About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: North Gauteng High Court, Pretoria
SAFLII
>>
Databases
>>
South Africa: North Gauteng High Court, Pretoria
>>
2019
>>
[2019] ZAGPPHC 180
|
|
Heatherview Estate Extension 24 Home Owners Association v Mahlatse Trading Enterprise CC and Others (22616/2019) [2019] ZAGPPHC 180 (20 May 2019)
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
DIVISION, PRETORIA
(1)
REPORTABLE:NO
(2)
OF
INTEREST TO OTHER JUDGES: NO
(3)
REVISED
CASE NO:22616/2019
20/5/2019
In
the matter between:
HEATHERVIEW
ESTATE EXTENSION 24
HOME
OWNERS ASSOCIATION (NPC)
(Registration
number: 2006/024/076/08)
Applicant
And
MAHLATSE
TRADING ENTERPRISE CC AND 101 others
Respondents
JUDGMENT
RANCHOD J
[1]
I heard this application in the urgent motion court where it is often
difficult, if not impossible to give a detailed judgment due to
constraints of time and the many matters enrolled for the week.
One
does the best one can in the circumstances.
[2]
In this matter, the applicant - a Home Owners Association, which is a
not-for-profit company (NPC) - seeks on an urgent basis relief as set
out in the notice of motion. Prayer 1 is the usual application
to
dispense with the forms and services provided for in Uniform Rule
6(12). I detail the relief sought in the prayers:
"2.
It is declared that the purported shareholders meeting that was held
on 25 March
2019 was unlawful and invalid;
3.
It is declared that all of the resolutions that were purportedly
adopted at the unlawful and
invalid meeting of 25 March 2019 are unlawful and void;
4.
Any and all of the 1
st
to 56
th
respondents are interdicted and restrained from:
4.1.
Holding themselves out to be directors of the applicant;
4.2.
Exercising or purporting to exercise any of the powers of the
directors of the applicant;
5.
The 1
st
to 55
th
respondents pay the costs of this application on a scale as between
attorney and client, jointly and severally, the one to pay
the other
to be absolved;
6.
Further and/or alternative relief."
[3]
It should be noted that although 102 respondents are cited (they are
all
the members of the applicant) the relief sought is against the
1
st
to 56
th
respondents.
[4]
The answering affidavit is headed "1st to 43rd , 4ih to 52nd,
55th,
56th and 79th respondents' answering affidavit." That is,
a total of 52 of the 102 respondents. The deponent to the Answering
Affidavit says they are the majority of the homeowners of the
applicant and its shareholders and who are the "disgruntled
members
I
shareholders
of the NPC."
[5]
For the sake of convenience, my reference to "the Respondents"
will henceforth be a reference to these disgruntled members.
[6]
The respondents oppose the application firstly, on the grounds it
lacks
urgency. After hearing the parties on the question of urgency,
I ruled that the matter was indeed urgent and the parties then argued
the matter on its merits.
[7]
The applicant alleges that the respondents are members of the
applicant
and are part of what it calls a "dissident group of
members", who have unlawfully and in contravention of both the
Act
and the applicant's MOI purported to convene a members' meeting
on 25 March 2019. At this unlawful meeting, the dissident members
purported to adopt resolutions to remove the applicant's lawfully
appointed directors and to substitute them with new directors;
remove
the applicant's duly appointed manager, JRL (the 101st respondent);
and amend the MOI by deleting article 3.13 (being the
article that
prohibits members that do not pay their levies from voting) without
having given proper notice of the meeting; without
a quorum being
present; and in circumstances where they were barred by the MOI from
voting. The applicant further alleges that
the dissident members did
so despite been aware that they cannot resort to self-help and should
approach a court for an order that
the directors convene such a
meeting - the vast majority of the dissident members previously
having unsuccessfully applied to this
court for precisely such an
order and already having made application to the Community Schemes
Ombud Service (the CSOS) - which
application is still pending - for
the same relief as that which the dissident members attempted to
obtain through the unlawful
self-help meeting. The unsuccessful
application was dealt with by Thlapi J.
[8]
I must say that the reference to the Memorandum of Association
appears
to be incorrect. The annexure to the papers, which is
referred to as the MOI is in fact the Articles of Association (the
AoA).
I will therefore refer to it as the latter.
[9]
It is further stated by the applicant that having purportedly adopted
the resolutions, the supposed new directors, without disclosing their
identities, sent correspondence to all of the applicant's
members to
advise them that an alternative bank account had been opened into
which levies are to be paid and that the lawfully
elected directors
of the applicant are no longer recognized as board members of the
applicant. Further, the supposed new directors
went on to state that
JRL is no longer recognized "as a board member of the applicant"
and a meeting is to be convened
to appoint a task team that will
source and appoint "new administrators"; and the new
directors "are working on
the handover plan of the [applicant's]
bank account as well as detail line transactions of the [applicant's]
financials".
[10]
The applicant goes on to say the practical effects of this conduct of
the supposed new directors
and misrepresentations are that members do
not pay their levies to the applicant which in turn leads to the
applicant being unable
to pay its debts as and when they become due
and payable. It then goes on to detail the further negative effects
of the actions
of the respondent's and the supposed new directors. I
will not detail them here as they are in the application. In any
event they
are not germane to the crisp issue.
[11]
The crisp issue before me is whether the respondents held a lawfully
constituted meeting
with the required quorum and whether the
resolutions passed have legal effect.
[12]
Central to this issue is the meaning and effect of section 61 of the
Act - in particular
subsections (3) and (12).
[13] On 20
February 2019, the respondents caused a notice for an Annual General
Meeting (AGM)
to be attached to the main entrance of the Township.
The deponent to the Founding Affidavit says it was visible for all
members
entering and exiting the premises. The next day the
respondents' legal representatives sent a notice on their behalf in
terms of
section 61(3) (a) of the Companies Act to the then board of
directors asking them to convene a meeting of members. The
respondents
say there was no response from the board or from the
managing agent, JRL. It is further alleged, that the signatories to
the notice
now constitute the majority of the respondents and the
majority of members of the Association. The notice of the meeting was
also
circulated on 22 February 2019 amongst those members who were
part of a WhatsApp group who, it is alleged, are the majority of the
members of the Association and therefore all communication is mainly
within that group. Thereafter on 17th of March 2019, say the
respondents, each homeowner was directly approached and handed a copy
of the notice.
[14]
Section 61(3) provides, and I quote:
"Subject to subsection (5)
and (6) the board of a company, or any other person specified in the
company's memorandum of incorporation
or rules, must call a
shareholders meeting if one or more written and signed demands for
such a meeting are delivered to the company,
and
(a)
each such demand describes the specific purpose for which the meeting
is proposed; and
(b)
in aggregate, demands for substantially the same purpose are made and
signed by the holders,
as of the earliest time specified in any of
those demands, of at least 10% of the voting rights entitled to be
exercised in relation
to the matter proposed to be considered at the
meeting."
[15] The
applicant submits that the relevant section provides that it is the
directors who must
convene the meeting and therefore the convening of
the meeting by the respondents on their own volition was unlawful.
Furthermore,
says the applicant, if the board fails to convene the
meeting in response to the notice in terms of section 61(3) then the
respondents
should proceed in terms of subsection (12).
[16]
Subsection (12) provides:
"If a company fails to
convene a meeting for any reason other than as contemplated in
subsection (11) -
(a)
at a time required in accordance with its memorandum of
incorporation;
(b)
when required by shareholders in terms of subsection(3;)or
(c)
within the time required by subsection (7),
a shareholder may apply to a court
for an order requiring the company to convene a meeting on a date,
and subject to any terms,
that the court considers appropriate in the
circumstances."
[17]
The respondents' stance is that they were not obliged to approach the
court having regard
to the fact that the word 'may' is used in
subsection (12). Hence they convened a meeting themselves. The
applicant concedes that
the word 'may' is not peremptory.
[18]
Section 61(1) provides:
"The board of a company, or
any other person specified in the company's memorandum of
incorporation or rules, may call a shareholders'
meeting at any
time."
[19] It is not the
respondents' case that they are empowered by the MOI (or the AoA for
that matter) or
any rules of the applicant to convene a shareholders'
meeting.
[20] In the general notes to
section 61 in
Henochsberg on the
Companies Act 71 of 2008
,
volume 1
published by LEXIS-NEXIS it is stated in relation to
section 61(1)
that:
"General
meetings are ordinarily convened by the directors, and a majority
shareholder cannot usurp this power."
[21] In
Commentary
on the
Companies Act of 2008
,
JL
Yeats
et al,
Vol.
1, Juta, at 2-1231 [Original Service, 2018] the learned authors
state:
'If
a company fails to convene a meeting for any reason other than those
contemplated in
s 61(11)
. . . the Act gives a shareholder the power
to apply to the court for an order requiring the company to convene a
meeting . . .
.'
[22]
It seems therefore that whilst shareholders or members may in terms
of
section 61(3)
request the board to convene a meeting, it is the
board that must in fact do so and where the shareholders or members
convene the
meeting themselves, it is unlawful. Their remedy, where
the directors refuse or fail to convene a meeting on request in terms
of
s61(3)
lies in subsection (12) i.e. to approach a court.
[23] It
seems to me therefore that the respondents' contention that since
section 61(12)
is not peremptory they may convene a meeting is
misplaced. It follows therefore that the meeting was unlawfully
constituted. In
this regard it is to be remembered that the Act is a
codification of the rights and powers of directors and members and
the company
itself.
[24] One of
the objectives of convening the meeting was to remove the existing
directors. However,
s71
provides for removal of directors.
[25]
Submissions were also made by the parties on whether there was a
proper quorum at the meeting
in question. In my view, I need not
consider this or any of the other issues raised (save for the
provisions of Schedule 1 to the
Act, which I deal with below) as the
determination that the meeting was unlawfully convened by the
respondents is dispositive of
the other issues.
[26]
Counsel for the respondents referred to
s4(2)
of Schedule 1 to the
Act and clause 3(13) of the AoA and, as I understood the submissions,
argued that the AoA are defective in
that they do not provide for a
distinction of shareholders as voting and non-voting shareholders.
The AoA also does not define
'privileges' of shareholders. In my
view, the respondents should have raised these issues in a
counterclaim for this court to deal
with them. They did not. Hence,
it is not an issue properly before this court. In any event, whether
voters are classified as voting
or non-voting is irrelevant.
According to the AoA those members who are in arrears with their
levies are precluded from voting.
[27]
Counsel for the respondents relied on
CDH
Invest NV v Petrotank South Africa (Pty) Ltd and another
[2018]
1 All SA 450
(GJ) at paras 79-81 for the contention that the board of
directors had a duty to convene a meeting when the notice in terms of
s61(3)
was served. In my view, the cited case does not advance the
respondents' case. As I have already said, the respondents' remedy
where the directors failed to convene the meeting was to apply to
court in terms of subsection (12). In
GOH
Invest
the majority shareholder had
done exactly what the respondents should have done in this matter,
i.e. apply to the court to compel
the directors to convene a meeting.
The reliance on paragraphs 79 to 81 of the judgment for the
respondents' stance that they could
convene a meeting is in my view
misplaced. As I understand the learned Judge (Van der Linde J) he was
of the view that intervention
by the court is not there for the
asking. At para 82 the learned judge goes on to say that the
intention of the Legislature must
have been to invoke the oversight
role of the court. Hence the court would first have to be satisfied
whether the calling of a
members' meeting was
bona
fide,
had a legitimate purpose and
in the best interests of the company. The reason for this is that a
court generally declines to interfere
in the management of a
company's affairs. It could not have been intended, reasoned the
learned judge, that the court should act
as a mere rubberstamp of
technical compliance by means of a prior statutory demand. With
respect, I cannot fault the reasoning.
[28] There
remains the question of costs. The applicant in the notice of motion
seeks costs
on an attorney and client scale. However, at the hearing
counsel for the applicant informed me that the applicant will not
pursue
punitive costs any longer and will be content with an order
that the costs follow the result. Counsel for the respondents
submitted
that an appropriate order would be that each party bear its
own costs. In my view, the relevant sections of the Act were clear -
yet the respondents chose to embark on the course of action that they
did. Also, an order that each party pays its own costs would
have the
effect that the remaining respondents would also be footing the bill
(through the payment of levies) of the HOA in circumstances
where
they did not participate in the actions of the 1st to 55
th
respondents save for the 79t h respondent. The applicant did not seek
costs against the 79t h respondent.
[29] In the
circumstances an order is granted in terms of prayers 2, 3 and 4 of
the notice of
motion. The 1
st
to 55
th
respondents are ordered to pay the costs of the application.
RANCHOD
J
JUDGE
OF THE HIGH COURT OF SOUTH AFRICA
Appearances
Counsel
on behalf of Applicant
: Adv S. J. Labuschagne
Instructed
by
: E. Y. STUART INCORPORATED
ATTORNEYS
270 MAIN STREET, BROOKLYN
PRETORIA
Counsel
on behalf of Resps. 1 - 56:
Adv O . Mokgotho
Instructed
by:
De Swardt Myambo Attorneys
941
Jan Shoba Street
Cnr Jan Sheba & Mackenzie Street,
Brooklyn,
PRETORIA.
Date
Heard:
15 May 2019
Judgment
handed down :
20 May 2019.