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2021
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[2021] ZAMPMBHC 58
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Sithole v Naude and Others; Ntiwane v Naude and Others (714/2021; 715/2021) [2021] ZAMPMBHC 58 (29 November 2021)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA,
MPUMALANGA
DIVISION (MAIN SEAT)
Case
Number: 714/2021
REPORTABLE:
YES
/ NO
OF
INTEREST TO OTHER JUDGES:
YES
/NO
REVISED.
In
the matter between:
JABULANI
LIGHTER SITHOLE
APPLICANT
and
ETIENNE
JACQUES NAUDE
FIRST RESPONDENT
JOHANNES
PETRUS KOEKERMOER
SECOND RESPONDENT
JOHANNES
LOWEDWYK BOUWER
THIRD RESPONDENT
MAWEWE
COMMUNIAL PROPERTY ASSOCIATION
FOURTH RESPONDENT
MAWECRO
(PTY)
LTD
FIFTH RESPONDENT
AND
Case
Number: 715/2021
In
the matter between:
ISSAC
MYOMO
NTIWANE
APPLICANT
and
ETIENNE
JACQUES NAUDE
FIRST RESPONDENT
JOHANNES
PETRUS KOEKERMOER
SECOND RESPONDENT
JOHANNES
LOWEDWYK BOUWER
THIRD RESPONDENT
MAWEWE
COMMUNIAL PROPERTY ASSOCIATION
FOURTH RESPONDENT
MAWECRO
(PTY)
LTD
FIFTH RESPONDENT
This
judgment will be handed down over the Zoom platform on 29 November
2021 and an electronic copy thereof shall be furnished to
the
parties. A signed copy of the judgment shall be filed on the court
file.
JUDGMENT
Roelofse
AJ:
INTRODUCTION
[1]
In this judgment, I deal with both
case numbers 714/2021 and 715/2021. I do so because respondents are
the same in both applications,
both applications traverse the same
factual material and requires the same determination. In addition,
the applications were heard
together and the parties were represented
by the same legal practitioners.
[2]
The applicant in case number
714/2021 is Mr. Jabulani Lighter Sithole (“
Mr.
Sithole”
). The applicant in case
number 715/2021 is Mr. Moyo Ntiwane (“
Mr.
Ntiwane”
). I shall refer to the
applicants in both the applications as “
the
applicants
” herein after.
[3]
The first to third respondents were
appointed to take control of all the affairs of the Mawewe Communal
Property Association (“
the
association”
) by virtue of a
court order granted by this court on 10 March 2020 (“
the
order”
). I shall visit the order
later in this judgment.
[4]
The association is the fourth
respondent in the applications. Mawecro (Pty) Ltd (“
the
company”
) is the fifth respondent
in the applications.
[5]
Only the company opposes the
applications and filed and delivered answering affidavits in both
applications. The company’s
answering affidavits were deposed
to by Mr. Johan Bredenkamp, the company’s Managing Director.
Relevant
background
[6]
I commence by setting out only the
relevant background that led to the dispute before this court.
[7]
The applicants were directors of the
company. Mr. Sithole was the Chairperson of the Board. They were
appointed as such by the association.
[8]
The company is a joint venture
between the association and CROOKS BROTHERS LIMITED (“
Crooks”
).
Crooks and the association are the only shareholders in the company.
The association holds 51% and Crooks holds 49% of the shares
in the
company. The relationship between the association and Crooks is
governed by a Shareholders’ Agreement to which the
company, the
association and Crooks are parties.
[9]
The
order was granted in litigation between the Mawewe Tribal Authority
and the Senior Traditional Leader of the tribe against the
then
executive committee of the association. The litigation ended up in
the Constitutional Court.
[1]
The
order remained intact. The full details of that litigation are not
important for purposes of this judgment. The order however
is for the
reliance placed thereon by the company for the removal of the
applicants as directors of the company..
[10]
Paragraphs 3.1 to 3.3 of the order
reads as follows:
“
3.1
the current committee of the Mawewe Communal Property Association
(eighth respondent) has dissolved on 4 February
2020;
3.2
no person
other than the persons
appointed in prayer 3.3 below, my conduct the affairs of the Mawewe
Communal Property Association, or hold
themselves out as being
authorized to conduct the affairs of the Mawewe Communal Property
Association;
3.3
that the following persons
are appointed to take control of all the affairs of the Mawewe
Communal Property association and report
back to this court on the
affairs of the Mawewe Communal Property Association and further
execution of the Anton Piller order,
within 90 days after date of
execution of this order:
3.3.1
Mr Johannes Lodewyk Bouwer;
3.3.2
Mr Johannes Petrus Koekemoer;
3.3.3
Mr Etienne Jaquess Naudé who shall at all relevant
times and
in conjunction with and in agreement with Mr Justice van Wyk.”
[11]
The order was an interim order
pending further proceedings that had to be instituted by the
applicants in that application not more
than 120 days from the
execution of the order.
[12]
On
17 March 2020, the first respondent notified the applicants in a
letter that they were suspended as directors of the company.
The
first respondent relied upon the dissolution of the association’s
committee and paragraph 3.3 of the order for the applicants’
suspension.
[2]
THE
APPLICANTS’ CASE
[13]
Mr.
Sithole, sets out the nature of the application as follows:
[3]
“
T
his
application in main, concerns my unlawful suspension and removal as
non- executive director and Chairperson of Mawecro (Pty)
Ltd by the
First Respondent and the Fifth Respondent. I wish to indicate from
the onset that my purported suspension and removal
was and continues
to be unlawful, devoid of any merit, a violation of the
Companies
Act, of 2008
, as amended, a further violation of the Code of good
corporate governance KING IV, and the shareholding agreement entered
into
between the MCPA and Crookes Brothers limited and the memorandum
of incorporation.”
[14]
Mr.
Ntiwane repeats what Mr. Sithole alleges in paragraph 4 of his
founding affidavit.
[4]
In
addition, he describes the application more concisely as follows:
[5]
“
I
n
this application I invite the Honorable court to decide on a crisp
issue relating to the lawfulness of of my removal as director
of
Mawerco (Pty) Ltd.”
[15]
Having regard to the papers before
me, I agree with Mr. Ntiwane’s description of the application.
I shall accept his invitation.
Relief
sought by the applicants
[16]
The applicants approach the court on
notice of motion for the setting aside of the suspension of the
applicants as directors (and
in the case of Mr. Sithole, also as the
Chairperson) of the company. The applicants, in addition, apply for
relief consequent to
the setting aside of their suspension,
including: the reappointment of the applicants as directors of the
company; payment to them
of all director fees for the period from
March 2020 and an order the meetings that were after their removal as
directors were not
properly constituted and are declared unlawful.
[17]
Mr.
Sithole sets out as follows in his founding affidavit:
[6]
“
I
wish to submit that the letter sent to me does not constitute a
proper notice as envisaged by the
Companies Act, as
will be clear
from below. The MCPA administrators
[the
first to third respondents]
failed to
appreciate the destinct nature of the company from its shareholders.
I submit that Mawecro (Pty) Ltd is an independent
company from its
shareholders. And their conduct herein constitutes a violation of the
Companies Act, code of good corporate governance,
the shareholding
agreement and MOI.”
[18]
Mr.
Sithole in effect says the same thing as Mr. Ntini in his founding
affidavit. He alleges that the letters of suspension (i.e
the letters
of 17 March 2020), “…..
by
law does not constitute a legal notice for removal by a
shareholder….
”.
[7]
[19]
A second letter was sent by the
first respondent to the applicants. It read as follows:
“
1.
We refer to our letter dated 17 March 2020.
2.
You are hereby given an opportunity to reply to the above letter
within 20 days of date of this
letter, to inform the current
committee of the MCPA
[the association]
why you should not be permanently
removed as a director of Mawecro Farming.”
[20]
The applicants rely on section 71 of
the Companies Act 71 of 2008 (“
the
Companies Act”
) and the failure
of the company to comply with same as well as the provisions of the
shareholders’ agreement in order to
substantiate their
allegation that their removal as directors of the company had been
unlawful.
THE
COMPANY’S CASE
[21]
The company alleges that the
applicants were removed as directors of the company by way of a
“RESOLUTION OF A MEETING HELD
BY MANAGEMENT OF THE CPA AS
DETERMINED BY A COURT ORDER”. The meeting was held on 13 March
2020. The resolution reads as
follows:
“
1.
That Siphiwe Happy Mkhatswa/Sithole , Jabulani Sithole and Isaac
Ntiwane be removed as directors of MAWECRO
farming (Pty) Ltd with
immediate effect.
2.
That Etienne Jacque Naude, Johannes Lowedwyk Bouwer and Justice Van
Wyk be appointed as Directors to
represent Mawewe Communal Property
Association as Directors to represent Mawecro farming (Pty) Ltd.
3.
That Etienne Jacque Naude be appointed as chairperson to represent
the directors of Mawewe
communal property association.”
[22]
The
company sets out in paragraphs 6.4 and 6.5 of its answering
affidavit
[8]
as follows:
“
6.4
The applicant was not listed in
prayer 3.3 of the 10 March 2020 order and could accordingly not
conduct the affairs of the CPA which
affairs include serving as a
director representing the CPI on the board of the Fifth Respondent.
We were informed of the 10 March
order which in effect interdicted
the applicant to serve as director. This formed the basis of the
Applicant’s removal as
director of the fifth respondent by the
CPA.
“
6.5
It follows that applicant was not removed by the directors of
the Fifth Respondent. The Applicant was removed by the
CPA (a
shareholder of the first respondent) as their representative terms of
the order. I am therefore advised (that although sections
71(1) and
(2) may be applicable) that section 71(3) and (4) of the Companies
Act, 71 of 2008 (“the Act”) are not applicable.”
[23]
The
company’s case is therefore that the directors of the company
did not remove the applicants. The applicants were removed
as
directors by the association because of the order. In the company’s
heads of argument, the company confirms that the removal
of the
applicants was effected in terms of the provisions of the
Shareholders’ Agreement.
[9]
Therefore, so the company alleges and argues, the applicants cannot
seek relief against the company and must be non-suited.
[24]
In
addition, the company alleges that the applicants are not entitled to
review the decision to remove them (to the extent that
they seek a
review of the decision) because section 71(5) afforded them 20 days
to apply to court for the review the determination
of the Board.
[10]
DISCUSSION
[25]
This court must decide whether the
suspension and removal of the applicants by the company was lawful.
Only if this court finds
that same was not, the consequential relief
that is sought by the applicants can be considered. I therefore
commence to decide
on that crucial question. In order to do so, I
have regard to the company’s Memorandum of Incorporation, the
Shareholders’
Agreement and the provisions of the
Companies Act
with reference to the appointment and removal of directors by a
company’s shareholders.
The
company’s Memorandum of Incorporation
[26]
Article 27.2 of the company’s
Memorandum of Incorporation provides that all directors shall be
elected by the shareholders
in accordance with the provisions of the
shareholders’ agreement. The Shareholders’ Agreement
therefore gives guidance
to the appointment and removal of the
directors of the company.
[27]
The Shareholders’
Agreement
[28]
Clause 10 of the Shareholders’
Agreement sets out provisions relating to directors. The relevant
provisions of the clause
read as follows:
“
10.1.
The following provisions were
applied to the appointment of DIRECTORS:-
10.1.1.
e
ach SHAREHOLDER holding more than
45% (forty five percent) of the voting rights of the COMPANY shall
have the right to appoint 3
(three) DIRECTORS to the BOARD;
10.1.2.
the SHAREHOLDERS will be entitled to
remove any of their representative appointees to the BOARD and to
replace any such DIRECTOR
who is removed or who ceases for any other
reason to be a DIRECTOR;”
[29]
From the afore-going
provisions of the Shareholders’ Agreement, the association, as
51% shareholder in the company had the
right to appoint the
applicants as directors and also the authority to remove them. The
authority of the shareholders to appoint
and remove directors of the
company therefore lies in the Memorandum of Incorporation and the
Shareholders’ Agreement.
[30]
The association’s
resolution of 13 March 2020 did exactly that. The resolution was a
resolution by the association (as shareholder)
to remove the
applicants as directors of the company and to appoint the first and
second respondents and Mr. Justice van Wyk as
directors of the
company.
[31]
Besides the company’s
Memorandum of Incorporation and the Shareholders’ Agreement,
the
Companies Act ultimately
regulates the removal of directors of a
company despite any provision of a company’s Memorandum of
Incorporation or Shareholders
Agreement. I next turn to the
provisions of the
Companies Act.
The
provisions of the
Companies Act
[32
]
Section 71
of the
Companies Act
provides
for the removal of directors. The relevant sub-sections for
purposes of this application are sub-sections 71(1) and 71(2) which
reads as follows:
“
(1)
Despite anything to the contrary in a company’s Memorandum of
Incorporation or rules, or any agreement between a company
and a
director, or between any shareholders and a director, a director may
be removed by an ordinary resolution adopted at a shareholders
meeting by the persons entitled to exercise voting rights in an
election of that director, subject to subsection
(2).
(2)
Before the shareholders of a company may consider a resolution
contemplated in subsection
(1)
—
(a)
the director concerned must be given notice of the meeting and the
resolution, at least equivalent to
that which a shareholder is
entitled to receive, irrespective of whether or not the director is a
shareholder of the company; and
(b)
the director must be afforded a reasonable opportunity to make a
presentation, in person or through
a representative, to the meeting,
before the resolution is put to a vote.
[33]
The wording of
section 71(1)
is
clear. It dominates a company’s Memorandum of Incorporation and
any other agreement between a company and a director or
between a
shareholder and a director. In my view,
section 71(1)
also dominates
the company’s Shareholders’ Agreement.
Section 71
(1) of
the
Companies Act empowers
the shareholders of a company to remove a
director.
Section 71(2)
provides for the procedure to exercise that
power. The procedure in
section 71(2)(a)
prescribes notice to be
given of the meeting and resolution to remove a director and
section
71(2)(b)
prescribes that a director be given an opportunity to make a
representation to the meeting before the resolution is put to vote.
[34]
In
Minister
of Defence and Military Veterans v Motau and Others
[2014] ZACC 18
,
at paragraph 72, the following is said over
section 71(2):
“
Section
71(1)
and (2)
[of
the
Companies Act]
is
the mechanism under the
Companies
Act through
which
shareholders may dismiss a director whom they have elected.
Importantly,
section 71(2)
requires
that a shareholder must give a director notice and a chance to make
representations before a resolution is adopted to dismiss
him or
her.”
[35]
With regards to the power of a
shareholder to appoint or remove a Chairperson and Deputy Chairperson
of the Board,
Minister of Defence and
Military Veterans
,
supra
,
sets out as follows at paragraph 73:
“
Second,
the Minister is, for the purpose of
section 71(1)
and (2), the
shareholder of Armscor. The Minister appoints the Chairperson and the
Deputy Chairperson of the Board and is thus
empowered through those
provisions to terminate their services. She is thus required to
comply with the prescripts of the section
in dismissing them.”
[36]
Section 71(1)
does not relate to the
removal of a director by the Board of a company. It relates to the
removal of a director by a shareholder
or shareholders.
Section 71(3)
provides for the removal of a director by the Board of a company
while
section 71(4)
provides for the procedure where a Board of a
company removes a director. It also provides for notice and
representations by directors.
[37]
Upon the company’s own
version, the procedure prescribed by
section 71(2)
was not followed.
I therefore find that the removal of the applicants was unlawful for
want of compliance with the prescripts of
section 71(2).
CONSEQUENTIAL
RELIEF
[38]
In light of the finding that the
removal of the applicants as directors of the company was unlawful,
there is no reason why certain
of the consequential relief sought in
the notice of motion should not be granted. As the removal of the
applicant is set aside,
there is no need for them to be re-appointed.
The order has the effect that their removal constitutes a nullity.
The applicants
are entitled to their directors’ fees from March
2020 to the date of this judgment.
[39]
In terms of the provisions of
section 66
of the
Companies Act, the
business and affairs of a
company must be managed by or under the direction of its board, which
has the authority to exercise all
of the powers and perform any of
the functions of the company. The board consists of a director or
directors, as the case may be.
[40]
In terms of clause 9.1 of the
company’s Shareholders’ Agreement, the board would be
responsible for the overall direction
of the company and the
formulation of policies applied to the business of the company.
[41]
In light of the finding that the
applicants’ removal as directors was unlawful, it must follow
that the appointment of the
first and second respondents and Mr. Van
Wyk in the applicants’ stead was also unlawful. In turn, the
board of the company,
who comprises of its directors were also not
properly constituted during the applicants’ absence. Therefore,
any and all
decisions taken from the applicant’s removal as
directors to the date of this judgment are unlawful and stand to be
set aside.
COSTS
[42]
Costs should follow the result for
there is no circumstance that dictates otherwise.
In
the premises, the following order is made:
1.
The removal of Mr. Jabulani Lighter Sithole
(“
Mr. Sithole”
)
as Director and Chairperson of Mawerco (Pty) Ltd (“
the
company”
) is hereby set aside.
2.
The removal of Mr. Isaac Myomo Ntiwane
(“
Mr. Ntiwane”
)
as Director of comopany is hereby set aside;
3.
The company is ordered to pay the
directors’ fees of Mr. Sithole and Mr. Ntiwane from March 2020
to the date of this judgment,
such payment to be effected to Mr.
Sithole and Mr. Ntiwane within 30 days of this order;
4.
All meetings of the reconstituted Board
from March 2020 to the date of this judgment are declared unlawful.
5.
The company is ordered to pay the
applicants’ costs.
_____________________
Roelofse
AJ
Acting
Judge of the High Court
DATE
OF HEARING:
28 November 2021
DATE
OF JUDGMENT: 24
November 2021
APPEARANCES
FOR
THE APPLICANT:
Adv SJ
Van Rensburg SC
Adv
M Mathaaphuna
Adv
Pumla Tinda
INSTRUCTED
BY:
S Tsotsetsi Attorneys
FOR
THE RESPONDENTS:
Adv J De Beer
Adv
ACJ Van Dyk
INSTRUCTED
BY:
WDT Attorneys
[1]
Mkhatshwa
and Others v Mkhatshwa and Others
2021 (5) SA 447
(CC).
[2]
The
letter of 17 March 2020 (annexure “IS2” to Mr. Ntiwane’s
affidavit refers to paragraph 3.3.1 of the order.
I accept that the
intention was to refer to paragraph 3.3 of the order.
[3]
Paragraph
4 of Mr. Sithole’s founding affidavit at page 9.
[4]
At
page 9.
[5]
Paragraph
12 of Mr. Ntiwane’s founding affidavit.
[6]
Paragraph
25 at page 15.
[7]
Paragraph
34 at page 18.
[8]
In
Mr. Ntiwane’s application.
[9]
Paragraph
4.4.3 of the Fifth Respondent’s heads of argument at page 13
thereof.
[10]
Paragraph
7.4 of the Fifth Respondent’s answering affidavit.