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[2017] ZASCA 147
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Smyth and Others v Investec Bank Limited and Another (674/2016) [2017] ZASCA 147; [2018] 1 All SA 1 (SCA); 2018 (1) SA 494 (SCA) (26 October 2017)
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THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case no: 674/2016
In
the matter between:
DAVID
JOHN SMYTH AND FORTY
OTHERS
APPELLANTS
and
INVESTEC
BANK
LIMITED
FIRST
RESPONDENT
RANDGOLD
& EXPLORATION COMPANY LIMITED
SECOND
RESPONDENT
Neutral
citation:
Smyth v Investec Bank Ltd
(674/2016)
[2017] ZASCA 147
(26 October
2017)
Coram:
Navsa, Lewis, Petse and Mathopo JJA and
Schippers AJA
Heard:
13 September 2017
Delivered:
26 October 2017
Summary
:
Company:
Shareholders: Oppression: Oppressive or Unfairly Prejudicial Conduct:
Section 252 of the Companies Act 61 of 1973: party
entitled to remedy
under s 252: member is someone whose name has been entered in the
company’s register of members as contemplated
in s 105 of the
Companies Act. Locus standi: Beneficial owners of shares in a company
not eligible to join as co-applicants with
relevant nominees holding
the shares on their behalf and subject to their instructions.
ORDER
On
appeal from
:
Gauteng
Division of the High Court, Pretoria (Rabie J sitting as court of
first instance), reported sub nom
Smyth
& others v Investec Bank Ltd & another
In re: Standard Bank Nominees (TVL)
(Pty) Ltd & others
2016 (4) SA 363
(GP).
The
appeal is dismissed with costs, including the costs of two counsel.
JUDGMENT
Petse
JA (Navsa, Lewis and Mathopo JJA and Schippers AJA concurring):
[1]
The facts in this appeal are straightforward but the pathway to the
resolution of the dispute between the protagonists is fraught
with
pitfalls. The main issue in this case is whether the remedy provided
for in s 252 of the Companies Act 61 of 1973 (the Act)
is available
to beneficial owners of shares in a company who have elected to hold
their shares through nominees. A related issue
is whether beneficial
owners who cannot invoke the remedy for which s 252 of the Act
provides because their legal interest falls
short of a right to
assert a claim, may nonetheless join as co-applicants together with
their relevant nominees in proceedings
for relief in terms of s 252
of the Act in relation to their shares by virtue of a direct and
substantial interest in such proceedings.
[2]
The appellants who comprised different categories of applicants were
classified into three groups. The first to seventh appellants
(the
first category) instituted the main application in the Gauteng
Division of the High Court, Pretoria in which they sought the
following relief against the respondents:
‘
1.
Declaring that the conclusion of:
1.1
the agreement styled the “Revised Settlement Agreement”
and concluded by the second respondent with JCI Ltd (JCI)
on 20
January 2010 and which was ratified by a simple majority of the
second respondent’s holders on 20 May 2010; and
1.2
the agreement styled the “Litigation Settlement Agreement”
and concluded by the second respondent with inter alia
the first
respondent on 22 January 2010, the conclusion and ratification of
which was a condition precedent to the Revised Settlement
Agreement;
constitutes
or involves an act or omission which is unfairly prejudicial, unjust
or inequitable as contemplated in Section 252(1)
as read with Section
252(3) of the Companies Act 61 of 1973 (“the Companies Act”).
2.
In the light of paragraph 1 above, ordering the first respondent to
purchase the applicants’ shares in the second respondent
in the
sum of R288.56 per share (or any other sum which the above Honourable
Court [may] in its discretion determine) plus the
ruling Randgold
price at the time of such purchase.’
[3]
The eighth to thirty-fourth appellants (the second category) sought
leave to intervene in the main application as co-applicants,
similarly seeking relief in terms of s 252 of the Act. The third
group comprised the thirty-fifth to forty-first appellants, who
were,
for convenience, referred to as ‘own name applicants’ in
the court below, also sought leave to intervene in the
main
application for the relief sought therein. Although they were
permitted to intervene, they were nevertheless ordered to pay
the
first respondent’s costs occasioned by the latter’s
opposition up to 2 May 2014 when they procured registration
of their
shares in their own names from the relevant nominees.
[4]
The first respondent, Investec Bank Limited (Investec), but not the
second respondent, Randgold & Exploration Company Limited
(Randgold), opposed the application to intervene. Investec and
Randgold both opposed the main application. In the main application
Investec and Randgold challenged the locus standi of the appellants.
It was not in dispute that the nominee applicants who sought
to
intervene in the main application did so at the behest of the
beneficial shareholders and were thus carrying out their instructions
in furtherance of the beneficial shareholders’ interests.
[5]
The court below (Rabie J) upheld the locus standi point taken by
Investec. Consequently, it non-suited the seven main applicants
and
dismissed the applications for leave to intervene brought by the
beneficial shareholders. The application of the seven applicants
who
had sought leave to intervene, the so-called ‘own-name
applicants’, was granted. However, as already indicated,
they were ordered to pay the costs occasioned by their application to
intervene until 2 May 2014, this being the date on which
they
procured the registration of their shares (from their relevant
nominees) in their own names. Subsequently, they sought and
were
granted leave by the court below to appeal against the costs order.
However, since these appellants are no longer pursuing
their appeal
in this court, nothing more need be said in relation to that issue.
With the leave of the court below, the appellants
who were non-suited
appeal to this court against that order.
[6]
The judgment of the court below is comprehensive and contains a
detailed account of the circumstances giving rise to the present
dispute. Not all of its factual and legal conclusions were impugned
on appeal. Consequently, in what follows only such parts under
attack
on appeal will be discussed in this judgment.
[7]
The dispute between the parties has its genesis in two agreements
concluded during January 2010. The first agreement was between
Johannesburg Consolidated Industries Limited (JCI Ltd) and Randgold.
The second agreement was concluded between Randgold and Investec.
The
former agreement is entitled ‘Revised Settlement Agreement’
and the latter the ‘Litigation Settlement Agreement’.
Both agreements related to four claims instituted by Randgold against
JCI Ltd on the one hand, and Investec and Investec Bank UK
on the
other, following an alleged fraudulent scheme of breathtaking
proportions perpetrated by JCI Ltd against Randgold. In what
follows,
I shall, when convenient to do so, refer to Investec and Randgold
collectively as the respondents.
[8]
As indicated above, the applicants in the main application sought a
declaratory order to the effect that the two agreements
are unfairly
prejudicial to them as contemplated in s 252 of the Act. They also
sought consequential relief that Investec be directed
to purchase
their shares in Randgold in order to relieve themselves of the
consequences of the unfairly prejudicial conduct of
which they
complained. In essence, the applicants in the main application
complain that both agreements are, as a direct result
of Investec’s
machinations, calculated to benefit Investec and its United Kingdom’s
associated company to their financial
prejudice as shareholders of
Randgold.
[9]
Investec raised a preliminary point contesting the legal standing of
some of the applicants (both in relation to the main application
and
the applications to intervene), asserting that the affected
applicants were not members of Randgold and therefore could not
seek
relief under s 252 of the Act. The appellants disputed the assertion
that they were not members of Randgold. In the alternative,
they
sought to meet the challenge to their legal standing by contending
that, as beneficial owners, they had a beneficial interest
in the
shares registered in the names of their respective nominees.
Consequently, they asserted that it was they, as beneficial
owners of
the shares in Randgold, and not their respective nominees, who stand
to suffer patrimonial loss flowing from the respondents’
unfairly prejudicial conduct. By virtue of this interest, they
contended that they have a direct and substantial interest in the
relief sought in the main application, entitling them to either
remain or join as co-applicants in the main application.
[10]
After some negotiation, the parties ultimately agreed, pursuant to
rule 33(4) of the Uniform Rules of Court, that the preliminary
point
relating to the applicants’ legal standing be adjudicated prior
to and separately from the remaining issues in the
main application.
In essence, what the court below was called upon to adjudicate was,
first and foremost, whether the words ‘any
member of a company’
in s 252 of the Act include a beneficial owner of shares whose shares
are registered in the name of
a nominee.
[11]
As already mentioned, allied to the main issue was the subsidiary
question, whether in the event that the beneficial owners
are found
not to be members of Randgold, they are nevertheless entitled to
intervene in the main application as co-applicants with
their
respective nominees on the ground that they have a direct and
substantial interest in the subject matter of the main application
which might be prejudiced by any order the court may make in the main
application.
[12]
The court below held that, on a proper construction of s 252 of the
Act, the term ‘member’ in s 252 does not include
a
beneficial shareholder. It also held that the legal interest asserted
by the beneficial shareholder applicants did not avail
them as they
could not be joined as co-applicants (with their respective nominees)
because they would not be asserting a claim
under s 252 nor
could they competently do so.
[13]
In regard to the first issue, the court below stated the following
(para 67):
‘
.
. . it is clear that the word “member” as referred to in
section 252, is not capable of being read so as to include
a
beneficial shareholder whose shares are registered in the name of a
nominee.’
[14]
With respect to the second issue, the court below held (paras 70 –
71):
‘
A
mere legal interest, which falls short of a right to assert a claim,
cannot be the basis for joinder and intervention as an applicant.
I
cannot imagine a situation . . . where a party who cannot or will not
assert a claim, can assume the role of
dominus
litis
.
The right to assert a claim is required by Rule 12, read with Rule
10, and is a prerequisite for joinder as an applicant. The
question
of whether a person has legal interest in the outcome of litigation
inevitably arises in the context of joinder of or
intervention by a
respondent.’ [Citations omitted.]
Consequently
only a registered member has locus standi to approach the court in
terms of s 252 and not a person who owns the ultimate
economic
interest in shares registered in somebody else’s name. A person
whose name is not registered in the register of
members has no right
to participate as an applicant in s 252 proceedings.’
[15]
The key statutory provisions in this case are in s 252 and s 103 of
the Act. The relevant portion of s 252 of the Act, headed
‘Member’s
remedy in case of oppressive or unfairly prejudicial conduct’
reads:
‘
(1)
Any member of a company who complains that any particular act or
omission of a company is unfairly prejudicial; unjust or inequitable,
or that the affairs of the company are being conducted in a manner
unfairly prejudicial, unjust or inequitable to him or to some
part of
the members of the company, may . . . make an application to the
Court for an order under this section.’
[16]
The relevant parts of s 103 of the Act, headed ‘Who are members
of a company’ read:
‘
(1)
The subscribers of the memorandum of a company shall be deemed to
have agreed to become members of the company upon its incorporation,
and shall forthwith be entered as members in its register of members.
(2)
Every other person who agrees to become a member of a company and
whose name is entered in its register of members, shall be
a member
of the company.’
Section
105(1) of the Act requires every company to keep in one of the
official languages, a register of its members and to forthwith
enter
therein the names and addresses of the members and, in the case of a
company having a share capital, a statement of the shares
issued to
each member, and to distinguish each share by, inter alia, its claim
or kind, and the amount paid therefor or agreed
to be considered as
paid on the shares of each member. In respect of each member, the
company shall enter the date on which the
member’s name was
entered in the register of members and the date on which a member
ceased to be such a member.
[17]
Significantly, s 109 provides that the register of members is prima
facie evidence of the matters entered in it in terms of
the Act.
[18]
Section 91A(3)
(a)
,
in turn, provides that a company shall enter in its register of
members in respect of every claim of securities, the total number
of
securities held in uncertificated form. And s 91A(4)
(b)
provides that, in the case of uncertificated shares, a transferee
shall, upon entry of his name in a subregister, become a member
of
and be recognised as a member by the company in respect of the
uncertificated securities registered in his name. The subregister
is,
for all intents and purposes, part of the register of members of the
company and must contain the information referred to in
ss 105
and 133 of the Act.
[19]
Subsections 1 and 2 of s 112 of the Act are also relevant. In essence
they provide that the subscribers of a company’s
memorandum of
incorporation are deemed to have agreed to become members of the
company, and on registration become members and
must be entered as
such in its register of members. In addition, every other person who
agrees to become a member of the company,
and whose name is entered
in its register of members is a member of the company. It is implicit
in this that for a person to become
a member, it is necessary that
the name of such a person must be entered in the register of members
of the company concerned.
[20]
It is apposite at this stage to make some preliminary observations
that will conduce to a proper consideration of the issues
at stake in
this appeal. First, it is necessary to be cognisant of the fact that
s 252 must be given such construction as will
advance the remedy
rather than limit it. (See in this regard
Donaldson
Investments (Pty) Ltd & others v Anglo-Transvaal Collieries Ltd:
SA Mutual Life Assurance Society & another Invervening
1979 (3) SA 713
(WLD) at 719H which was endorsed by the full court in
Dondaldson Investments (Pty) Ltd & others v
Anglo-Transvaal Collieries Ltd & others
1980
(4) SA 204
(T) at 709B-F.)
[21]
In
Sammel & others v President Brand
Gold Mining Co Ltd
1969 (3) SA 629
(A)
at 666C-D, this court said that a ‘nominee’ is a person
who is nominated or appointed to hold the shares in his
name on
behalf of another and that the nominee is in effect simply an agent
of the transferee. And that the reason why ‘nominee’
and
not ‘agent’ is used is because the word comes from the
English law. This court went on to state at 666D-E that:
‘The
policy of the law is that a company shall concern itself only with
the registered holder and not the owner or beneficial
owner of the
shares’. The nominee does not hold the shares as an agent for
another but must himself appear on the register
as the holder of the
shares.
Henochsberg
on the Companies Act
Butterworths
Lexis Nexis Service Issue 33 of June 2011
states
that the fact that the nominee holds the shares on behalf of another,
generally known as the ‘owner’ or ‘beneficial
owner’, does not appear on the company’s register. This
is explained with reference to the decision in
Standard
Bank of South Africa Ltd v Ocean Commodities Inc
1983
(1) SA 276
(A) at 289. There, this court said that it is the policy
of the law that a company should concern itself only with the
registered
owners of the shares.
[22]
To conclude on this aspect, it is necessary to refer briefly also to
a decision of this court in
Dadabhay v Dadabhay & another
1981
(3) SA 1039
(A) at 1047D where Holmes AJA said:
‘
[T]he
nominee shareholder takes his instructions from the beneficial
shareholder.’
[23]
Previously, in
Oakland Nominees (Pty) Ltd v Gelria Mining &
Investment Co (Pty) Ltd
1976 (1) SA 441
(A), Holmes JA, in
explaining the concept of a ‘nominee’, had occasion to
say the following (at 453A-B):
‘
A
nominee is an agent with limited authority: he holds shares in name
only. He does so on behalf of his nominator or principal,
from whom
he takes instructions; see
Sammel
& others v President Brand Gold Mining Co Ltd
1969
(3) SA 629
(A) at 666. The principal, whose name does not appear on
the register, is usually described as the “beneficial owner”.
This is not, juristically speaking, wholly accurate; but it is a
convenient and well-understood label. Ownership of shares does
not
depend upon registration. On the other hand, the company recognises
only its registered shareholders. . . . The practice is
a convenient
one and is accepted by the JSE.’
Accordingly,
what requires emphasis is that when a nominee has been nominated, it
is that nominee and not the beneficial owner who
is eligible to have
his or her or its name entered in the register of members. And only
once his or her name is entered in the
register of members does he or
she become a member. (See in this regard
Doornkop
Sugar Estates Ltd v Maxwell
&
others
1926 WLD 127
at 134.)
[24]
Unsurprisingly, in this court counsel for the appellants accepted
that: (a) a shareholder has a right to hold shares in own
name or
through a nominee; (b) a nominee acts in accordance with the
instructions given by the beneficial owner; (c) a beneficial
owner
has the right to terminate the nomination and to hold the shares in
his or her own name; and that (d) the nominees who were
permitted to
intervene in the main application will act in the furtherance of the
interests of the beneficial owners. It is against
the foregoing
backdrop that I turn to deal with what is at the heart of this
appeal.
[25]
The appellants’ primary criticism of the judgment of the court
below was that it erred in holding that the remedy under
s 252 of the
Act is not available to a beneficial owner of shares in a company who
has freely elected to hold those shares through
a nominee. It was
further contended that (and I quote from the appellants’ heads
of argument):
‘
The
crucial question is whether, when shares are held through a nominee,
s 252 should, on a proper, purposive construction, be regarded
as
being restricted to nominees and to exclude beneficial owners –
notwithstanding the nominees being agents with no direct
interest of
their own, and the beneficial shareholders being the principals who
have suffered the prejudice.’
[26]
Furthermore, criticism was levelled against the judgment of the court
below for its reliance on the decision in
Atlasview
Ltd & others v Brightview Ltd & others
[2004]
EWHC 1056
(Ch). It was submitted that the court below erred in
finding that the interests of the nominee are co-extensive with those
of the
beneficial owner for purposes of invoking the remedy under s
252 of the Act. This was so, so went the argument, because the
prerequisite
for a successful invocation of the remedy in s 252
cannot be satisfied without imputing the prejudice suffered by the
beneficial
owner to a nominee to sue under s 252. And that to deny a
beneficial owner relief under s 252 flies in the face of established
common-law principle that an agent may not sue in his own name on
behalf of the principal. In support of this proposition the
appellants
relied on
Sentrakoöp
Handelaars Bpk v Lourens & another
1991 (3) SA 540
(W).
[27]
In my view, the appellants’ argument is plainly unsustainable.
In
Sentraalkoöp Handelaars Bpk
a cedent had sued in its name when the debt that it sought to enforce
had earlier been ceded to a third party. Marais J held that
a
creditor who has divested himself of his right to sue by way of
cession could not sue in its own name as the agent of the cessionary.
Thus, the appellants’ argument entirely loses sight of the fact
that the remedy sought to be enforced by the appellants is
created by
statute. The selfsame statute provides that such a remedy is
available only to members of a company when the jurisdictional
requirements spelt out in s 252 are satisfied. In these circumstances
the common law principle upon which the appellants rely must,
in the
context of s 252, be taken to have been explicitly overridden by the
Act. (
Compare
Minister
of Safety & Security v Sekhoto & another
[2010] ZASCA 141
;
2011 (1) SACR 315
(SCA) para 22.)
[28]
I revert to the crux of the dispute between the parties, the
interpretation of s 252 of the Act. Principles of
interpretation
dictate that a court should pay due regard to the
overall scheme of the Act. During an interpretative process, it is as
well to
remember that a fundamental principle of statutory
interpretation is that words in a statute must be given their
ordinary meaning,
unless to do so would result in an absurdity. ( See
South African Transport and Allied
Workers Union & another
v Garvas
& others
[2012] ZACC 13
;
2013 (1)
SA 83
(CC) para 37;
S v Zuma &
others
[1995] ZACC 1
;
1995 (2) SA 642
(CC) paras 13-14;
Dadoo Ltd v
Krugersdorp Municipal Council
1920 AD
530
at 543.)
This general principle is,
however, subject to three interrelated qualifications. First, the
statutory provision should be interpreted
purposively. (See
Department of Land Affairs & others v
Goedegelegen Tropical Fruits (Pty) Ltd
[2007]
ZACC 12
;
2007 (6) SA 199
(CC) para 5;
Dengetenge
Holdings (Pty) Ltd v Southern Sphere Mining Development Company Ltd &
others
[2013] ZACC 48
;
2014 (5) SA 138
(CC)
paras
84-86.)
Second, the relevant
statutory provision must be contextualised. (See
North
East Finance (Pty) Ltd v Standard Bank of South Africa Ltd
[2013]
ZASCA 76
;
2013
(5) SA 1
(SCA) para 24;
KPMG Chartered
Accountants (SA) v Securefin Ltd & another
[2009]
ZASCA 7
;
2009 (4) SA 399
SCA para 39.)
Third,
closely related to the purposive approach is the requirement that
statutes must be interpreted consistently with the Constitution
so as
to preserve their constitutional validity, where it is reasonably
possible to do so. As Wallis JA put it in
Natal
Joint Municipal Pension Fund v Endumeni Municipality
[2012]
ZASCA 13
;
2012
(4) SA 581
para 18
:
‘
[T]he
“inevitable point of departure is the language of the provision
itself”, read in the context and having regard
to the purpose
of the provision and the background to the preparation and production
of the document. . . . A sensible meaning
is to be preferred to one
that leads to insensible or unbusinesslike results or undermines the
apparent purpose of the document.’
[29]
Accordingly, as endorsed in a long line of cases, the logical point
of departure is the language of the provision itself read
in the
context of the overall scheme of the Act, having regard to the
purpose of the provision and against the background to the
production
of the relevant statute. (See in this regard
South
African Airways (Pty) Ltd v Aviation Union of South Africa &
others
[2011] ZASCA 1
;
2011 (3) SA 148
(SCA) paras 25-30;
Bothma-Batho
Transport (Edms) Bpk v S Bothma & Seun Transport (Edms) Bpk
[2013] ZASCA 176
;
2014 (2) SA 494
(SCA) paras 10-12;
Novartis
SA v Maphil Trading
[2015] ZASCA 111
;
2016 (1) SA 518
(SA) paras 24-31.)
[30]
It is as well to recall that this appeal is about the question
whether the appellants – whom it is common cause are beneficial
shareholders – are members of Randgold as contemplated in s 252
read with s 103. The appellants criticised the reliance by
the court
below on foreign cases in reaching its conclusion. They contended
that in none of those cases was the issue raised in
this appeal,
namely whether a beneficial owner who sustains the prejudice sought
to be redressed by s 252, pertinently considered.
Whilst accepting
that a company should concern itself only with registered owners of
shares, the appellants nevertheless argued
that s 103 of the Act
should not be regarded as a definition of the word ‘member’
for all the purposes of the Act.
But in the context of s 252 the
word ‘member’ should include a beneficial owner. And this
could be done, so the
argument continued, by reading in the words ‘or
to the beneficial shareowners in the case of shares registered in the
name
of a nominee’ immediately after the words ‘or to
some part of the members of the company’. It was further
submitted
that not to do so would undermine the objective of the
widespread practice of registering shares in listed companies in the
names
of nominees.
[31]
The thrust of the appellants’ argument is that because it is
the beneficial shareholder who suffers the prejudice contemplated
in
s 252 of the Act and not the nominee although a member in terms of s
103, it is permissible to go behind the register of members
for
purposes of s 252. In support of this submission, the appellants
relied on
Kalil v Decotex (Pty) Ltd & another
[1987] ZASCA
156
;
1988 (1) SA 943
(A). There, this court had occasion to consider
the meaning of ‘member’ in the context of s 346(1) of the
Act for purposes
of determining the applicant’s locus standi in
a winding-up application. The locus standi of the applicant, who was
a registered
shareholder, was disputed by one of the respondents on
the ground that although the applicant was still a registered member,
he
had ceded his shares to a third party. Thus, he was in truth not a
member of the company. This question raised a dispute of fact
which
could not be resolved on the papers. In upholding the appeal against
the order non-suiting the applicant, Corbett JA said
the following
(at 970H-J):
‘
It
is common cause that when the application was launched in the court a
quo the appellant was still shown in the share register
of Decotex to
be the holder of the two shares held by him immediately prior to the
Easter agreement. Prima facie, therefore, he
remained a member of the
company (s 109 of the 1973 Companies Act). The Court is however,
entitled to go behind the register in
order to ascertain the identity
of the true owner . . .’
[Citations
omitted.]
[32]
The other decision relied upon by the appellants is
Barnard v Carl
Greaves Brokers (Pty) Ltd & others, Carl Greaves Brokers (Pty)
Ltd & others v Barnard, Barnard v Bredenhann
& others
[2007] ZAWCHC 2
;
2008 (3) SA 663
(C) in which Barnard, who had not
yet obtained registration of his membership in the respondent, had
applied in the same proceedings
for an order directing the respondent
to enter his name in its register of members. In anticipation of such
registration he also
sought relief under s 252. In upholding
Barnard’s application, Binns-Ward AJ said the following:
‘
The
provisions of s 252 are available to “members” – ie
registered shareholders. On the particular facts of the
current
matter I do not consider the fact that Barnard is not yet registered
as a member as an obstacle to his resort to s 252.
I have already
found that Barnard is a shareholder entitled as against the company
to obtain the insertion of his name on the members’
register. .
. .
In
my view it is competent for a shareholder who has not obtained
registration of his membership of the company because of opposition
or lack of co-operation by the company or his fellow shareholders,
but is entitled to such registration, to apply in the same
proceedings for an order directing his enrolment on the register of
members and, in anticipation of the grant of such an order,
as a
member for relief in terms of s 252 . . .’
Ex
parte Avondzon Trust (Edms) Bpk
1968
(1) SA 340
(T) and
Lourenco & others
v Ferela (Pty) Ltd & others (No 1)
1998 (3) SA 281
(T) are also instances, albeit in a different
context, where it was held that only a member, as defined, is
entitled to seek relief
against oppressive conduct.
[33]
To my mind neither of these decisions supports the proposition for
which they were cited by the appellants. In
Kalil
,
the upshot of the passage quoted above was that the applicant was ‘a
member’ of the company in name only as he had
ceded his shares.
The matter was referred for oral evidence in order to determine
whether or not this was in truth the position.
On the other hand, the
opening sentence in the passage from
Barnard
,
quoted above, makes plain that had the applicant not been entitled to
have his name entered in the register of members, his application
for
relief under s 252 would have been unsuccessful. Hence Barnard’s
membership in the company was considered at the outset.
[34]
As already mentioned, the appellants also criticised the reliance by
the court below on foreign authorities because, so they
contended,
none of those cases applies four-square to the central argument they
advanced, namely that s 103 ought not to be regarded
as constituting
a definition of the word ‘member’ for all purposes of the
Act. And that in the context of this case
the word ‘member’
should include a beneficial shareholder. It is therefore necessary to
say something in relation to
some of those cases.
[35]
In
Atlasview Ltd v Brightview Ltd
[2004]
EWHC 1056
(Ch) the court was called upon to determine, amongst other
things, whether Mr and Mrs Barton, who were petitioners complaining
of oppressive conduct, had locus standi to invoke the remedy deriving
from s 459 of the English Companies Act 1985. Section
459 of the
English Companies Act conferred a right of petition on ‘a
member of a company’ and on someone to whom shares
have been
transferred by operation of law. It was common cause that both Mr and
Mrs Barton were not registered shareholders of
Brightview
as contemplated in s 22 of the English Companies Act, which is in
material respects the equivalent of s 103 of the Act, and that
no
shares had been transferred to either of them by operation of law.
The court, whilst acknowledging that there might well be
a basis for
joining them as respondents, held that they could not be joined as
petitioners. In reaching this conclusion, the court
reasoned that s
459 conferred a right to petition a court only on members of the
company or those to whom shares have been transferred
by operation of
law, and that neither Mr nor Mrs Barton fell within those categories.
They were consequently non-suited.
[36]
A similar conclusion was reached in
Farstadt Supply A/S v Enviroco
Ltd
[2011] UKSC 16.
There, the court considered the meaning and
import of s 22 of the English Companies Act which is couched in
identical terms to
s 103 of the Act. In the course of its judgment
the court said the following (paras 37-39):
‘
The
starting point is that the definition of “member” in what
is now section 112 of the 2006 Act (section 22 of the
1985 Act for
the purposes of this appeal) reflects a fundamental principle of
United Kingdom company law, namely that, except where
express
provision is made to the contrary, the person on the register of the
members is the member to the exclusion of any other
person, unless
and until the register is rectified. . . .
Ever
since the Companies Clauses Consolidation Act 1845 and the Companies
Act 1862 membership has been determined by entry on the
register of
members. The companies legislation proceeds on that basis and would
be unworkable if that were not so. . . .
For
those and other purposes the legislation makes it clear that the
member is the person on the register, and where it is necessary
to
apply the legislation to persons who are not on the register, special
provision is made . . .’
[37]
Hacquet and Two Others v McCarthy and
Three Others
[2006] EWHC 832
(Ch) is
another instance where the English courts were called upon to decide
the preliminary issue whether petitioners under section
459 of the
English Companies Act 1985 had the requisite standing to bring the
petition following a dispute amongst shareholders.
The court was
required to decide upfront whether the petitioners were members of
the company in which they held shares. The court
found that persons
entitled to petition under s 459(1) were members of the company as
defined in section 22(1). And that those
who were not members under
section 22(1) could petition only if they were either persons to whom
shares have been transferred or
to whom shares have been transmitted
by operation of law.
[38]
Reference may also be made to an Australian decision in
In Re
Fernlake (Pty) Ltd
1994 (13) ACSR 600
in which the following was
stated (at 605 5-35):
‘
.
. . it does not follow that because the respondent was entitled to
dictate the manner in which the voting rights attaching to
those
shares were exercised, he was entitled to notice by the company of
any relevant meeting. It is one thing to say that as between
the
vendor and the purchaser the mutual rights and obligations which they
have created by their agreement affect the manner in
which each are
to act in respect of the subject property. It is quite another matter
to suggest that those bilateral rights and
obligations can somehow
affect the company . . . Quite to the contrary the authorities
suggest that as between the trustee/vendor
on the one hand who
remains the registered owner of the shares, and the company and the
shareholders on the other, it is he and
not the beneficial owner of
the shares whose position must be considered. Indeed it would be very
curious if the position were
otherwise. The memorandum and articles
of association of a company constitute an agreement between the
company and the shareholders
and between the shareholders inter se.
Although a particular shareholder may hold the benefit of that
agreement on trust for a
third party, the registered owner of the
shares is the primary party to that agreement. He is the “member”
of the company,
not the beneficial owner of those shares: see s 184
of the Law [statute] and
Maddocks
and DJE Constructions Pty Ltd
[1982] HCA 17
;
(1982) 148 CLR 104
;
40 ALR 283.
Absurd results would follow if an
obligation were cast on the company or the other shareholders to
determine the extent to which
he holds those shares on trust for
another. Quite rightly, the company and shareholders are entitled to
treat the registered shareholder,
for all intents and purposes, as
the owner of the shares and as the person entitled to exercise the
rights in respect of those
shares. The obligations which the
shareholder chooses to create between himself and a third party
cannot possibly affect that position
. . . if a vendor fails to
adhere to his obligations to vote in accordance with the purchaser’s
directions . . . the vendor
would clearly leave himself open to an
action for damages . . . for breach of contract . . .’
[39]
Finally on this score, the decision of the New Zealand High
Court in
RPB Solutions Ltd v Avoca Holdings Ltd
[2010] 2 NZLR
857
(HC) is relevant. There, the court was dealing with ss 87 and 96
of the New Zealand Companies Act 105 1993. The former section
required a company to maintain a share register in which names of
registered shareholders are entered (similarly to s105 of the
Act)
whilst the latter, like s 103 of the Act, provided that a
shareholder means a person whose name is entered in the company's
share register. The court held that the remedy against oppression
provided for in s 174(1) of the New Zealand Act (comparable to
s 252
of the Act) was available only to persons whose names are entered in
the share register to the exclusion of anyone else.
[40]
In their commentary on the import of s 459(2) of the English
Companies Act, 1985, Blackman et al in
Commentary
on the Companies Act
vol 1 (2003) at
9-5
point out that:
‘
In
England it has been held that for the purposes of s 459 of the
English 1985 Act (corresponding to our section 252(1)) a “member”
is a member as defined in section 22 of the Act (corresponding to our
s 103); and hence the beneficial owner of shares is not a
member for
this purpose . . . But because section 459(2) of that Act expressly
renders the provisions of s 459 applicable
also to a person “who
is not a member of a company but to whom shares in the company have
been transferred or transmitted
by operation of the law” that
conclusion is perhaps inevitable.’
[41]
Thus, it can be seen from the foregoing discussion that in terms of
the English, Australian and New Zealand jurisprudence the
party who
can legitimately complain of oppressive conduct under the statutory
regimes operative in those jurisdictions is a member
of the company
concerned – that is someone whose name has been entered in the
company’s register of members.
[42]
It remains to deal with the contention by the appellants that for
purposes of the relief sought under s 252 of the Act, s 103
should
not be taken to be a definition of who is entitled to invoke s 252.
Whilst accepting that a company and its shareholders
inter se are
entitled to treat registered shareholders as owners of the shares –
and thus entitled to exercise the rights
relating to those shares for
all other purposes under the Act, the appellants nonetheless argued
that an exception must be made
with respect to s 252. The logic of
this submission escapes me. In any event I believe that it is
completely answered by the countervailing
argument advanced by the
respondents. And it is this. First, whilst the word ‘member’
is not defined in s 1 of the
Act that is of no moment for s 103
does so definitively. Second, with reference to Francis
Benion
Statutory Interpretation
6 ed (2013) at 518,
the respondents
correctly argued that it matters not where a definition of a word in
a statute is located. At 517, the learned author
states that a
definition is exhaustive when it provides a full statement of the
meaning of the terms being defined. And as Daniel
Greenberg
Craies on Legislation
10ed (2013) at 24.1.2
crisply
puts it:
‘
.
. . the only useful rule of legislative drafting [is] that there are
no useful rules of legislative drafting, the only correct
approach
being to consider what is best for clarity of the law or the
convenience of the reader on each occasion.’
[43]
Counsel for the appellants also made some play of the averment
contained in the affidavit of one of the intervening applicants,
Standard Bank Nominees (SBN), that:
‘
.
. . SBN has no beneficial interest in the contested shares and . . .
the registration of the contested shares in the name of SBN
is a
matter of form only and not substance. . . . If joined in the
proceedings, SBN will not enter into any of the factual disputes
that
may exist. It will simply, on the instructions of the beneficial
shareholders, seek the relief which they seek on the bases
which they
rely.’
In
my view this statement contains the seeds of its destruction and
cannot assist the appellants. On the contrary it underscores
the
trite principle that a nominee acts in the interests of and subject
to the instructions of the beneficial owner.
[44]
It was further contended on behalf of the appellants that this court
should adopt an expansive interpretation of the word ‘member’
in order to avoid absurdity or to give effect to the true purpose of
s 252. In support of this proposition the appellants relied
on
Hanekom v Builders Market Klerksdorp
(Pty) Ltd & others
[2006] ZASCA 2
;
2007 (3) SA 95
(SCA) para 7. In my view, this decision does not, in
the context of this case, support the proposition for which it is
cited by
the appellants. There, Scott JA was at pains to point out
that the courts have repeatedly cautioned against the dangers of
departing
too readily from the ordinary (and I venture to say clear)
meaning of the words of the statute. In particular, they have
stressed
that the absurdity must be ‘utterly glaring’ for
departure to be justified. In this case I cannot see how any
absurdity,
let alone an utterly glaring one, would ensue if the word
‘member’ were interpreted in the way for which the
respondents
contended.
[45]
In my judgement, to interpret s 252 in the manner for which the
appellants contend would do violence to the language of the
section.
In
Standard Bank Investment Corporation
Ltd v Competition Commission & others
;
Liberty Life Association of Africa Ltd v
Competition Commission
[2000] ZASCA 20
;
2000 (2) SA 797
(SCA) this court, with
reference to the judgment of Innes CJ in
Dadoo
Ltd & others v Krugersdorp Municipal Council
1920 AD 530
, emphasised that it would be wrong for courts to ignore
the clear language of a statute under the guise of adopting a
purposive
interpretation as doing so would be straying into the
domain of the legislature.
[46]
In
Dadoo
, Innes CJ stated the following (at 543):
‘
Speaking
generally, every statute embodies some policy or is designed to carry
out some object. When the language employed admits
of doubt, it falls
to be interpreted by the court according to recognised rules of
construction, paying regard, in the first place,
to the ordinary
meaning of the words used, but departing from such meaning under
certain circumstances, if satisfied that such
departure would give
effect to the policy and object contemplated. I do not pause to
discuss the question of the extent to which
a departure from the
ordinary meaning of the language is justified, because the
construction of the statutory clauses before us
is not in
controversy. They are plain and unambiguous. But there must, of
course, be a limit to such departure. A Judge has authority
to
interpret, but not to legislate, and he cannot do violence to the
language of the lawgiver by placing upon it a meaning of which
it is
not reasonably capable, in order to give effect to what he may think
to be the policy or object of the particular measure.’
[47]
In
South African Police Service v Public Servants Association
[2006] ZACC 18
;
2007 (3) SA 521
(CC), the Constitutional Court
embraced this theme and said (para 20):
‘
Interpreting
statutes within the context of the Constitution will not require the
distortion of language so as to extract meaning
beyond that which the
words can reasonably bear. It does, however, require that the
language used be interpreted as far as possible,
and without undue
strain, so as to favour compliance with the Constitution. This in
turn will often necessitate close attention
to the . . . and
institutional context in which the provision under examination
functions. In addition it will be important to
pay attention to the
specific factual context that triggers the problem requiring
solution.’
See also
Bato
Star Fishing (Pty) Ltd v Minister of Environmental Affairs &
others
[2004] ZACC 15
;
2004 (4) SA 490
(CC) para 89.
[48]
I turn now to consider the alternative submission advanced on behalf
of the appellants. As alluded to above (para 9), the appellants
contended that as beneficial shareholders they have a direct and
substantial interest in the proceedings under s 252 of the Act.
Accordingly, so the argument went, they are the necessary parties
entitled to join as co-applicants in the main application together
with the nominees in whose names their shares are registered. In
elaboration it was contended that neither Uniform rule 10(1) nor
12(1) and the common law precludes the appellants’ joinder in
the main application as co-applicants.
[49]
The implication of these contentions, if upheld, is that both the
nominees – as members of Randgold – and the beneficial
shareholders will together pursue a remedy such as that provided for
in s 252 even though the beneficial owners are not members
as
contemplated in that section. Counsel for the appellants relied on
the decisions such as
Henri Viljoen
(Pty) Ltd v Awerbuch Bros
1953 (2) SA
151
(O) at 169-170 and
Burger v Rand
Water Board & another
[2006] ZASCA
150
;
2007 (1) SA 30
(SCA) para 7 in support of these contentions.
[50]
Rule 10(1) provides:
‘
Any
number of persons, each of whom has a claim, whether jointly, jointly
and severally, separately or in the alternative,
may join as
plaintiffs in one action against the same defendant or defendants
against whom any one or more of such persons proposing
to join as
plaintiffs would, if he brought a separate action, be entitled to
bring such action, provided that the right to relief
of the persons
proposing to join as plaintiffs depends upon the determination of
substantially the same question of law or fact
which, if separate
actions were instituted, would arise on each action, and provided
that there may be a joinder conditionally
upon the claim of any other
plaintiff failing.’
[51]
In turn, rule 12 provides:
‘
Any
person entitled to join as a plaintiff or liable to be joined as a
defendant in any action may, on notice to all parties, at
any stage
of the proceedings apply for leave to intervene as a plaintiff or a
defendant. The court may upon such application make
such order,
including any order as to costs, and give such directions as to the
further procedure in the action as to it may seem
meet.’
[52]
In dealing with this submission, the court below stated the following
(paras 69-71):
‘
.
. . as a matter of construction section 252 allows for one entity to
make application to court and that would be the registered
member and
no one else. The section simply does not allow for a multiplicity of
applications or actions in respect of the same
shares as envisaged by
the applicant. Even if the beneficial holders are detrimentally
affected by actions of the majority, same
would not entitle them to
intervene in any proceedings since the only entities which have a
legal interest to act are the members
mentioned in section 252 of the
Act. Lastly, the Uniform Rules of Court and the principles in respect
of joinder and intervention
never intended to expand the class of
claimants on whom a cause of action is conferred by primary
legislation. See
Atlasview
(supra)
paragraph 31.
A
mere legal interest, which falls short of a right to assert a claim,
cannot be the basis for joinder and intervention as an applicant.
I
cannot imagine a situation,
ceteris paribus
, where a party who
cannot or will not assert a claim, can assume the role of dominus
litis. The right to assert a claim is required
by Rule 12, read with
Rule 10, and is a prerequisite for joinder as an applicant. The
question of whether a person has a legal
interest in the outcome of
litigation inevitably arises in the context of joinder of or
intervention by a respondent. See
Vitorakis v Wolf
1973 (3) SA
928
(W) and
Shapiro v SA Recording Rights Assoc Ltd (Galeta
Intervening)
2008(4) SA 145 (W).
Consequently
only a registered member has locus standi to approach the court in
terms of section 252 and not the person who owns
the ultimate
economic interest in shares registered in somebody else's name. A
person whose name is not registered in the register
of members has no
right to participate as an applicant in section 252 proceedings.’
[53]
The learned authors of
Herbstein &
Van Winsen
–
The Civil
Practice of the High Courts of South Africa
5
ed (2009) vol 1 at 225-226
,
point
out that in terms of rule 12 the applicant for leave to intervene
must be a person ‘entitled to join as a plaintiff
or a
defendant’. And that joinder is competent either on the basis
of convenience or on the basis that the party whose joinder
is in
question has a direct and substantial interest in the subject-matter
of the proceedings.
[54]
It is trite that a party wishing to institute legal proceedings must
have a direct and substantial interest in the dispute
which is the
subject matter of the proceedings. (See in this regard
Jacobs
en ‘n ander v Waks en andere
[1991] ZASCA 152
;
1992 (1) SA 521
(A) at 534A-E.) In
Sandton
Civic Precinct (Pty) Ltd v City of Johannesburg & another
[2008] ZASCA 104
;
2009 (1) SA 317
(SCA) para 19 Cameron JA said that
legal standing means the ‘sufficiency and directness of a
litigant’s interest in
proceedings which warrants his or her
title to prosecute the claim asserted’. Simply put, legal
standing therefore means
the right of the applicant to assert a
claim. I have some difficulty in understanding how Uniform rules 10
and 12 and the common
law principles relating to joinder of
interested parties could avail the appellants on the facts of this
case. My reservation stems
from the fact that the appellants seek to
be joined as co-applicants with their nominees and perforce to invoke
a statutory remedy
specifically catered for someone who is a member
of a company in terms of the Act. In my view, to allow them to do so
would fly
in the face of clear provisions of s 252 of the Act, which
unambiguously confine the remedy only to members, which the
appellants
are not. It may be useful to contrast the provisions of s
252 of the Act with those of s 163 of the current
Companies Act 71 of
2008
. In terms of the provisions of the latter Act, unlike those of
the former, the remedy against oppressive or prejudicial conduct
is
available to either a shareholder or a director of a company whereas
s 252 of the Act confines the remedy exclusively to a member.
Accordingly, it must follow that this was the kind of interest that
the beneficial shareholders were required to demonstrate in
order to
establish their entitlement to the relief sought in the main
application. This they failed to do. In my view the appellants’
argument on this score can be disposed of on the simple basis that it
would be idle to permit the intervention of the appellants
in the
main application in circumstances where the remedy created by s 252
of the Act is available only to a member of the company
as defined in
s 103 as the legislature saw it fit.
[55]
It was a simple matter for the appellants, if they wished to avail
themselves of the remedy provided for in s 252 of the Act
in their
own names, to terminate the nomination of their respective nominees
so as to procure the entry of their names in the register
of Randgold
members. Instead, they obdurately elected ‘to saddle what has
proven to be an unruly horse’ by seeking
to invoke the s 252
remedy in their own names as beneficial owners. They were ill-advised
in doing so. As I see it, for as long
as the nominees’ names
remained in the register of members, the beneficial owners lacked a
legal interest in the subject-matter
of the litigation. (
Compare
Bowring NO v Vrededorp Properties CC &
another
[2007] ZASCA 80
;
2007 (5) SA
391
(SCA) paras 19-20.)
This is all the
more so when regard is had to the fact that in any event the nominees
are in truth advancing the interests of the
beneficial owners. In
particular, they also act subject to the latters’ instructions.
[56]
For all the aforegoing reasons, the appeal accordingly falls to be
dismissed. However, before making the order, it is necessary
to say
something about the issue of costs. The costs order of the court
below included the costs of three counsel. In their written
heads of
argument, counsel for the parties sought a similar order in this
court, where three counsel were employed.
[57]
Whilst the issues involved in this matter were not
unattended
by some difficulty, and were perhaps even of great importance to the
parties, they were nonetheless not of such great
complexity to
warrant the employment of three counsel. Costs of two counsel
therefore should suffice. (See in this regard
Motsepe
v Commissioner for Inland Revenue
[1997]
ZACC 3
;
1997 (2) SA 897
(CC) para 32.)
[58]
In the result the following order is made:
The
appeal is dismissed with costs, including the costs of two counsel.
_________________
X M Petse
Judge of Appeal
APPEARANCES
For
Appellant: P B J Farlam SC
(with
D M Davis and S G Korbet, heads of argument prepared by: C D A Loxton
SC with P B J Farlam SC and D M Davis)
Instructed
by:
Korbers
Inc, Johannesburg
Webbers,
Bloemfontein
For
First Respondent: A P Rubens SC
(with
J Blou SC, S Stein SC and N Farvoqui)
Instructed
by:
Werkmans
Attorneys, Sandton
Honey
Attorneys, Bloemfontein
For
Second Respondent: G Farber SC
(with
N Konstantinides SC)
Instructed
by:
Van
Hulsteyns Attorneys, Sandton
Rossouws
Attorneys, Bloemfontein