
was stated that they thought they were signing
their shares. They were defrauded of the true nature of what they
were signing.
He said misrepresentation was possible, he could not
have signed for a document he had not seen. However, he was not able
to state
who did so. Even other doctor shareholders he spoke to, did
not know how their signatures at page 11 were procured. He also said
he became aware of the existence of the 2002 agreement in 2016. He
did not sign documents like agreements with his short form signature.
DOCTOR
KARAIRE MUSHABE
[23]
She testified that she became a shareholder in 2001. Her signature
appeared at page 11, however,
she had no recollection of when she
signed same. She said she never met Mr Garwood. She only saw the said
page in 2016. It was
strange that there were two (2) pages with page
number 11. It could well have been an extract of a meetings’
attendance register.
She said she only remembered discussions and
disagreements about 2002 agreement. She never discussed about the
said agreement with
her husband, who was one of the directors during
the period the 2002 agreement was mooted. In 2016 when the case
started, she together
with other plaintiffs discussed the 2002
agreement, her husband was also part of the discussions. Her husband
told her about five
(5) shares he signed for on 6 January 2020.
Previously they had not discussed his interaction with the defendant
or about the letter
requesting the shareholders to sign the 2002
agreement. Initially she had said she did not recall if she received
the letter of
4 June 2002 addressed to shareholders enclosing the
2002 agreement, however she was certain that she never received the
2002 agreement.
Later, she said she did not receive the said letter.
DOCTOR
MAYANJA
[24]
He testified that he became a shareholder in 2001. He said his
signature appeared on the second
page 11. He said he did not know how
his signature ended up in that page. He never interacted with Mr
Garwood and never signed
the 2002 agreement. He was also not aware of
the 1996 agreement. He only heard informally about the discussions
relating to 2002
agreement. He never saw or received communication
about 2002 agreement and could not have said he would or would not
sign it.
[25]
He said he would not sign one page, without more, there would have to
be a reason him to sign,
for example, that of signing an
acknowledgement of receipt of a cheque, share certificate and etc.
When he received page 11 he
was troubled, he made enquiries from
other plaintiffs who were at a loss about the said signatures. He
never enquired from the
defendant, he was of the view that the
defendant would not have assisted him to prove that he never signed
the 2002 agreement.
DEFENDANT’S
WITNESSES
[26]
The defendant also called five (5) witnesses.
MR
ARCHIBALD
He
testified that he was a retired chartered accountant, he was employed
as a financial manager by the defendant. He was also its
board
member. He said he was not personally involved in the procurement of
the signatures appearing at pages 11. He confirmed the
resolution
recorded in the minutes of the meeting of 2 April 2002. In
particular, that Afrox shareholding would be reduced from
60% to 55%.
Further, that prior to transfer of shares the shareholder’s
agreement was to be agreed upon and signed. He tabled
the revised
shareholder’s agreement and drew attention to paragraph 9. He
was not involved in preparation of that agreement,
but believed it
was the one annexed to the papers.
[27]
He said, save for two (2) doctors who did not sign the agreement, he
did not recall any other
difficulties and queries with the doctor
shareholders about the 2002 agreement. He was present in the meeting
of 9 December 2002.
He did not recall that doctor Bagumah objected to
the report that only three (3) doctors had not signed. He had not
heard that
doctor Bagumah said his signature at page 11 was a
forgery. Under cross examination he conceded that the fact that the
version
of 2002 agreement was tabled at the meeting of 16 May 2002
did not imply that it was adopted by shareholders. Further, that the
agreement sent with the letter of 4 June 2002 was being sent for the
first time to shareholders.
DOCTOR
STOFILE
[28]
She testified that she was a signatory to the 2002 shareholders’
agreement appearing from
pages 147 to 158 of the papers. Her
signature appeared at and she signed page 11, however, she did not
recall when and under what
circumstances she signed page 11 and
whether that page was presented as part of the 2002 agreement. As a
director of the defendant
she was signing a number of documents. She
confirmed that the new shareholders’ agreement was tabled on 16
May 2002. It was
discussed in board meetings and the board was kept
abreast of who had signed or not. She was not part of procuring the
signatures.
She did not know that doctor Bagumah had said his
signature was forged, at any stage. In cross examination she conceded
that having
signed page 11, she would not have needed to sign again.
She did not know why doctor Mntonintshi needed to sign twice. She
also
conceded that, only one doctor Mntonintshi appeared as a
shareholder in the defendant’s documents. She also said that
she
did not recall if she had read the answering affidavit in 2016,
when she deposed to a confirmatory affidavit. However, she said
she
ought to have read it, as ordinarily she would not have signed
without having read it. Further, if in 2016 she had said she
was
presented with the 2002 agreement by Mr Garwood, she probably
remembered then, even though she did not recall at the stage
of the
hearing.
MISS
PILLAY
[29]
Ms Pillay was only able to confirm that she was responsible for the
drafting of the 2002 agreement.
DOCTOR
G MBAMBISA
[30]
He testified that he served on the board of the defendant company
from the latter’s inception.
He confirmed that he appended the
signature appearing at page 11, accepting the 2002 agreement. He said
in their doctors’
meeting they discussed the agreement and were
keen on the agreement. He was present in directors’ meetings
that discussed
the 2002 agreement. However, he said he did not recall
if he signed a separate page or it was attached to the actual
agreement.
He also did not recall where he signed.
[31]
In cross examination he said he signed page 10 first, the last page
of the 2002 agreement, in
his capacity as a director of the
defendant, simultaneously with Mr Garwood. Thereafter, the agreement
was circulated to the shareholders
for signature. His wife appeared
to have signed page 11 first, he said he did not know if other
shareholders signed before he did,
as page 11 is not dated. He also
did not know why he did not sign pages 10 and 11 simultaneously. He
was unable to recall if he
signed page 11 at a meeting or in his
office.
DOCTOR
R R MBAMBISA
[32]
She is also a shareholder of the defendant company. She only
confirmed that she signed the 2002
agreement. She also confirmed her
signature at page 11 but could not recall who gave her the page 11
document.
[33]
The issue for determination is whether the 2002 agreement replaced
the 1996 agreement or the
1996 agreement is still valid in that; the
2002 agreement is of no force and effect for failure to comply with
the non-variation
clause. Also, whether the 2002 is valid or binding
as the defendant contends.
ONUS
[34]
The existence of 1996 and its clause 7 are admitted by the defendant.
The plaintiffs seek that
2002 agreement be declared to be of no force
and effect because the 1996 agreement was not varied in writing as
clause 7 required.
As appearing from pleadings and in accordance to
the oral testimonies plaintiffs, save for the fourth plaintiff who
alleged fraud,
others stated that their signatures appearing on pages
11 were not in acceptance of 2002 agreement. Indeed they do not
recall the
circumstances surrounding the appending of the said
signatures, however, they said they did not do so to agree to the
2002 agreement.
Doctor Meel went further to say he would not use his
short form of signature to sign a document in the nature of 2002
agreement.
He and doctor Gaire said they never saw the agreement.
They never interacted or saw Mr Garwood about the agreement. The
defendant
on the other hand made positive assertions in its plea that
the agreement was presented to shareholders and was signed at various
places between May to June 2002. Further, the 2002 agreement complied
with clause 7. Where shareholders acquired shares after the
dates of
signing of the 2002 agreement, those shareholders agreed, in writing
to be bound to and accepted the terms of 2002 agreement.
[35]
In
Pillay v Krishna and another
1946 AD 946
at 951-952 Davis
AJA referred to various principles governing the incidence of the
burden of proof. Those include the one that
‘where the person
against whom the claim is made is not content with a mere denial of
that claim, but sets up a special defence
then he is regarded as
quoad
that defence, as being claimed: for his defence to be
upheld he must satisfy the court that he is entitled to succeed on
it.’
He went further to quote the
summary of two rules, and other related applicable rules to the
effect that ‘first the plaintiff
proves his declaration, unless
it be admitted and then the defendant since he is plaintiff so far as
that goes’. The onus
is on the person who alleges something and
not on the opponent who merely denies it, put differently the burden
of proof is not
cast on the party who merely denies an assertion.
[36]
The defendant also pleaded estoppel against plaintiffs’ denial
of 2002 agreement.
[37]
Plaintiffs therefore have to prove that the 1996 contract was not
varied and replaced, as a consequence
thereof, they are entitled to
the declaration that the 2002 agreement is of no force and effect.
The defendant on the other hand
has to prove its positive assertions,
which in turn will prove that the 2002 was validly concluded. In
relation to evidence, this
depends on whether pages 11 were signed as
part of the 2002 agreement by the shareholders.
[38]
According to plaintiffs, the applicable legal principles are those
relating to general principles
of governing written contracts. The
amendment or cancellation of the contract is required to be in
writing, in line with
Shifren
principle. Further, whether the
Shifren
clauses can be circumvented in effect by operation of
estoppel.
[39]
The defendant on the other hand submits that where plaintiffs admit
signing 2002 agreement for
a different reason and not to accept 2002
agreement they would be bound by the agreement unless, if such was
induced by fraud or
was
justus error
. They would have to prove
why they should not be bound by it. Alternatively, where the
plaintiff signed page 11, as a single page,
not as part of the 2002
agreement, it is not clear whether it was presented as a single
document for each one to sign or page 11
was misrepresented to them,
in circumstances where it did not form part of 2002 agreement, their
pleadings directly or by implication
impute fraud. Fraud or
dishonesty ought to be clearly pleaded and each plaintiff have to
prove that case.
[40]
Furthermore, with regard to fourth plaintiff, he would have to prove
fraud. Seventh plaintiff
would have to prove why, after having signed
the document signifying her consent to 2002 agreement, she should not
be bound by
it. Finally, according to the defendant the non-signature
by one shareholder does not impact on the others who signed, those
would
be bound by the 2002 agreement.
[41]
The first aspect that requires resolution relates to the defendant’s
inability to avail
the original pages 11. The submission on behalf of
the defendant in this regard is that only the fourth plaintiff stated
that he
never signed page 11. The rest of plaintiffs have no issue
with the fact that pages 11 were signed by them. What is in issue is
the purpose for which it was signed. In those circumstances, the
defendant submits that there would be no prohibition against
acceptance of the photocopy of pages 11 as evidence.
[42]
Save for some plaintiffs who raised concerns about authenticity of
pages 11, in relation to them
not having been signed as part of the
2002 agreement, as presented by the defendant, the plaintiffs did not
object to the admissibility
of pages 11. In fact they conceded,
except for fourth plaintiff, that they had signed the said pages. In
the light thereof, it
is accepted that pages 11 represent pages that
the defendant says were signed by the plaintiffs, except for fourth
plaintiff.
[43]
The next issue relates to whether plaintiffs signed 2002 agreement.
The plaintiffs pleaded that
there was an attempt to have the 1996
agreement changed and replaced with 2002 agreement but it was
unsuccessful. According to
the defendant, in the light of the fact
that plaintiffs said they signed pages 11, they should have pleaded
fraud or dishonesty.
It is difficult to agree with this, mainly
because, most plaintiffs, except fourth and seventh, say they do not
know the circumstances
of their signing the said document, some
speculate that it could have been an attendance register or for
acknowledgement of receipt
of some dividend cheque, etc. What they
are certain of is that they were not signing to agree to 2002
agreement. I am inclined
to agree with the submission on behalf of
plaintiffs regarding the need to determine whether the parties were
of the same mind,
of being bound by 2002 agreement than whether the
plaintiffs proved fraud or dishonesty.
[44]
There is a dispute as to whether the 2002 agreement constituted an
amendment to the 1996 agreement.
According to plaintiffs it did,
therefore it needed to be in writing and signed for by the parties.
Farlam JA in
Pillay and another v Shaik and others
2009 (4) SA
74
(SCA), considered which agreements needed to be in writing. After
quoting from
Goldblatt v Freemantle
1920 AD 123
at 128-129,
the learned judge stated:
‘
[50] I do not agree with the
court a quo’s conclusion that there could be no binding
contracts between the parties unless
each was signed by or in behalf
of the buyers and sellers. In my opinion it is clear from Goldblatt v
Freemantle, supra, and the
authorities cited therein that, in the
absence of a statute which prescribes writing signed by the parties
or their authorised
representatives as an essential requisite for the
creation of a contractual
obligation
(something
that does not apply here), an agreement between parties which
satisfies all the other requirements for contractual validity
will be
held not to have given rise to contractual obligations only if there
is a pre-existing contract between the parties which
prescribes
compliance with a formality or formalities before a binding contract
can come into existence. That this is so is clear,
for example, from
CW Decker's annotation on Van Leeuwen's Commentaries on
Roman-Dutch
Law
4.2
s
1
(no
t s
2
as
Innes CJ says at 129) where he pointed out (Kotzé's
translation, 2 ed, vol 2 p 12) that we no longer uphold the
distinction
drawn in Roman law between real, verbal, literal and
consensual contracts because all contracts with us are made with
consent.
With regard to written contracts he referred to an
observation by Samuel Strykius (
Modern
Pandect
2.14.7)
as follows:
'(W)e must
regard the
written
contracts as distinct, in so far
as we should bear in mind that although the writing does not
constitute the essentiality of the
contract, which is contained in
the mutual consent of the parties, they may nevertheless agree that
their verbal agreement shall
be of no effect until reduced to
writing, in which case the agreement cannot before signature have any
binding force, although
there exists mutual consent; and it cannot be
said that the writing served not in perfecting the transaction, but
only as proof
thereof . . ., since here it is agreed that the consent
should not operate without the writing, which must be observed as a
legitimate
condition.'
[51]
The passage in
Wessels
cited in
the judgment in the
Meter
Motors
judgment
supports this approach. The learned author refers to
Institutes
3.23. pr,
and says that '(t)he plain meaning of this passage seems to be that
if the parties agree to have their contract of sale
in writing, then
until a document is drawn up there is no
vinculum
juris
and
therefore no actionable contract. This is the interpretation which
Voet (18.1.3) gives to this passage and it seems difficult
to justify
any other.'
[45]
Mr Daniels, counsel for the defendant, submitted that the 1996
agreement does not include a term
that it may be the only agreement
or that that no other shareholders agreements may be entered into.
The Memorandum of association
and articles of association acknowledge
a possibility that more than one shareholders’ agreement may be
in force from time
to time. Further, there are shareholders who
acquired shares after the 1996 agreement was signed, their
shareholding was not conditional
upon the signature thereof. The 2002
agreement does not purport to vary or amend a term in the 1996
agreement it is a new agreement.
Therefore, clause 7 cannot be a
prohibition against a new different agreement.
[47]
The defendant is of the view that clause was not effective against
subsequent agreements. Mr
Whitcutt, counsel for the plaintiff, traced
the history of
Shifren principle.
In
Nyandeni Local
Municipality and MEC for local Government and others
(CA68/2009),
Mthatha, delivered on 12 November 2009, unreported, Alkema J did
likewise. The learned judge explained that the principle
binds
contracting parties to the entrenchment clause under their written
agreement to the effect that no variation thereof shall
be binding
unless agreed to in writing and signed by both parties. At paragraph
43 he referred to a number of Supreme Court judgments
where the
principle has consistently been reaffirmed [
Impala Distributors v
Taunus Chemical Manufacturing Co.
1975(3) 273 at 277;
Kovacs
Investments 724 (Pty) Ltd v Marais
[2009] 4 All SA 398
(SCA)],
among others.
[48]
I am unable to agree with the submission that the 2002 agreement was
not varying the 1996 contract.
The facts indicate that the said
agreements were not meant to co-exist. The 2002 agreement introduced
clause 9, among others, which
would have the effect of changing the
continued shareholding by the shareholders after retirement,
emigrating or relocating practices.
That constituted a major
variation of the 2016 agreement. Therefore the 2002 agreement would
have replaced the initial agreement.
The
Shifren
principle
would therefore apply in the two agreements, except on grounds of
public policy which grounds, of which none are said
to be in this
matter.
[49]
Mr Daniels, counsel for the defendant submitted that it is unlikely
that plaintiffs would have
been presented with pages 11 as loose
unattached documents and that those would simply be signed. None of
plaintiffs, except fourth
plaintiff said they had a reason not to
sign the 2002 agreement. Therefore, there is no reason to conclude
that they would not
have signed when they were asked to do so.
Further, doctor Mushabe’s position of refusing to sign was
recorded as such with
its consequences.
[50]
The evidence establishes that there are shareholders who did not sign
the agreement. That is
so, even on the defendant’s version, but
according to the defendant, they are not among plaintiffs. As regards
the pages
11, they do present a difficulty, firstly, they are not
dated or stated where they were signed. There is a shareholder who
signed
on both pages 11. They also do not indicate if they are
annexures to what document. Unlike the signature clauses at the end
of
the agreement, at page 10, therein, it is clear as to who signed,
in respect of which party, on what date and in what capacity.
The
common cause facts are that Mr Garwood was to procure the signatures.
Some plaintiffs testified that they never saw the agreement
and never
met Mr Garwood.
[51]
During evidence it was canvassed with the witnesses that the minutes
indicated in a board meeting
that only two doctors had not signed the
2002 agreement by 9 December 2002. It may be accepted that the said
record indicates what
was reported to the board members. However, it
may not suffice for purposes of concluding that, against what the
witnesses stated
that they never agreed to the 2002 agreement and
some never even met Mr Garwood, it proves that they indeed signed the
2002 agreement.
There is no evidence about the circumstances of the
procurement of the signatures, what document was presented and
whether the
signatory understood what one was signing for. I would
not even say there are irreconcilable versions, the court is called
upon
to make inferential reasoning, among others, from what
transpired in board meetings.
[52]
In the circumstances I am unable to find that plaintiffs, other than
fourth and seventh signed
the 2002 agreement. The position of those
plaintiffs is somewhat different. It was to be expected for seventh
plaintiff to explain
the circumstances under which she signed the
document headed St Mary’s Private Hospital Shareholder’s
agreement. Fourth
plaintiff also needed to prove that his signature
was forged. However, the determination of the issue in the next
paragraph has
a bearing on their cases too.
[53]
Mr Daniels submitted further that, a finding in favour of one
plaintiff will not necessary mean
a finding in favour of other
plaintiffs. This submission presents a difficulty, firstly, clause 7
requires signature of all the
shareholders. Secondly, in
circumstances where it has not been said the agreement would have
different consequences for the shareholders
who signed and those who
did not, it is not clear what the practical implications of the order
would be for each or the other shareholder.
In my view, either the
2002 agreement met the requirements for the variation of the 1996
agreement or did not, in spite of the
defendant witness shareholders
who said they signed or plaintiffs who did not prove that they never
signed the agreement.
ESTOPPEL
[54]
At paragraphs 48 and 49 in Nyandeni, supra, the learned judge
affirmed that reliance on estoppel
to circumvent the
Shifren
principle is seldom invoked with any degree of success and
carries a host of potential problems. It is not permitted where it is
forbidden by law. Furthermore, in the present case, as submitted by
Mr Whitcutt, the evidence does not support the defendant’s
assertions, from which the defendant seeks to invoke estoppel. The
defendant had stated that plaintiffs, by their conduct, represented
that the 2002 agreement had been signed. Further, that they did not
dispute the existence of 2002 agreement. Plaintiffs disputed
that
they agreed to 2002 agreement. Most of them said they were not aware
of its existence, their participation as shareholders,
in those
circumstances cannot be construed to represent that they signed or
agreed to 2002 agreement.
[55]
In my view, the defendant has not established that the 2002 agreement
was presented to shareholders
and signed at various places as it had
alleged. The defendant witnesses testified about their own accent to
the 2002 agreement.
They also could not recall if they were presented
with the actual agreement. Their evidence as to their state of mind,
in my view
cannot extend to plaintiffs who said they never saw the
agreement, others never interacted with Mr Garwood.
In
the result,
1.
The defendant’s 2002 shareholders’ agreement is hereby
declared to be invalid and of no force or effect
ab initio
and
is hereby set aside.
2.
The defendants’ counterclaim is hereby dismissed.
3.
The defendant is hereby ordered to pay costs of the application,
including costs of the counter application and the costs occasioned
by the appointment of two (2) counsel.
B
MAJIKI
JUDGE
OF THE HIGH COURT
Counsel
for the Plaintiffs : Mr
Whitcutt SC with Ms C De Witt
Instructed
by
: Messrs
FASKEN (incorporated in South
Africa
as Bell Dewar Inc.)
C/o
ZILWA ATTORNEYS
Office
suite 452
4
th
Floor Development House
York
Road
MTHATHA
Counsel
for the Defendant :
Mr Daniels SC
Instructed
by :
Messrs Webber Wentzel
C/oMessrs
Keightley Sigadla
Nonkonyana
Incorporated
60
Cumberland Street
MTHATHA