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[2017] ZASCA 121
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Morudi and Others v NC Housing Services and Development Co Ltd and Others (903/2016) [2017] ZASCA 121 (22 September 2017)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Not
Reportable
Case No: 903/2016
In the matter between:
MOSALASUPING
PHILLIP MORUDI
FIRST
APPELLANT
FURTHER
70 APPELLANTS
SECOND TO 71 APPELLANTS
and
NC
HOUSING SERVICES & DEVELOPMENT
FIRST RESPONDENT
CO
LTD
SCHOLTZ
JACOBS BABUSENG
SECOND
RESPONDENT
SEODI
JULIUS MONGWAKETSI
THIRD RESPONDENT
Neutral
citation:
Mosalasuping
& others v NC Housing & others
(903/2016)
[2017] ZASCA 121
(22 September 2017)
Coram:
Cachalia,
Tshiqi and Mathopo JJA and Molemela and Mbatha AJJA
Heard:
18
August 2017
Delivered:
22
September 2017
Summary:
Rescission
– a court of appeal may only interfere if power not properly
exercised – no bona fide defence which prima
facie carries
prospects of success.
ORDER
On
appeal from:
Northern
Cape Division of the High Court, Kimberly (Lever AJ sitting as a
court of appeal):
The
appeal is dismissed with costs, which shall include those of two
counsel.
JUDGMENT
Tshiqi
JA (Cachalia and Mathopo JJA and Mbatha AJA concurring):
[1]
This is an
appeal against an order of the Northern Cape Division of the High
Court, Kimberley, in terms of which Lever AJ refused
an application
for rescission of an earlier order granted by that court, by consent
between the first respondent (NC Housing Services
& Development
Co Ltd) on the one hand and the second and third respondents (Messrs
Scholtz Jacob Babuseng and Seodi Julius
Mongwaketsi) on the other,
per Kgomo JP (the main application).
[2]
The matter
has a protracted litigation history and the facts relevant to these
proceedings are summarised succinctly in the respondents’
heads
of argument. During 1997 a group of individuals from previously
disadvantaged communities obtained a shelf company to use
as a
vehicle to exploit commercial opportunities in the Northern Cape for
the benefit of the members of these communities. It was
converted
into a public company to enable registration of more than 50 people
as shareholders and its name was changed to that
of NC Housing. As a
public company there were no pre-emptive rights in favour of its
existing shareholders in respect of the shares
taken up in its
Memorandum of Incorporation and there was no limitation on the number
of shares an individual shareholder could
hold. Capital was acquired
by way of subscription for shares from members of the targeted
communities.
[3]
On 4
January 2002, the Board of Directors passed a resolution to sell
shares to an investor to enable NC Housing to purchase an
interest in
Meriting Investments (Pty) Ltd (Meriting), a substantial shareholder
in Teemane (Pty) Ltd, a joint venture company
between Meriting and
Sun International Limited, which owns the Flamingo Casino in
Kimberley. Pursuant to this resolution and in
February 2002, Mr
Schalk Junior Van Rensburg invested R191 000 in the former and
this enabled NC Housing to purchase eight
shares (equivalent of eight
per cent equity) in Meriting. Mr Van Rensburg later sold these shares
to the third respondent (Mr Mongwaketsi)
for R300 000.
[4]
On 8 May
2004, the shareholders passed a resolution providing that any
shareholder wishing to increase their stake in NC Housing
could
deposit money into its bank account at Standard Bank, Kimberley. The
understanding was that the shareholder would then be
issued with
additional shares commensurate with the deposit made. The second
respondent, Mr Babuseng, says that he made deposits
totalling R50 000
over a period into the bank account and to Meriting on behalf of NC
Housing entitling him to the issue of
additional shares. Eight years
elapsed after the resolution was passed and the money invested was
used towards the general funding
of NC Housing and the acquisition of
further equity in Meriting. NC Housing subsequently acquired a 20 per
cent interest in NWC
Manganese (Pty) Ltd, which had a right to mine
manganese but did not have the capital to exercise the right itself.
It therefore
entered into a joint venture agreement with a Chinese
registered entity known as AML wherein NWC held 51 per cent and AML
49 per
cent of the equity respectively.
[5]
On 21
September 2007, NC Housing was deregistered by the Registrar of
Companies due to its failure to file annual tax returns. The
full
import of the deregistration was apparently not appreciated by the
board and the management of NC Housing at the time but
the need to
restore the registration became apparent when difficulties arose
between the shareholders in the NWC joint venture
in approximately
2011. The only possible resolution of the dispute was for the
shareholders in NWC to sell their shares to a third
party for R250
million. NC Housing’s shares in NWC represented its major asset
and a special resolution was required to approve
the sale. This in
turn required the restoration of NC Housing to the Register of
Companies to facilitate the convening of a special
general meeting
for that purpose.
[6]
An
application to restore the registration was launched and an order
granted re-vesting NC Housing with its assets. The order was
silent
on whether or not its board was restored. This led to difficulties in
the management of NC Housing. There was a need to
approve the sale of
NC Housing’s shares in NWC and to increase NC Housing’s
authorised share capital, but when Mr Babuseng
attempted to convene a
special general meeting of shareholders to address these issues
Messrs Morudi (first appellant), D J Jacobs
(the second appellant), F
A G Adams (the third appellant) and V A Goliath (the fourth
appellant), (hereinafter referred to as the
Morudi group) questioned
Mr Babuseng’s entitlement to the additional shares he had
previously acquired and the previous sale
of shares to Mr Van
Rensburg. The Morudi group brought an urgent application in the name
of NC Housing for an interdict and were
granted an order interdicting
the holding of this meeting. Messrs Babuseng and Mongwaketsi launched
the main application, (which
became the subject of the rescission
application) , in which they sought inter alia an order declaring:
a)
that the
persons whose names appeared in an annexure to the application marked
as annexure ‘M’ be the list of the prospective
shareholders of NC Housing pending a decision of the board to
increase the number of authorised shares pro rata to a certain
maximum
and for the board to authorise the issuing of such shares
accordingly;
b)
that the
said prospective shareholders be authorised to vote for the
appointment of a new board of directors; alternatively
c)
that the
board that existed prior to de-registration be reinstated and the
board of directors be authorised to convene a meeting
of shareholders
for the purpose of considering a special resolution to sell NC
Housing’s main asset
[7]
In the
founding affidavit, Messrs Morudi, Jacobs and Adams were cited as
major businessmen and directors of NC Housing and Mr Goliath
was
cited as a major businessman and former director. The main
application was initially opposed by Mr Morudi and he stated that
he
was acting in his capacity as a director of NC Housing and was
authorised through a resolution passed by the NC Housing’s
Board of Directors comprising of himself, and Messrs Jacobs, Adams
and Goliath. In terms of this resolution Mr Morudi was authorised
to
depose to all affidavits in opposition to the application and the
firm Towell & Groenewald Attorneys was appointed to represent
NC
Housing in the matter.
[8]
On 16
October 2012 the main application came before Williams J who made an
order, by agreement between the parties, referring the
contentious
issue of whether annexure ‘M’ correctly reflected NC
Housing’s shareholding to trial. Pending the
outcome of the
trial, she made an interim order by agreement, which would regulate
the future conduct of the affairs of NC Housing.
The order authorised
the issue of one ordinary share par value to each person whose name
appeared in annexure ‘M’,
directed that the board, which
would consist of Mr Morudi and his group and Mr Babuseng, as
chairperson, to convene a meeting to
consider a resolution to sell NC
Housing’s main asset: its shares in NWC. It further
directed that should the main
asset be sold, the proceeds of the sale
would be divided equally and deposited into the trust accounts of the
respective attorneys
of the parties pending judgment in the trial.
[9]
Pursuant to
the order, the persons listed in annexure ‘M’ were
assembled on 16 November 2012 at a general meeting arranged
for the
purposes of approving the sale of the shares in NWC. Consensus could
not be reached at this meeting and it was adjourned
and reconvened on
the 1 December 2012 where those present, who formed a quorum of NC
Housing’s shareholders as identified
in William J’s
order, passed the resolution for the sale of the shares in NWC. They
also established a subcommittee of shareholders
to examine the
disputes between Messrs Babuseng and Mongwaketsi on the one side and
the Morudi group on the other. Ultimately,
at a shareholders’
meeting held on 19 April 2013, it was resolved that NC Housing would
withdraw its opposition to the main
application. To give effect to
the resolution, the mandate of NC Housing’s original attorney
was withdrawn and a new attorney
appointed. The new attorney, A
Horwitz from the firm of attorneys Adrian B Horwitz and Associates
served and filed a notice of
substitution as attorney of record and
on 12 August 2013 served and filed a withdrawal of NC Housing’s
opposition to the
main application.
[10]
On 26
August 2013, the Morudi group, purporting to act on behalf of NC
Housing, launched an urgent application to declare the shareholders’
meeting of 19 April 2013 and all resolutions passed thereat to have
been unlawful. On 8 August 2014, the urgent application was
dismissed
by Mamosebo AJ. It is common cause that the Morudi group did not
appeal against the dismissal of their urgent application
and took no
further steps to set aside the 19 April 2013 resolution. In the
meantime, on 8 February 2014, the attorney representing
Messrs
Babuseng and Mongwaketsi, filed a notice setting the main application
down for trial from 1 to 5 September 2014.
[11]
On 28
August 2014 a pre-trial conference took place at the chambers of
Kgomo JP, the Judge President, Northern Cape Division of
the High
Court (the JP). On 29 August 2014, Towell and Groenewaldt served a
notice to withdraw as attorneys of record in the main
application. On
1 September 2014, notwithstanding the firm’s delivery of the
notice to withdraw, Mr Kgotlagomang, an attorney
at the firm,
appeared in court before the JP claiming to be representing the
Morudi group
in
the main application. Mr Kgotlagomang was in the company of a group
of some of the appellants. The following debate ensued between
the JP
and Mr Kgotlagomang:
‘
Mr
Kgotlagomang: . . . I appear on behalf of the second, third and the
fourth Respondents in the matter My Lord.
Court:
Mr Kgotlagomang, I don’t quite follow, I am a bit lost now.
They appear in their individual capacities?
Mr
Kgotlagomang: Indeed My Lord. The Court would have noted that –
or the Court was informed that the Towel & Groenewaldt
Attorneys
has withdrawn as Attorneys of record in respect of the first
Respondent My Lord, which will be the company in the matter
My Lord.
Court:
Yes
Mr
Kgotlagomang: I provided the Court with a copy of the notice of
withdrawal.
Court:
Yes, I am a bit at a loss now and you then say you appear on behalf
of?
Mr
Kgotlagomang: The 2
nd
, the 3
rd
and the 4
th
Respondents My Lord.
Court:
Mr Morudi, 2
nd
, 3
rd
Mr Jacobs and the 4
th
?
Mr
Kgotlagomang: Indeed My Lord.
Court:
Mr Adams?
Mr
Kgotlagomang: Indeed My Lord.
.
. .
Court:
What capacity now?
.
. .
.
. .
Mr
Kgotlagomang: My Lord, in the beginning they [Messrs Morudi, Jacobs,
Adams and Goliath] were acting as Directors but it appears
that they
have always been holding dual positions because their names appear on
Annexure M to the proceedings My Lord and as a
result they are
shareholders as or as interest holders as contemplating in this
application My Lord.
.
. .
Court:
Mr Kgotlagomang are you representing them as Directors or as
individuals?
Mr
Kgotlagomang: As individuals.
.
. .
Court:
Well, tell me what does the 1
st
– sorry the 2
nd
,
3
rd
and 4
th
Respondent wish to do today because
there is a draft agreement between the 1
st
, 2
nd
,
and – 1
st
and 2
nd
Applicants and the 1
st
Respondent the company. We know their position is clear, there is no
lis or issue between them. They . . . have an order –
draft
order which they wish to make an order of court. So . . .
(incomplete).
Mr
Kgotlagomang: My Lord, with regards to the 2
nd
, the 3
rd
and the 4
th
Respondents they are intending on opposing and
since the matter was referred for oral evidence, the matter may
proceed in respect
of the 2
nd
, the 3
rd
and the
4
th
Respondents My Lord, on the grounds that they are
indeed shareholders as appears in Annexure M My Lord.
.
. .
Court:
Mr Kgotlagomang, let me hear you. Look, you are not properly before
the Court . . . your clients were cited in their capacity
as
Directors and not as individuals. If you . . . persist that they
would want to oppose the application, it would mean that…you
will have to apply for a postponement and… they will have to
pay the costs because this application comes at such a late
stage . .
. .
.
. .
.
. . I must adjourn so that you could speak to them. You [are] not on
record, they are not on record. But I could adjourn for what
it is
worth, so that you can speak to them.’
[12]
After the
adjournment, Mr Kgotlagomang did not apply for the postponement but
withdrew from the matter. He however informed the
court that the
group wished to address the court, but the JP refused on the basis
that they were not before the court. Thereafter
the draft agreement
between Messrs Babuseng, Mongwaketsi on the one hand and NC Housing
on the other hand, was made an order of
court by the JP. Subsequently
Mr Morudi and 70 others brought an application to rescind this order
under the common law and in
terms of rule 42(1)
(a)
of the
Uniform Rules of Court. The subject of this appeal is the refusal by
Lever AJ to rescind this order, on the basis that Mr
Morudi and 70
others failed to establish grounds for rescission.
[13]
The grounds
upon which the appeal are based are that:
a)
The high
court misdirected itself in finding that Mr Morudi and 3 other
appellants were cited in the main application in their representative
capacities as directors of NC Housing and therefore did not properly
explain their default
b)
The high
court misdirected itself in finding that the 5
th
to 71
st
appellants did not properly explain their default
c)
The high
court misdirected itself in finding that the appellants had not shown
‘a bona fide defence that has some prospects
of success’.
d)
The high
court misdirected itself regarding the interpretation of rule
42(1)
(a)
of the Uniform Rules of Court
e)
The high
court misdirected itself in finding that it has not been shown that
the appellants’ rights as enshrined in s 34 of
the
Constitution
[1]
were infringed.
[14]
A court,
when considering whether to rescind a judgment or order, either in
terms of the common law or rule 42, is exercising a
discretion. ‘[A
court of appeal] may interfere with the exercise of a discretionary
power by a lower court only if that power
had not been properly
exercised. This would be so if the court has exercised the
discretionary power capriciously, was moved by
a wrong principle of
law or an incorrect appreciation of the facts . . . .’ (See
Ferris &
another v FirstRand Bank Ltd
[2013]
ZACC 46
;
2014 (3) SA 39
(CC) at para 28 and 29. An applicant applying
for rescission in terms of the common law must show sufficient cause
which requires
a reasonable and acceptable explanation for the
default and also that they have a bona fide defence which prima facie
carries some
prospects of success. (See
Colyn
v Tiger Food Industries Ltd t/a Meadow Feed Mills (Cape)
2003 (6) SA 1
SCA para 11).
[15]
The four
grounds of appeal are inextricably linked to each other and it is not
necessary to deal with each one separately. The order
which the
appellants sought to set aside was obtained by agreement between
Messrs Babuseng and Mongwaketsi on the one hand and
NC Housing on the
other, through the 19 April 2013 resolution. The order by Williams J
certainly did not prohibit the parties from
resolving their disputes
amicably.
[16]
The
fundamental flaw in the application for rescission is that the urgent
application, which sought to set aside the 19
April
2013 resolution was dismissed by Mamosebo AJ. Because there was no
appeal against this order, the resolution stands. The consequence
is
that the appellants have no bona fide defence to the main
application, which prima facie carries some prospects of success.
Counsel for the appellants contended that the urgent application was
dismissed on a technicality and that its dismissal should
be ignored.
This submission fails to take into account the legal consequences of
the order. The order sought in the urgent application
was that the
meeting held on 19
April
2013 and the resolutions taken thereat be declared unlawful and set
aside. Mamosebo AJ dismissed this application and the
reasons she
advanced for dismissing it were irrelevant for the purposes of the
rescission application.
[17]
As is
apparent from the debate between the JP and Mr Kgotlagomang, the JP
was at pains to enquire from Mr Kgotlagomang in what capacity
he and
the group of appellants were appearing in court on 1 September 2014,
as NC Housing’s opposition to the main application
had been
withdrawn and as Towell and Groenewaldt, a firm to which Mr
Kgotlagomang was an attorney, had earlier served a notice
to withdraw
as attorneys of record in the main application. Therefore even
if the appellants had seized the opportunity offered
by the JP, to
apply for a postponement in order to ask for leave to intervene in
the matter, it seems to me that this would have
been a fruitless
exercise as they were bound by the resolution taken on 19 April 2013.
In the premises I conclude that the requirements
for rescission were
not met.
[18]
I have read
the dissenting judgment of and am constrained to emphasise the
following: Contrary to what she says in para 32 of her
judgment, para
7 of the main judgment specifically points out that in the main
application the Morudi group was not acting in their
personal
capacities. In para 10 the main judgment also states that when the
Morudi group launched the urgent application seeking
to declare the
19 April 2013 resolution unlawful, they purported to act on behalf of
NC Housing. The import of these findings is
simply that throughout
the protracted litigation the Morudi group acted as either directors
or shareholders or in both capacities
but not in their personal
capacities. What the dissenting judgment overlooks is that the
dispute that was withdrawn by agreement
was between Mongwaketsi and
Babuseng on the one hand and NC Housing on the other, and not between
the former and any of the shareholders
in their personal capacities.
There was therefore no lis between Mongwaketsi and Babuseng against
the individual shareholders or
any of the appellants in their
personal capacities. When the appellants appeared before the JP they
could only have done so as
directors or as shareholders of NC Housing
and not in any other capacity. However, the fundamental problem was
that their opposition
to the main application, which concerned NC
Housing had been withdrawn. Their attempt to challenge this
withdrawal had failed.
[19]
I make the
following order:
The
appeal is dismissed with costs, which shall include those of two
counsel.
___________________
Z L L Tshiqi
Judge
of Appeal
Molemela
AJA:
[20]
I have read the first judgment and regrettably cannot agree with its
reasoning and conclusion. The background to this matter
has already
been sketched in the first judgment. Before addressing myself to the
issues in this appeal, I will mention a few additional
facts which
are important for purposes of this dissenting judgment. As correctly
pointed out in the first judgment, the first respondent
(NC
Housing Services & Development Co Ltd)
(the
company) in the application that served before Williams J on 16
October 2012 (the main application) was initially a private
company,
which was converted into a public company for use as a vehicle to
access opportunities for the benefit of members of the
previously
disadvantaged communities. Capital for the company had been acquired
by way of subscription of shares from members of
previously
disadvantaged communities.
[21]
Furthermore, before the main application was launched, Mr Morudi had
previously succeeded in interdicting the holding of an
annual general
meeting due to the first applicant, Mr Babuseng’s failure to
give the shareholders adequate notice of the
meeting. Instead of
issuing a proper notice, Mr Babuseng, together with the second
applicant, Mr Mongwaketsi (herein after referred
to as the
applicants), approached Williams J for a declaratory order in the
main application. A reading of the set of affidavits
filed in the
application reveals various factual disputes. The main bone of
contention seems to be directed at the number of shares
the
applicants in the main application purported to be entitled to. The
ancillary bone of contention pertains to the validity of
a contract
which purported to allot 500 shares (50 per cent of the company’s
issued shares) to a certain ‘investor’,
allegedly without
the board’s approval.
[22]
According to the Morudi group, the aforesaid transaction was not
sanctioned by the board of directors and was in direct contrast
to
the achievement of the purpose for which the company was acquired. It
is common cause that the investor subsequently sold the
shares in
question to the second applicant, Mr Mongwaketsi, which transaction
increased his shareholding in the company to 57 per
cent. The
latter’s entitlement to this shareholding is disputed.
Suffice it to say that given the number and nature
of factual
disputes raised in this matter, it is not surprising that, by
agreement between the parties to the dispute, the primary
issue of
whether annexure ‘M’ reflected the correct shareholding
in the company was referred to trial.
[23]
I
turn now to address myself to the issues in the appeal. The central
issue in the appeal is the court a quo’s refusal to
rescind the
judgment of the JP. Since the consideration of an application for
rescission of judgment entails the exercise of a
discretion, I must
also consider whether the court a quo, in reaching its decision,
judicially exercised its decision.
[24]
It is trite law that an applicant in an application for rescission of
judgment must show that he or she has a direct and substantial
interest that clothes him / her with locus standi in that
application.
[2]
In
Bowring
N
O v Vrededorp Properties CC & another
[3]
it was held that the
enquiry relating to non-joinder of a party is one of substance rather
than one of the form of the claim. This
Court reiterated that the
substantial test is whether the party which alleges to be a necessary
party for purposes of joinder has
a legal interest in the subject
matter of the litigation that may be prejudicially affected by the
judgment of the court in the
proceedings concerned.
In
the interests of brevity of this dissenting judgment, I will
consolidate the considerations applicable to the determination of
the
existence of locus standi with a discussion on the capacity in which
the Morudi group were cited in the main application, which
is the
essence of the first ground of appeal.
[25]
It is appropriate to precede the determination of whether the Morudi
group had direct and substantial interest in the matter,
with a brief
analysis of salient statutory provisions. At the risk of stating the
obvious, it bears mentioning that in terms of
the common law and
various provisions of the Companies Act 61 of 1973 (the 1973 Act) and
the Companies Act 71 of 2008 (the
Companies Act) company
violations
may, in certain circumstances, be imputed to directors on account of
breach of their duties, which may result in them
incurring personal
liability. For purposes of clarity, I must point out from the
outset that I do not consider the applicants
in the main application
to have brought the main application as a ‘derivative action’.
Legal
framework
[26]
Section 96 of
the
1973 Act provides as follows:-
'
96
Limitation of time for issue of share certificates
(1) Every
company shall within two months or within such extended time, not
exceeding one month, as the Registrar on good grounds
shown and on
payment of the prescribed fee, may grant, after the allotment of any
of its shares, debentures or debenture stock,
complete and have ready
for delivery the certificates of all shares, the debentures or the
certificates of all debenture stock
allotted.
(2) If
default is made in complying with the requirements of subsection (1),
any person entitled to the certificates of shares,
the debentures or
the certificates of debenture stock in question may by notice in
writing call upon the company to make good the
default, and if the
company fails to comply with the notice within ten days after service
thereof, the Court may on the application
of such person make an
order directing the company to make good the default within such time
as may be specified in the order,
and if it thinks fit direct that
any costs of or incidental to the application shall be borne by the
company or by any director
or officer of the company responsible for
the default.
(3) If
default is made in complying with the requirements of subsection (1),
the company, and every director or officer thereof
who knowingly is a
party to the default, shall be guilty of an offence.’
[27]
In terms of
s 36(2)
of the
Companies Act, the
authorisation and
classification of shares and other terms associated with each class
of shares, as set out in a company’s
Memorandum of
Incorporation, may be changed only by an amendment of the Memorandum
of Incorporation by special resolution of the
shareholders or the
board of the company, except to the extent that the Memorandum of
Incorporation provides otherwise.
[28]
Section 77
of the
Companies Act provides
as follows:-
‘
77
Liability of directors and prescribed officers
(1)
In this section, director includes an alternate ‘
director’
,
and─
(a)
a
prescribed officer; or
(b)
a
person who is a member of a committee of a board of a company, or of
the audit committee of a company,
irrespective
of whether or not the person is also a member of the company’s
board.
(2)
A director of a company may be held liable ─
(a)
in
accordance with the principles of the common law relating to breach
of a fiduciary duty, for any loss, damages or costs sustained
by the
company as a consequence of any breach by the director of a duty
contemplated in
section 75
,
76
(2) or
76
(3)(a) or
(b);
or
(b)
in
accordance with the principles of the common law relating to delict
for any loss, damages or costs sustained by the company as
a
consequence of any breach by the director of─
(i)
a duty contemplated in
section 76
(3)
(c);
(ii)
any provision of this Act not otherwise mentioned in this section; or
(iii)
any provision of the company’s Memorandum of Incorporation.
(3)
A director of a company is liable for any loss, damages or costs
sustained by the
company as a direct or indirect consequence of the
director having─
(a)
acted
in the name of the company, signed anything on behalf of the company,
or purported to bind the company or authorise the taking
of any
action by or on behalf of the company, despite knowing that the
director lacked the authority to do so;
(b)
acquiesced
in the carrying on of the company’s business despite knowing
that it was being conducted in a manner prohibited
by section 22(1);
(c)
been a
party to an act or omission by the company despite knowing that the
act or omission was calculated to defraud a creditor,
employee or
shareholder of the company, or had another fraudulent purpose;
(d)
signed,
consented to, or authorised, the publication of─
(i)
any financial statements that were false or misleading in a material
respect;
or
(ii)
a prospectus, or a written statement contemplated in section 101,
that contained─
(aa)
an
‘untrue statement’ as defined and described in section
95; or
(bb)
a
statement to the effect that a person had consented to be a director
of the company, when no such consent had been given, despite
knowing
that the statement was false, misleading or untrue, as the case may
be, but the provisions of section 104 (3), read with
the changes
required by the context, apply to limit the liability of a director
in terms of this paragraph; or
(e)
been
present at a meeting, or participated in the making of a decision in
terms of section 74, and failed to vote against─
(i)
the issuing of any unauthorised shares, despite knowing that those
shares had
not been authorised in accordance with section 36;
(ii)
the issuing of any authorised securities, despite knowing that the
issue of
those securities was inconsistent with section 41;
(iii)
the granting of options to any person contemplated in section 42 (4),
despite knowing
that any shares─
(aa)
for
which the options could be exercised; or
(bb)
into
which any securities could be converted, had not been authorised in
terms of section 36;
(iv)
the provision of financial assistance to any person contemplated in
section 44 for
the acquisition of securities of the company, despite
knowing that the provision of financial assistance was inconsistent
with
section 44 or the company’s Memorandum of Incorporation;
(v)
the provision of financial assistance to a director for a purpose
contemplated in
section 45, despite knowing that the provision of
financial assistance was inconsistent with that section or the
company’s
Memorandum of Incorporation;
(vi)
a resolution approving a distribution, despite knowing that the
distribution was
contrary to section 46, subject to subsection (4);
(vii)
the acquisition by the company of any of its shares, or the shares of
its holding company,
despite knowing that the acquisition was
contrary to section 46 or 48; or
(viii)
an allotment by the company, despite knowing that the allotment was
contrary to any provision
of Chapter 4.
.
. . .
.
. . .
(6)
The liability of a person in terms of this section is joint and
several with any other
person who is or may be held liable for the
same act.
.
. . .
[29]
Section 157
of the
Companies Act provides
:
‘
157
Extended standing to apply for remedies
(1)
When, in terms of this Act, an application can be made to, or a
matter can be brought before, a court, the Companies Tribunal,
the
Panel or the Commission, the right to make the application or bring
the matter may be exercised by a person─
(a)
directly
contemplated in the particular provision of this Act;
(b)
acting
on behalf of a person contemplated in paragraph
(a)
,
who cannot act in their own name;
(c)
acting
as a member of, or in the interest of, a group or class of affected
persons, or an association acting in the interest of
its members; or
(d)
acting
in the public interest, with leave of the court.
(2)
The Commission or the Panel, acting in either case on its own motion
and in its absolute
discretion, may─
(a)
commence
any proceedings in a court in the name of a person who, when filing a
complaint with the Commission or Panel, as the case
may be, in
respect of the matter giving rise to those proceedings, also made a
written request that the Commission or Panel do
so; or
(b)
apply
for leave to intervene in any court proceedings arising in terms of
this Act, in order to represent any interest that would
not otherwise
be adequately represented in those proceedings.
(3)
For greater certainty, nothing in this section creates a right of any
person to commence
any legal proceedings contemplated in section 165
(1), other than─
(a)
on
behalf of a person entitled to make a demand in terms of section 165
(2); and
(b)
in the
manner set out in section 165.’
[30]
Section 158
of the
Companies Act states
as follows:
‘
158
Remedies to promote purpose of Act
When
determining a matter brought before it in terms of this Act, or
making an order contemplated in this Act─
(a)
a court
must develop the common law as necessary to improve the realisation
and enjoyment of rights established by this Act; and
(b)
the
Commission, the Panel, the Companies Tribunal or a court─
(i)
must promote the spirit, purpose and objects of this Act; and
(ii)
if any provision of this Act, or other document in terms of this Act,
read
in its context, can be reasonably construed to have more than
one meaning, must prefer the meaning that best promotes the spirit
and purpose of this Act, and will best improve the realisation and
enjoyment of rights.’
[31]
Section 161
[4]
of the
Companies
Act, allows
a holder of issued securities to apply to court for an
order determining any of his or her rights in terms of the Act, or
the Memorandum
of Incorporation or any rules of the company. The
shareholder may also apply to court in order to protect any of his or
her rights
and may seek an order remedying the harm done to him or
her by the company
or
any of its directors
to the extent that they are or may be held liable in terms of s 77.
(My emphasis).
Locus
standi of the appellants in respect of the rescission application
(Capacity in which the Morudi group was cited in the main
application)
[32]
The first judgment has made n
o
specific finding with regards to the capacity in which the Morudi
group were cited as respondents in the main application. The
respondents, in their heads of argument, submitted that “there
is, with respect, no evidence that
Morudi
et al
acted
in any other capacity than as Directors prior to 1 September 2014.”
Before us, counsel for the respondents contended
that the Morudi
group had been cited only in a representative capacity and, in any
event, only had a financial interest in the
main application, as
opposed to a legal interest. It is necessary for me to deal with this
aspect as it plays a large role in the
conclusion that I have
reached. I am of the view that all the appellants had a direct and
substantial interest in the main application.
Contrary to the
respondents’ contentions, the Morudi group was not cited in the
proceedings ‘only in a representative
capacity’. This
conclusion was made based on the reasons mentioned below.
[33]
First, the first applicant in the main application, Mr Babuseng,
described himself as a businessman, prospective shareholder
and
director of the first respondent. The second applicant, Mr
Mongwaketsi, was described as a major businessman and a 50 per cent
shareholder. There is no assertion of the latter being cited in any
representative capacity. It is thus plain that the second applicant
is cited exclusively as a prospective shareholder. Furthermore, the
applicants, in the main application did not merely seek an
order
sanctioning the holding of a board meeting for purposes of the
allotment of shares within the board’s powers. They
sought to
justify why they, in particular, were entitled to a significantly
higher allotment of shares than other shareholders.
They sought an
order of court that would sanction that specific entitlement. The
inescapable conclusion is that the applicants
pursued this litigation
in their personal capacities as shareholders. Given the provisions of
s 157
of the
Companies Act,
[5
]
there is no logical reason why the Morudi group cannot assert their
own rights on the same basis. It follows that the rest of the
shareholders must by parity of reasoning, have the same legal
interest.
[34]
P M Meskin in
Henochsberg
on the
Companies Act
[6
]
submitted
on the basis of the provisions of s 65(2) of the 1973 Act, which
stipulated that the memorandum and articles were binding
on the
company and the members thereof to the same extent as if they
respectively had been signed by each member, that the memorandum
and
articles in question had contractual force between members inter se
in so far as their rights and obligations as members were
concerned.
Such contractual force, so it was argued, entitled an individual
member to enforce his or her personal rights ‘
qua’
member
by means of proceedings for an interdict or a declaration of rights
or for specific performance. I agree with the learned
author’s
proposition. On that basis, the applicants and the Morudi group
therefore had locus standi in the main application
in respect of the
allotment of shares. In the Canadian case
John
Graham & Co Ltd et al v Canadian Radio-Television Commission
[7]
,
a unanimous bench found that a corporate shareholder had standing to
challenge a decision of the CRTC approving the transfer of
a majority
share interest in a company in which it was a minority shareholder on
the basis that the value and earnings for its
shares could be
affected by the transfer.
[8]
[35]
Secondly, the first respondent in the main application is a
registered company and can therefore sue and be sued in its own
name.
It is trite that a company is a separate entity from its directors.
There is no legal prescript requiring directors of a
company to be
cited as co-defendants. In any event, on the respondents’ own
version, Mr Goliath ceased being a director of
the company long
before the litigation in the main application commenced. Clearly, he
could not have been cited in a representative
capacity. In all the
affidavits filed on behalf of the applicants it was consistently
re-iterated that Mr Goliath was not a director.
It was suggested in
argument before us that the Morudi group were cited in a
representative capacity
ex
abudanti cautela
because of the applicants’ uncertainty pertaining to the ruling
that the court would make, with regards to the company’s
directorship. This argument has no merit. If the intention was to sue
only the company, it could have been cited as the only respondent
and
the names of those who held the position of director as at the time
of de-registration, could have merely been mentioned in
the body of
the founding affidavit.
[36]
Thirdly
,
the
serious consequences that may result if the allegations made against
the Morudi group were to be proven, are also indicative
of the direct
and substantial interests they have in this matter. The applicants in
the main application accused some of the members
of the Morudi group
of having attempted to allot shares to themselves to the detriment of
other prospective shareholders. For their
part, the Morudi group
considered the relief sought by the applicants as an ‘attempt
to obtain a benefit for [themselves]
to the exclusion of the other
shareholders of [the] first respondent’. It is clear that there
are many allegations and counter-allegations
of impropriety on the
part of several directors and shareholders. It is quite evident that
a significant number of those allegations
amount to a contravention
of various provisions of the
Companies Act, for
which the directors
could be held personally liable. It is therefore undisputable that
the issues raised in this matter are substantial
issues that had to
be ventilated in order to avoid an allotment of shares that would be
prejudicial to other shareholders, especially
considering the purpose
for which the company had been created. Given the seriousness of the
allegations made and the repercussions
stipulated in the
Companies
Act, I
cannot agree with the respondents’ contention that the
Morudi group’s interest in the matter is purely financial and
not legal. There is no logical explanation why Messrs Morudi, Jacobs
and Adams would not have a legal right to oppose the application
in
their capacities as the implicated directors so as to refute the
allegations made against them with a view to warding off personal
liability. This view finds support in
Henochsberg
[9]
,
where
it is submitted that in the case of the
s 77(3)
(e)
liability,
a director may apply to court for an order setting aside the
unauthorised transaction.
[37]
Fourthly, the applicants in the main application moved for a costs
order in terms of which the Morudi group would be jointly
and
severally liable with the company for the costs of opposing the main
application. The cost order prayed for, which seems to
be the one
envisaged in
s 77(6)
of the
Companies Act,
[10]
placed the Morudi group in an invidious position in that if they did
not oppose the application, the allegations made against them
would
stand unchallenged and yet if they opposed, there was a risk of
personal liability in respects of costs. I am of the view
that the
cost order sought by the applicants also gave the Morudi group a
legal interest to oppose the application in their individual
capacities.
[38]
Fifthly, a disproportionate allotment has the potential of
prejudicing the interests of all shareholders. This is more so the
case because the voting rights in a public company are exercised in
proportion to the members’ shareholding and a prejudicial
allotment may hamstring some shareholders’ participation in the
affairs of the company. This leads ineluctably to the conclusion
that
it was imperative to cite or at least serve the application on all
those prospective shareholders who were offered shares
and thus stood
to be prejudiced by the board’ decision pertaining to the
allotment of shares.
[39]
Sixthly,
it
is of significance that the resolution taken on 19 April 2013 did not
remove or suspend the Messrs Morudi, Jacobs and Adams’
appointment as directors. The risk that the directors are faced with
were thus still extant even after the passing of the resolution.
They
did therefore, in their capacity as directors, retain the legal right
to ventilate issues of company violations in the main
application
‘
qua’
directors.
[40]
Lastly, it is worth mentioning that the respondents by their own
admission recognised that a dispute pertaining to the entitlement
to
the allotment of shares is of direct and substantial interest to all
prospective shareholders. The following averment in their
Founding
Affidavit at para 16.6 is quite telling:-
‘
I
have already dealt with the urgency of this matter and reiterate
same. The Honourable Court will also note that the Second Applicant
and I are presently the majority of prospective shareholders in First
Respondent, and have there for a clear interest and
urgency to
obtain an order as set out in the Notice of Motion.
We
also recognise all the other prospective shareholders as listed in
annexure “
M”
,
and
will an order in terms of the Notice of Motion be in the
interest of such prospective shareholders as a whole too.
I pause to mention that it is impossible, because of the urgency of
this matter, to cite all the prospective shareholders in this
application, or to serve this application beforehand upon all of
them. Annexure “
M”
will make this averment clear.’ (My emphasis)
[41]
It is therefore not surprising that the applicants in the main
application of their own volition undertook to serve the rule
nisi
they were applying for
‘
4.1
upon the Respondents and;
4.2
upon the persons listed in annexure “
M”
to the
founding affidavit by way of one (1) advertisement in the Diamond
Field Advertiser and by way of registered post;
.
. . . ’
[42]
For all the aforementioned reasons, I conclude that the Morudi group
had a legal interest in the main application and were
cited as
respondents in a dual capacity, i.e. as shareholders and as
directors. The same reasons form the basis for my conclusion
that the
appellants’ locus standi to bring the rescission application
was beyond question. For the same reasons, I also conclude
that the
rest of the appellants had a direct and substantial interest that
entitled them to have intervened in the same proceedings.
Requirements
for rescission of judgment
[43]
The question is whether the court a quo correctly decided that the
requirements for rescission of judgment were not satisfied
or met.
The
appellants applied for rescission of judgment both under the common
law and in terms of rule 42(1)
(a)
of the
Uniform Rules of Court. As correctly set out in para 14 of the first
judgment, an applicant applying for rescission in terms
of the common
law must show sufficient cause
[11]
,
which requires a reasonable and acceptable explanation for the
default and a bona fide defence which prima facie carries some
prospect of success.
Explanation
for not participating in the proceedings
[44]
In
De
Wet & others v Western Bank Ltd
[12]
,
T
rengrove
AJA stated as follows in relation to an application for rescission of
judgment brought under the common law:
‘
Thus,
under the common law….[b]roadly speaking the exercise of the
Court’s discretionary power [to rescind judgments]
appears
to have been influenced by considerations of justice and
fairness, having regard to all the facts and circumstances
of the
particular case
’.
(Emphasis
added).
[45]
In
Harris
v Absa Bank Ltd t/a Volkskas
[13]
,
Moseneke
J stated that:
‘
[6].
. . an enquiry whether sufficient cause has been shown is
inextricably linked to or dependent upon whether the applicant acted
in wilful disregard of Court rules, processes and time limits.
[9]
The Court's discretion in
deciding whether sufficient cause has been established must not be
unduly restricted. In my view, the
mental element of the default,
whatever description it bears, should be one of the several elements
which the court must weigh
in determining whether sufficient or good
cause has been shown to exist
.’
(Emphasis added.)
[46]
In this matter, it is undisputable that the merits of the matter were
not considered by the JP on the acceptance
that
the main application was no longer opposed due to the company having
withdrawn its opposition and the Morudi group having been
cited only
in a representative capacity. Once it is accepted, as I have done,
that the Morudi group were respondents that were
entitled to oppose
the main application in their own right because of the legal interest
they have in the matter, it ineluctably
follows that they ought to
have been given a hearing on the date the main application was
enrolled to be heard.
[47]
The full transcript of those proceedings speaks for itself. The long
and the short of it is that
the
Morudi group was not given a hearing. It is evident from the
transcript that by the time the proceedings were adjourned, a finding
had already been made that the Morudi group were not parties in the
matter. They were not granted an opportunity to address the
court
despite a specific request that was made on their behalf. This
request was repeated after the adjournment, but failed to
yield any
fruit as it was ruled that they were not before the court.
It
follows that the failure to give them a hearing, despite them being
respondents who had a legal interest in the application,
constituted
a procedural irregularity. Their failure to participate in the
proceedings is not of their own making. The Morudi group
has thus
advanced a reasonable and acceptable explanation for their
non-participation in the proceedings, which is borne out by
the
record.
[48]
I
am unable to agree that the position the Morudi group found
themselves in on the date of the hearing of the main application is
analogous to a situation where shareholders demand to be heard by a
court whenever the company in which they hold shares is a party
to
the proceedings. That analogy does not take into account that in this
particular matter, the Morudi group was actually cited
as respondents
in the matter and thus had a legal interest in the main application.
Bona
fide defence
[49]
In para 16 of the first judgment it is stated that:
‘
T
he
fundamental flaw in the application for rescission is that the urgent
application, which sought to set aside the 19
April 2013 resolution was
dismissed by Mamosebo AJ. Because there was no appeal against this
order, the resolution stands. The consequence
is that the appellants
have no bona fide defence to the main application, which prima facie
carries some prospects of success.’
I
disagree with this finding. My approach on this aspect is obviously
from the premise that the Morudi group was cited in a dual
capacity.
The reasons for my disagreement are set out hereunder.
[50]
It must be borne in mind that the only issue raised before Mamosebo
AJ was the validity of the resolutions taken at an allegedly
improperly constituted meeting which was held on 19 April 2013. None
of the issues raised in the main application were raised as
issues
for her determination and neither did she make any findings with
regards to such issues. Once it is accepted that the Morudi
group was
cited in a dual capacity and had a legal interest that entitled them
to oppose the application, it then follows that
the company’s
decision to withdraw its opposition did not detract from the Morudi
group’s entitlement to oppose the
application in their own
right. Mamosebo AJ’s order dismissing the application to
declare the meeting invalid and to set
aside its resolutions
therefore cannot be a stumbling block in respect of the Morudi
group’s opposition of the main application.
[51]
The reason for the afore-going conclusion is twofold: first, the
shareholder resolution taken on 19 April 2013, which was implicitly
sanctioned by Mamosebo AJ’s order, merely authorised the
withdrawal of the opposition of the main application by the company.
The withdrawal that was subsequently filed was thus on behalf of the
company as the first respondent in the main application. The
Morudi
group never withdrew its opposition of the main application and was
therefore entitled to participate in the proceedings
and to place
evidence before court in their capacity as the affected shareholders
who were specifically cited as the second, third
and fourth
respondents. This is more so the case in respect of Messrs Morudi,
Jacobs and Adams, whose directorship was never terminated
by the
resolution of 19 April 2013.
[52]
The
Companies Act enjoins
us to follow an approach that interprets
its provisions
in
a manner which would advance the remedies provided by the various
sections instead of limiting them. This is quite evident from
the
provisions of
s 158
of the
Companies Act
[14
]
.
In
this regard, it must be borne in mind that the applicants did not
withdraw the main application. Instead, the company filed a
‘withdrawal of opposition to application’. Subsequent to
that, the applicants filed an amended notice of motion which
inter
alia sought an order in the following terms: ‘An order
declaring that the number of shares allotted to each shareholder
listed in annexure “M” shall be in accordance with the
allotted shares reflected therein’. In my view, the Morudi
group was also well entitled to oppose the main action in their
capacities as the affected shareholders. Given the clear provisions
of
s 161
[15]
of the
Companies
Act, which
empowers a shareholder to approach a court for an order
determining any rights of that shareholder pertaining to shares, the
Morudi
group’s entitlement to oppose the main application on
its merits did not end merely because the company decided to abandon
its opposition of that application. Sight must not be lost of the
essence of the dispute: the opposition of the declaratory order
was
on the basis of allegations of various non-compliances with the
Memorandum of Incorporation and the
Companies Act pertaining
to the
allotment of shares, hence the dispute relating to the accuracy of
Annexure “M” in relation to the exact proportion
of
shareholding. At no stage did the Morudi group, as the affected
shareholders, withdraw their opposition of the application.
In my
view, a proposition that proffers that a company’s abandonment
of its opposition puts paid to the other respondents’
right to
assert their rights in relation to the exact proportion of
shareholding amounts to a negation of the very remedies granted
to
shareholders in terms of
section 161
and various other provisions of
the
Companies Act.
[53]
Secondly, the resolution taken on 19 April 2013 did not make any
pronouncement on the contentious issue of the proportion of
shareholding. This much was acknowledged by Mr Matshoba in an
opposing affidavit filed some five months after the resolution of
19
April 2013 was adopted. He conceded that the question of the exact
proportions in which the individual shareholders were entitled
to
hold shares had still not been resolved. This means that the dispute
pertaining to the exact shareholding remained unresolved
despite the
resolution taken on 19 April 2017. For the aforementioned reasons,
Mamosebo AJ’s order, confined as it was to
the validity of the
resolution that authorised the company to withdraw its opposition,
could not have served as a bar to the Morudi
group from persisting
with their opposition of the main application.
[54]
Reverting to the main application, the affidavits filed in that
application abound with allegations of non-compliances with
various
provisions of the company’s Memorandum of Association and the
Companies Act pertaining
to the issuance or allotment of shares; the
failure to open a share register; purported agreements being entered
without the Directors’
Resolutions and resolutions not being
borne out by minutes of meetings. Significantly, it is not disputed
that the company issued
shares in excess of the share capital without
the special resolution of shareholders. The averment pertaining to
the first applicant’s
claim of having acquired more shares than
other shareholders by virtue of a board resolution taken by previous
board members is
also disputed. The Morudi group pointed out that the
first applicant’s claim was not supported by any minutes of a
board
meeting.
[55]
The allegation that the investor could acquire the 500 shares
allocated to him allegedly entitling him to 50 per cent of the
issued
shares has also been placed in dispute. Whereas the applicants
averred in the founding affidavit that the investor’s
entitlement to 50 per cent shareholding was on the strength of a sale
agreement entered into between the company and the investor
in
February 2002, (annexure I), the Morudi group denied that the company
had ever authorised such a sale. They furnished minutes
of the board
meeting which was held in December 2003. The minutes reflected that
the investor was offered shares in respect of
the Casino deal only
and that it was resolved that a certain firm of attorneys would
attend to the drafting of the relevant agreement.
The minutes in
question bear Mr Babuseng’s signature. In the replying
affidavit, Mr Babuseng did not deny that the signature
appearing on
the minutes is his, but merely stated that the resolution in question
‘was not executed’. He mentioned
further that the date in
annexure I was a typographical error. Given the parties’
responses to each other’s averments
in the various affidavits
filed, it seems to me that the major disputes raised are not those
that can summarily be brushed aside
as being plainly without merit or
fanciful.
[56]
Considering the statutory provisions already canvassed earlier in
this judgment, the averments made and the documents annexed
to the
various affidavits that have been filed, it seems to me that the
applicants’
entitlement
to the shares mentioned in the afore-going paragraphs is not cut and
dried, and is something that would have to be decided
upon with the
benefit of cross-examination. The referral of the matter to trial was
thus not misplaced. Furthermore,
the
serious light in which the alleged disputes must be seen is evident
from the fact that the resolution of 19 April 2013 enjoined
the
company to investigate the conduct of the Morudi group with a view to
instituting criminal proceedings against them ‘in
relation to
irregularities that have been alleged to have occurred in the issue
of [s]hares . . .’. The Morudi group’s
unwillingness to
back off from their stance in respect of the opposition of the main
application must also be seen against that
light. All these aspects
are, in my view, weighty considerations that form part of the
equation in the determination of whether
the Morudi group has shown a
bona fide defence that meets the requirements of a rescission
application. All things considered,
the Morudi group has indeed shown
a bona fide defence which carries prospects of success. Insofar as
the court a quo found that
they had not done so, it erred.
[57]
With regards to the rest of the appellants, it is clear from what has
already been set out above, that they too, had a direct
and
substantial interest in the matter. The Morudi group’s averment
that the other appellants had mandated them to represent
their
interests is evidently permissible in terms of
s 157(1)
(c)
of the
Companies Act.
[16
]
Even
if it is accepted that they were not cited as respondents and
therefore not parties to the matter on the date of the hearing,
they
nevertheless, had a direct and substantial interest which entitled
them to apply to intervene in the proceedings at the commencement
of
the trial. Their direct and substantial interest is undeniable,
especially considering that the draft order which was subsequently
made an order of court
has
prejudicial consequences. The order had the effect of endorsing the
second applicant’s alleged entitlement to 57 per cent
of the
company’s share capital, thus validating a contract that was
allegedly entered into contrary to the board’s
resolution. The
first applicant’s alleged entitlement to an additional 17 per
cent shareholding has similarly been confirmed.
This
has
permanent and far-reaching consequences impacting on all prospective
shareholders, as the proportion of the shareholding would
be deemed
to be in accordance with annexure “M” notwithstanding the
disputes about the validity of the contract that
formed the basis of
the applicants’ increased shareholding. The basis for the
participation of the remaining 67 shareholders
as intervening parties
in the main application has therefore been made. In my view, the
requirements for the granting of rescission
of judgment have been
satisfied.
Decision
of the court a quo
[58]
The court a quo
took
the view that the JP had correctly considered the Morudi group not to
be parties in the main application on the basis that
they were merely
cited in their representative capacities as directors. Significantly,
the court a quo did not address itself to
any of the statutory
provisions referred to earlier in the judgment on the question of
locus standi. The court a quo also concluded
that due to the fact
that the appellants were physically present in court, the draft order
that was made an order of court was
not issued in their absence. It
accordingly held that they had not properly explained their default
under the common law and in
terms of rule 42 of the Uniform Rules of
Court. It further concluded that because Mamosebo AJ’s order
had not been set aside,
it impacted the appellants’ bona fide
defence. All these aspects have already been canvassed in
detail earlier in the
judgment. T
o
suggest, as the court a quo has done, that the order granted was not
made in the absence of the Morudi group purely because they
were
physically present in court when the decision was made, fails to
adequately take into account that in an application for rescission
of
judgment, the court’s discretionary power must be ‘
influenced
by considerations of justice and fairness, having regard to all the
facts and circumstances of the particular case’
[17]
(Emphasis added).
[59]
It is well-established that the scope for a court of appeal to set
aside an order made by a lower court in the process of exercising
a
discretion is limited. It is equally trite that such an order
can indeed be interfered with by an appellate court if the
lower
court’s discretion was not exercised judicially, or where the
decision of that court was ‘influenced by wrong
principles or a
misdirection on the facts, or that it had reached a decision which in
the result could not reasonably have been
made by a court properly
directing itself to all the relevant facts and principles.’
[18]
For all the reasons I have already mentioned above, I am of the view
that the court a quo’s discretion pertaining to its
determination of whether sufficient cause was shown was not properly
exercised, because it was influenced by a wrong appreciation
of the
facts and was moved by a wrong principle of law.
[60]
I would therefore uphold the appeal with costs.
________________________
M B
Molemela
Acting
Judge of Appeal
APPEARANCES
For
the Appellant:
J G Van Niekerk SC
Instructed
by:
Towell & Groenewaldt, Kimberly
Honey
Attorneys, Bloemfontein
For
the Respondent:
P Zietsman SC with P R Cronje
Instructed
by:
Adrian B Horwitz & Associates, Kimberly
McIntrye
Van der Post Attorneys, Bloemfontein
[1]
The Constitution of the Republic of
South Africa, 1996.
[2]
Amalgamated
Engineering Union v Minister of Labour
1949
(3) SA 637
(A) at 651.
[3]
Bowring N O v
Vrededorp Properties CC & another
2007
(5) SA 391
(SCA) para 21.
[4]
Application to
protect rights of securities holders
(1)
A holder of issued securities of a company may apply to a court for—
(a)
an order determining any
rights of that securities holder in terms of this Act, the company’s
Memorandum of Incorporation,
any rules of the company, or any
applicable debt instrument; or
(b)
any appropriate order
necessary to—
(i)
protect any right contemplated in paragraph
(a)
; or
(ii)
rectify any harm done to the securities holder by—
(aa)
the company as a
consequence of an act or omission that contravened this Act or the
company’s Memorandum of Incorporation,
rules or applicable
debt instrument, or violated any right contemplated in paragraph
(
a
);
or
(bb)
any of its directors to the extent
that they are or may be held liable in terms of section 77.
(2)
The right to apply to a court in terms of this section is in
addition to any other
remedy available to a holder of a company’s
securities—
(a)
in terms of this Act; or
(b)
in terms of the common
law, subject to this Act.’
[5]
See para 28 at 15.
[6]
P M Meskin
Henochsberg
on the
Companies Act
5 ed
Vol 1 at 123 (Service Issue 28).
[7]
John Graham & Co Ltd et al v
Canadian Radio-Television Commission
[1975] 68 DLR 110
;
1975 CanLII 1061
(FCA).
[8]
At 120:
‘
The
values of their shares in terms of earnings, capital appreciation or
depreciation and participation in the affairs of the
company could
well be affected by the decision.’
[9]
P Delport
Henochsberg on the
Companies Act
first
edition, Vol
1 at 303 (Service Issue 13).
[10]
See para 27 at 15.
[11]
Chetty v Law Society, Transvaal
1985 (2) SA
756
(A).
[12]
De Wet & others v Western Bank
Ltd
1979
(2) SA 1031
(A) at 1042H.
[13]
Harris v Absa Bank Ltd t/a
Volkskas
2006 (4) SA 527
(T) at 529-560.
[14]
See para 29 at 16.
[15]
See para 30 at 16.
Also see
Du
Plooy NO & others v De Hollandsche Molen Share Block Ltd &
another
[2015]
ZAWCHC 173; 2017 (3) SA 274 (WCC).
[16]
See para 28 at 15
.
[17]
See
De
Wet
fn
10
at
1042H
.
See also
Bowring
fn
2 para 21.
[18]
Trencon Construction (Pty) Limited
v Industrial Development Corporation of South Africa Limited &
another
[2015] ZACC 22
;
2015 (5) SA 245
(CC) para 88.