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[2019] ZALMPPHC 57
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Roka Phasha Makgalanoto Community Trust v Phasha and Others (2631/2019) [2019] ZALMPPHC 57 (27 November 2019)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
(LIMPOPO DIVISION,
POLOKWANE)
(1)
REPORTABLE:
YES
/NO
(2)
OF
INTEREST TO THE JUDGES: YES/
NO
(3)
REVISED.
CASE
NO: 2631/2019
27/11/2019
In the matter between:
ROKA PHASHA
MAKGALANOTO COMMUNITY TRUST APPLICANT
TRUST (IT 760/2011)
and
KGOBOKO NELSON
PHASHA
FIRST RESPONDENT
SEFATENG CHROME MINE
(PROPIERTARY) LIMITED SECOND RESPONDENT
MAMPA SEROLE COMMUNITY
TRUST
THIRD RESPONDENT
(IT
000136/2011)
TJIBENG
COMMUNITY TRUST
FOURTH RESPONDENT
BOLEPU
HOLDINGS (PROPIERTARY) LIMITED
FIFTH RESPONDENT
CORRIDOR
MINING RESOURCES (PTY) LTD
SIXTH RESPONDENT
THE
COMPANIES AND INTELLECTUAL PROPERTY SEVENTH RESPONDENT
COMMISSION
JUDGMENT
MAKGOBA
JP
[1]
In this application the Applicant seeks following relief:
1.1.
That the First Respondent be declared a delinquent director in terms
of section 162 (5) of the Companies
Act 71 of 2008 (“the
Companies Act&rdquo
;).
1.2.
That the First Respondent be removed as representative director on
the board of the Second Respondent’s
company on behalf of the
Applicant.
[2]
The Applicant is a duly registered community Trust of the Roka Phasha
Makgalanoto Traditional
Community and a shareholder in the Sefateng
Chrome Mine (Pty) Ltd, the Second Respondent. The First Respondent is
a member of the
Roka Phasha Makgalanoto Traditional Community and has
been delegated by the said community to be their representative
director
on the board of the Second Respondent Company. The other
Respondents, namely 3
rd
,
4
th
,
5
th
and 6
th
Respondents are also shareholders in the Second Respondent company
i.e Sefateng Chrome Mine (Pty) Ltd.
[3]
This application is opposed by only the First Respondent. The Second
Respondent, though it gave
a notice to oppose, filed what it referred
to as an answering affidavit but indicated that it abides the
decision of the Court.
Common
Cause Facts
[4]
The following facts are common cause or not disputed:
4.1.
The Applicant is the shareholder holding 166 par value shares at
Sefateng Chrome Mine (Pty) Ltd.
4.2.
On or about 6 June 2017 the Roka Phasha Makgalanoto Traditional
Community (“the Community”) of
which the deponent to the
founding affidavit, Tlakale Maria Phasha, is the traditional leader,
(Kgoshigadi) took a resolution in
terms of which the First Respondent
was removed as their representative director at the Sefateng Chrome
Mine (Pty) Ltd.
4.3.
Persuant to this resolution of the community taken on 6 June 2017, on
25 July 2018 the Trustees of the Applicant
took a resolution to the
effect that
“
Kgoboko
Nelson Phasha’s appointment as Trust Representative at Sefateng
Chrome Mine (Pty) Ltd is hereby set aside, nullified
and revoked
forthwith”
4.4.
The above resolutions were brought to the attention of the Second
Respondent (Sefateng Chrome Mine (Pty)
Ltd) but the latter failed to
implement the resolutions.
4.5.
The relationship and communication between the Applicant, the
Community and the First Respondent has irretrievably
broken down but
the Second Respondent still retains the First Respondent on its board
of directors.
Issues
for Determination
[5]
There are two issues before me for determination.
First,
whether the First Respondent has, according to the Applicant, by his
conduct contravened the provisions of
sections 76(2)
;
76
(3) and
section 162(5)
of the
Companies Act for
him to be declared a
delinquent director.
Second,
whether the Applicant has made out a case for the nullification and
withdrawal of the First Respondent’s representation
of the
Applicant at Sefateng Chrome Mine (Pty) Ltd.
Declaration
as Delinquent Director
[6]
The effect of a declaration of a person as a delinquent director is
that he is thereupon disqualified,
for so long as the declaration
remains in force, from being a director of any company.
[7]
In the declaration of a person as a delinquent director what is
required to be established is
conduct intended to harm the company,
alternatively an attitude of recklessness by the director in the face
of an appreciation
that his conduct could cause the company harm. The
relevant causes of delinquency entail either dishonesty, willful
misconduct
or gross negligence. The applicant in such proceedings
must allege that the respondent conducted himself with the intention
of
harming the company.
See
Lewis
Group Ltd v Woollam and Others (1)
[2017] 1 All SA 192
(WCC)
.
[8]
The following sections of the
Companies Act 71 of 2008
are relevant
for my determination of the issues in this matter:
Section
76
(2) read as follows
:
“
(2)
A director of a company must—
(a)
not use the position of director, or any information obtained while
acting in the capacity of a director—
(i)
to gain an advantage for the director, or for another person other
than the company or a wholly-owned subsidiary of the company;
or
(ii)
to knowingly cause harm to the company or a subsidiary of the
company”
Section
76(3)
reads
:
“
(3)
Subject to subsections (4) and (5), a director of a company, when
acting in that capacity, must exercise the powers and perform
the
functions of director—
(a)
in good faith and for a proper purpose;
(b)
in the best interests of the company; and
(c)
with the degree of care, skill and diligence that may reasonably be
expected of a person—
(i)
carrying out the same functions in relation to the company as those
carried out by that director; and
(ii)
having the general knowledge, skill and experience of that director.”
Section
162(5)
reads
:
“
(5)
A court must make an order declaring a person to be a delinquent
director if the person—
(a)
…
.
(b)
….
(c)
while a director—
(i)
grossly abused the position of director;
(ii)
took personal advantage of information or an opportunity, contrary to
section
76(2)(a)
;
(iii)
intentionally, or by gross negligence, inflicted harm upon the
company or a subsidiary of the company, contrary to
section 76(2)(a)
;
(iv)
acted in a manner—
(aa)
that amounted to gross negligence, wilful misconduct or breach of
trust in relation to the performance of the director’s
functions within, and duties to, the company; or
(bb)
contemplated in
section 77(3)(a)
, (b) or (c).”
[9]
It is the Applicant’s contention that the First Respondent has
by his conduct violated the
provisions of
sections 76(2)
,
76
(3) and
162
(5) of the
Companies Act.
[10
]
The Applicant’s complaints against the First Respondent are the
following:
10.1.
The First Respondent used his position as a director of the Second
Respondent to form a parallel Trust, which in turn
conducted business
with the Second Respondent.
10.2.
The First Respondent used his position as a director of the Second
Respondent to form and register a company known as
PHATJIMA, and that
the latter company is allocated business by the Second Respondent.
10.3.
The First Respondent created a company known as Dirangtota Transport
and Projects and this company was awarded mining
contracts by
Sefateng Chrome Mine. That in this regard he has used his position as
a director of Second Respondent to benefit personally
to the
detriment of the Applicant.
[11]
The existence of a parallel Trust was denied by the First Respondent.
The Applicant did not attach any documentary
proof to its founding
affidavit to confirm the existence of such a Trust. Under the
circumstances I am unable to make a finding
that such a parallel
Trust does in fact exist.
Regarding
Phatjima and Dirangtota issues, the allegations of the award of
mining contracts or any business to these entities are
denied by the
First Respondent. The First Respondent’s version is confirmed
by the Second Respondent in the latter’s
supporting affidavit.
In
the absence of any company records, copies of contracts or any
corroborating evidence annexed to the founding papers these alleged
breached of
section 76(2)
of the
Companies Act cannot
be established.
[12]
As a matter of law the Applicant relies on the following cases to
submit that an order of delinquency is
justified against the First
Respondent, namely
Grancy
Property Limited v Manala and Others
[2013] 3 All SA 111
(SCA)
and
Visser
Sitrus (Pty) Ltd v Goede Hoop Sitrus (Pty) Ltd & Others
2014 (5)
SA 179
(WCC)
.
For
the reasons that follow hereunder I am of the view that reliance on
the aforementioned cases is misplaced.
[13]
The
Grancy
case
is founded on
section 163
of the
Companies Act. The
section provides
a shareholder with a remedy against any oppressive or unfairly
prejudicial acts or omission of a company or related
person that
unfairly disregards the interests of a party such as the Applicant.
The applicant in
Grancy
made a multiple allegations of malfeasance and moral turpitude
against the first respondent in that case.
Such
allegations were alleged breach of fiduciary obligations,
misappropriation and misuse of assets, misrepresentations, fraud,
unauthorised use of Company funds and denying its entitlement as a
shareholder.
Needless
to say that the circumstances in
Grancy
differ with the case
before me, hence the legal principles in
Grancy
are not
applicable in the present matter.
[14]
In
Visser
the applicant therein based its
section 163
claim on
the alleged breach by the respondent’s directors of their
section 76
fiduciary duties
(Section 76
provides that a director must
act in good faith and for a proper purpose and in the best interests
of the Company). The Court held,
in
Visser
, that the
circumstances would have to be exceptional for a decision taken in
accordance with
section 76
to cause unfair prejudice in terms of the
Companies Act.
Still
,
the
Visser
case had to do with the provisions of
section 163
and not
section 162(5)
as in the present case.
[15]
The appropriate case dealing with an order of delinquency of a
director is that of
Gihwala
and Others v Grancy Property Ltd and Others
[2016] 2 All SA 649
(SCA)
.
Even in that case the bar is set too high to justify an order of
delinquency. It was held that delinquency was justified where
it was
found that the directors have been guilty of gross abuses of their
positions in circumstances where they owed a fiduciary
duty to ensure
that the Company complied with terms of an investment agreement.
This
entails a breach of trust in relation to the performance of one’s
duty as a director.
[16]
In essence, the Supreme Court of Appeal held in
Gihwala
that
for an application to succeed in terms of
section 162(5)
of the
Companies Act a
delinquency order can only be made in consequence of
serious misconduct on the part of a director.
[17]
In the present case I am not persuaded that the conduct of the First
Respondent make out a case for delinquency.
Removal
of the First Respondent as representative of the Applicant
[18]
As already stated above, the Community and subsequently the Trustees
of the Applicant have both passed resolutions
in terms of which the
First Respondent is withdrawn as their representative on the board of
the Second Respondent. It is common
cause that the Second Respondent
failed to implement those resolutions. The result is that the First
Respondent is still on the
board of directors of Sefateng Chrome Mine
(Pty) Ltd.
[19]
The removal of the First Respondent as a representative of the Trust
(Applicant) and the community on the
board of directors of the Second
Respondent was occasioned by the following circumstances and grounds:
19.1.
The First Respondent usurped the powers of the Trust (Applicant) and
took decisions by himself without consulting fellow
Trustees.
19.2.
The First Respondent continued to call unlawful community meetings in
the name of Roka Phasha Makgalanoto Traditional
Authority and imposed
himself as the community leader. He organized other Community members
to rebel and undermine the authority
of the Kgoshigadi.
19.3.
The First Respondent unlawfully formed a parallel Traditional
Authority and illegally obtained the Applicant Trust’s
stamp,
consequently usurping the Trust and the functions of the Traditional
Authority and powers of the traditional leader, being
the Kgoshigadi.
19.4.
The First Respondent started and continued a reign of terror against
the Trustees, Kgoshigadi and members of the Roka
Phasha Makgalanoto
Traditional Authority by intimidating and threatening members of the
Traditional Authority.
[20]
In the light of the aforementioned grounds in paragraph 19 above, I
make a finding that the Trustees as well
as the Community had good
cause to revoke the First Respondent’s representation at the
Sefateng Chrome Mine (Pty) Ltd. The
relationship between the parties
has reached such a state of disintegration that all trust is lost
between them and with little
chance of reconciliation. It is common
cause that the First Respondent was appointed to the board of
directors of the Second Respondent
by virtue of the mandate given by
the Applicant and the Community. Consequently the termination of the
mandate or withdrawal of
authority should result in his resignation
from the board of directors of the Second Respondent.
[21]
It is strange to note that the Second Respondent persists in
retaining the First Respondent on its board
despite the termination
of his mandate by the Applicant. One wonders what the Second
Respondent stands to gain in this impasse.
This is nothing else but
the divide and rule tactics practiced by some members of Corporate
South Africa. This cannot be in the
interests of the community the
Second Respondent purports to serve.
[22]
It is quite disturbing to note that even though the Second Respondent
purports not to oppose this application
but abide the decision of the
Court, it went on to file an answering affidavit which supports the
case for the First Respondent.
Mr Venter, the attorney for the Second
Respondent at all material times, now acts on behalf of the First
Respondent in this case.
This is a clear conflict of interests
situation because the Applicant (who is in conflict with First
Respondent) is a shareholder
of the Second Respondent company.
[23]
Although the Applicant has been unsuccessful in its relief relating
to the order of delinquency, it has however
succeeded in the order to
revoke and annul the First Respondent’s representation at the
board of the Second Respondent.
A
substantial success has been achieved in this regard. It is therefore
only fair that the Applicant should be absolved from payment
of legal
costs of this application.
[24]
I accordingly grant the following order:
1.
The application to declare the First
Respondent as a delinquent director in terms of
section 162(5)
of the
Companies Act is
dismissed.
2.
The application for the removal of the First Respondent as a
representative of the Applicant
on the board of the Second Respondent
is granted and the First Respondent’s mandate to represent the
Applicant therein is
revoked and / or annulled.
3.
It is ordered that the First Respondent be replaced as a
representative of the Applicant
on the board of directors of the
Sefateng Chrome Mine (Pty) Ltd.
4.
Each party shall pay own costs.
E
M MAKGOBA
JUDGE
PRESIDENT OF THE HIGH COURT, LIMPOPO DIVISION, POLOKWANE
APPEARANCES
Heard
on
: 13 November 2019
Judgment
delivered on : 27
November 2019
For
the Applicant
: Adv K
Mokwena
Instructed
: Mpshe Tsatsi Attorneys
For
the First Respondent : Mr D W Venter
Venter
De Villiers Attorneys
c/o
Mathopo-Makweya Inc