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[2017] ZAGPPHC 11
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Venter NO and Another v Silver Lakes Homeowners Association NPC (444994/2016) [2017] ZAGPPHC 11 (20 January 2017)
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
DIVISION, PRETORIA
20/1/17
CASE
NO: 444994/2016
Reportable:
No
Of
interest to other judges: No
Revised:
No
In
the matter between:
CORNE
VENTER
N.O. First
Applicant
SASJE
VENTER
N.O. Second
Applicant
and
SILVER
LAKES HOMEOWNERS ASSOCIATION
NPC Respondent
JUDGMENT
DE
VILLIERS, AJ:
Introduction
1.
In
the end, the applicants sought the following relief:
"That Rule 11.2
(effective from 27 May 2016) of the Respondent's Rules be declared
null and void".
2.
The facts were simple:
2.1
The applicants are the trustees of a trust, the
Venter Family Trust, and are in that capacity the registered owners
of an immovable
property in the Silver Lakes residential estate;
2.2
The respondent is a company duly incorporated in
accordance with the provisions of section 21
of the
Companies Act
61 of 1973
(" the old Companies Act'
),
now a
non-profit company, as envisaged in the Companies Act 71 of
2008
(
" the
new
Companies Act'
>);
2.3
It was common cause that the trustees, acting as
trustees of the trust-
2.3.1.
Are members of the respondent as a result of the
ownership of the property;
2.3.2.
Are bound by the respondent's Memorandum of
Incorporation
(
"the
MOI'
)
and by
its rules;
2.4
The respondent's board of directors advised the
members of the respondent on 6 May 2016 that they have approved
additions to the
rules, which would become effective on an interim
basis on 27 May 2016;
2.5
The relief sought in this matter pertains to one
of these rules, the second one quoted-
"
11.
GENERAL MEETINGS OF MEMBERS
11.1.
General Meetings of Members will be held
in accordance with the provisions of the
Companies Act, 2008
, the
Memorandum of Incorporation and further subject to the following:
11.2.
A Member may be represented by proxy at
General Meetings, provided that a person, other than the chairperson
of the General Meeting,
may not act as proxy for more than 5 (five)
Members, unless he holds direct or indirect ownership of these
Members' units exceeding
5 (five) units."
2.6
According
to the notice (and the rules), such promulgated rules would only
become permanent rules if ratified at a
"
Constitutional General Meeting
(CGM)";
[1]
and
2.7
The applicants took issue with the limitation on
proxies, engaged the respondent in correspondence, and ultimately
this litigation
ensued.
3.
I
do not know all the background facts. I know that:
3.1
The respondent's stated purpose of limiting the
number of proxies to five, was to prevent a member from
"controlling"
an Annual General Meeting or a CGM of the
respondent;
3.2
The respondent has about one thousand six hundred
members;
3.3
It seems that at the previous Annual General
Meeting of the respondent, a person held about one hundred and fifty
proxies. The respondent
describes this as a case of "...
manipulation of the voting process, in that
a
certain group of members endeavoured to bring
about results through the abuse of proxies".
I
have not been told the facts for this conclusion by the respondent;
and
3.4
No facts have been provided as the reason for the
introduction of the five-proxy rule (as opposed to say two or
twenty).
4.
The fact that I do not know all the background
facts is not reflected as a criticism, those are matters known to the
drafters and
their clients, and there may be reasons why the
background facts were limited. In the end it played no role in my
decision.
The
legal dispute
5.
As
reflected earlier, in the end the dispute became a narrow one:
5.1.
The applicants' case was that the limitation as
set out in
Rule 11.2
(quoted above) is "...
in
contradiction with the provisions of the Respondent's MOI and more in
particular the provisions set out in
5.9.1 thereof ...".
5.2.
That clause, clause 5.9.1, reads-
"A member may be
represented at a general meeting by a proxy, who need not be
a
member" ;
5.3.
The respondent denied that the addition of
Rule
11.2
(quoted above) took away, or limited, the right of a member to
vote by proxy as set out in 5.9.1 of the MOI;
5.4.
The applicants alleged, but did not prove their
allegation that-
"
It is further
common cause that all rules implemented must be in accordance with
the provisions set out in the respondent's MOI
and that any rule that
is in conflict or contradictory with the MOI is void ...";
5.5.
This averment was denied in the answer. The
averment was not common cause.
6.
The parties did not refer to or rely on any
section in the new
Companies Act in
the founding or answering
affidavits (or in the replying affidavit). I fully subscribe to the
summary of the obligations of the
parties to plead their cases
properly in motion proceedings as set out in Swissborough Diamond
Mines (Pty) Ltd and Others v Government
of the Republic of South
Africa and Others
1999 (2) SA 279
(T) at 323 under the heading
"
The
law relating to the content of affidavits generally”
.
Still, if I had followed that trite approach
in this matter, I would not have decided the real issue, which was to
be found in the
new
Companies Act. I
dealt with the matter on this
basis as the act binds me, despite there being only one reference to
the act in the two sets of heads
of argument.
The
new
Companies Act, the
MOI and the rules
7.
Section
5(1)
[2]
of the new
Companies Act requires
of me to interpret and apply the act in a
manner that gives effect to the purposes set out in
section 7
of the
act. This aspect was not addressed in any one of the two sets of
heads of argument.
8.
Not having
dealt with
section 5
of the new
Companies Act, the
two sets of heads
of argument contained no reference to any of the purposes listed in
section 7
of the new
Companies Act that
I had to apply in
interpreting and applying the act.
[3]
9.
Section 7(a)
of the new
Companies Act states
that
one of the purposes of the act is to
"promote
compliance with the Bill of Rights as provided for in the
Constitution, in the application of company law".
I
make no finding on its applicability to this set of facts as the case
has not been pleaded.
10.
The heads of argument delivered on behalf of the
applicant did rely on section 58 of the new
Companies Act. That
was
the sole reference to the new
Companies Act in
the two sets of heads
of argument.
11.
Section 58
of the new
Companies Act applies
to this case as a result of the
provisions of
section 10(3)(a).
[4]
I quote the first
three sub-sections of
section 58
(underlining added):
"
58
Shareholder right to be represented by proxy
(1)
At any time
,
a shareholder of a company
may
appoint
any individual
,
including an individual who is not a
shareholder
of that company,
as
a
proxy
to-
(a)
participate in, and speak and vote at
,
a shareholders meeting
on behalf
of the shareholder; or
(b)
give or withhold written consent on behalf
of the shareholder to a decision contemplated in
section 60.
(2)
A proxy appointment-
(a)
must be in writing, dated and signed by
the shareholder; and
(b)
remains valid for-
(i)
one year after the date on which it was
signed; or
(ii)
any longer or shorter period expressly set
out in the appointment, unless it is revoked in a manner contemplated
in subsection (4)
(c), or expires earlier as contemplated in
subsection (8) (d).
(3)
Except to the extent that the Memorandum
of Incorporation of a company provides otherwise-
(a)
a shareholder of that company may appoint
two or more persons concurrently as proxies, and may appoint more
than one proxy to exercise
voting rights attached to different
securities held by the shareholder;
(b)
a proxy may delegate the proxy's
authority to act on behalf of the shareholder to another person
,
subject to any restriction set out in the instrument appointing the
proxy; and
(c)
a copy of the instrument appointing a
proxy must be delivered to the company, or to any other person on
behalf of the company, before
the proxy exercises any rights of the
shareholder at a shareholders meeting."
12.
On the face of it, the right of member to appoint
a person as his/her proxy is unlimited. He/she
may
appoint
"any individual' , "at any
time".
It seems to me that the meaning
of
"may"
is
in the nature of
"being entitled to, or
have the right to".
The wording of the
act seems to be of wider application than the wording of clause 5.9.1
of the MOI upon which the applicants relied
(
"a
member may be represented at a general meeting
by a
proxy, who need
not be
a
member"
).
13.
Section 15
of the new
Companies
Act
>contains four important provisions for
the purposes of this decision. I refer only to the relevant parts of
the four provisions
addressing the relationship between the act and
the MOI and that rules:
13.1.
The first
provision is in
section 15(1)
of the new
Companies
Act.
[5
]
It states that
each provision of a company's MOI must be consistent with the act and
that it is void to the extent that it contravenes,
or is inconsistent
with, the act. This would mean that I have to look to the act to
determine the width of application of the right
to appoint a proxy
and not to the MOI, as argued;
13.2.
The second
provision is in
section 15(2)(d)
of the new
Companies Act.
[6
]
It states that a
company's MOI may not include any provision that negates, restricts,
limits, qualifies, extends or otherwise alters
the substance or
effect of an unalterable provision of the act. The parties, not
havening addressed the new
Companies Act in
the affidavits or in
their heads of argument, also omitted to address the issue of an
unalterable provision. To my mind, that was
the real legal issue. In
the case of an unalterable provision, the intended rule clearly (at
least) restricted and limited the
right to appoint a proxy. Such a
provision would have been void had it been included in the MOI. Until
the introduction of the
rule limiting the number of proxies, members
had the right to pool proxies in favour of one individual. The rule
limiting proxies
to five took that right away, or restricted it, or
limited it, or qualified it, or affects it. Reverting to the real
issue, it
was held in Du Plessis v Clearwater Estates NPC and Others
(82306/2014) [2015] ZAGPPHC 1063 (13 November 2015) also reported as
NPC 2015 JDR 2477 (GP) by my brother CJ Van Der Westhuizen AJ at Para
27 that
section 58(1)
is an unalterable provision of the act.
[7]
I had not been
referred to this judgment. It is of direct application to this
matter. Clearly, the five proxy rule, had it
been in the MOI,
would have restricted or limited the substance of the right to
appoint any person as a proxy and would have fallen
foul of
section
15(2)(d)
of the new
Companies Act;
13.3.
The
third
provision is in
section 15(3)
of the new
Companies
Act
>.
[8]
It states that
that, except to the extent that a company's MOI provides otherwise,
the board of the company may make, amend or repeal
any necessary or
incidental rules relating to the governance of the company in
respect of matters that are not addressed
in the act or the MOI. The
right to appoint any person as a proxy is contained in the act (and
the MOI contains provisions with
regard to the appointment of
proxies); and
13.4.
The fourth
provision is in
section 15(4)
of the new
Companies Act.
[9
]
It states that is
that a rule so promulgated must be consistent with the act and the
company's MOI, and any such rule that is inconsistent
with the act or
the MOI is void to the extent of the inconsistency. This reference to
being void ends the argument of a rule having
only interim
application (and/or subject to a resolutive condition).
14.
By now, it must be clear that I am of the view
that the five-proxy rule is inconsistent with the new
Companies Act
and
therefore void.
15.
I
was invited by both counsel to make a finding of cost of senior
counsel. I have not been referred to any authority on this point.
16.
My instincts were that that such a class of costs
order does not exist. I can see no reason why the status of senior
counsel, appearing
on his (in this case) own, should warrant a higher
fee.
Rule 69(5)
makes it clear that it is the taxing master who must
determine what a reasonable fee should be. It does not refer to any
role to
be played by the presiding judge or his/her right to usurp
the function of the taxing master. The approach that the taxing
master
has to follow has been set out in
Hennie
De Beer Game Lodge CC v Waterbok Bosveld Plaas CC and Another
2010 (5) SA 124
(CC) at Para 8 and for example in
City
of Cape Town v Arun Property Development (Pty) Ltd and Another
2009 (5) SA 227
(C) at Para 17, 24, 25 and 30.
17.
However, upon conducting superficial research, my
view of the law seems not to carry universal support. In several
cases reported
on SAFLll, such orders have been granted. My brother
Murphy stated the following in
Tobias v Road
Accident Fund
(4934/2009) [2010]
ZAGPPHC 537 (15 April 2010) at Para 29:
"Mr Thabede argued
that it is not competent for the court to make an order that costs
should include the costs of senior counsel.
In this regard he
referred to
rule 69(1)
which confers authority on the court to depart
from the general rule that only the fees of one counsel will be
allowed. Because
the rule is silent in relation to the employment of
a senior counsel who appears without a junior, the matter, Mr
Thabede, submitted
is rightly within the jurisdiction of the taxing
master in terms of
rule 69(5)
, which provides that fees will be in
accordance with the tariff where applicable or in such amount he
considers reasonable. Mr
Thabede therefore has a point. However, in
determining a reasonable fee the taxing master is required to take
account of the category
to which the counsel belongs (senior or
junior); the time spent and the general standard of fees charged -
Sebenza Kahle Trade CC v Emalahleni Local Municipal Council
[2003] 2 All SA 340
(T). Accordingly, it has become acceptable
practice for courts to pronounce in their costs orders, having regard
to the nature
of the matter, its implications and complexity, that
the costs of senior counsel are justified."
18.
My stint as an acting judge has come to an end. I
do not want to make a definitive ruling about the practice without
full argument
on the powers of a judge in making the order as
requested. Even if my instincts are wrong, I still would have had a
discretion
to refuse the request. I do. The taxing master can
determine the reasonable fees of counsel.
Consequently,
I make the following order:
1.
Rule 11.2
(effective from 27 May 2016) of the
Respondent's Rules declared void;
2.
The respondent is ordered to pay the costs of the
application.
________________________
DP
de Villiers
Acting
Judge of the High Court
Gauteng
Division
Heard
on:
24 November 2016
On behalf of the
Applicant:
FW Botes SC
Instructed
by:
Hotane Snyman & Taljaard Inc
On
behalf of the Respondent:
AF Arnoldi SC
Instructed
by:
Christo Bekker Inc
Judgment
handed down:
20 January 2017
[1]
MOI clause 7.2;
[2]
"5(1) This Act must be interpreted and applied in a manner that
gives effect to the purposes set out in section 7";
[3]
See section 7(i). I have to (mutatis mutandis} "balance the
rights and obligations of shareholders and directors within
companies";
[4]
"10(3) Sections 58 to 65, read with the changes required by the
context-
(a) apply to a non-profit company
only if the company has voting members; and ..."
[5]
"(1)Each provision of a company's Memorandum of
Incorporation-
(a) must be consistent with this Act;
and
(b) is void to the extent that it
contravenes, or is inconsistent with, this Act, subject to section 6
(15)."
[6]
"(2) The Memorandum of Incorporation of any company may-
(a) include any provision-
(i) dealing with a matter that this
Act does not address;
(ii) altering the effect of any
alterable provision of this Act; or
(iii) imposing on the company a
higher standard, greater restriction, longer period of time or any
similarly more onerous requirement,
than would otherwise apply to
the company in terms of an unalterable provision of this Act;
(b) …
(d) not include any provision that
negates, restricts, limits, qualifies, extends or otherwise alters
the substance or effect
of an unalterable provision of this Act,
except to the extent contemplated in paragraph (a) (iii)."
[7]
The case dealt with the question if the MOI could limit the right to
be presented by proxy to proxies delivered by a stipulated
period
before the meeting concerned. See Para 12, 22, 27, and 28;
[8]
"(3) Except to the extent that a company's Memorandum of
Incorporation provides otherwise, the board of the company may
make,
amend or repeal any necessary or incidental rules relating to the
governance of the company in respect of matters that
are not
addressed in this Act or the Memorandum of Incorporation, by-
(a) ..."
[9]
"(4) A rule contemplated in subsection (3)-
(a) must be consistent with this Act
and the company's Memorandum of Incorporation, and any such rule
that is inconsistent with
this Act or the company's Memorandum of
Incorporation is void to the extent of the inconsistency;
(b) takes effect on a date that is
the later of- ..."