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2019
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[2019] ZAMPMBHC 17
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Flaming Silver Trading 373 (Pty) Ltd v Vantage Goldfields SA (Pty) Ltd and Others (858/2019) [2019] ZAMPMBHC 17; [2019] ZAMPMBHC 7 (18 October 2019)
REPUBLIC OF
SOUTH AFRICA
IN THE
HIGH COURT OF SOUTH AFRICA,
MPUMALANGA DIVISION (MAIN SEAT)
CASE NO:
858/2019
In the matter
between:
FLAMING
SILVER TRADING 373 (PTY)
LTD
Applicant
and
VANTAGE
GOLDFIELDS SA (PTY)
LTD
First Respondent
HOGAN
LOVELLS (SOUTH AFRICA) INC.
Second Respondent
R C
DEVEREUX
N.O.
Third Respondent
D
TERBLANCHE
N.O.
Fourth Respondent
F
DIPPENAAR
Fifth
Respondent
JUDGMENT
Roelofse
AJ:
[1]
There is a dispute between the applicant (“
Flaming
Silver
”), first respondent (“
Goldfields
”)
and the fifth respondent (“
Mr. Dippenaar”
)
[1]
over a written sale of shares agreement that was entered into between
Goldfields (as seller) and Flaming Silver (as purchaser)
on 1
November 2017 (“
the principal agreement
”).
[2]
Flaming Silver seeks specific performance by Goldfields of its
obligations in terms of the fourth addendum to the principal
agreement.
Goldfields and Mr. Dippenaar are of the view that Flaming
Silver is not entitled to specific performance. The reasons for their
stance are different. However, in some respects, their reasons
overlap.
[2]
In order to appreciate the parties’ views, I have, in my view,
no choice but to traverse material which, at the end, may
appear to
have been unnecessary in light of the conclusion I ultimately reach.
[3]
I approach the matter by briefly dealing with the common cause
facts relating to the entering into of the principal agreement, the
addenda thereto
[3]
,
the relevant terms of the agreements and the events thereafter that
lead to the parties approaching this court.
[4]
The Lilly Mine (“
the mine”
) is situated
near Barberton in Mpumalanga. The mine was operated by Vantage
Goldfields (Pty) Ltd through latter’s subsidiary
company,
Makonjaan Imperial Mining Company (Pty) Ltd
(“
MIMCO”
).
Vantage Goldfields (Pty) Ltd owned 58% of MIMCO’s shares.
Goldfields owns the remaining shares in MIMCO.
[5]
On 5 February 2016, disaster struck the mine. The mine
collapsed when a centre pillar in the mine gave way. Ninety miners
were trapped
underground. Rescue teams spent eight days in a
desperate attempt to rescue the trapped and missing miners. The
rescue attempt
included the drilling of a new rescue hole.
Eighty-seven miners were rescued. Sadly, the bodies of three miners
remain buried underground
until this day. The collapse caused the
main entrance to the mine to become totally inaccessible. As a
result, mining operations
came to a complete standstill.
[6]
MIMCO became unable to pay its debts. On 4 April 2016, MIMCO’s
directors resolved to place MIMCO under business rescue. Thereafter,
on 12 December 2016, Vantage Goldfields (Pty) Limited commenced with
business rescue proceedings pursuant to a resolution of its
directors.
[7]
During or about October 2017, the third respondent
[4]
shared his view with Mr. Dippenaar that the mine has a reasonable
prospect of being rescued subject to necessary funding being
obtained. The third respondent introduced Mr. Dippenaar to Mr.
Arendse. Mr. Arendse and Mr. Dippenaar identified Flaming Silver
as a
special purpose vehicle for the proposed business venture. Flaming
Silver and Goldfields concluded the principal agreement.
[8]
The conditions precedent of the principal agreement is of
importance. I recite them in full. They read as follows:
“
3.
CONDITIONS
PRECEDENT
3.1
This agreement is subject to the fulfilment of the following
Conditions precedent, namely
that –
3.1.1 the
Purchaser is on or before 31 January 2018 or such later date as
agreed to by the parties in writing
prior to the expiry thereof able
to procure financing on terms acceptable to it and to the BRP (acting
reasonably insofar as such
financing pertains to VGL, Barbrook and
MIMCO in his capacity as BRP in each instance) for funding to be
provided to the Purchaser,
MIMCO, VGL, Barbrook and/or the BRP from
suitable reputable and verifiable sources in the amount of
R310,000,000.00 (R310 million)
which may be in cash (to the extent of
approximately R200,000,000 (R200 million) or to in kind to be
provided for value
(approximately R110,000,00 (R110 million), as
the case may be, including such cash amounts required to discharge
the requirements
of the approved and/or published Business Rescue
Plans in respect of VGL, MIMBCO and Barbrook to enable the Business
Rescue Practitioner
to resume normal production on the Mines in
accordance with such Business Rescue Plans or amended Business Rescue
Plans;
3.1.2 the
Purchaser makes payment of the amount referred to in clause 6.1 on
the due date;
and
3.1.3 all
requisite regulatory approvals required shall have been obtained by
no later than 31 January 2018 or
otherwise agreed to by the Parties.
3.2
Should the Condition precedent referred to in clause 3.1.1 not be
fulfilled on or before
31 January 2018 or any other Condition
Precedent not having been met by the due date thereof and the period
for fulfilment thereof
not be extended by the Parties in writing
prior to the expiry thereof, then this agreement shall lapse and be
of no force and effect.
3.3
………..
[9]
Clauses 4, 5, 6 and 7 of the principal agreement sets out the
merx
, price, payment and Goldfields’ obligations upon
fulfilment of the conditions president.
[5]
I recite those clauses for what they provide is relevant for purposes
of understanding the parties’ views and the reasoning
in this
judgment. These clauses, in relevant part, read as follows:
“
4.
SALE
4.1
Subject to the Conditions precedent and with effect from the
Effective date, the Seller
hereby sells to the Purchaser who
purchases the Sale shares and the Sale claims from the Seller as one
indivisible transaction
subject to the terms and conditions of this
agreement.
4.2
Ownership of the Sale shares and Sale claims shall pass to the
Purchaser on the Completion
Date.
4.3
…………………..
5.
PURCHASE PRICE
5.1
The purchase price for:
5.1.1 the
Sale shares is the sum of R1.00; and
5.1.2 the
Sale claims is the sum of R10,000,000.00 (R10 million).
6.
PAYMENT OF PURCHASE PRICE
6.1
The Purchaser shall within 60 (sixty) calendar days calculated from
the Effective date pay
the purchase price for the Sale shares and the
Sale claims in cash free of deduction, bank charges, withholding,
set-off or counterclaim
of any nature to attorneys Martins Weir-Smith
Inc. who shall hold the funds in trust pending the Completion date.
6.2
On the Completion date, the attorneys referred to in 6.1 shall make
payment of the purchase
price as follows:
6.2.1 R1.00
to the Seller;
6.2.2 R10
000 000.00 (R10 million) to the Seller.
6.3
………….
6.4
The attorneys referred to in clause 6.1 hereby irrevocably undertake
to effect payment of
the purchase price in accordance with clause 6.2
to the Seller of the Completion date.
7.
COMPLETION
7.1
On the Completion date and by not later than 13h00 (or such other
time as the Parties may
agree to in writing) representatives of the
Seller, the Purchaser and the Business Rescue Practitioner shall meet
at the offices
of the Seller whereupon:
7.1.1
the Seller shall subject to the terms of this agreement deliver to
the Purchaser –
7.1.1.1
the share certificates representing the Sale shares together with
duly completed, signed and dated
share transfer forms so as to enable
registration of transfer of the Shares to take place into the name of
the Purchaser or his
nominee;
7.1.1.2
a resolution by the directors of VGL and MIMCO sanctioning the
transfer of the relevant Shares
and nominating the individuals
designated by the Purchaser to be the directors of VGL and/or
MIMCO;
7.1.1.3
the written resignations of all the directors of VGL, Barbrook and/or
MIMCO;
7.1.1.4
in respect of VGL – all books, records, a certified copy of the
certificate of incorporation,
a certified copy of the memorandum and
articles of association/memorandum of incorporation, minute books,
accounting records, any
other documents vesting in VGL;
7.1.1.5
in respect of MIMCO – all books, records, a certified copy of
the certificate of incorporation,
a certified copy of the memorandum
and articles of association/memorandum of Incorporation, minute
books, accounting records, any
other documents vesting in MIMCO;
7.1.2 the
Seller shall deliver to the Purchaser a deed of cession in respect of
the Sale claims”.
[10]
On 21 December 2017, Flaming Silver and Goldfields agreed to
extend the date by which the conditions precedent in clauses 3.1.1
and 3.1.3 of the principal agreement were to be fulfilled to 31 March
2018. For this purpose, Flaming Silver and Goldfields entered
into
the first addendum to the principal agreement. Clause 4.2 of the
first addendum provides as follows:
“
4.2
Ad Clauses 3.1.1,
3.1.3 and 3.2
[of the principal
agreement]
by amending
the date “31 January 2018” and substituting with “31
March 2018” in all relevant places.”
[11]
On 3 May 2018, Flaming Silver and Goldfields concluded the
second addendum to the principal agreement in terms of which the
suspensive
conditions in clauses 3.1.1 and 3.1.2 of the principal
agreement were deemed to have been fulfilled by no later than 31
March 2018.
Clause 3.3 of the second addendum provides as follows:
“
3.3
Subject to the terms set out in this Addendum, the Parties have
reached agreement that except for the
Conditions precedent referred
to in Clause 3.1.3 of the Principle Agreement, (“the Remaining
Condition Precedent”),
all the other Conditions Precedent are
by mutual agreement, deemed to have been fulfilled by no later than
31 March 2018.”
[12]
Clause 4.3 of the second addendum required Goldfields to apply
for Ministerial Consent for the transaction by no later than 30 July
2018.
[6]
[13]
On 2 August 2018, Flaming Silver and Goldfields entered into
the third addendum to the principal agreement. Clause 4.1 of the
second
addendum reads as follows:
“
The date set out in
clause 4.3 of the Second Addendum
[date
of Ministerial approval]
is
amended from “30 July 2018” to “31 October 2018”
or such later date agreed in writing between the parties.”
[14]
On 31 October 2018, Mr. Arendse (ostensibly on behalf of
Flaming Silver), Goldfields and Siyakhula Sonke Empowerment
Corporation
(Pty) Limited concluded the fourth addendum to the
principal agreement, the relevant part of which reads as follows:
“
3.4
The Parties record the successful completion of the Conditions set
out in clause 4 of the Third Addendum
and that they currently await
the consent of the Minister as contemplated in the Section 11
Application that has been submitted.
3.5
Subject to the consent of the Minister referred to in clause 3.4 the
Parties have arranged
to deliver the requirements of the Completion
date as set out in clause 4 of this Addendum.
3.6
The Parties and SSC in specific circumstances now wish to vary the
Principal Agreement (as
amended by the First Addendum, the Second
Addendum and the Third Addendum) as set out in this Addendum.
4.
COMPLETION
The Parties agree to effect
the following arrangements between them in respect of the Principal
Agreement (as amended by the First
Addendum, the Second Addendum and
the Third Addendum):
4.1
The Purchaser shall forthwith transfer the balance of the Purchase
Price of R9 000 001 (nine
million and one Rand) to the attorneys
trust account nominated in writing by the Seller and approved by the
Purchaser to be held
in trust on behalf of the Purchaser to be
released and transferred to the Seller on the date of receipt by the
Seller of the Minister’s
consent to the Section 11 Application.
4.2
The Seller shall forthwith deliver to the attorneys referred to in
clause 4.1 the Completion
documents referred to in clauses 7.1.1 and
7.1.2 of the Principal Agreement to be released and transferred to
the Purchaser on
the date of receipt by the Seller of the Minister’s
consent to the Section 11 Application against payment to the Seller
of
the amount referred to in clause 4.1.
4.3
Should the Minister refuse the Section 11 Application for any reason,
the attorneys referred
to in clause 4.1 shall return the funds
deposited by the Purchaser to the Purchaser together with any
interest earned thereon and
shall return the closing documents
delivered in terms of clause 4.2 to the Seller.”
[15]
On 31 October 2018, Mr. Dippenaar requested that a directors’
meeting be held to discuss and vote on whether the “suspensive
condition” provided for in the principal agreement should be
extended. The board did not heed the request and did not meet
on 31
October 2019.
[16]
Mr. Arendse and Goldfields signed the fourth addendum during
the late afternoon of 31 October 2018.
[17]
On 31 October 2018 at 18h02, Mr. Arendse wrote an e-mail to
Flaming Silver’s directors. He said as follows:
“
Urgent
Gentlemen,
As you know that today (31
October) is critical date in terms of closing of the transaction and
key to this is the renegotiation
of either a date extension or a
agreed completion, subject to section 11 permission only.
What it means there would be
no more conditions precedent between the transacting parties other
than what the law requires.
Please provide me with your
permission or disapproval to engage, finalize and if the parties
agree, sign on behalf of flaming Flaming
Silver SPV.
To prevent the potential
collapsing of the transaction, this needs to happen today/tonight.
Kindly revert urgently.
Sent from my iPhone”
[18]
On 31 October 2018, at 21h49, Mr. Arendse addressed Mr.
Dippenaar in an e-mail. The e-mail was sent to Mr. Dippenaar, Mr. K
Moabelo
and Mr. Andrew Mthembu (a former director of Flaming
Silver).
[7]
In part, the e-mail it reads as follows:
“
I am pleased to report
that the closing agreement have been signed by VGSA a short while
ago, which needs to be ratified by the
FS board with or without your
vote. I trust that the remaining directors will apply their own mind
and do what is right for FS
and not entertaining your personal
interest and malicious intentions. We have many stakeholders that are
depending the success
of this transaction.”
[19]
Flaming Silver’s Board met on 12 November 2018. All the
directors attended the board meeting. Item 4 on the agenda provided
as follows:
“
Vote on whether the
suspensive condition provided for in the Sale of Shares Agreement of
1 November 2017 should be extended”
[20]
Ministerial approval was given on 21 December 2018. The
approval was e-mailed to Goldfields and the second respondent on 9
January 2019.
[21]
On 31 January 2019, Goldfields’ directors informed Mr.
Arendse that the completion of the principal agreement had not been
reached. It is recorded in a letter directed to Mr. Arendse.
Goldfields, after acknowledging that condition 3.1.1 of the principal
agreement was waived, alleges that:
“…
.the waiver
does not render the funding requirement of the Sale Agreement pro non
scripto. The VGSA
[Goldfields]
position is that the
funding by SCC and the IDC was at all relevant times a condition of
the Sale Agreement.”
[22]
On 14 February 2019, Flaming Silver delivered a written notice
of breach, to Goldfields. Flaming Silver alleged compliance by it
of
its obligations and the fulfilment of the conditions precedent, the
consequence of which is that the principal agreement became
enforceable as against Goldfields. Flaming Silver demanded specific
performance in terms of clause 4.2 of the fourth addendum.
[23]
On 20 February 2019, Goldfields responded to Flaming Silver’s
demand. In their response, Goldfields: acknowledged having received
the purchase price and concurred that the effect of the fulfilment of
the conditions precedent was that the whole of the principal
agreement has become enforceable. However, Goldfields recorded that:
“
The requirement of
adequate funding as contemplated in Clause 3.1.1 of the “Principal
Agreement is common cause between the
Parties and remains a
condition, despite the deemed fulfilment of the Condition precedent
in this regard, and any uncertainty in
this regard was addressed and
removed in Clause 4.11 of the Second Addendum.”
[24]
Clause 4.11 of the second addendum reads as follows:
“
VGSA
[Goldfields]
agrees to endorse the
agreed upon and amended Business Rescue Plans as prepared and
presented by the Business Rescue Practitioner
in consultation with
the Seller, the Purchaser and/or SAP (as the case maybe)”
[25]
On 13 March 2019, Goldfields directed a letter to Flaming
Silver. In this letter, Goldfields informed Flaming Silver that
latter
has breached the terms of the principal agreement. The grounds
upon which Goldfields believed that Flaming Silver was in breach
of
the principal agreement mainly related to the funding requirements
recorded in clause 3.1.1 of the principal agreement. There
were also
other breaches alleged which, in my view, is immaterial for the
adjudication of this matter. The following demand was
directed by
Goldfields:
“
It is hereby demanded
in terms of Clause 10 of the Principal Agreement that you remedy your
breaches of the Agreement as set out
herein within 10 (ten) calendar
days of receipt of this communication by performing your contractual
obligations in terms of the
Agreement. The Seller tenders reciprocal
performance of its obligations to deliver documents of title as
contemplated in clause
7.1 of the Principal Agreement.”
[26]
On 26 March 2019, Goldfields sent a letter to Flaming Silver
cancelling the principal agreement on the basis of Flaming Silver’s
alleged breach of the principal agreement.
[27]
The battle lines drawn, the parties brought their dispute to
court for adjudication. The applicant launched the main application
on 14 March 2018 in the urgent court. Save for the urgency prayer
and, seeking authorisation that the third and fourth respondents
be
cited in the application, the applicant seeks the following relief:
“
2.
That the First Respondent forthwith furnish to the Second Respondent:
2.1
Share certificates in respect of the shares held by First Respondent
in Goldfields Goldfields
(Pty) Ltd and Mkhonjaan Imperial Mining
Company (Pty) Ltd (“MIMCO”) on 1 November 2017;
2.2
Completed, signed and dated share transfer forms in respect of the
shares referred to in
paragraph 2.1 that will facilitate the transfer
of the said shares into the name of Applicant;
2.3
Written resignations of the directors of Goldfields Goldfields (Pty)
Ltd, MIMCO and Barbrook
Mines (Pty) Ltd (“Barbrook”);
2.4
All books, records, the certificate of incorporation, the memoranda
and articles of association
or the memorandum of incorporation,
minute books, accounting records or copies thereof and any other
documents vesting therein,
of:
(a)
Goldfields Goldfields (Pty) Ltd;
(b)
MIMCO;
2.5
A deed of cession from First Respondent to Applicant of all claims by
First Respondent against:
(a)
Lomyisho Investments (Pty) Ltd;
(b)
MIMCO;
(c)
Goldfields Goldfields (Pty) Ltd.
3.
That Second Respondent forthwith pay to First Respondent the R9 000
001.00 held
by it in Trust in terms of clause 4.1 of the Fourth
Addendum to the Sale of Shares Agreement between Applicant, Siyakhule
Sonke
Empowerment Corporation (Pty) Ltd and First Respondent.
4.
That Second Respondent release and hand over to Applicant the
documents referred
to in paragraph 2.1 and 2.5 above3, upon receipt
thereof by it.”
[28]
The applicant also seeks costs in its favour.
[29]
In the intervention application, Mr. Dippenaar sought leave to
intervene as fifth respondent together with further relief as
follows:
“
3.
It is declared that:
3.1.
The resolution dated 12 November 2018, by the Board of Directors of
the Applicant (in the main
application) to ratify the signing of the
Fourth Addendum to the Sale of Shares Agreement is null and void;
3.2.
The Sale of Shares Agreement dated 1 November 2017 is null and void
due to the non-fulfilment
of the suspensive condition contained in
Clause 3.1.3 thereof”
and
costs.
[30]
Her Ladyship Ms. Mphahlele J heard the intervention
application. Mr. Dippenaar’s joinder was not opposed. On 7 June
2019,
Mphahlele J dismissed prayers 3.1 and 3.2 of the notice of
motion in the intervention application and ordered that Mr. Dippenaar
pay the costs. The fundamental basis upon which Mphalele J dismissed
the intervention application appears to be a finding that
Flaming
Silver’s Board, at its meeting of 12 November 2018, did not
resolve to ratify the signing of the fourth addendum
because, based
on the minutes of the board meeting, it could not be found that the
board in fact took that resolution.
[31]
On 1 July 2019, Mr. Dippenaar filed an application for leave
to appeal Mphahlele J’s judgment and orders. Paragraph 3 of the
application for leave to appeal is important in the context of these
proceedings. It reads as follows:
“
3.
The learned Judge should have granted prayer 3.2 of the notice of
motion
[in the
intervention application]
with
costs.”
[32]
Goldfields opposes the main application on the basis that the
Second Addendum is voidable at the instance of Goldfields as a result
of an intentional or negligent representation by Flaming Silver and
on the basis that Goldfields has elected to cancel the second
addendum which resulted in the lapsing of the sale of shares
agreement due to non-fulfilment of the suspensive condition contained
in clause 3.1.3 thereof.
[8]
[33]
Mr. Dippenaar opposes the main application on the grounds
that:
“
The Fourth Addendum, which extended the
fulfilment of the suspensive condition contained in Clause 3.1.3 of
the principal agreement
was extended by the Fourth Addendum which was
signed without the requisite authority and resolution by Flaming
Silver’s board
to ratify the unauthorised signing of the Fourth
Addendum and as such that the Fourth Addendum was invalid null and
void; by virtue
of the invalidity of the Fourth Addendum, the
principal agreement lapsed on 31 October 2018 due to the
non-fulfilment of the suspensive
condition contained in Clause 3.1.3
of the principal agreement; resulting in that the applicant is not
entitled to specific performance
in terms of the principal agreement
that had lapsed.”
[34]
On 19 June 2019, Mphahlele J postponed the hearing of the main
application. In addition, she ordered that: Mr. Dippenaar file an
amended notice of motion
[9]
;
Flaming Silver supplement its answering affidavit (only if so
advised); Mr. Dippenaar to file his reply to the supplementary
answering affidavit. Mr. Dippenaar was ordered to pay the wasted
costs occasioned by the amendment.
[35]
Mr. Dippenaar filed an amended notice of motion. The amended
notice of motion in the intervention application introduced a new
prayer
3.1A (“
prayer 3.1A”
) as follows:
“
Alternatively, the resolution dated 31 October
2018 by the Board of Directors of the applicant (in the main
application) to ratify
the signing the Fourth Addendum to the Sale of
Shares Agreement is null and void;”.
[36]
Flaming Silver filed a supplementary answering affidavit. In
the supplementary answering affidavit, Flaming Silver meets Mr.
Dippenaar’s
challenge to the resolution of 31 October 2018 by
alleging that Mr Arendse, Mr Mudziri and Mr. Moabelo “…
retrospectively approved the Fourth Addendum……”.
Mr Mudziri and Mr. Moabelo’s confirmatory affidavits record
as follows in paragraph 2 thereof:
“
I have read the answering affidavit and
supplementary affidavits of Frederick Sam Arendse herein (dated 8
April 2019 and 27 June
2019) respectively and confirm the contents
hereof insofar as they relate to me, particularly a round-robin
resolution was taken
on 31 October 2018 to approve retrospectively
the conclusion of the Fourth Addendum to the Sale of Shares Agreement
on 1 November
2017.”
[37]
On 2 July 2019, Mr. Dippenaar and Goldfields filed an
application that they intend to apply to court at the hearing of the
application
for an order that Goldfields and Mr. Dippenaar be granted
leave to cross-examine Mr Arendse, Mr Mudziri and Mr. Mohabelo “…
in respect of and concerning the round-robin resolution allegedly
taken on 31 October 2018.”
I shall refer to this
application as “the Rule 6(5)(g) application”.
[38]
Mr Arendse, Mr Mudziri and Mr. Mohabelo are named in the
notice of motion in the Rule 6(5)(g) application. In addition,
Goldfields
and Mr. Dippenaar sought leave to subpoena Mr Arendse, Mr
Mudziri and Mr. Mohabelo and an order directing them to bring certain
documents and electronic equipment and data files to court. In
support of the Rule 6(5)(g) application, Mr. Dippenaar alleges that:
“
I submit that reasonable grounds exist to
doubt the veracity of the allegations by the Applicant’s
directors. On their version,
they took the Round-Robin Resolution
between approximately 22:00 and 22:00 on the evening of 31 October
2018. This in turn implies
that the Resolution attached as Annexure
‘RA6’ and ‘RA7’ were drafted during these
hours and circulated
for signature by the Applicant’s
directors. This is highly improbable.”
[10]
and
“
I respectfully point out that I am unable to
present any evidence to dispute the truth of the Applicant’s
statement that a
Round-Robin Resolution was taken on 31 October 2018.
The primary facts concerning the Round-Robin Resolution for purely in
the
knowledge of the Applicant’s for abovementioned directors
and should be carefully scrutinised. Cross-examination of the
Applicant’s
directors would be the only manner to arrive at the
truth.”
[11]
[39]
Flaming Silver opposed the Rule 6(5)(g) application. Its
attorney deposed to its answering affidavit. She alleges as follows
[12]
:
“
The Applicant’s answer to these
allegations is that:
(a) There
are indications in the evidential material before the Court that the
Applicant’s
directors were of the view that the conclusion of
the Fourth Addendum had to be approved on that date – 31
October 2018.
Given that the addendum was concluded after normal
hours, the passing of the resolution at the time mentioned, is most
certainly
not improbable.
(b) The
case made by the Fifth Respondent in his founding affidavit for the
invalidity
of the resolution to ratify the conclusion of the Fourth
Addendum was that he, as a director, had not been furnished with
sufficient
information to take a meaningful view on the resolution.
Cross-examination of the directors of Applicant on the manner of
taking
the resolution on 31 October 2018 will not advance the case
made by the Fifth Respondent in any way. First Respondent
deliberately
chose not to file supplementary papers when he amended
the relief he was claiming. I am advised that authority exists that
the
process envisaged by Rule 6(5)(g) cannot be used to put up or
advance a case not made out in the initial founding papers.”
[40]
At the commencement of the hearing of the matter, I requested
Adv Stoop SC
[13]
to address me on whether the main application could proceed
considering paragraph 3
[14]
of the application for leave to appeal. I specifically raised this
issue because should the appeal ultimately succeed, I may have
already ordered specific compliance with an agreement which may be
found not to exist. Goldfields and Mr. Dippenaar indicated that
they
resolved to withdraw their notice of application for leave to appeal.
I directed them to deliver a notice to that extent by
close of
business on the day of the hearing. The notice of withdrawal of the
application for leave to appeal was filed on 15 July
2019. This
removed the bar I perceived to exist to the hearing and deciding the
main application including the relief sought in
prayer 3.1A.
[41]
After hearing argument for the parties in the Rule 6(5)(g)
application, I granted an order in terms of the notice of motion in
the
Rule 6(5)(g) application. I gave an
ex tempore
judgment
before I granted the order. I do not intend to repeat herein what I
set out in that judgment, suffice to say that I found
that it would
be impossible to determine the main application on the papers alone
and that it would be necessary for the directors,
who allegedly made
the round-robin resolution to testify in that regard. Mr Arendse was
cross-examined by Adv Stoop. I allowed
Mr. Arendse to be re-examined
by Adv Beaton SC
[15]
.
[42]
As I see it, the first and paramount issue I must decide is
whether the fourth addendum extended the fulfilment of condition
3.1.3
of the principal agreement (“
condition 3.1.3”
).
If the fourth addendum did not extend the fulfilment of condition
3.1.3, it is the end of the matter for Flaming Silver because
the
principal agreement will then have lapsed. Flaming Silver would not
be entitled to specific performance in terms of the principal
agreement (or the fourth addendum). If I find that the fourth
addendum is null and void as a result of a defect in the conclusion
of the fourth addendum, then, depending upon the nature of the
defect, Mr. Dippenaar may be entitled to prayer 3.1A.
[43]
Central to the lawfulness of the fourth addendum is the issue
of the purported ratification of the entering into of the fourth
addendum
by Mr. Arendse.
[44]
Mr. Dippenaar alleges that Mr. Arendse recognised that he
acted without authority and that Flaming Silver’s Board would
have
to ratify the signing of the fourth addendum.
[45]
I agree that Arendse recognised that he acted without
authority and that Flaming Silver’s Board would have to ratify
the signing
of the fourth addendum. This is in accordance with Mr.
Arendse’s evidence in court and the evidence in the papers,
properly
considered as a whole. Mr. Arendse testified that he, Mr.
Matzuri and Mr. Moabelo had discussions during the course of 31
October
2018. The result of those discussions was that he, Mr.
Matzuri and Mr. Moabelo had agreed to enter into the fourth addendum.
[46]
After being challenged by Mr. Dippenaar in the intervention
application over the ratification of the fourth addendum, Flaming
Silver
seeks to meet the challenge by producing a purported
resolution by Flaming Silver’s Board that it has ratified the
fourth
addendum. The purported resolution reads as follows:
“
RESOLUTION PASSED IN
WRITING AT A MEETING OF THE DIRECTORS OF FLAMING SILVER TRADING 373
(PTY) LTD………HELD AT
PRETORIA ON 31 OCTOBER 2018
“
WHEREAS the Company
concluded a Sale of Shares Agreement with Vantage Goldfields SA (Pty)
Ltd for the purpose of their 74% shareholding
in Vantage Goldfields
and their 42% shareholding in Makonjwaan Imperial Mining Company.
AND WHEREAS the Company
concluded and executed a fourth addendum to the sale of shares
agreement on 31 October 2018.
AND WHEREAS the conclusion
and execution of that fourth addendum requires ratification.
RESOLVED THAT:
1.
The conclusion and
execution of the fourth addendum by Frederick Sam Arendse on behalf
of the Company is ratified.
[47]
The resolution appears to be signed by Mr. Arendse, Mr.
Matzuri and Mr. Moabelo. The space provided for Mr. Dippenaar to sign
on
the resolution is empty. Mr. Arendse testified that the resolution
was backdated to 31 October 2018 and that the resolution was
signed
on 1 November 2018 by him, Mr. Matzuri and Mr. Moabelo when they met
on 1 November 2018 at Siyakhula Sonke Empowerment Corporation
(Pty)
Ltd (“
SCC”
)’s premises. Mr. Arendse
confirmed that no meeting of the directors took place on 31 October
2018 as is recorded in the resolution.
Mr. Arendse explains in his
testimony that the resolution was drafted by Flaming Silver’s
secretary, who is an attorney.
[48]
I find that it has been established that: the main agreement
was entered into by Flaming Silver and Goldfields; the main agreement
was subject to the fulfilment of conditions precedent
[16]
;
if the conditions president were not fulfilled by their due date, or
the period for their fulfilment not be extended by the parties
in
writing, the principal agreement would lapse and be of no force and
effect; the conditions in clauses 3.1.1 and 3.1.2
of the
principal agreement were deemed to be fulfilled; only the condition
in clause 3.1.3 of the principal agreement (“
condition
3.1.3”
) remained operative and had still to be fulfilled;
the due date of condition 3.1.3 was extended to 31 October 2018; Mr.
Arendse
signed the fourth addendum on 31 October 2018; the fourth
addendum negated condition 3.1.3; in signing the resolution, Mr.
Arendse
acted without authority; the round-robin discussions and
agreement on 31 October 2018 between Mr. Arendse, Mr. Matzuri and Mr.
Moabelo ratify the fourth addendum was not a unanimous board
decision; Mr. Arendse, Mr. Matzuri and Mr. Moabelo signed the
resolution;
the resolution was backdated; the resolution was signed
on 1 November 2018; and, between the transmission of annexure ‘FD12’
[17]
and the adopting of the resolution, there was no further
communication with Mr. Dippenaar over the resolution.
[49]
Having made the aforesaid findings, what remains is that I
have to consider the status of the resolution for if the resolution
was
invalid, the fourth addendum was unlawful and the principal
agreement has lapsed and is of no force and effect due to the
non-fulfilment
of condition 3.1.3 of the principal agreement.
[50]
Section 66(1) of the Companies Act 71 of 2008 (“
the
Act”
) provides that the business and affairs of a company
must be managed by or under the direction of its board “…
..which
has the authority to exercise all of the powers and perform any of
the functions of the company, except to the extent that
this Act or
the company’s Memorandum of Incorporation provides otherwise”
.
[51]
The board of directors of a company collectively bear the
company’s powers. If there is more than one director, an
individual
ordinary director, as such, has no authority to act for
the company for any purpose unless he is authorised expressly,
impliedly
or ostensibly to do so.
[18]
Arendse could not enter into the fourth addendum without the Flaming
Silver’s Board’s authority. This is acknowledged
by
Flaming Silver for there would have been no purpose for Mr. Arendse’s
request for ratification and the resolution.
[52]
In the absence of any allegation that Flaming Silver’s
Memorandum of Incorporation provided otherwise and in light of the
express acknowledgment that the entering into of the fourth addendum
had to be ratified and the taking of the resolution, I accept
that
the fourth addendum could only be entered into by a resolution of
Flaming Silver’s Board.
[53]
A company’s decisions are taken at a meeting of the
company’s board. Only decisions taken by a company’s
board,
properly constituted, are valid.
[54]
Section 73 of the Act deals with board meetings. Subsection
(4) of section 73 of the Act provides as follows:
“
The board of a company may determine the form and time for
giving notice of its meetings, but—
(a)
such
a determination must comply with any requirements set out in the
Memorandum of Incorporation, or rules, of the company; and
(b)
no
meeting of a board may be convened without notice to all of the
directors, subject to subsection (5).”
[55]
Subsection (5) of section 73 of the Act provides as follows:
“
Except to the extent that the company’s Memorandum of
Incorporation provides otherwise—
(a)
if all
of the directors of the company—
(i) acknowledge actual receipt of the notice;
(ii) are present at a meeting; or
(iii) waive notice of the meeting,
the meeting may proceed even if the company failed to give the
required notice of that meeting, or there was a defect in the giving
of the notice;
(b) a majority of the directors must be present at a
meeting before a vote may be called at a meeting of the directors;
(c)
each
director has one vote on a matter before the board;
(d)
a
majority of the votes cast on a resolution is sufficient to approve
that resolution; and
(e)
………
.”
[56]
A meeting of directors is validly constituted as such if it
has been properly convened by notice to all the directors within
reach
and a quorum must be present.
[19]
It will
not be valid notice if it was only given to the majority of the
directors, even if the minority is perceived to be conflicted
and
cannot purportedly vote at the meeting as the company is entitled to
the collective wisdom of all the directors.
[20]
A board that is not properly constituted cannot take a valid board
resolution and a purported resolution is a nullity.
[21]
[57]
Mr. Dippenaar was not notified that a board meeting would take
place on 1 November 2018 for purposes of ratifying the fourth
addendum
and he was not furnished with the proposed resolution which
contained the purported ratification. Mr. Arendse’s explanation
for not notifying Mr. Dippenaar of the resolution was that he would
in any event not have voted in favour thereof is of no moment.
Whether Mr. Dippenaar would have voted in favour or against the
resolution does not dispense with the notice requirement in section
73(4)(b) of the Act. There was no compliance with the prescripts of
section 73(4)(b) and no valid resolution could be taken by
the
remaining directors.
[58]
The meeting of 1 November 2018 could not validly proceed and
no resolution could be voted upon for there is no evidence of any
notice
of the meeting as required in section 73(4)(b) of the Act.
Flaming Silver’s Board was therefore not properly constituted
due to the non-compliance with the provisions of section 73(4)(b) of
the Act, at least in respect of the notice that was required
to be
given to Mr. Dippenaar. Consequently, the purported resolution to
ratify the entering into of the addendum is null and void
and of no
consequence. Therefore, the fourth addendum was not lawfully entered
into and of no moment. As a result, the main agreement
lapsed due to
on fulfilment of suspensive condition 3.1.3.
[59]
In light of my finding that the resolution is null and void
and of no consequence, I need not consider the first respondent’s
remaining defences.
[22]
However, the finding I made that the meeting of 1 November 2018 could
not validly proceed and no resolution could be voted upon
destroys
the resolution. This entitles Mr. Dippenaar to an order in terms of
prayer 3.1A only to the extent that the purported
ratification of the
fourth addendum to the principal agreement is declared null and void
for there was no board decision and therefore
no decision to declare
null and void.
[60]
Lastly, Goldfields avers that SCC should have been joined
because it is a party to the third and fourth addendums. On 21
December
2017, Vantage Goldfields (Pty) Ltd and SCC entered into a
loan agreement in terms of which SCC loaned R 2 million to Vantage
Goldfields
(Pty) Ltd. Neither SCC nor Vantage Goldfields (Pty) Ltd
are parties to the principal agreement. SCC did not become a party to
the
principal agreement through either the third or fourth addendums.
In the third addendum, SCC undertook “…
.in favour of
the Seller as a condition to the Principal Agreement to make a
monthly payment of R 1.1 million …….
for each of the
months of August, September and October 2018 to Vantage Goldfields
Proprietary Limited for purposes of post-commencement
funding
advanced to Vantage Goldfields Proprietary Limited by SCC as
lender…..”
in the terms of the loan agreement
between SCC and Vantage Goldfields Proprietary Limited. In clause 3.6
in the fourth addendum,
in respect of SCC, it is recorded that “
The
parties and SCC in specific circumstances now wish to vary the
Principal Agreement (as amended by the First Addendum, the Second
Addendum and the Third Addendum) as set out in this addendum”
.
I see no rights nor any obligations for SCC in the main agreement nor
are any rights and obligations created for SCC in the third
or fourth
addendum. The mere fact that a person is a party to an agreement does
not by that mere fact give it a real and substantial
interest of a
legal nature in proceedings.
[23]
Notwithstanding being a party to the third and fourth addendums, SCC
does not have a real and substantial interest of a legal nature
in
the main agreement or the third and fourth addendum. Therefore, SCC
was not a necessary party to the proceedings.
[61]
Even if SCC had to be joined, SCC has unequivocally waived its
right to be joined in the main application through a resolution of
its directors on 5 April 2019.
[24]
In Toekie's Butchery (Edms) Bpk en Andere v Stassen
1974 (4) SA 771
(T) at 744F, Colman J, (with whom Nicholas J concurred) states the
following:
“
Joinder can only be dispensed with if the interested party
has unequivocally waived his right to be joined and undertaken to be
bound by any decision which the Court may make.”
In
addition, I see no prejudice caused for any of the respondents in the
main application by the non-joinder of SCC.
[62]
Flaming Silver seeks an order that the third and fourth
respondent be cited in the main application. However, it does not
seek relief
against those respondents. Due to their capacities as
joint business rescue practitioners for Vantage Goldfields (Pty) Ltd
and
MIMCO, I am of the view that they have sufficient interest in the
proceedings to be joined therein. In any event, the third and
fourth
respondents did not oppose their joinder and neither did Goldfields
or Mr. Dippenaar.
[63]
There is no reason why costs must not follow the result.
I make the following
order:
1. The
applicant is authorised to cite the third and fourth respondents
in
this application (“
the main application”
);
2. The purported
ratification of the signing the fourth addendum to the Sale
of Shares
Agreement of 1 November 2017 is declared null and void.
3. Prayers
2 to 4 of the Notice of Motion in the main application are
dismissed;
4. The
applicant is ordered to pay the respondents’ costs in the
main
application.
5. The
applicant is ordered to pay the fifth respondent’s costs
as
incurred from 7 June 2019.
Roelofse AJ
Acting Judge of the High Court
DATE OF
HEARING:
9 July 2019
DATE OF
JUDGMENT:
17 July 2019
APPEARANCES
FOR THE
APPLICANT:
Adv Beaton SC
INTSTRUCTED
BY:
Vogel Malan Attorneys
FOR THE
FIRST AND FIFTH
RESPONDENTS:
Adv. B Stoop SC
INSTRUCTED
BY:
Barnard
Inc. Attorneys
[1]
Mr.
Dippenaar is one Flaming Silver’s four directors. The other
directors are Mr. Frederick Sam Arendse (“Mr. Arendse”),
Mr. K Mudziri and Mr. K Maobelo. Arendse is the deponent to the
affidavits on behalf of Flaming Silver (save for the opposing
affidavit in Goldfields and Dippenaar’s the Rule 6(5)(g)
application to which reference will be made later).
[2]
See
paragraphs 33 and 34 below for Goldfields’ defence (in the
main application) and Mr Dippenaar’s cause of action
(in the
intervention application). These paragraphs summarize Goldfields’
and Mr. Dippenaar’s views.
[3]
Four addenda
written were entered into.
[4]
Who is o
ne
of the joint business rescue practitioners of
Vantage
Goldfields (Pty) Ltd and MIMCO.
[5]
Clause 1.1.2
of the principal agreement defines “Completion date” as
“the date at which all Conditions president
have been met.
[6]
Consent in
terms of
Section 11(1)
of the
Mineral and Petroleum Resources
Development Act 28 of 2002
for the transfer of the controlling
interest in Vantage Goldfields (Pty) Ltd to MIMCO, held by
Goldfields.
[7]
Annexure ‘FD12’
[8]
Paragraph 5.1 of the first
respondent’s answering affidavit at page 126; and, in the
alternative
,
on the grounds that Silver has repudiated the Sale of Shares
Agreement
alternatively
was in breach in the terms thereof which it had failed to remedy
notwithstanding a demand to do so.
[9]
During
argument I was made to understand that Flaming Silver made
application to amend its notice of motion in the intervention
application and that same was opposed by Goldfields and Mr.
Dippenaar.
[10]
Paragraph 6 of
the affidavit in support of
the
Rule 6(5)(g)
application.
[11]
Paragraph 8 of the affidavit in support of the
Rule 6(5)(g)
application.
[12]
Paragraph 3
of the answering affidavit in the
Rule 6(5)(g)
application.
[13]
Appearing
for Goldfields and Mr. Dippenaar.
[14]
See
paragraph 31 above. Also see prayer 3.2 of the notice of motion in
the intervention application at paragraph 29 above.
[15]
Appearing
for Flaming Silver.
[16]
Clauses
3.1.1 to 3.1.3 of
the principal agreement.
[17]
See
paragraph 18 above.
[18]
Wolpert v Uitzigt Properties
(Pty) Ltd
1961 (2) SA 257
(W) at 267; Rosebank Television &
Appliance Co (Pty) Ltd v Orbit Sales Corporation (Pty) Ltd
1969 (1)
SA 300
(T) at 303; Tuckers Land & Development Corporation (Pty)
Ltd v Perpellief
1978 (2) SA 11
(T) at 15; Kaimowitz v Delahunt and
Others
2017 (3) SA 201
(WCC) paras 11 and 15, in particular in para
27 where the following is said
:
“In my view, the management of a company in terms of the
overall supervision thereof resides in the board as opposed to
individual directors. So much is clear from the wording of
s 66
(1)
of the
Companies Act&rdquo
;.
;
Moraitis Investments (Pty) Ltd and Others v Montic Dairy (Pty) Ltd
and Others [2017] 3 All SA 485 (SCA) para 35).
[19]
Subsection (5) (a) of the Act.
[20]
Novick and Another v Comair
Holdings Ltd and Others
1979 (2) SA 116
(W) at 128. See also
Transcash SWD (Pty) Ltd v Smith
1994 (2) SA 295
(C) at 299 G-H where
the following was said: “
The
legal position in relation to the absence of a quorum at a
director's meeting is succinctly stated in Palmer's Company Law
25th
ed (1992) vol 1 para 8.306 at 808.1 as follows:
'If
the requisite quorum is not present the meeting is irregular and
cannot transact business.'
See also Blythe v The
Phoenix Foundry Ltd, Wilson & Muir
1922 WLD 87
at 91-2 at 91-2
and authorities there cited; Henochsberg on the
Companies Act 4th ed
vol 2 at 827, 828.”
Also
see: South African Broadcasting Corporation Ltd v Mpofu
[2009] 4 All
SA 169
(GSJ) para 49.
[21]
Panamo Properties (Pty) Ltd and
Another v Nel and Others NNO
2015 (5) SA 63
(SCA) at para. 22 where
it was said that: “
The
consequence of the board not having been properly constituted,
(which was not what occurred in the present case), would be
that the
resolution was not a resolution of the board of directors
.”
[22]
See
paragraph 32 above.
[23]
See:
Rosebank Mall (Pty) Ltd v Cradock Heights (Pty) Ltd 2004 (2) SA 353
(WLD)
[24]
Annexure
“RA10”.