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[2017] ZASCA 11
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Barry v Clearwater Estates NPC and Others (187/2016) [2017] ZASCA 11; 2017 (3) SA 364 (SCA) (16 March 2017)
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THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
No: 187/2016
In
the matter between:
RICHARD
DU PLESSIS
BARRY
APPELLANT
and
CLEARWATER
ESTATES NPC (CLEARWATER
ESTATES
HOMEOWNERS ASSOCIATION)
FIRST RESPONDENT
KEVIN
OLIVIER (CHAIRPERSON)
SECOND RESPONDENT
THE
COMMISSIONER OF COMPANIES AND
INTELLECTUAL
PROPERTY COMMISSION
THIRD RESPONDENT
Neutral
citation
:
Richard
Du Plessis Barry v Clearwater Estates NPC & others (
187/2016)
[2017] ZASCA 11
(16 March 2017)
Coram
:
Leach, Willis, Swain and Mbha JJA and Schippers AJA
Heard
:
3 March 2017
Delivered:
16
March 2017
Summary
:
Companies Act 71 of 2008
:
s 58(1)
: appointment of proxy ‘at
any time’ :
s 58(3)
(c)
: instrument evidencing proxy to be deposited ‘before’
shareholders meeting : Memorandum of Incorporation of company
requiring proxy to be deposited ‘not less than 48 hours before’
meeting : article inconsistent with unalterable provisions
of
s 58(1)
: article void in terms of
s 15(1).
ORDER
On
appeal from
:
Gauteng Division of the High Court, Pretoria (Van der Westhuizen AJ
sitting as court of first instance.)
The
appeal is dismissed with costs.
JUDGMENT
Swain
JA
(Leach,
Willis, Mbha JJA and Schippers AJA concurring)
[1] The appellant, Mr
Richard Du Plessis Barry, in his capacity as a director of the first
respondent, Clearwater Estates NPC, a
company duly registered in
terms of the company laws and known as the Clearwater Estates
Homeowners Association, launched an application
before the Gauteng
Division of the High Court (Pretoria). An order was sought declaring
that all the business and resolutions transacted
at a special general
meeting held by the first respondent on 27 September 2014, were
unlawful and void.
[2] The second
respondent, Mr Kevin Olivier, was cited in his capacity as the
Chairperson of the Board of Directors of the first
respondent. The
third respondent, the Commissioner of the Companies and Intellectual
Property Commission, was cited, insofar as
it may be necessary, to
rectify its register in respect of the first respondent, in
accordance with any order that may be granted.
[3] The special general
meeting in question was convened for the purpose of considering and
adopting various resolutions relating
to the internal governance of
the first respondent. A resolution that approved an increase in the
levy payments by the residents
was the catalyst that ignited the
present dispute.
[4] The challenge to the
validity of the resolutions passed at the meeting was that
shareholder proxies submitted on the day of
the meeting, were in
contravention of articles 13.7.10 and 13.7.11 of the first
respondent’s Memorandum of Incorporation
(MOI). These articles
provide that a proxy shall not be treated as valid unless it is
deposited at a designated location not less
than 48 hours before the
time designated for holding the meeting at which the proxy is to be
exercised. Absent these late proxies,
the attendance at the meeting
did not meet the requirements contained in article 13.3.2 of the MOI,
which provides for a quorum
of not less than 25 per cent of voting
rights being present for the purpose of passing any special
resolution at any meeting.
[5] In order to attain
the requisite quorum, the Board of the first respondent proposed a
vote condoning the late filing of these
proxies, which was accepted
by a majority decision at the meeting. The contested resolutions were
then put to the vote and passed.
The appellant contends that the
meeting was not properly constituted as no special resolutions could
be passed in the absence of
the requisite quorum. The board's
proposal to condone the late filing of the proxies and the adoption
of this proposal at the meeting
according to the appellant, amounted
to the amendment of the first respondent’s MOI which could be
effected only by way of
a special resolution as contemplated in s
65(11) of the Companies Act 71 of 2008 (the Act). This resolution
could not be passed
because it also lacked the requisite quorum. In
other words, the absence of a quorum for the purposes of passing the
intended resolutions,
was sought to be remedied by the invocation of
a special vote that required the same quorum.
[6] The first
respondent’s answer to these submissions was that articles
13.7.10 and 13.7.11 of the MOI were contrary to the
provisions of s
58(1) of the Act, which provides that a shareholder may appoint a
proxy ‘at any time’. These articles
were accordingly null
and void as contemplated in s 15(1)
(b)
of the Act. On this
basis, so it contended, the requirement in the articles that any
proxy be delivered not less than 48 hours
before the meeting, was
null and void.
[7] The motivation of the
parties is readily apparent. On the one hand, the appellant seeks to
uphold and enforce the articles in
question with the object of
defeating the resolutions passed at the special general meeting. On
the other hand, the first respondent
seeks the annulment of articles
13.7.10 and 13.7.11 with the object of preserving the validity of the
resolutions. It has to be
questioned whether the present dispute with
its attendant legal costs, is in the interest of the residents.
The undisputed
evidence is that the proposed increase in the levies
from R451.50 per month to R724 per month, carries the recommendation
of an
investigative team whose report was provided to members prior
to the meeting. The increase was apparently necessary to ensure that
the first respondent has sufficient funds to pay its debts and comply
with its obligations in terms of the MOI.
[8] The court a quo (Van
der Westhuizen AJ) held that the articles in question were
inconsistent with the provisions of s 58(1)
of the Act, which was
held to be an unalterable provision conferring an unqualified right
on a shareholder, to appoint a proxy
‘at any time’. It
held that the articles impermissibly sought to alter the time
stipulated in s 58(1) by adding a limitation
to the time within which
the proxy had to be delivered to the company, or other person on
behalf of the company. The court a quo
reasoned that the articles
were void to this extent, with the result that the proxies in dispute
were properly considered and taken
into account and the resolutions
validly passed at the meeting. The application was accordingly
dismissed with costs, with leave
to appeal to this Court being
granted at a later stage.
[9]
A resolution of the dispute requires a consideration of ss 58(1) and
58(3)
(c)
of the Act, together with the provisions of articles
13.7.10 in 13.7.11 of the MOI of the first respondent. The sections
provide
as follows:
‘
58.
Shareholder right to be represented by proxy –
(1)
At any time, a shareholder of a company may appoint any individual,
including an individual who is not a shareholder of that
company, as
a proxy to –
(a)
participate
in, and speak and vote at, a shareholders meeting on behalf of the
shareholder; or
(b)
.
. .
(2)
. . .
(3)
Except to the extent that the Memorandum of Incorporation of a
company provides otherwise –
(a)
.
. .
(b)
.
. .
(c)
a
copy of the instrument appointing a proxy must be delivered to the
company, or to any other person on behalf of the company, before
the
proxy exercises any rights of the shareholder at a shareholders
meeting.’
[10]
Articles 13.7.10 and 13.7.11 of the first respondent’s MOI read
as follows:
‘
13.7.10
Any power of attorney and any instrument appointing a proxy and the
power of attorney or other authority (if any) under
which it is
signed, or a notarially certified copy of such power of attorney
shall be deposited at the office or at such other
place in South
Africa as is specified for that purpose in the notice convening the
meeting, not less than 48 (FORTY EIGHT) hours
(excluding Saturdays,
Sundays and public holidays) before the time appointed for holding
the meeting or adjourned meeting at which
the person named in such
instrument proposes to vote, or a poll where a poll is to be held
after a meeting or adjourned meeting;
13.7.11
If the power of attorney or other instrument or proxy is not
deposited timeously, it shall not be treated as valid.’
[11]
These sections must be considered in the context of the definition in
s 1 of the Act of ‘alterable provisions’
and ‘unalterable
provisions’. An ‘alterable provision’ is:
‘
.
. . a provision of this Act in which it is expressly contemplated
that its effect on a particular company may be negated, restricted,
limited, qualified, extended or otherwise altered in substance or
effect by that company's Memorandum of Incorporation.’
An
‘unalterable provision’ is:
‘
.
. . a provision of this Act that does not expressly contemplate that
its effect on any particular company may be negated, restricted,
limited, qualified, extended or otherwise altered in substance or
effect by a company's Memorandum of Incorporation or rules.’
[12]
The importance of the distinction is apparent from the provisions of
s 15(2)
(d)
which provides that, subject to the provisions of s
15(2)
(a)
(iii), the MOI of a company may not contain a
provision that negates, restricts, limits, qualifies, extends or
otherwise alters
the substance or effect of an unalterable provision
of the Act. In addition, s 15(1) of the Act provides that:
‘
(1)
Each provision of a company's Memorandum of Incorporation –
(a)
must
be consistent with this Act; and
(b)
is
void to the extent that it contravenes, or is inconsistent with, this
Act, subject to section 6(15).’
[13] I agree
with the conclusion of the court a quo that the provisions of s 58(1)
are unalterable. The right of a shareholder
to appoint a proxy ‘at
any time’ is a provision that does not expressly contemplate
its alteration in any way by a
company's MOI. The provisions of s
58(3)
(c)
are however alterable, because the section expressly
contemplates that its effects may be altered. Consequently if the
articles
in question contravene or are inconsistent with the
provisions of s 58(1), they are void in terms of s 15(1) of the Act.
[14] Central
to the appellant's argument is the proposition that on a proper
interpretation of these sections, a clear
distinction is drawn
between the concept of the appointment of a proxy in terms of s
58(1), and the exercise of the proxy in terms
of s 58(3)
(c)
.
The latter section deals, conceptually, with the administration of
proxies. The proviso qualifies an individual's right to exercise
a
proxy by stipulating that a proxy may be exercised only if the
instrument appointing the proxy is delivered to the company (or
an
authorised agent) before the proxy exercises any rights at a meeting.
According to the appellant, the place of delivery, the
person to whom
the instrument is to be delivered and the time for delivery, are
dealt with in this subsection. Any amendment of
the time period from
‘before’ (as in the subsection), to ‘not less than
48 (FORTY EIGHT) hours . . . before’
(as in the first
respondent's MOI), relates solely to the exercise of the appointment
and not to the appointment itself, and is
authorised by s 58(3)
(c)
.
It was submitted on behalf of the appellant that this interpretation
does not give rise to any conflict between ss 58(1) and 58(3)
(c)
,
as an individual could hold a valid appointment but be unable to
exercise that appointment at a particular meeting. The appellant
contended that the legislature therefore intended that there could be
a lawful variation through a company MOI of the provisions
in the Act
relating to the stipulation of a time period, within which proxies
must be submitted for the purpose of exercising the
rights contained
therein, at a particular meeting of the company.
[15] The
respondent’s answer to these contentions was that the wording
of s 58(1)
(a)
is clear and unambiguous and permits no
interpretation other than that a shareholder has the right to appoint
any individual as
a proxy ‘at any time.’ The respondent
argued that this subsection was an unalterable provision in the Act
whose purpose
was to protect the right of shareholders to participate
in, speak and vote at a shareholders meeting and to do so through a
proxy
of their choice. The respondent submitted that the appointment
of a proxy may accordingly take place at any time, including during
the meeting. The time clause in the first respondent's MOI
accordingly negates, restricts, limits or qualifies this fundamental
right of a shareholder contrary to the provisions of s 15(2)
(d)
of the Act. The time clause contained in the first respondent's MOI
therefore contravenes and is inconsistent with s 58(1) of the
Act and
is void to that extent.
[16] In my
view, the distinction which the appellant seeks to draw between the
appointment of a proxy and the exercise
of a proxy in terms of s
58(1) and s 58(3)
(c)
of the Act, is artificial. On the
appellant's interpretation the appointment of a proxy by a
shareholder to act for and behalf
of the shareholder at a particular
meeting, less than 48 hours before the meeting is to take place, does
not affect the validity
of the appointment but simply means that the
proxy cannot be exercised at that meeting. However, the appointment
contemplated by
s 58(1) is not made in vacuo. Although it may take
place at ‘any time’, it has a defined purpose in terms of
the Act.
That purpose in terms of s 58(1)
(a)
, is to
‘participate in, and speak and vote at, a shareholders meeting
on behalf of the shareholder’. The appointment
of a proxy in
respect of a particular meeting seeks to achieve this statutorily
defined purpose. If that purpose is thwarted by
a time bar imposed in
terms of s 58(3)
(c)
for the delivery of the instrument
appointing the proxy, then the validity of the appointment of the
proxy itself is impugned.
The appointment of a proxy who is unable to
perform any of these statutorily defined functions at a particular
meeting has no purpose
and is no appointment at all.
[17]
The erroneous interpretation placed upon these sections by the
appellant results from a failure to pay due regard
to the language
used,
‘
.
. . the context in which the provision appears’, and ‘the
apparent purpose to which it is directed . . .’
.
(
Natal
Joint Municipal Pension Fund v Endumeni Municipality
[2012] ZASCA 13
;
2012 (4) SA 593
(SCA) para 18). That the validity of
the appointment of the proxy and not simply the exercise by the proxy
of his or her statutory
rights in terms of s 58(1)
(a)
is the object of the articles in question, is clear from the wording
of Article 13.7.11. This article provides that if the proxy
is not
deposited timeously ‘. . . it shall not be treated as valid’.
If the object was only to prohibit the exercise
by the proxy of the
rights conferred upon him or her at the meeting in question, and not
affect the validity of the appointment
of the proxy, the article need
only have provided that the proxy was prohibited from participating
in and exercising any rights
at the meeting.
[18] The
plain wording of ss 58(1)
(a)
and 58(3)
(c)
of the Act
read together and in context with due regard to their purpose, is
that a shareholder of a company may appoint at any
time, anyone who
is not a shareholder of the company as a proxy to participate in, and
speak and vote at a shareholders meeting
on behalf of the
shareholder, provided that the proxy delivers a copy of the
instrument appointing the proxy, to the company or
to any other
person on behalf of the company, before the proxy may exercise any of
the rights of the shareholder at the meeting.
[19]
I am fortified in this conclusion by an examination of the comparable
provisions contained in the repealed Companies
Act 61 of 1973 (the
1973 Act), with ss 58(1) and 58(3)
(c)
of the Act. Section 189
of the 1973 Act provided as follows:
‘
(1)
Any member of a company entitled to
attend and vote at a meeting of the company, or where the
articles of
a company limited by guarantee so provide, any member of such
company, shall be entitled to appoint another person
(whether a
member or not) as his proxy to attend, speak, and vote in his stead
at any meeting of the company . . .’
‘
(3)
(a)
Any provision contained in a company's articles shall be void insofar
as it would have the effect of requiring the instrument appointing
a
proxy, or any other document necessary to show the validity of or
otherwise relating to the appointment of a proxy, to be received
by
the company at its registered office or by any other person more than
forty-eight hours before a meeting in order that the appointment
may
be effective thereat.’
[20] In terms
of the 1973 Act, a provision in a company's articles that the
instrument appointing a proxy had to be
received by the company more
than 48 hours before the meeting, would be void and the proxy would
not be ‘effective’
at the meeting. However, a provision
(as provided for in article 13.7.10), requiring the instrument to be
presented not less than
48 hours before the meeting would be valid.
Although no time period was stipulated in s 58(1) of the 1973 Act for
the appointment
of a proxy, a limitation was nevertheless placed upon
the ability of a shareholder to appoint a proxy less than 48 hours
before
a meeting, where the company's articles contained this
provision. To do so would be an exercise in futility as the proxy
could
not be exercised at that meeting. In striking contrast, the Act
contains no such limitation and provides that the appointment of
a
proxy may take place ‘at any time’ in terms of s 58(1)
.
In addition, no minimum period is specified in s 58(3)
(c)
of the Act for the delivery of the instrument evidencing the proxy.
It only has to be delivered ‘before’ the proxy
exercises
the rights of the shareholder at the meeting.
[21]
It is a principle of statutory interpretation that
a
‘
deliberate
change of expression will
prima
facie
indicate a change of legislative intention. . . but, as indeed the
words
prima
facie
serve to emphasise, a change in wording does not always and
inevitably denote a change of intention. . .’. (
R
v Shole
1960 (4) SA 781
(A) at 787A). However, as pointed out in
Endumeni
supra paras 20-26, it is ‘entirely artificial’ to speak
of ‘an intention of Parliament’ and what has to
be
considered is ‘the apparent purpose of the provision’.
Viewed in this context a deliberate change of expression
will prima
facie indicate a change in the legislative purpose of the provision
in question. The use of the phrase ‘at any
time’
,
is a
deliberate change of expression. Considered together with the
omission of a minimum period for the delivery of the instrument
evidencing the proxy and its substitution with the requirement that
it is to be delivered ‘before’ the exercise of
any rights
at the meeting, a change of legislative purpose with regard to the
former minimum period of 48 hours is clearly indicated.
[22] In
reaching this conclusion I do not overlook the practical difficulties
which the appellant alleges will arise
from this interpretation of
the provisions of ss 58(1) and 58(3)
(c)
of the Act. It was
submitted that should a corporation be unable to regulate the
submission of proxies by the imposition of a deadline
before a
meeting, general meetings of corporations, particularly large
corporations, will become unworkable. The situation is postulated
of
a large company with thousands of shareholders being hamstrung by the
submission of thousands of proxies on the day of a scheduled
meeting.
It was argued that because s 63(1)
(b)
of the Act enjoins the
officer presiding over a general meeting to validate and verify
proxies prior to allowing a proxy to exercise
a vote on the
instrument, a general meeting would be unable to proceed on the
scheduled day because of the administrative burden
imposed on the
presiding officer. If these practical difficulties are real and not
simply apparent, their resolution lies not in
a strained
interpretation of the Act, but by legislative intervention.
[23] The
provisions of articles 13.7.10 and 13.7.11 of the first respondent’s
MOI are accordingly inconsistent
with the provisions of s 58(1) and
are void in terms of s 15(1) of the Act.
[24] The
following order is granted:
The
appeal is dismissed with costs.
_________________________
K G
B Swain
Judge
of Appeal
Appearances:
For the Appellant:
S G Gouws (with L W De Beer)
Instructed
by:
Jacobs
& Moodie (Lit) Inc, c/o Klagsbrun, Edelstein, Bosman & De
Vries, Pretoria
Symington
& De Kok, Bloemfontein
For the
Respondent:
B C Stoop SC
Instructed
by:
Lombard
Muller & Partners Inc, Pretoria
Christo
Dippenaar Inc, Bloemfontein