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[2008] ZASCA 142
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Surmon Fishing (Pty) Ltd and Others v Compass Trawling (Pty) Ltd and Others (162/08) [2008] ZASCA 142; 2009 (2) SA 196 (SCA) ; [2009] 2 All SA 176 (SCA) (27 November 2008)
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THE
SUPREME COURT OF APPEAL
REPUBLIC
OF SOUTH AFRICA
JUDGMENT
Case Number: 162 / 08
SURMON FISHING (PTY)
LTD First Appellant
SAM MONTSI Second Appellant
FOODCORP (PTY) LTD Third
Appellant
and
COMPASS TRAWLING (PTY)
LTD First Respondent
WAYNE LOUW Second Respondent
SUNIL RANCHOD Third
Respondent
BARRIE KING Fourth Respondent
LYNWETH BHANA Fifth
Respondent
BLUE CONTINENT PRODUCTS (PTY)
LTD Sixth Respondent
BHANA COASTAL FISHING (PTY)
LTD Seventh Respondent
___________________________________________________________________
NEUTRAL CITATION:
Surmon
Fishing (Pty) Ltd
v
Compass Trawling (Pty) Ltd
(
162/2008)
[2008] ZASCA 142
(27 November 2008)
CORAM : HARMS ADP, SCOTT,
PONNAN and COMBRINCK JJA and GRIESEL AJA
HEARD: 6 November 2008
DELIVERED: 27 November 2008
SUMMARY: Company –
exercise of powers of - by directors.
___________________________________________________________________
___________________________________________________________________
ORDER
___________________________________________________________________
On appeal from
: The Cape High Court (Van Der Riet AJ sitting
as court of first instance).
The appeal is dismissed with costs.
___________________________________________________________________
JUDGMENT
___________________________________________________________________
PONNAN JA
(Harms ADP, Scott and Combrinck JJA and Griesel
AJA concurring):
[1] The present appeal has its genesis in the grant by the Minister
of Environmental Affairs and Tourism, in terms of
s18
of the
Marine
Living Resources Act 18 of 1998
of certain long term hake fishing
rights, which authorised the catching of hake by the deep sea trawl
method for commercial purposes.
Given the capital intensive nature of
deep sea trawling as well as the fact that significant numbers of
permit holders have been
granted rights to relatively small tonnages
of fish, the Directorate of Marine and Coastal Management of the
Department of Environment
and Tourism actively encouraged holders of
rights in the fishing industry to pool their resources to foster
economic viability.
[2] Against that backdrop, during 1999, two of the holders of
commercial fishing rights in the hake deep sea trawl fishery, Blue
Continent Products (Pty) Ltd ('Blue Continent') (the sixth
respondent) and Azanian Fishing (Pty) Ltd ('Azanian') concluded a
joint
venture agreement, which came to be known as the Compass
Fishing Hake Joint Venture (‘the joint venture’), to
facilitate
exploitation of their pooled fishing rights. Over time,
the fifth respondent, Lynweth Keith Bhana ('Bhana') and the first
appellant,
Surmon Fishing (Pty) Ltd ('Surmon'), elected to become
participants in the joint venture in accordance with the general
terms and
conditions ('the GTC') applicable to it.
[3] Whilst the joint venture employed vessels belonging to third
parties at its inception, the common intention of the parties
to the
joint venture had always been to acquire a trawler to properly
exploit their pooled fishing rights. To that end, in 2001,
Blue
Continent purchased a vessel that came to be known as the MFV
Compass Challenge
for approximately R 20.5m. After the vessel had
been subjected to an extensive refit and reconfiguration, it was sold
for approximately
R 33.6m to the first respondent, Compass Trawling
(Pty) Ltd ('Compass Trawling'), a company in which the participants
in the joint
venture held shares. At the same time funds were loaned
by Blue Continent to Compass Trawling to facilitate the sale. All of
this
occurred in consultation and by agreement with the joint venture
participants.
[4] Initially, Compass Trawling and the joint venture operated as
separate entities. During April 2003, however, a written Agreement
of
Assignment was concluded, in terms of which, as the agreement put it:
‘the parties agreed to transfer the rights and obligations
of
the joint venture to Compass Trawling with the consent of the
participants and to allow the joint venture to remain extant but
dormant until otherwise agreed by the parties’. To that end,
once again in the words of the written agreement: ‘the
joint
venture assigned to Compass Trawling all of its rights and
obligations … arising out of the JV [joint venture] Formation
Agreement and the JV Participation Agreements read with the GTC’.
Thereafter, Compass Trawling carried on the business activities
relating to the exploitation of the pooled hake rights, which had
previously been conducted by the joint venture.
[5] On 13 August 2007, a written offer was made by the third
appellant, Foodcorp (Pty) Ltd ('Foodcorp'), to Surmon to purchase
its
hake rights. It is common cause that an offer of that kind is subject
to Clause 9.3 of the GTC, which reads:
'9.3 Should a Participant ("the
Willing Seller") at any time receive an offer for all or any of
its assets ("the
Offer") from a third party ("the
Offeror”) which the Willing Seller wishes to accept, then the
following provisions
shall apply:
9.3.1 the Willing Seller shall
forthwith and in writing furnish the Joint Venture with relevant
details of the Offer;
9.3.2 within twenty [20] days of
receipt of the said details in terms of sub-clause 9.3.1 above, the
Joint Venture shall be entitled
to purchase the assets referred to in
the Offer at the same price and on the same terms and conditions
mutatis mutandis contained
in the Offer and in the event of the Joint
Venture purchasing such assets, the provisions of sub-clause 9.2.11
above shall apply
mutatis mutandis;
9.3.3 if the Joint Venture
decides not to purchase the assets referred to in the Offer, then
the Willing Seller shall be entitled
to accept the Offer provided
that in respect of any assets not disposed in terms of the Offer any
future sale shall remain subject
to the provisions of this
sub-clause 9.3.'
.
On 27 August 2007 and acting in terms of Clause 9.3 of the GTC read
together with the Agreement of Assignment, Surmon furnished
Compass
Trawling with details of the Foodcorp offer. Compass Trawling thus
became entitled to purchase Surmon’s hake rights
on the same
terms and conditions as reflected in the Foodcorp offer.
[6] On 12 September 2007, a duly constituted meeting of the directors
of Compass Trawling was convened to consider and discuss
the Foodcorp
offer. At that meeting four out of the six directors present and
voting, voted in favour of a resolution that Compass
Trawling should
purchase Surmon's hake rights at the same price and on the same terms
and conditions as contained in the Foodcorp
offer. After the meeting,
Compass Trawling addressed correspondence to Surmon and Foodcorp,
notifying them that it had resolved
to purchase Surmon’s hake
rights. On 13 September 2007, the second appellant, Sam Montsi
(‘Montsi’), purported,
in his capacity as a director of
Compass Trawling, to call a meeting of the shareholders of Compass
Trawling to discuss 'the acquisition
by the Company of certain hake
rights as decided by the Board of the Company at its meeting on 12
September 2007 ... and if necessary,
to overrule such decision and
commitment.' In response, on 21 September 2007, attorneys acting for
Wayne Louw (the second respondent),
Sunil Ranchod (the third
respondent) and Barrie King (the fourth respondent), all directors of
Compass Trawling, who together with
Bhana had voted in favour of the
resolution to purchase Surmon’s hake rights, addressed a letter
to both Montsi and Surmon.
This stated, inter alia, that a valid and
binding contract for the purchase of the hake rights had come into
existence and that
Montsi's notice purporting to call a general
meeting, was invalid and unauthorised.
[7] That letter elicited a response from attorneys acting for Surmon,
which formally withdrew Montsi's notice but contended that
the
decision of Compass Trawling to purchase Surmon’s hake rights
lacked validity, inasmuch as the requirements of Clause
7.10 of the
GTC had not been satisfied. Accordingly, so the letter proceeded,
Surmon had accepted the offer from Foodcorp.
[8] Impasse having been reached, an application was launched by
Surmon, Montsi and Foodcorp as the first, second and third
applicants,
respectively, for declaratory relief, inter alia, that:
‘
(a) At a meeting of the
board of directors of the first respondent [Compass Trawling] held on
12 September 2007 a resolution in
the following terms was
not
passed:-
“
that
Compass Trawling buy the quota of Surmon Fishing on terms contained
in their offer from Foodco
rp”;
(b) The decision of the board
of directors of the first respondent at the aforesaid meeting was
in effect a decision
not
to buy the first applicant's long term Hake Fishing Rights on the
terms contained in the offer from the third respondent;
(c) The first applicant's
acceptance of the offer by the third applicant to purchase the
first applicant's long term Hake Fishing
Rights on the terms
contained in the offer ("the offer") brought about a firm
and binding agreement of sale on the
terms and conditions contained
in the offer.'
The respondents opposed the relief sought and launched a
counter-application. Van Riet AJ, who heard the matter in the Cape
High
Court, granted an order in the following terms:
'1 That the application is
dismissed with costs.
2 That the counter application
accordingly succeeds.
2.1 It is declared that, at the
meeting of the Board of Directors of the First Respondent held on 12
September 2007, a resolution
was validly passed in the following
terms: "
That
Compass Trawling buys the quota of Surmon Fishing on terms as
contained in their offer from Foodcorp
".
2.2 It is further declared that
a valid and enforceable agreement exists between the First
Respondent and the First Applicant
in terms whereof the First
Respondent has purchased the long-term hake rights of the First
Applicant at the same price and on
the same terms and conditions,
mutatis mutandis,
as those contained [in] the offer of the Third Applicant dated 13
August 2007, ….
2.3 The First Applicant is
directed to take all such steps as are necessary in order to
transfer the long-term hake rights held
by it to the First
Respondent, including the signing of all necessary documentation in
this regard, as well as making application
for such transfer in
terms of
section 21
of the
Marine Living Resources Act No 18 of
1998
.
2.4 The Deputy Sheriff of this
court is authorised and directed, in the event of the First
Applicant failing to sign any such
documents or to take any steps
referred to in the preceding sub-paragraph within 5 (five) days of
the order of this court, to
sign such documents and to take such
steps on the Applicant's behalf.
2.5 An interim interdict is
granted, pending the transfer of the long-term hake rights,
presently held by the First Applicant
to the First Respondent:
(i) Prohibiting the first
applicant from transferring the long-term hake rights presently held
by it to the Third Applicant;
(ii) Directing the First
Applicant to make the long-term hake rights presently held by it
available to the First Respondent, on
the terms set out in clause 9.1
of the General Terms and Conditions … and to, forthwith, take
all steps and sign all documents
necessary in order to give effect
thereto.
(iii) The Deputy Sheriff of
this court is authorised and directed, in the event of the First
Applicant failing to sign any such
documents or to take any steps
referred to in the preceding sub-paragraph within 5 (five) days of
the order of this court, to
sign such documents and to take such
steps on the Applicant's behalf.
2.6 That the Applicants, are
jointly and severally to pay the Respondents' costs of the counter
application.'
[9] Clause 7.10 of the GTC provides:
'Decisions of the Management
Board and the Executive Committee shall be taken by a majority of the
members thereof present and voting
provided that any decision
relating to all financial matters, whether of the Joint Venture
itself or in relation to the Participants
vis-à-vis the Joint
Venture, to the rights and obligations of the Participants in
relation to the Joint Venture and to matters
arising in connection
with the contracting of the Vessel to the Joint Venture, shall
require the support of more than 66.6% (sixty
six point six percent)
of the Management Board or Executive Committee members, as the case
may be, present and voting to be adopted.'
[10] Two issues thus arose for determination in the court below:
first, whether or not Clause 7.10 was indeed applicable; and,
second,
whether the requisite majority of more than 66.6% of those present
and voting, had been attained. Van Riet AJ thought it
unnecessary for
him to enter into what he described as the ‘vexed question as
to whether Clause 7.10 of the GTC applied to
the decision of the
Board of Directors of Compass Trawling’ as he was willing to
‘assume, without deciding, in the
[appellants’] favour
that it did indeed apply and that, therefore: “…
the
support of more than 66.6%
…’’ of its
Directors was required in order to validly pass the resolution’.
The learned Acting Judge accordingly
held that when four out of the
six directors voted in favour of the resolution, the requisite
majority of more than 66.6% envisaged
in Clause 7.10 had been
attained. That issue should perhaps first be disposed of in order to
clear the way for a consideration
of the main issue in this appeal. I
will do so briefly.
[11] On this aspect of the case, the thrust of the appellants’
contention is that 66.6% in the context of Clause 7.10 should
be
interpreted to mean two-thirds. Accordingly, so the contention
proceeded, what the clause required is a majority of
more
than
two-thirds of the directors present and voting. Van Riet AJ reasoned:
‘on its ordinary grammatical meaning, 66.66 (recurring)%
[being
the number that had voted in favour of the resolution] is more than
66.6%. That is a linguistic and mathematical fact. The
fact that the
difference is small does not, … detract from this fact. …
The use of the words “
more than
” however, means
that the parties could just as well have meant to say: “
at
least two-thirds
”, through the use of the words: “
more
than 66.6%
”.’
[12] In
Fundstrust (Pty) Ltd (in Liquidation) v Van Deventer
1997
(1) SA 710
(A), Hefer JA stated (at 726H – 727A):
'Recourse to authoritative
dictionaries is, of course, a permissible and often helpful method
available to the Courts to ascertain
the ordinary meaning of words
(
Association of
Amusement and Novelty Machine Operators and Another v Minister of
Justice and Another
1980 (2) SA 636
(A) at 660F-G). But judicial interpretation cannot be
undertaken, as Schreiner JA observed in
Jaga
v Dönges NO and Another
;
Bhana v Dönges NO
and Another
1950 (4)
SA 653
(A) at 664H, by "excessive peering at the language to be
interpreted without sufficient attention to the contextual scene".
The task of the interpreter is, after all, to ascertain the meaning
of a word or expression in the particular context of the statute
in
which it appears (
Loryan
(Pty) Ltd v Solarsh Tea and Coffee (Pty) Ltd
1984
(3) SA 834
(W) at 856G
ad
fin
). As a rule every
word or expression must be given its ordinary meaning and in this
regard lexical research is useful and at times
indispensable.
Occasionally, however, it is not. The present appears to me to be
such a case.'
[13] Linguistically, Van Riet AJ may well be correct, but in ordinary
parlance it would be most unusual to say that 66.6% means
something
other than two-thirds. In this instance, the narrow confines of a
linguistic interpretation are clearly inapposite. As
Conradie JA put
it in
Lloyds of London Underwriting Syndicates 969, 48, 1183 and
2183 v Skilya Property Investments (Pty) Ltd
[2004] 1 All SA 386
(SCA) para 14:
‘Sophisticated
semantic analysis is not the best way of arriving at an understanding
of what the parties meant to achieve
by [the relevant clause]. A
better way is to look at what, from the point of view of commercial
interest, they hoped to achieve
by the … provision’.
[14] One’s common understanding, particularly in this
contextual scene, undoubtedly is that a resolution by 66.6% means a
resolution by two-thirds of those present and voting. To interpret
the clause so that a majority of two-thirds
exactly
and not a
majority of
more
than two-thirds is required is unnatural and
clearly emasculates the clause. Had three directors voted in favour
of the resolution
and three against it, the resolution would have
failed. Four in fact voted in favour of the resolution. That, on the
approach of
the learned Acting Judge, constituted both a simple
majority as well as the special majority envisaged in the clause. In
my view,
it could never have been contemplated that in a situation
such as this - namely, where provision is made for a special voting
regime
- the voting of one extra director in favour of a resolution
would at one and the same time constitute the swing vote for both a
simple majority as well as for the special majority contemplated by
Clause 7.10. It follows that the court below ought to have
reached a
contrary conclusion to that reached by it on this aspect of the case.
I turn now to consider the principal issue in this
appeal.
[15] Compass Trawling is a company duly incorporated in terms of the
Companies Act 61 of 1973 and as such its board of directors
is
charged with the management of the business of the company, subject
of course to the provisions of the Act, its articles of
association
and the provisions of its shareholders agreement. Clause 68 (a) of
Compass Trawling’s articles of association
provides:
'The directors may meet together
for the dispatch of business, adjourn and otherwise regulate their
meetings as they think fit.
Questions arising at any meeting shall be
decided by a majority of votes. In the event of an equality of votes,
the chairman shall
have a second or casting vote. A director may at
any time convene a meeting of the directors.'
The shareholders agreement of Compass Trawling, which was concluded
on 16 August 2001, contains fairly detailed provisions relating
to
its directors. Clause 6.4 reads:
'All resolutions put to the vote
at meetings of directors, if not passed unanimously by the directors
present, shall be deemed to
have been rejected unless passed by
majority vote of all such directors.'
It is thus clear on either the articles of association or the
shareholders agreement that a majority vote is all that was required
for a valid decision of the board of directors of the company.
[16] In terms of the assignment it was the
rights
and
obligations
of the joint venture – not its
management
- that came to be assigned to Compass Trawling. Nor, in fact, could
the management be assigned. Clause 7.10 of the GTC appertains
to the
internal management of the joint venture. It prescribes the voting
regime for valid decisions of its management board and
executive
committee. That voting regime cannot simply be imposed upon the board
of directors of Compass Trawling, a separate and
distinct juristic
entity. When resolving to purchase Surmon’s hake rights, each
of those present and voting at the meeting
acted
qua
director
of Compass Trawling. As such they had no inherent powers, for the
powers that they exercised were in fact the powers of
the company,
which had been conferred upon them by the articles of association.
They thus lacked the authority to place further
restrictions on the
powers of the company than those provided for in the articles of
association. The board of directors owed their
fealty to and were
accordingly obliged to apply - rather than to defy - the articles of
association of the company.
[17] What, however, presents as an insuperable obstacle in the way of
the appellants’ contention is Clause 8 of the agreement
of
assignment. Clause 8, headed ‘Conflict’, provides:
'In the event of any provision
contained in the JV Formation Agreement and/or the JV Participation
Agreements, read with the GTC
conflictin[g] with any provision of the
Compass Trawling Shareholders Agreement, the latter shall prevail.'
In my view that clause is destructive of the appellants’ case,
for it makes plain that the parties applied their minds to
the
possibility of a conflict between the GTC and the shareholders
agreement and resolved unequivocally and expressly that, in
the event
of such conflict, the latter would prevail. It follows in those
circumstances that the first issue and consequently the
appeal falls
to be decided against the appellants.
[17] In the result the appeal is dismissed with costs.
_________________
V PONNAN
JUDGE OF APPEAL
APPEARANCES:
For
Appellant: H M Scholtz SC
R
D E Gordon
Instructed
by:
Cliffe
Dekker Inc
Cape
Town
Claud
Reid
Bloemfontein
For
Respondent: J Newdigate SC
Instructed
by:
Webber
Wentzel Bowens
Cape
Town
Matsepe
Inc
Bloemfontein