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2021
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[2021] ZANCHC 2
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Dawson v Sidney on Vaal CPA and Another (603/2019) [2021] ZANCHC 2; [2021] 2 All SA 429 (NC); 2021 (6) SA 167 (NCK) (8 January 2021)
IN
THE HIGH COURT OF SOUTH AFRICA
(Northern
Cape Division, Kimberley)
Case
number:
603/2019
Date
heard:
14/08/2020
In
the matter of:
Date
available:
08/01/2021
JASON
DAWSON
and
Applicant
SIDNEY
ON VAAL CPA
THE
CHIEF DIRECTOR
First Respondent
DEPARTMENT OF RURAL
DEVELOPMENT
AND
LAND REFORM, NORTHERN CAPE
PROVINCE
Second
Respondent
Coram: Van
Tonder, AJ
JUDGMENT
VAN TONDER, AJ
[1]
This is an application brought by
the applicant in his capacity as a
member of the first respondent for an order in the following terms:
1.
Ordering
that the first respondent be placed under Administration of the
Director General: Land Affairs in terms of
section 13(1)
of the
Communal Property Associations Act 28 of 1996
;
2.
Granting
the under mentioned powers in terms of
section 13(2)
of the
Communal
Property Associations Act to
the Director General: Land Affairs:
2.1.
Appointing of a receiver as receiver of
the first respondent to administer the affairs of the first
respondent temporarily until
such time as a new committee of the
first respondent has been elected.
2.2.
The receiver is authorised, during his
temporary term of office, to do all things necessary to
maintain the affairs of the
first respondent in good and proper
order, and is specifically authorised and instructed to perform the
following tasks:
2.2.1.
The day to day management of the affairs
of the first respondent;
2.2.2.
The control of the first respondent’s
bank account(s)and administration of same;
2.2.3.
The payment of the first respondent’s
ordinary running expenses;
2.2.4.
The maintenance and control of books,
records and documents of the first respondent;
2.2.5.
Updating the register of members of the
first respondent in compliance with the first respondent’s
constitution, the
Communal Property Associations Act (the
CPA Act)
and the Settlement Agreement provided that the receiver is
specifically directed and authorised to table the updated members’
register for approval at the 2019 annual general meeting of the first
respondent to be convened as set out herein below;
2.2.6.
Mandating and instructing the auditors of
the first respondent to prepare all outstanding financial statements
of the first respondent;
2.2.7.
Convening (including the determination of
date, time and venue), holding and chairing the annual general
meetings or any other meetings
of the first respondent referred to
herein below or which the receiver deems necessary for the fulfilment
of his tasks;
2.2.8.
Arranging an election of committee members
to take place at the 2019 annual general meeting and to represent the
respective constituencies
in compliance with the first respondent’s
constitution, the CPA Act and the Settlement Agreement;
2.2.9.
Engaging the services of the Independent
Electoral Commission of South Africa (the IEC) or any other suitable
body or person(s)
to serve as election monitors;
2.2.10.
Review and set aside any decision,
resolution, contract, transaction, undertaking, agreement or
the like, made by any of the
executive committee or any of its
members, past or present, acting in unison or individually, found by
the receiver to be contrary
to the provisions of the constitution of
the first respondent, the provisions of the CPA Act, any other
statutory provision, or
the Settlement Agreement, or not in the best
interest of the members of the first respondent;
2.2.11.
Engaging the services of an attorney or
counsel for assistance in the proper interpretation of the first
respondent’s constitution
and any other legal requirements
which the receiver is required to observe, if deemed necessary by
him;
2.2.12.
Approaching the High Court for directions
or other relief on any matter pertaining to his appointment or
the fulfilment of
his tasks as receiver.
2.3. The receiver
shall, as soon as is practicably possible:
2.3.1 Update the
register of members of the first respondent as provided in 2.2.5
above.
2.3.2.
Convene and hold the annual general
meetings of the first respondent for 2019 at which the elections as
envisaged herein shall take
place.
2.3.3.
Call for nominations for election of
members to fill any vacant posts on the executive committee and/or
any other committee of the
first respondent in terms of clause 9 of
the first respondent’s constitution, upon such terms as is deem
applicable and in
compliance of the rules of natural justice.
2.4.
The receiver shall, in his sole discretion, be entitled:
2.4.1.
To schedule the meetings referred to above
on the same day or on different days, as he deems fit and
practicable;
2.4.2.
To engage the assistance of the IEC or any
other suitable body or person(s) to assist him in maintaining order
at and monitoring
the voting at any meetings of the first respondent.
2.5. As regards to the
nomination of candidates to stand for election;
2.5.1.
The receiver shall in his sole discretion
determine the nomination process to be followed, provided that it
shall be fair and transparent;
2.5.2.
The receiver shall determine any disputed
issues in respect of the first respondent’s constitution
and effect the
necessary amendments to it;
2.5.3.
The receiver shall be entitled to call for
written submissions from the parties in the matters referred to in
2.5.1 and 2.5.2, and
shall, if he deems it fit, be entitled to seek
independent advice and assistance from neutral third parties,
including an opinion
from senior council on the interpretation of the
first respondent’s constitution.
2.6.
At
the time when the election referred to above is called, the receiver
shall address written notices to the Sidney on Vaal Municipality
and
to the Regional Director, Department of Land Affairs, advising them
of the impending election of committee members from the
respective
regions and requesting them to appoint representatives to serve on
the committee of the first respondent.
2.7.
Following
the appointment of the receiver in terms hereof:
2.7.1.
He shall update the members register
within a period of 1 (one) month from the date of this order and
which register shall be submitted
for approval at the 2019 annual
general meeting;
2.7.2.
He shall convene and hold the elections
and annual general meetings within a period of 6 (six) months from
the date of this order.
3. Costs of suit
[2]
This application was preceded by an urgent
application which was
brought during March 2019, which urgent application was settled on
the basis of interim relief pending the
finalisation of the main
application herein, which order was made on 12 April 2019, in
inter
alia
the following terms:
2.
That
the first respondent undertakes to not declare, authorise, approve
the financial statements nor hold an annual general meeting
of the
members until the main application is disposed of;
3.
The
first respondent undertakes that general meetings of members will be
held for information purposes only. Any decisions
that are
required to be made by any such general meeting in terms of the
constitution of the first respondent, shall be valid only
if any such
decisions are previously certified and approved for each of the
parties, such approval shall not withheld unreasonably;
4.
That
the first respondent is authorised to make dividend payments to
beneficiaries as set out in annexure “JD10” (being
the
December 2018 beneficiary payment list) to the applicant’s
founding affidavit, excluding such beneficiaries and amounts
which
are incorrectly and/or irregularly listed and/or disputed, which
disputed beneficiaries and/or amounts shall be excluded
from any
payment;
5.
All
payment made shall be previously approved by the treasurer and
the executive committee. Proof of all such payments
shall be
provided to the applicant’s attorneys within seven (7) days
from date of payment.
[3]
The remainder of the order dealt with the postponement
of the main
application, reserving the costs of the urgent application,
time periods in respect of the filing of answering
and replying
affidavits, heads of argument and so forth.
[4]
The applicant essentially requests an order
that the Sidney on Vaal
Communal Property Association (the first respondent/CPA) be
placed under the
administration of the
Director-General: Land Affairs, in terms of
Section 13(1)
of the
Communal Property Associations Act 28 of 1996
.
[5]
He also goes one step further and
request an order that the Director
General: Land Affairs be granted the powers by the court in terms of
section 13(2) of the CPA
Act, to appoint a receiver to exercise the
powers on behalf of the Director General: Land Affairs, and for the
receiver to take
over the running of the CPA as set out in the notice
of motion.
[6]
The applicant is a member of the
CPA and was appointed by the
executive committee as the CPA’s Commercial Operations Officer
since June 2017.
[7]
The basis upon which he brings the
application is set out in his
founding affidavit as follows:
“
The grounds for the Application for the
appointment of an Administrator is to stop the continued
maladministration of the Association’s
affairs by the Executive
Committee and that it would consequently be just and equitable that
the Association be placed under administration.”
[8]
The incidences of maladministration that the
applicant relies upon
are set out as the following:
[8.1.] Manipulation of the payment of dividends;
[8.2] Unauthorised payments;
[8.3]
Conflict of interests by the members of the executive committee;
[8.4]
Executive Committee not acting in the best interests of
the Association;
[8.5] Lack of proper financial management.
[9] The applicant indicated that
three members of the executive committee, namely Mr. T. Swartz,
Chairman, Mr. H. Langeveldt, Deputy Chairman and Ms. L. Modise,
Deputy Secretary, have been members of the CPA’s executive
committee (in different positions) for the last three terms, since
2014.
MANIPULATION
OF DIVIDEND PAYMENTS AND
UNAUTHORISED PAYMENTS
[10]
Since an annual general meeting held in 2014 dividend payments
were
made to members of the first respondent from time to time.
[11]
The applicant alleges that the executive committee has manipulated
dividend payments as a result of which (current or former) members of
the executive committee have unduly benefitted.
[12]
The applicant indicates that from the outset there was a
problem with
the identification and verification process of beneficiaries, as well
as the whole process with which dividends have
been paid, which
resulted in many complaints regarding payment, non-payment and
incorrect payment of dividends.
[13]
The applicant had conducted an investigation in respect
of the
process of identification and verification of beneficiaries, as well
as the payment process itself. He has even compiled
a report in
which the executive committee have been notified of these “
systemic
failures
” but that they have “
done virtually
nothing to rectify
” it.
[14]
Prior to November 2015 beneficiaries of a single claim were
all paid
the same dividend amount, irrespective of how many individuals were
part of that particular claim.
[15]
At an annual general meeting held on 28 November 2015, it
was decided
that dividends would be paid out strictly in accordance with the
provisions of the CPA’s constitution, i.e.,
that the dividend
amount would be paid to the head of each household.
[16]
Despite the aforesaid decision the dividends that were paid
out in
December 2015 were again paid by way of the dividend amount paid to
each member instead of to the head of each household.
This
resulted in more dividends being paid than what should have been
paid, resulting in unauthorised payments in excess of R400
000-00.
[17]
The correct manner of payment (in accordance with the constitution
of
the CPA) was only introduced during August 2018, after which
each head of the household was paid the amount of the dividend,
whereupon he would divide it proportionately between members of the
household, or the first respondent would pay out each portion
of the
dividend to the member of each household.
[18]
The Applicant also complained of dividend payments increasing
from R9
million in 2016 to R16 million in 2017, as well as an increase in the
wage bill of the first respondent from R800 000-00
in 2017 to R5.3
million in 2018.
CONFLICT
OF INTEREST
[19]
The Applicant also alleges that Langeveld and Swartz have
a conflict
of interest in that in addition to serving on the executive committee
of the CPA, they have also recently been appointed
as directors of
Scarlet Sun 15 (Pty) Ltd, which is a joint venture company in which
the first respondent holds 51% shares, and
Blue Dust (Pty) Ltd holds
49% shares.
[20]
Scarlet Sun 15 (Pty) Ltd conduct mining operations on the
Than and
Mozib farms, over which the first respondent holds mining rights.
[21]
The Applicant states that Langeveld and Swartz earn an additional
salary as directors and have supported or taken decisions in favour
of Scarlet Sun 15 (Pty) Ltd, for example by signing a resolution
to
award the mining rights over the farm Droogeveld to Scarlet Sun 15
(Pty) Ltd, in the event of litigation regarding the rights
being
successful, and the rights eventually being awarded to the first
respondent.
NOT
ACTING IN THE BEST INTERESTS OF THE
ASSOCIATION
[22]
The Applicant referred to the fact that the Development
account of
the first respondent had been depleted from R20 million to an amount
of R194-00 without any infrastructure developments
having taken
place. He indicated that funds are being moved between accounts
without authorisation to the detriment of the
members of the
association as well as future generations.
[23]
He alleges that the association’s profit share in
Scarlet Sun
15 (Pty) Ltd is not fully paid, and that there has been underpayment
on a monthly basis since 2015.
[24]
The applicant alleges that the CPA has entered into loan
agreements
with Scarlet Sun 15 (Pty) Ltd, in contravention of its constitution,
and without any resolution to that effect by members
of the CPA.
[25]
In respect of the members of the executive committee, the
applicant
contends that:
[25.1] In March 2016 after
signing a lease agreement in respect of cattle grazing
rights,
and receiving the first rental, the executive committee paid
themselves an amount of R3 000-00 each without any authorisation
to
that effect.
[25.2] In March 2017 the
members of the executive committee have unilaterally decided
to
increase their salaries with 40%, while other staff’s salaries
were only increased with 7%.
[25.3] That when Mr John Kale, a
member of the executive committee passed away in November
2017, half
of his bonus was paid to his estate and half to Rosy White (incoming
member of the executive committee) in August 2018,
despite the
applicant’s contention that the full bonus should be paid to
Kale’s estate.
[25.4] During March 2016, the
executive committee decided to purchase immovable property from
which
it could operate its offices, without a mandate being obtained during
the November 2015 AGM.
[25.5] In this same
transaction the Applicant ascertained from Mr Swartz and Gerts of
the
executive committee that they had obtained a R200 000-00 “
kickback
”
in respect of the property, which was paid into the account of Gerts,
from where it was shared among the other members of
the executive
committee.
LACK
OF PROPER FINANCIAL MANAGEMENT
[26] The applicant alleges
that there have been numerous financial irregularities in
respect of
the association, as a result of which he reported the financial
irregularities to the Directorate of Priority Crime
Investigation
(DPCI). [27] He also mentions that the audit reports for 2016 and
2017 was only received by him on 7 May 2018, after
he had informed
the auditors in April 2018, that he had reported the matter to the
DPCI.
[28]
The applicant also referred to the fact that the executive
committee
could not provide the required supporting documentation to the
auditors to have the 2018 audit finalised.
[29]
The applicant has also compiled a report on the financial
irregularities, which recommendations have largely gone unnoticed and
have not even been distributed to the members of the association
or
all the members of the executive committee.
[30]
The applicant concludes as follows in his founding affidavit:
“
The reluctance of the Executive Committee to
address the
concerns raised in the reports as well as the total
lack of the implementation of proper financial control mechanisms
fostered an
environment where the looting of the resources of the
SOVCPA could and continue unabated.”
THE
FIRST RESPONDENT’S ANSWERING AFFIDAVIT
[31]
The first respondent filed its answering affidavit deposed
to by the
executive committee’s chairman, Mr Thomas Tommie Swartz, duly
authorised by a resolution of the members of the
executive committee,
wherein it denies that there is any basis upon which the CPA should
or could be placed under administration.
[32]
The first respondent contend that the application is premature
in
that the applicant has failed to exhaust the internal remedy
contained in section 10(2) of the Communal Property Association
Act,
before proceeding with his application.
[33]
The first respondent also alleges that the applicant is
mala fide
and that his application is an abuse of process, because the
applicant’s real intention is to prevent the CPA from
continuing
with, and finalising, its review and spoliation
applications against Theta Mining (Pty) Ltd, in respect of a mining
right that
was granted to Theta Mining (Pty) Ltd, and not to the
first respondent. If these proceedings were successful, and
the
mining right over Droogeveldt farm is eventually awarded to the CPA,
it would increase the amounts of dividends that the CPA
could pay by
millions of Rand.
[34]
It accuses the applicant of trying to persuade members at
a special
business meeting held on 12 January 2019, to accept the terms of a
proposed memorandum of understanding between the first
respondent and
Theta Mining (Pty) Ltd, which proposed agreement was not in the best
interests of the first respondent, as a result
of which the majority
of the members rejected the terms thereof.
[35]
The deponent also points out that the applicant was since
his
appointment as the Commercial Operations Officer in June 2017 tasked
with:
[35.1] administering the financial
affairs of the first respondent and to report to the executive
committee.
[35.2] the drafting of the financial
statements of the first respondent in collaboration with the
auditors.
[35.3] revising and finalising the list
of members and beneficiaries of the CPA.
[36]
Swartz mentions that since middle January 2019 the applicant
has
absconded and remaining absent from the first respondent’s
offices.
[37]
He alleges that the applicant is the author of the state
of events
that he complains of, in that he had failed to discharge his duties
and responsibilities to the CPA, and that since his
appointment he
had the duty to rectify all the matters he now raises, but that he
had failed to do so.
[38]
Swartz states that in view of the fact that the CPA makes
dividends
payments to 291 households by way of payments to about 778 eventual
beneficiary recipients, which amounted to R2.2 million
that was paid
in March 2019, a small number of mistakes that have been made in the
process are insignificant. He also bemoans the
fact that the
applicant was the only person approving the beneficiaries and the
amounts paid, wherefore he submits the applicant
could not now
approach the court to place the first respondent under administration
as a result of a few incidents that happened
under his tenure.
[39]
Swartz disputed that it would be just and equitable to place
the CPA
under administration.
[40]
He stated that the dividend payments were made in the following
manner:
“
All dividend payments are and were made to the
members as decided by the members during general meetings and
endorsed by the Exco
in terms of a revised dividend list prepared by
Dawson in 2017. This list was again revised in November 2018 as
result of
the adoption of new members on the Annual General Meeting
(the AGM) of October 2018 and discrepancies on the list prepared by
Dawson.”
[41]
Swartz also stated that at the special general meeting of
the members
of the CPA held at Kimberley on 17 August 2019, the members
unanimously decided to oppose the application of Dawson
and as such
endorsed the decision of the executive committee to oppose the
application.
[42]
Swartz indicated that the interim order in the urgent application
to
the effect that the CPA may not hold an annual general meeting or
approve the financial statements pending the finalisation
of the main
application, was operating to the detriment of the CPA as a result of
one disgruntled member (the applicant).
[43]
He also referred to actions implemented by the executive
committee
after the current executive committee was elected during October
2018.
[44]
Swartz stated that the applicant was in charge of the payments
since
June 2017, and that the applicant and the executive committee
approved the list of beneficiaries as well as the amount payable
to
each beneficiary. The applicant had even prepared the dividends list
and advised the executive committee to accept and approve
the
payments contained therein.
[45]
He alleged that the applicant had failed to comply with
his duties in
terms of his employment agreement, and was about to be disciplined
for the irregularities that he had committed as
the chief operations
officer of the CPA. The applicant was specifically tasked to
investigate all administrative, financial and
risk assessments within
the CPA, and to provide the executive committee with reports and
documentary proof of all discrepancies
that he had found, which he
had failed to do.
[46]
The applicant was also the only person to access the first
respondent’s bank account and the only person to make the
payments from the Payaccsys account, in accordance with the payment
list prepared by the applicant, and which he advised the executive
committee to accept.
[47]
Swartz also contended that granting an order placing the
first
respondent under administration would be to the detriment of the
first respondent and its members, as the first respondent
is
conducting highly complicated court cases, mining activities, cattle
and game farming activities, all of which are currently
controlled by
skilled people. He also expressed reservations regarding
whether the department has the capability, and the
necessary and able
staff contingent, to take over the aforesaid operations.
[48]
He denies that the first respondent does not have strategic,
business
and operational plans in place, and contend that:
“
The affairs of the CPA may not be perfect, but
they are sufficiently correct to entitle the CPA to administer
itself. It is
respectfully submitted that the Act does not
require CPA’s to conform with the high standard of perfection
that is required
of registered companies.”
[49]
He states that the executive committee did not simply ignore
the 28
November 2015 resolution, but that the decision was taken to pay the
dividends as per the 13 December 2014 decision after
the executive
committee had discussions with various constituencies of the first
respondent namely Kimberley,
Barkley-West, Longlands, Delportshoop and Pampierstad. As a
result, dividends were paid to every
head of the household, as well
as each first-generation descendant, and thereafter
pro rata
in respect of second-generation descendants and onwards, as was
previously done.
[50]
Swartz indicated that the applicant was instructed to investigate
all
discrepancies pertaining to the dividend list and payments to
beneficiaries in terms thereof. He also confirmed that
the
applicant had compiled a report in respect thereof, but alleges that
the correctness of the applicant’s report had to
be verified,
wherefore the applicant was requested to give full disclosure of all
the allegations in his report, which he had failed
to do. The
applicant had subsequently provided the executive committee with the
documents required, but had steadfastly failed
to discuss it with the
executive committee.
[51]
Swartz states that after the current executive committee
was elected
in October 2018, they decided that the (incorrect) list prepared by
the applicant had to be audited by the executive
committee after
having been reviewed by the applicant, which should have been
completed by 28 February 2019. As the applicant
was mostly
absent during December 2018 and January 2019, whereafter he absconded
since 12 January 2019, this was not done.
[52]
The executive committee had however completed the task,
and the
revised list was attached as an annexure to the answering
affidavit.
[53]
Swartz also denied that there was any dividend manipulation,
and
indicated that the method of payment that was implemented from 2014
until 2018, is not any indication of maladministration.
[54]
In respect of the alleged unauthorised payments of more
than R400
000-00, Swartz indicated that the payments were made to the heads of
the households, who then had to distribute it to
the first-generation
descendants. Fifteen people complained that they did not
receive their dividend payments, whereafter
payments were made to
them.
[55]
In respect of the alleged increase in expenditure, Swartz
points out
that dividend payments increased from R9 million during 2016, to R16
million in 2017, whereas the number of households
increased from 83
households initially to 203 households in 2017. He also refers
to the fact that the 2016 and 2018 financial
statements were approved
by the members after the auditors had issued their audit opinion
thereon.
[56]
He denies any maladministration and allege that the financial
statements indicate the successful operation of the first respondent
to the benefit of its members.
[57]
With regard to the alleged conflict of interest, Swartz
states that
it is important for the first respondent (as 51% shareholder) to have
directors appointed to the board of Scarlet Sun
15(Pty) Ltd, in order
to look after the first respondent’s interests.
[58]
A decision regarding who the first respondent would enter
into an
agreement with (in the event of it being granted mining rights on
Droogeveldt) would have to be taken by the majority of
the members of
the first respondent at a special business meeting or a general
meeting.
[59]
In respect of the allegations that the executive committee
is not
acting in the best interests of the first respondent, Swartz states
that all transfers of funds between accounts of the
first respondent
was done after consultation between the executive committee, the
applicant and the auditors. The applicant
had advised that the
executive committee could make such withdrawals, subject to
substituting the withdrawals with the same amounts
from the loan
account of the first respondent with Scarlet Sun 15 (Pty) Ltd.
[60]
He also states that the withdrawal of funds from the Investec
development fund was done as a result of the fact that no specific
projects were planned for that time, was done with the consent
of
members granted at general meetings, and was done
bona fide
and
in the interest of all the beneficiaries. He however denied
that the development fund was depleted as alleged.
[61]
Swartz also stated that the applicant had compiled an operational
business intelligence report, which was continuously being addressed
by the first respondent.
[62]
Swartz also denied that Scarlet Sun 15 (Pty) Ltd was not
making full
payment of the first respondent’s profit share therein.
[63]
In respect of the amount of R3000-00 paid to executive committee
members, he indicated that this was done by the previous executive
committee as a result of additional work, time and travelling
spent
on the project. This would also be put to the members of the
first respondent at the next general meeting.
[64]
With regard to the 40% increases in the (previous) executive
committee’s salaries, this was approved by members as a result
of the fact that executive committee members were in the full
time
employ of the first respondent as there was a substantial increase in
the busines of the first respondent, as well as a similar
increase in
the number of staff employed by it. It was also the previous
executive committee’s strategic, commercial
and business
guidance that put in place the lucrative mining agreement that
provides the funds for the dividend payments.
[65]
In respect of the alleged unauthorised purchase of immovable
property, Swartz denied this, and attached minutes of a members’
meeting held on 28 November 2015, where the purchase was
approved.
[66]
With regard to the “
kickback
” of R200 000-00 that
was allegedly divided among the executive committee members, Swartz
denies this, and states that Gerts
on his own received an amount of
R200 000-00. When the executive committee became aware of this,
they decided to take disciplinary
action against him, which was
currently under investigation.
[67]
In response to the alleged lack of proper financial management
Swartz
denies that the 2016 and 2017 financial statements were only provided
to the applicant in May 2018. He alleges that
the 2016
statements were already at the applicant’s disposal at the
November 2016 AGM, and that the 2016 and 2017 statements
would have
been approved at the 21 April 2018 annual general meeting, but for
the fact that the applicant did not attend the meeting.
As a
result of his absence, the meeting was postponed to 12 May 2018.
[68]
The applicant also failed to attend the 12 May 2018 meeting,
at which
meeting the financial statements were accepted, with the proviso that
all the shortcomings and discrepancies set out in
the audit
completion report would be addressed.
[69]
In view of the fact that it was the first time that the
auditors had
issued an audit completion report, the executive committee was
initially unfamiliar with the process, but has all
the documentation
required for 2016 and 2017 been provided to the auditors during June
2019. This despite the fact that it
was an enormous task to
collect and compile the aforesaid documents, as the executive
committee had to obtain information and documents
from more than 50
people scattered over a large area.
[70]
In respect of the 2018 audit of the financial statements,
Swartz
admits that the executive committee was initially unable to provide
the required documents. This was however subsequently
obtained,
and at the time of deposing to the answering affidavit only three
items remained outstanding. With a few exceptions
mentioned in
Swartz’s affidavit, the 2018 statements could also be finalised
at the time of deposing to the answering affidavit.
[71]
In answer to the allegation that the executive committee
had failed
to implement any of the applicant’s recommendations, Swartz
states that the current executive committee had taken
numerous steps
to address the issues pertaining to the alleged irregularities.
In this regard the applicant was requested
to provide documents and
explain the irregularities that he had identified. Only in July
2018 were the documents provided,
but the applicant never explained
the relevance of the documents as was agreed.
[72]
Swartz in therefore denies that there is any reason to place
the
first respondent under administration.
[73]
Swartz then request condonation for the late filing of the
first
respondent’s answering affidavit, which was necessitated by the
need to obtain numerous documents and consult with
various people
spread over a large geographical area
THE
PARTIES CONTENTIONS
[74]
Adv Raubenheimer on behalf of the applicant argued that
it needed to
be emphasized that the legislation in question is socio economic
legislation with the purpose of empowering communities
that were
previously disempowered or dispossessed of land.
[75]
He also submitted that the type of communities involved,
are
traditionally poor communities with also a low rate of literacy and
schooling, and that a CPA was not as highly regulated as
a company.
[76]
He argued that if the system as created by the community
does not
work, or does not render results, because of the inherent risk of
abuse, provision is made for the CPA to be placed
under
administration and that it would then resort under the Director
General: Land Affairs.
[77]
Adv Raubenheimer argued that if any
maladministration is conducted in respect of the administration of
the CPA the Director General: Land Affairs should be in the
position
to get involved therein, in order to make sure that such
maladministration is investigated and/or if necessary addressed
and
rectified.
[78]
He argued that in terms of Section 13(1)(A) of the CPA
Act, a CPA
can be placed under administration if it is
a)
insolvent or
b)
under maladministration or
c)
any other cause which results in the CPA being unwilling
or unable to
pay its debts or unable to meet its obligations or
d)
if it is otherwise just and equitable to do so.
[79]
Adv Raubenheimer argued that the first basis for the application
is
because of maladministration as proliferated by the current executive
committee of the first respondent.
[80]
He argued that the factual basis constituting the maladministration
is premised on the following elements:
1.
Manipulation of dividend payments;
2.
Unauthorised payments;
3.
Conflict of interest by executive committee members;
4.
Executive committee members acting contrary to the best
interests of
the association;
5.
Lack of proper financial management
[81]
He emphasized that the executive committee has a fiduciary
responsibility in the execution of their duties, and argued that the
aforesaid elements are indications of the breach of the said
fiduciary duty.
[82]
He argued that it was difficult to determine who the beneficiaries
of
the CPA are, in respect of whom dividend payments needed to be made,
and contrasted this with the position of the Companies
Act in terms
of which the company has to make a decision in respect of the
declaring of a dividend on the audited financial statements
of the
company.
[83]
He submitted that it is trite that the first respondent
does not have
audited financial statements and have not had such statements for
quite some time, and that despite this the aforesaid
decisions were
taken in respect of the payment of dividends.
[84]
He argued the fact that dividend payments were not only
made to
specific households but also to members of the households with the
effect that the more members in a household, the bigger
dividend was
payed to such household.
[85]
He argued that the problem with that was that it opened
the door for
households to grow expediently in order to inflate the number of
members thereof which would lead to significant overpayment.
[86]
He argued that the executive committee, despite being alerted
did not
rectify the position and that up to the day of argument there was no
audited list of household beneficiaries in respect
of dividends.
He argued that there was a report compiled but that nothing has been
done in order to rectify or finalise an
audited list of
beneficiaries.
[87]
He also argued that there was a problem in providing the
auditors
with the required documentation to obtain the financial statements.
[88]
He furthermore argued that the value of the land is due
substantially
to the fact that there are extremely rich diamond deposits on the
land in question, and that companies are eager
to mine these
deposits, which lead to the executive committee that capitalises on
this by facilitating payment of facilitation
fees with the sole
purpose to decide in favour of which company should conduct the
mining therein.
[89]
Adv Raubenheimer argued that the Act and the Constitution
of the CPA
makes it clear that the executive committee is responsible for the
creation of proper control systems, which they have
failed to do in
this instance.
[90]
Adv Raubenheimer argued that the second basis of the application
is
that it would be just an equitable to grant an order as set out in
the Notice of Motion.
[91]
He submitted that the court needed to look at all the surrounding
circumstances in order to decide whether it is just and equitable to
order the first respondent to be placed in administration
or not.
[92]
He submitted that the facts as set out in his argument above,
weighs
clearly in favour of granting the order sought, compared to the facts
against the granting of the order.
[93]
He stressed the fact that the fact that there were no properly
functioning internal control measures, which was of paramount
importance, and that the compliance systems in the first respondent
was for all intents and purposes non-existent.
[94]
In other words that there was no compliancy or lacking or
inadequate
compliance with the provisions of the CPA Act and the constitution of
the first respondent.
[95]
In respect of the revised list of beneficiaries that was
furnished by
the first respondent, Adv Raubenheimer argued that this list did not
take the position any further, as no indication
was given as to what
the underlining process was that were used to compile this list and
to account whether it was reliable, or
on what objective facts it was
based.
[96]
Adv Raubenheimer argued that firstly the fact that no audited
financial statements were available in order to declare dividends,
and secondly that there was not sufficient information regarding
whom
the exact beneficiaries and members were, that these two aspects
created the circumstances for a perfect storm for corruption
and
abuse.
[97]
He argued that based on that the Court should interfere
and place the
first respondent under administration in order for the Director
General to conduct the necessary investigations and
take the
necessary remedial action.
[98]
Adv Raubenheimer indicated that he would not proceed with
opposing
the application for condonation for the late filing of the first
respondents answering affidavit, and that he would also
not persist
with the point taken in respect of the lack of authority of the
deponent to the first respondent answering affidavit.
[99]
Adv Knoetze SC on behalf of the first respondent argued
that this
matter did not deal with a company or a high society organisation,
but that this matter dealt with a communal property
association,
which has its own legislation and regulations regulating it.
[100] He argued that the
applicant had high ideals and when he was unable to attain them,
he
felt dissatisfied, wherefore he now blames the executive committee
for what he wanted to have done, but Adv Knoetze urged that
that was
not the test in these proceedings but that one should look at the CPA
Act itself.
[101] He argued that the
court have to consider the interest of the communal property
association and its members, and not the personal feelings of one
member, in this instance the applicant.
[102] Adv
Knoetze SC argued that one should take cognisance of the
preamble to
the Act which plays a central role in the interpretation thereof,
namely that the Act deals with communities that should
be assisted to
do which the Act allows then to do, namely to establish a CPA and to
administrate it according to the community’s
wishes.
[103] He
argued that you cannot expect the members of the CPA to comply
with
the high level of regulation and requirements of, for instance the
King Report, which is important when considering whether
to put the
CPA under administration, or allow the system to do as good as it can
under the circumstances.
[104] He
argued that the Court should be inclined to ensure that the
assistance required is rendered, and not to unnecessarily place the
CPA under administration.
[105] He further argued
that the democratic principles as set out in Section 9 of the
CPA Act
is of particular importance in the interpretation of the Act.
[106] He
argued that people and members of the CPA should be free to
manage
themselves by democratic process as envisaged in the CPA Act.
[107] He
submitted that the applicant wanted to impose his views on
what
should be done in the CPA on the executive committee thereof, and
that that this was not what the Act required.
[108] He
argued that the people ought to be allowed to govern themselves
and
that the people were satisfied with the manner in which it was
currently done.
[109] He
argued that the applicant stood alone in his application and
he was
not able to find anybody to join him as an applicant.
[110] He
submitted that the views of the applicant were not shared
by the
other members of the CPA, and emphasised the fact that the applicant
is attempting to place the CPA under administration
based on one
man’s (the applicant’s) ideals and aspirations.
[111] Mr
Knoetze SC argued that maladministration (as mentioned in
section
13(1) of the CPA Act) does not stand separate, but that it forms part
of the factors which may result in the CPA being
unwilling or unable
to pay its debts or unable to meet its obligations.
[112] He
argued that applicant’s approach to the matter namely
that
maladministration as such and by itself, can justify a court to place
the CPA under administration as
just
an equitable in the circumstances, is
patently wrong.
[113] Adv
Knoetze SC argued that there were no allegations whatsoever
that the
CPA is unwilling or unable to pay its debts, wherefore
maladministration cannot be a defining factor.
[114] At
most maladministration can be one of the factors that the
Court ought
to consider in deciding whether it is just equitable to place the
first respondent under administration.
[115] He referred to the
case of
Mathebula and Others v
The
Nwandlamhari Communal Property Association
and Others
, in which Section 13 of the CPA Act was
considered.
[1]
[116] He
argued that in that matter the complaints made against the
executive
committee was far more serious than in the present matter and that
the Court did not place the CPA under administration.
[117] Mr
Knoetze SC argued that this supported his argument that a
CPA should
be dealt with understanding and sympathy.
[118] Mr
Knoetze SC argued that some of the allegations upon which
the
applicant relied in order to bring this application referred to
events that happened five years ago.
[119] He
argued that the CPA should be assisted, without summarily
taking away
the fact that they govern themselves.
[120] Mr.
Knoetze SC argued that the applicant has not availed himself
of the
existing remedies in terms of Section 10 and 11 of the CPA Act, and
argued that courts these days are extremely strict when
internal
remedies are available and not utilized by litigants coming to Court.
[121] Mr Knoetze also
referred to Section 14 of the Act indicating that if the applicant’s
allegations were true, that would constitute criminal offences in
terms of Section 14 which despite the fact that the applicant
has
laid criminal charges long ago, the expert unit of the SAPS has not
found any untoward acts perpetrated by the executive committee.
[122] Mr Knoetze SC argued
that in order to determine the meaning of the term “just
and
equitable” in Section 13(1) it would be helpful to take note of
the similarities between Section 13(1) and certain provisions
of the
Companies Act 71 of 2008
.
[123]
Especially in few of the fact that there are currently no judgements
and/or legislation and/or regulation dealing with when it would be
considered to be just unequitable to place a CPA under
administration.
[124] He
also argued that an applicant who relied on the just and equitable
provision must not have been wrongfully responsible for the situation
that has arisen.
[125] In
this regard Mr Knoetze SC argued that the applicant cannot
rely on
lack of procedures and so forth, of which he was part and parcel part
of, and/or at the very least involved with, to succeed
with an
application where he was partly responsible for the situation that
involved.
[126] Adv
Knoetze SC argued that the applicant was responsible and
tasked with
the review of the dividend list of beneficiaries, especially in view
of the fact that the incidents complaint of took
place about four
years ago.
[127] Adv Knoetze argued
that the present executive committee was elected during October
2018,
and that the Court could not order the CPA to be placed under
administration for acts that were conducted by the previous
executive
committee prior to the election of the current executive committee.
[128] Adv
Knoetze SC argued that the complaints levied by the applicant,
was
either part and parcel of his duties, or transpired long ago, before
present CPA was elected.
[129] In
respect of the alleged conflict of interest in respect of
two members
of the exco being directors on the mining company, Adv Knoetze SC
argued that it was only fit and proper that members
of the executive
committee were in fact directors in the mining company, in order to
safeguard the first respondent’s position
and its interests, in
view of the fact that the CPA is the majority shareholder of the said
company.
[130] He reiterated that
the mining activities were the only real income of the CPA,
and that
nothing was kept secret from its members.
[131] He submitted that
this linked to the fact that if there was in fact a problem the
applicant could have availed himself and the problem could have been
solved by way of the internal remedies, without the necessity
to
place the CPA under administration.
[132] Adv
Knoetze SC argued that if there were more people that supported
the
applicant, they could have demanded a general meeting and elected a
new committee.
[133] Adv
Raubenheimer in reply indicated that that could only take
place in
terms of the constitution if the chairman and the deputy chairman as
well as two executive committee members together
with ten other
members called for such a general meeting.
[134] Adv
Knoetze SC argued that if the applicant has availed himself
of the
aforesaid procedure, this application would have been unnecessary as
the relief being sought in respect of the selection
of a new
committee, could have been dealt with by exercising the applicant’s
rights in terms of the constitution.
[135] Adv
Knoetze SC also stressed that if the Director General agreed
with the
applicant, or shared his concerns, the Director General could have
asked for a special meeting to elect a new executive
committee in
terms of the provisions of the Act.
[136] Adv
Knoetze SC referred to the fact that the deponent Swartz
explains the
delay in finalising the financial statements, and referred to the
fact that only three items were required to finalised
the 2018
reports. He stated that there were a number of cogent reasons as to
why the financial statements were not prepared sooner,
but that that
constituted no need for an administrator to be appointed for that
reason.
[137] Adv
Knoetze SC questioned the powers of the administrator, indicating
that the relief sought does not say how long the administrator would
be appointed, and for how long the administrator would be
in control,
neither as to what must happen for the administrator to no longer to
be in control of the CPA.
[138]
He also criticized the fact that no indication is given as to who
must give effect to the order if the application is granted.
[139] In
respect of costs Adv Knoetze SC argued that the applicant
should be
ordered to pay the costs as it is not a constitutional matter as one
cannot argue that the applicant brought the application
in the
interest of the CPA, as the application was lacking in too many
instances to show such an intention.
LEGISLATIVE
FRAMEWORK
[140] The applicant contend
that the first respondent should be placed under administration
firstly, as a result of maladministration, and secondly on the basis
that it would be just and equitable for it to be placed under
administration.
[141] The preamble to the
CPA act sets out its aims as
follows:
To enable communities to form
juristic persons, to be known as communal property associations in
order to acquire, hold and manage
property on a basis agreed to by
members of a community in terms of a written constitution; and to
provide for matters connected
therewith.
WHEREAS it is desirable that
disadvantaged communities should be able to establish appropriate
legal institutions through which
they may acquire, hold and manage
property in common;
AND WHEREAS it is necessary to
ensure that such institutions are established and managed in a manner
which is non-discriminatory,
equitable and democratic and that such
institutions be accountable to their members;
AND WHEREAS it is necessary to
ensure that members of such institutions are protected against abuse
of power by other members;
[142] In the Bakgatla
decision, Jafta J indicated that the CPA act is a visionary piece
of
legislation passed to restore the dignity of traditional communities,
and proceeded to state that the Act should be interpreted
as
follows:
[34]
It is by now trite that section 39(2) of the Constitution has
introduced a
new approach to the interpretation of statutes. The
section obliges courts to promote “the spirit, purport and
objects of
the Bill of Rights” when construing legislation.
This new approach has been described as “a mandatory
constitutional
canon of statutory interpretation. ”The duty to
seek an interpretation that promotes the objects of the Bill of
Rights arises
even where the parties have not raised the issue
because the obligation imposed by the section is, as was observed in
Phumelela,
mandatory.
…………
[36]
Therefore in construing section 5(4) of the Act, we are obliged not
only to
avoid an interpretation that clashes with the Bill of Rights
but also to seek a meaning of the section that promotes the rights
of
the Bakgatla-BaKgafela Traditional Community to restitution of land.
Had the Supreme Court of Appeal borne this duty in mind,
it could
have attached a different meaning to the section. A meaning that
would be consonant with the purpose of the Act.”
[2]
[143]
Section 13
of the
Communal Property Associations Act provides
as
follows:
13.
Administration, liquidation and deregistration.
—
(1)
A division of the Supreme
Court or a Magistrate’s Court having jurisdiction in respect of
the area in which the property of
the association is situated or the
area in which the land which may be acquired by a provisional
association is situated, may,
on application made by the
Director-General, an association or provisional association or any
member thereof, or any other interested
person, place the association
or provisional association under the administration of the
Director-General or grant a liquidation
order in respect of an
association or provisional association, where the association or
provisional association, because of insolvency
or maladministration
or for any other cause is unwilling or unable to pay its debts or is
unable to meet its obligations, or when
it would otherwise be just
and equitable in the circumstances.
(2)
The Director-General
shall, pursuant to an administration order referred to in
subsection
(1)
,
have such powers to manage the
affairs of the association or provisional association as the Court,
subject to the provisions of
this Act, may determine.
(3)
The Director-General may,
upon written application by an association or provisional
association, cause such an association or provisional
association to
be deregistered, if he or she is satisfied that—
(a)
a resolution in favour of
deregistration was adopted at a meeting attended by a substantial
number of the members of the association
or provisional association;
(b)
the resolution was adopted
by a majority of members present or represented at the meeting; and
(c)
all relevant matters which
reasonably have to be addressed prior to deregistration, including
the way in which the assets and liabilities
of the association or
provisional association will be dealt with, have been addressed.
(4)
Where the Court orders the
liquidation of an association or provisional association, it shall
make such order as to the distribution
of the assets of the
association or provisional association as it deems just and
equitable, having considered any recommendations
which the
Director-General may make in this regard.
(5)
The Minister may prescribe
the procedure to be followed in an application contemplated in
subsection
(1)
,
and set out the powers and duties
of the Director-General, the Registration Officer, the association,
members and interested parties
in those situations.
[3]
[144]
The Minister has published regulations under the Act, in Government
Notice R1908
of 22 November 1996, but the regulations do not deal
with the procedures to be followed in an application under
section
13(1).
[145] From the express
wording of
section 13(1)
of the act, it is clear that an association
may be placed under the administration of the Director General:
“…
, where the
association or provisional association, because of insolvency or
maladministration or for any other cause is unwilling
or unable to
pay its debts or is unable to meet its obligations, or when it would
otherwise be just and equitable in the circumstances.”
[146]
From the act itself, it is thus clear that an association may
be
placed under administration or liquidated in the circumstances where:
[146.1] the association is unwilling or unable to pay its debts or is
unable to meet its obligations, as a result of insolvency,
or
maladministration or any other cause, or
[146.1] when it would be otherwise just and equitable to do so.
[147] Maladministration in
itself, is thus not an independent ground for placing a CPA
under
administration, as it is only relevant as a factor contributing to
the association being unwilling or unable to pay its debts
or unable
to meet its obligations.
[148] In the present
matter, there is no question that the association is able to not
only
pay its debts and meet its obligations, but is also in a position to
pay dividends to the members of the association, more
particularly to
the heads of the families and the first generation descendants of the
claimants.
[149] However, subject to
the circumstances of the case, maladministration may very well
be a
factor influencing the decision as to whether it would be just and
equitable to place the association under administration
or not.
[150] Neither the Court,
nor the parties’ counsel were able to find any judgments
expressly dealing with an application in terms of Section 13(1) of
the CPA Act.
[151] On the day of the
hearing of the matter Adv Knoetze SC was able to refer the Court
to a
judgment dealing with an application in terms of Section 13 of the
CPA Act.
[152] He referred to
the unreported judgment of
Mathebula and Others v The Nwandlamhari
Communal Property Association and Others
, in which Section 13 of
the CPA Act was considered.
[4]
[153] In that matter
similar allegations were also made in regard to problems with
verifying
who the legitimate beneficiaries of the association were,
financial statements not being prepared, as well as gross
maladministration
and squandering of financial
resources, etc. Despite the serious allegations Khumalo J
however dismissed
the application and stated as follows:
“
[113] The Applicants have also
accused the NCPA EC of gross violations or maladministration of
the resources of
the NCPA by the executive members which has resulted
in the squandering of funds and as a result obliged them to take the
necessary
steps. The allegations have not been substantiated with any
further evidence except for the distribution of the benefits that has
occurred discriminatorily without any proven resolution or policy
adopted by the members. The two payments as indicated happened
during
the period of the initial EC and the second one during the transient
EC. As it is the period that elections are supposed
to take place, it
is not necessary that all the affairs of the NCPA be placed under
administration which in any case lies with
the courts located
in the Mpumalanga area. If the verification process has been
finalised the Director General can proceed
with the arrangements for
the AGM.”
[5]
[154] As also referred to
in the
Mathebula
judgment, insofar as there are disputes of
fact, the matter stands to be adjudicated on those facts set out by
the applicant that
are admitted by the respondent, as well as the
respondent’s factual allegations (unless the respondent’s
version was
rejected on the papers).
[6]
[155] As set out by the
Supreme Court of Appeal (as it then was) in the matter of
Fakie NO
v CCII Systems (Pty) Ltd
in the words of Cameron JA:
“
[55] That
conflicting affidavits are not a suitable means for determining
disputes of fact has been
doctrine in this Court for more than 80
years. Yet motion proceedings are quicker and cheaper than
trial proceedings, and
in the interests of justice courts have been
at pains not to permit unvirtuous respondents to shelter behind
patently implausible
affidavit versions or bald denials. More than 60
years ago, this Court determined that a judge should not allow a
respondent to
raise "fictitious" disputes of fact to delay
the hearing of the matter or to deny the applicant its order.
There
had to be "a bona fide dispute of fact on a material
matter". This means that an uncreditworthy denial,
or
a palpably implausible version, can be rejected out of hand,
without recourse to oral evidence. In Plascon-Evans Paints Ltd v Van
Riebeeck Paints (Pty) Ltd, this Court extended the ambit of
uncreditworthy denials. They now encompassed not merely those
that
fail to raise a real, genuine or bona fide dispute of fact, but also
allegations or denials that are so far-fetched or clearly
untenable
that the court is justified in rejecting them merely on the papers.
[56] Practice in
this regard has become considerably more robust, and rightly so. If
it were
otherwise, most of the busy motion courts in the country
might cease functioning. But the limits remain, and however robust a
court
may be inclined to be, a respondent's version can be rejected
in motion proceedings only if it is "fictitious" or so
far-fetched and clearly untenable that it can confidently be said, on
the papers alone, that it is demonstrably and clearly unworthy
of
credence.”
[7]
[156] The remaining
question is whether it would be just and equitable to place the first
respondent under administration, and if so, what powers should be
granted in such an order.
[157] Adv Knoetze SC argued
that the liquidation of a CPA in terms of section 13(1) of
the CPA
act corresponds with the process whereby a company is liquidated in
terms of the provisions of chapter XIV of the Companies
Act 61 of
1973. He also submitted that the placing of a CPA under
administration corresponds with the placing of
a company under
business rescue in terms of Chapter 6 of the
Companies Act, 71 of
2008
.
[158]
He also submitted that cognisance should be taken of
section 81
of
the
Companies Act, 71 of 2008
, in respect of liquidating a company on
the basis that it is just and equitable to do so, in the event of the
company being able
to pay its debts.
[159] I find this argument
very persuasive.
[160] Section 344 of the
Companies Act, 61 of 1973 provides as follows:
“
344.
Circumstances in which company may be wound up by Court.
—
A company may be wound up by the
Court if— ……
(
h
) it appears to the
Court that it is just and equitable that the company should be wound
up.”
[161]
Section 81
of the
Companies Act, 71 of 2008
also provides as follows:
“
81.
Winding-up of solvent companies by court order.
—
(1) A court may order a
solvent company to be wound up if—
………
(
c
) one or more of the
company’s creditors have applied to the court for an order to
wind up the company on the grounds that—
(i)
……
; or
(ii)
it is otherwise just and
equitable for the company to be wound up;
(
d
) the company, one
or more directors or one or more shareholders have applied to the
court for an order to wind up the company
on the grounds that—
(ii) ……; or
(iii) it is
otherwise just and equitable for the company to be wound up;”
[162]
In respect of business rescue proceedings,
section 131
of the
Companies Act, 71 of 2008
also provides as follows:
“
131. Court
order to begin business rescue proceedings.
—
(1)
Unless a company has
adopted a resolution contemplated in
section 129
, an affected person
may apply to a court at any time for an order placing the company
under supervision and commencing business
rescue proceedings.
………
(4) After
considering an application in terms of
subsection
(1)
,
the court may—
(
a
) make an order placing
the company under supervision and commencing business rescue
proceedings, if the court is satisfied that—
(ii) …….;
or
(iii)
it is otherwise just and equitable to do so for financial reasons,
and there is a reasonable
prospect for rescuing the company; or
(
b
) dismissing the
application, together with any further necessary and appropriate
order, including an order placing the company
under liquidation.”
[163] In view of the
similarities in respect of the wording of the aforesaid acts and
the
wording of
section 13
of the CPA act, I am of the view that the
principles relating to companies, in respect of the test for it being
just and equitable
to place a company under liquidation or business
rescue, can be applied to communal property associations as well.
[164] In the matter of
Erasmus v Pentamed
[8]
,
Nestadt J (as he then was) gave a detailed analysis of the meaning
and ambit of “
just and equitable
” as used in
section 344(h) of the Companies Act, 61 of 1973 and its predecessor,
as follows:
“
The meaning and ambit of 'just and
equitable' as used in s 344 (h) and its predecessor, s 111 (g) of the
1926 Companies Act (an
expression, incidentally, also appearing in s
97 (1), 252 (3) and 427 (1) of the present Act), has been considered
in many cases;
and the same applies in respect of the corresponding
sections of the various successive English Companies Acts. Not
surprisingly
our Courts have drawn guidance from English decisions in
this regard. The main principles which emerge are, so it seems to me,
the following:
(i)
'Just and equitable', unlike the
preceding subparagraphs of s 344 postulates not facts, but only a
broad conclusion of law, justice
and equity
(per
TROLLIP J, as he then was, in Moosa NO v Mavjee Bhawan (Pty) Ltd and
Another
1967 (3) SA 131
(T) at 136H; see, too, Henochsberg on The
Companies Act 3rd ed at 598 - 9). It is not to be interpreted so as
to only include matters
ejusdem generis the other grounds specified
in s 344 (Emphy's case at 365H; Henochsberg at 600). It is to be
contrasted with an
application under s 252 in which regard oppression
has to be shown (Aspek Pipe
Co case supra at 526 - 527).
(ii)
It affords the Court a wide judicial
discretion in the exercise whereof
,
however, certain other sections of the Act must be taken account of.
They are:
(a)
Section 347 (2) (broadly similar to the
old s 117 (2)) which provides, in effect, that, if some other remedy
is available to the
applicant and he is acting unreasonably in
seeking to have the company wound up instead of pursuing that other
remedy, the application
may be refused. Section 252 (corresponding to
s 111 bis of the 1926 Act) provides such an alternative remedy. The
onus of proving
its availability and the applicant's unreasonableness
as aforesaid lies on the person opposing the winding-up order
(Moosa's case
supra; Henochsberg at 614).
(b)
In terms of s 354 (2) (the successor to
the old s 120) regard is to be had, in relation to applications to
windup generally, inter
alia, to the wishes of the majority of
shareholders (Moosa's case supra at
149A; Henochsberg (op cit at 624)).
(iii)
The
sub-section is applicable to a variety of situations. In what follows
attention is restricted to those cases where a winding-up
of a
solvent company at the instance of a member is sought.
(iv)
As
TROLLIP J, dealing with this sort of case, further pointed out in
Moosa's case at 137A, the Courts have in the course of time
evolved
certain general principles which are useful as guides in particular
cases for, and provide examples of, the exercise of
the discretion
referred to. On the other hand the tendency to create categories or
headings under which cases must be brought if
the 'just and
equitable' principle is to apply, is wrong; the generality of those
words is not to be thus reduced (Ebrahimi v Westbourne
Galleries Ltd
1973 AC 360
(HL) at 374 - 5; Re A and BC Chewing Gum Ltd
(1975) 1 All
ER 1017
(CA) at 1027; Emphy's case at 367C - D).
(v)
One class of case, probably the most
important and certainly the most relevant, applies to what have been
termed small, domestic,
private companies.
(a)
It occurs where there is a breach of
some basic, material obligation existing between the members which
renders it just and equitable,
judged according to broad common-sense
considerations, that the company be wound-up.
The rule is based on the fact that
'a limited company is more than a mere legal entity,
with a personality in law of its own; that there is room in company
law for
recognition of the fact that behind it, or amongst it, there
are individuals, with rights, expectations and obligations inter se
which are not necessarily submerged in the company structure' (per
Lord WILBERFORCE in the Westbourne Galleries case at 379B -
C).
(b)
Very often (perhaps usually) the source of
the obligation is the existence between members of what has loosely,
though inaccurately
(the Westbourne Galleries case at 380A - B) been
called a quasi partnership in this sense that prior to the formation
of the company
there was a pre-existing partnership, the obligations
of which it is reasonable to suppose continue to underly the new
company
structure (the Westbourne Galleries case at 379 - 80). This,
however, is not a requirement and I do not read Moosa's case or
Emphy's
case as holding otherwise. It is not necessary, as I
understand the authorities, and more particularly the Westbourne
Galleries
case especially at 379G - 380B, that the shareholders of
the company in question be, in substance, partners. They were not in
the
A and BC Chewing Gum case, yet an obligation not to exclude the
applicant from the management of the company was held to exist and,
it having been breached, it was held just and equitable to wind-up
the company. The obligation can, in the words of TROLLIP J in
Moosa's
case at 137H, arise from any 'arrangement (whether) express tacit or
implied' between the members.
(c)
The breach may take the form, inter
alia, of conduct which destroys or, possibly, seriously impairs the
personal relationship of
confidence, friendly co-operation or trust
which it was agreed or contemplated would exist between members
regarding the running
of the company's affairs
.
Hereunder would fall the two principles, respectively emanating from
Loch v John Blackwood Ltd
1924 AC 783
(PC) and In re Yenidje Tobacco
Co Ltd
(1916) 2 Ch 426
(CA) and referred to in Moosas's case at 137.
Mere dissatisfaction at being outvoted
on the business affairs of the company would, however, normally not
suffice, at least in
the absence of fraud
(Loch's case at 788 - 9; Taylor v Welkom Theatres (Pty) Ltd and
Others
1954 (3) SA 339
(O) at 351D - G). The Court must guard
against allowing s 344 (h) to become a launching platform, at
the instance of
minority shareholders, for the unwarranted
interference in the internal management of a company acting within
its powers (Taylor's
case at 352B - D; Hart's case at 467D - E).
(d)
Such conduct may be constituted by, eg,
constant quarrelling between the shareholders (Yenidje Tobacco's
case); adultery by one
director with the other's wife (Lawrence v
Lawrich Motors (Pty) Ltd
1948 (2) SA 1029
(W); a lack of probity, or
unfair or 'burdensome, harsh and wrongful' conduct by controlling
shareholders in managing the company
(Moosa's case at 137G; Hart's
case at 467C - D). In relation to 'partnership companies' the
general rule is that a winding-up
may be ordered if such facts are
shown as would justify a dissolution of the partnership between them
(Westbourne Galleries case
at 375C - D; Emphy's case at 366A). It has
been applied, not only in the cases just mentioned, but in many
others, some of which
are referred to in Taylor's case at 346 fin -
349D. (See too Marshall v Marshall (Pty) Ltd and Others
1954 (3) SA
571
(N)).
(e)
(i) ……….
(vii)
Thirdly,
where, whatever the size of the company, its substratum has ceased to
exist in the sense that the principal or main or
specific object or
distinct purpose for which the company was formed or which
constitutes the foundation of the company can no
longer be carried
out at all or fully, or that such main purpose has failed altogether
(per HORWITZ J in Taylor's case at 350C;
see, too, Re Baku
Consolidated Oil Fields Ltd
(1944) 1 All ER 24
(Ch).
(viii)
An applicant who
relies on the just and equitable provision must not have been
wrongfully responsible for the situation which has
arisen
(Emphy's case at 368 fin).”
(Emphasis
added)
[165] In
Apco Africa
[9]
,
Ponnan JA phrased the first principle guiding a court to exercise
its discretion as follows:
“
[19] There are two
distinct principles that guide a court in exercising its discretion
to wind up a domestic
company which is in the nature of a
partnership. The first, enunciated in Loch v John Blackwood (supra)
(at 788), is that it may
be just and equitable for a company to be
wound up where there is a justifiable lack of confidence in the
conduct and management
of the company’s affairs grounded on
conduct of the directors, not in regard to their private life or
affairs, but in regard
to the company’s business. That lack of
confidence is not justifiable if it springs merely from
dissatisfaction at being
out-voted on the business affairs or on what
is called the domestic policy of the company, but is justifiable if
in addition there
is a lack of probity in the director’s
conduct of those affairs.”
[166] In the matter of
Knipe v Kameelhoek
[10]
,
Daffue J, relied on the judgment in
Rand Air (Pty) Ltd v Rasy
Bester Investments (Pty) Ltd
1985 (2) SA 345
(W) at 350C-H
and
went on to indicate that:
“
[24] A domestic company or
quasi-partnership, or a company akin to partnership may be
liquidated due to a complete breakdown
in the relationship, of
reasonableness, good faith, trust, honesty and mutual confidence
which should exist between the directors
and/or shareholders
thereof.”
CONCLUSION
[167] By applying the
aforesaid principles to the facts of the matter, the court has
to
decide whether it would be just and equitable to place the
association under the administration of the Director General: Land
Affairs in terms of section 13(1) of the CPA Act.
[168] For purposes of
deciding this matter, I will adjudicate the matter on the basis
that
the applicant is not precluded from proceeding with his application
in terms section 13(1), without having first exhausted
the remedies
contained in section 10(2) to 10(5) or section 11(6) and 11(7) of the
CPA Act, without reaching a decision thereon
or making a finding to
that effect.
[169] In view of the fact
the current executive committee was elected during October
2018, the
allegations and complaints levelled against the previous executive
committees, prior to October 2018, can in my view
not be relied upon
as a basis to place the first respondent under administration as a
result of the conduct of its current executive
committee.
[11]
[170] It is common cause
that since August 2018, the dividends have in fact been paid
out in
accordance with the constitution namely that a dividend is paid to
each household head, who distributes or divides the said
dividend to
the other member of his household.
[171] Despite this, Mr
Raubenheimer contended that the list of beneficiaries was still
wrong, wherefore the dividend payments would in any event not be
correct.
[172] In this regard, as
set out above, unless I find a reason to reject the first
respondent’s
version on the papers as palpably farfetched and
untenable, the matter must be adjudicated essentially on the first
respondent’s
version. I cannot find any allegations in
the first respondent’s answering affidavit so inherently
untenable
and/or farfetched that I can reject it.
[173] In respect of the
allegations regarding the manipulation of dividend payments and
the
making of unauthorised payments, the conduct and events complained of
relate to events that have taken place prior to October
2018.
[174] The dividends have
been paid out in the correct manner since August 2018, and the
executive committee have since reviewed and updated the list of
members and beneficiaries.
[175] The increases in the
amounts of dividends being paid, the increase of the wage
bill, as
well as the increases in respect of the salaries all took place
during 2017 prior to the election of the current executive
committee,
and even if this was not the case, these events were duly explained
by the executive committee.
[176] The fact that two
members of the executive committee are also directors of Scarlet
Sun
15 (Pty) Ltd, conducting the mining operations can hardly be
described as a conflict of interest. Especially in view
of the
fact that the first respondent holds 51% of the shareholding in the
company, as a result of which the first respondent has
to protects
its interest in respect of the day-to-day management of the company.
[177] The events upon which
the applicant relies to substantiate his allegations that
the
executive committee is not acting in the best interest of the
association, already took place during 2016 and 2017, i.e., again
before the current executive committee was elected.
[178] These events (the
increases of the executive committee’s salaries, the grazing
rights agreement, the purchase of the immovable property, the alleged
kickback received etc.) were also fully explained by the
executive
committee.
[179] Also these events
took place while the applicant was appointed and acting as the
first
respondent’s Commercial Operations Manager, wherefore these
events transpired while the applicant was to a large extent
in
control of, or at the very least involved with, running the
day-to-day operations of the CPA.
[180] As a result of this
the applicant cannot now rely on these events to succeed with
an
application to place the CPA under administration, where he was also
(at the very least partly) responsible for the situation
that
resulted.
[181] The alleged lack of
financial management of the association is denied by the executive
committee, who alleges that since the new executive committee was
elected during October 2018 the new executive committee has resolved
the majority of difficulties in respect of obtaining the audited
financial statements of the association, which statements reflect
the
fact that the association is in a healthy financial position and
being administered properly by the executive committee.
[182] The operational
business intelligence report, which was compiled by the applicant,
was also according to the executive committee, continuously being
addressed by the first respondent.
[183] In view of the
aforesaid, the Applicant has failed to establish that it would
be just and equitable for the first respondent to be placed under the
administration of the Director General: Land Affairs, as
envisaged in
section 13(1) of the CPA Act.
[184] I therefore make an
order in the following terms:-
1.
The late filing of
the first respondent’s answering affidavit is condoned.
2.
The application is
dismissed.
3.
The applicant is
ordered to pay the costs of the application, including the costs of
the urgent application that were reserved.
AG VAN TONDER
ACTING JUDGE
On behalf of the Applicant:Adv. E.
Raubenheimer (oio Engelsman Magabane Inc
On behalf of First Respondent: Adv. B.
Knoetze SC (oio Van de Wall Inc)
[1]
Mathebula and Others v The Nwandlamhari Communal Property
Association and Others (90356/16) [2019]
ZAGPPHC 201 (9 May
2019)
[2]
Bakgatla -Ba-Kgafela Communal Property Association v
Bakgatla-Ba-Kgafela Tribal Authority and Others
2015
(6) SA 32
(CC) at par 34
and 36 also reported as 2015 (10) BCLR 1139 (CC)
[3]
Communal Property Associations Act No 28 of 1996
section 13
[4]
Mathebula and Others v The Nwandlamhari Communal Property
Association and Others (90356/16) [2019]
ZAGPPHC 201 (9 May
2019)
[5]
Mathebula and Others v The Nwandlamhari Communal Property
Association and Others (90356/16) [2019] ZAGPPHC 201 (9 May 2019) at
par 113
[6]
Mathebula and Others v The Nwandlamhari Communal Property
Association and Others (90356/16) [2019]
ZAGPPHC 201 (9 May 2019)
at par 82-85
[7]
Fakie NO v CCII Systems (Pty ltd
[2006] ZASCA 52
;
2006 (4) SA 326
(SCA) at par 55-56
[8]
Erasmus v Pentamed Investments (Pty) Ltd
1982 (1) SA 178
(WLD) at
181A-185E
[9]
Apco Africa (Pty) Ltd & Another v Apco Worldwide Inc
[2008] ZASCA 64
;
2008 (5) SA
615
(SCA) at 624J – 625B also reported as [2008] 4 All SA 1
(SCA)
[10]
Knipe & Others v Kameelhoek (Pty) Ltd & Another
2014 (1) SA
52
(FB) at 62G
[11]
Mathebula and Others v The Nwandlamhari Communal Property
Association and Others (90356/16) [2019] ZAGPPHC 201 (9 May 2019) at
par 108 and 110