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[2017] ZAGPPHC 73
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Loest v Gendac (Pty) Ltd and Another (17699/2016) [2017] ZAGPPHC 73; 2017 (4) SA 187 (GP) (3 March 2017)
IN THE HIGH COURT OF
SOUTH AFRICA
GAUTENG
DIVISION, PRETORIA
CASE NO: 17699/2016
3/3/2017
NOT
REPORTABLE
NOT
OF INTEREST TO OTHER JUDGES
REVISED
In
the matter between:
HEIN
CILLIERS
LOEST
Applicant
and
GENDAC
(PTY)
LTD
First
Respondent
SEFEKO
(PTY)
LTD
Second
Respondent
JUDGMENT
MANAMELA,
AJ
Introduction
[1]
The applicant seeks an order compelling the first and second
respondents (the respondents) to allow the applicant access to
information in the form of copies of bank statements; management
account statements and contracts entered into by the respondents
with
third parties.
[1]
The applicant
relies, in this regard, on the provisions of the Promotion of Access
to Information Act 2 of 2000 (PAIA) and submits
that access to the
required information is for exercise or protection of his rights in
terms of section 164 of the Companies Act
71 of 2008 (the
Companies
Act).
[2
]
[2]
Section 164
of the
Companies Act provides
for what is referred to as
the "dissenting shareholders appraisal rights''.
[3]
It is submitted that the applicant, as a shareholder of the
respondents should be allowed access to the respondents' bank
statements
and management accounts for the period January 2013 to
December 2015, and contracts entered into by the respondents with
third
parties from 26 August 2014 to date, for purposes of
determination of the fair value of his shares in the respondents.
[3]
The application is opposed by respondents on various grounds, but in
the main, on the grounds that the applicant does not require
the
information for protection of his rights, and that the appraisal
rights procedure provided by
section 164
represents an alternative
remedy to access to information in terms of PAIA. The applicant
submits that the 30-day period contemplated
in the provisions of
PAIA, had elapsed since he sent his request for the information in
terms of
section 53(1)
,
[4]
also
of PAIA, without any reaction by the respondents. Therefore, the
respondents ought to be deemed to have refused his request
to access
the impugned information, hence this application.
[4]
For the sake of completeness, it ought to be mentioned that, the
respondents delivered a striking-out application on the basis
that
the material in the applicant's replying affidavit constitutes new
matters and new evidence that should have been included
in the
founding affidavit.
[5]
There was
no follow-through of the striking application at the hearing of this
matter on 07 December 2016. But, I consider this
abandonment to have
been proper and commendable under the circumstances of this matter,
as the material contained in the applicant's
replying affidavit was,
in my view, justified by what was raised in the opposing affidavit
and also the absence of a response to
the applicant's request for
information in terms of PAIA. There was no way the applicant could
fathom the respondents' grounds
for refusal of his request after it
was met with radio silence. Therefore, there is no need of further
detention by this issue,
save in respect of costs, which I shall deal
with in the order to be made.
Brief factual
background
[5]
From what is stated in the introduction above, it is clear that
determination of the issues in this application would primarily
require interpretation of statutory provisions. However, some factual
background to the matter is warranted, even if it is to set
the
scene, so to speak. This ought to be brief.
[6]
The respondents are private profit companies, conducting business in
software development and guard monitoring services, respectively,
and
with registered office addresses at Persequor Techno Park, Pretoria.
The companies appear to be related and share premises.
The applicant
was a director of both until his removal by special resolution of
shareholders on 26 August 2014.
[6]
He appears to be still challenging his removal as a director,
[7]
but this is not part of the determination required here.
[7]
The applicant is or was a shareholder of the respondents at all
material times. There is some denial on the part of the
respondents
[8]
that the
applicant is currently a shareholder, but his status as a shareholder
at the time when the
section 164
procedure was triggered is common
cause. However, although I hold the view that the respondents'
contentions are of no consequence
for current purposes, I briefly
deal with this issue further below.
[8]
In
his capacity as shareholder of the respondents, the applicant
received during August 2015, notices informing him of general
meetings of shareholders to be held on 27 August 2015.
[9]
The notices stated, among others, that the respondents' ordinary
share capital would be converted from shares with par value of
R1.00
per share to shares of no par value; that the ordinary share capital
of the respondents would be increased; that the respondents
would be
authorised to issue such number of further ordinary shares from their
authorised ordinary share capital which would exceed
30% of the
voting power of the then issued ordinary share capital, and that the
memoranda of incorporation of the respondents would
be amended to
achieve the aforementioned intentions.
[10]
[9]
The applicant delivered to the respondents in the morning of 27
August 2015 prior to commencement of the meetings notices objecting
to proposed resolutions.
[11]
However, the resolutions were nevertheless adopted by a majority of
71.4% of the voting rights exercised,
[12]
with the applicant being the only dissenting shareholder.
[13]
[10]
The applicant asserted his rights in terms of
section 164
of the
Companies Act. He
also approached BDO Corporate Finance (BDO) in
September 2015 to assist him in the determination of the value of his
shareholding
in the respondents. BDO placed the values as R 1.8
million and R4.2 million on his shareholdings in the first and second
respondents,
respectively. He had previously been offered an amount
of R250 000.00 by the respondents on the basis of the valuation of
the respondents'
auditor prepared a year earlier, in September 2014.
The applicant sent requests to the respondents in terms of PAIA for
access
to specified financial information on 21 January 2016
[14]
and followed up with letters by his attorneys of record in early
February 2016, but in vain.
[15]
[11]
The applicant wants out of the respondents as he considers the
resolutions adopted to have adverse effect on his rights and
interests as a shareholder. According to him, the provisions of PAIA
ought to assist him to access the necessary financial material
for
the determination of the fair value of his shares, as contemplated in
terms of
sections 164
of the Companies Act.
The dispute,
submissions and legal principles (an analysis)
[12]
To recap, the dispute between the contending parties is essentially
whether the applicant is entitled to the information sought
in terms
of the provisions of PAIA in order to exercise or protect his rights
in terms of
section 164
of the
Companies Act. However
, as I mentioned
above, the dispute is elongated or stretched by other peripheral
points. Some of these serve as pivots to the dispute,
but others are
mere detours and will be disposed of as soon as they arise in the
facts below. However, I will employ subheadings
to facilitate a
discussion of all the issues. But the subheadings may not necessarily
offer an accurate description of what appears
thereunder or
distinguish one part from the other. So, all this ought to be
considered jointly.
Is the applicant
a shareholder?
[13]
As indicated above, the respondents challenge the status of the
applicant as a shareholder and therefore his standing in this
application. They say the applicant holds no shares by virtue of the
provisions of
section 35(5)
[16]
and 164(9)
[17]
of the
Companies Act. The
applicant denies that these statutory provisions
are correctly interpreted or applied. He asserts that he did not lose
his shares
through the exercise of his rights in terms of
section
164.
I agree. The applicant is still a shareholder for purposes of
receiving fair value for his shares.
[18]
Section 164
doesn't deprive him of his status as a shareholder, but
merely removes other trappings or privileges associated with this
status,
whilst the applicant as a dissenting shareholder pursues the
remedy in terms of this statutory provision.
The
status of the applicant's objection vis-a-vis other provisions
o(section 164 of the
Companies Act
[14
]
It is common cause that the applicant objected to or dissented from
the adoption of the resolutions in terms of
section 164.
However, it
is not clear whether there is compliance with the steps or processes
subsequent to the objection as prescribed by the
legislature in
section 164.
On the one hand, there is mention of the respondents'
offer to the applicant having lapsed and thereby signalling the
reinstatement
of his rights as a shareholder without
interruption,
[19]
whilst on
the other hand, it is submitted that the provisions of
section 35(5)
find application with regard to the surrender to the company of the
applicant's shares.
[15]
The two positions articulated above are, in my view, contradictory or
even irreconcilable. It is conceivable that all these
may be problems
of interpretation of the provisions of
section 164.
But, I do not
deem it warranted to determine whether or not the applicant's pursuit
of a remedy based on
section 164
is still valid. Therefore, any
determination of the issues to follow will be predicated on the
assumption that the applicant can
still validly enforce his appraisal
rights in terms of
section 164
, subsequent to his objection.
Request for
information and PA/A, and section 164 of the Companies Act
General
[16]
The applicant's request for access to the respondent's information is
based on
section 50
of PAIA, which reads in the material part:
"50 Right of
access to records of private bodies
(1) A requester must
be given access to any record of a private body if
(a)
that
record is
required for the exercise or protection of any rights
;
(b)
that
person complies with the procedural requirements in this Act relating
to a request for access to that record; and
(c)
access to
that record is not refused in terms of any ground for refusal
contemplated in Chapter 4 of this Part.
(2) ...
(3) A request
contemplated in subsection (I) includes a request for access to a
record containing personal information about the
requester or the
person on whose behalf the request is made."
[underlining added
for emphasis]
[17]
There was no response from the respondents
[20]
and the applicant submits he had to approach this Court for an order
in terms of the provisions of PAIA. The applicant submits
he requires
access to the impugned documents or records for the exercise or
protection of his rights in terms of section 164.
[18]
Section 164
of the
Companies Act provides
that a dissenting
shareholder may demand the company to pay him the fair value of his
shares upon occurrence of certain events.
It reads in the material
part:
"(1) ...
(2) If a company has
given notice to shareholders of a meeting to consider adopting a
resolution to-
(a) amend its
Memorandum of Incorporation by altering the preferences, rights,
limitations or other terms of any class of its shares
in any manner
materially adverse to the rights or interests of holders of that
class of shares, as contemplated in
section 37(8)
…
(3) At any time
before a resolution referred to in subsection (2) is to be voted on,
a dissenting shareholder may give the company
a written notice
objecting to the resolution.
(4) Within 10
business days after a company has adopted a resolution contemplated
in this section, the company must send a notice
that the resolution
has been adopted to each shareholder who-
(a) gave the company
a written notice of objection in terms of subsection (3); and
(b) has neither –
(i) withdrawn that
notice; or
(ii) voted in
support of the resolution.
(5) A shareholder
may demand that the company pay the shareholder the fair value for
all of the shares of the company held by that
person if-
(a) the shareholder-
(i) sent the company
a notice of objection, subject to subsection (6); and
(ii) in the case of
an amendment to the company's Memorandum of Incorporation, holds
shares of a class that is materially and adversely
affected by the
amendment;
(b) the company has
adopted the resolution contemplated in subsection (2); and
(c) the shareholder-
(i) voted against
that resolution; and
(ii) has complied
with all of the procedural requirements of this section.
(6) The requirement
of subsection (S)(a)(i) does not apply if the company failed to give
notice of the meeting, or failed to include
in that notice a
statement of the shareholders rights under this section.
(7) A shareholder
who satisfies the requirements of subsection (5) may make a demand
contemplated in that subsection by delivering
a written notice to the
company within
(a) 20 business days
after receiving a notice under subsection (4); or
(b) if the
shareholder does not receive a notice under subsection (4), within 20
business days after learning that the resolution
has been adopted.
(8) A demand
delivered in terms of subsections (5) to (7) must also be delivered
to the Panel, and must state -
(a) the
shareholder's name and address;
(b) the number and
class of shares in respect of which the shareholder seeks payment;
and
(c) a demand for
payment of the fair value of those shares.
(9) A shareholder
who has sent a demand in terms of subsections (5) to (8) has no
further rights in respect of those shares, other
than to be paid
their fair value, unless -
(a) the shareholder
withdraws that demand before the company makes an offer under
subsection (11), or allows an offer made by the
company to lapse, as
contemplated in subsection ( l 2)(b);
(b) the company
fails to make an offer in accordance with subsection (11) and the
shareholder withdraws the demand; or
(c) the company, by
a subsequent special resolution, revokes the adopted resolution that
gave rise to the shareholder's rights under
this section.
(10) If any of the
events contemplated in subsection (9) occur, all of the shareholder's
rights in respect of the shares are reinstated
without interruption.
(11) Within five
business days after the later of-
(a) the day on which
the action approved by the resolution is effective;
(b) the last day for
the receipt of demands in tenns of subsection (7)(a);or
(c) the day the
company received a demand as contemplated in subsection (7)(b), if
applicable, the company must send to each shareholder
who has sent
such a demand a written offer to pay an amount considered by the
company's directors to be the fair value of the relevant
shares,
subject to subsection (16), accompanied by a statement showing how
that value was determined.
(12) Every offer
made under subsection (11)-
(a) in respect of
shares of the same class or series must be on the same terms; and
(b) lapses if it has
not been accepted within 30 business days after it was made.
(13) If a
shareholder accepts an offer made under subsection (12)-
(a) the shareholder
must either in the case of-
(i) shares evidenced
by certificates, tender the relevant share certificates to the
company or the company's transfer agent; or
(ii) uncertificated
shares, take the steps required in terms of
section 53
to direct the
transfer of those shares to the company or the company's transfer
agent; and
(b) the company must
pay that shareholder the agreed amount within 10 business days after
the shareholder accepted the offer and-
(i) tendered the
share certificates; or
(ii) directed the
transfer to the company of uncertificated shares.
(14) A shareholder
who has made a demand in terms of subsections (5) to (8) may apply to
a court to determine a fair value in respect
of the shares that were
the subject of that demand, and an order requiring the company to pay
the shareholder the fair value so
determined, if the company has-
(a) failed to make
an offer under subsection (11); or
(b) made an offer
that the shareholder considers to be inadequate, and that offer has
not lapsed.
(15) On an
application to the court under subsection (14)
(a) ...
(b)
(c) the court
(i)
(ii) must determine
a fair value in respect of the shares of all dissenting shareholders,
subject to subsection (16);
(iii) in its
discretion may-
(aa) appoint one or
more appraisers to assist it in determining the fair value in respect
of the shares; or
(bb) allow a
reasonable rate of interest on the amount payable to each dissenting
shareholder from the date the action approved
by the resolution is
effective, until the date of payment;
(iv) may make an
appropriate order of costs, having regard to any offer made by the
company, and the final determination of the
fair value by the court;
and
(v) must make an
order requiring-
(aa) the dissenting
shareholders to either withdraw their respective demands or to comply
with subsection ( l 3)(a); and
(bb) the company to
pay the fair value in respect of their shares to each dissenting
shareholder who complies with subsection (13)(a),
subject to any
conditions the court considers necessary to ensure that the company
fulfils its obligations under this section ...
"
Section
164
of the
Companies Act
[19
]
Section 164
of the
Companies Act represents
one of the statutory inn
ovations
[21]
brought into the
realm of South African company law by the legislature. Although, it
is not labelled as such, it is one of the
prominent protections of
minority shareholders, together with
sections 163
(for the oppression
or unfair prejudice remedy) and
section 165
(for derivative action).
[20]
Generally stated,
section 164
created the right for a shareholder,
dissatisfied with proposed resolutions, to object and thereafter exit
the company with receipt
of fair value for his or her shares. But,
there is no need to go into minute details in the analysis of this
provision for current
purposes, save to remark that the procedural
requirements of
section 164
appear at quick glance, with respect, to
be cumbersome.
[21]
The current occupation of the Court by the provisions of
section 164
follows the applicant's submission that he needs to exercise or
protect his rights in terms thereof. But, not all provisions of
section 164
are material. The nub of the applicant's contentions is
with regard to the determination of fair value for the applicant
shares.
This is the limited basis on which the analysis of this
provision will continue.
[22]
There is no provision for a dissenting shareholder to approach the
Court for access to information for purposes of determining
fair
value. What is allowed in terms of
section 165(14)
is for a
dissenting shareholder to approach the Court, on application, for
determination of the fair value of the shares. This
relief is
available where no offer is made by the company in respect of the
dissenting shareholder's shares or the dissenting shareholder
considers the offer made to him in respect of his shares inadequate
(before such an offer lapsed).
[22]
[23]
The Court hearing an application to determine the fair value of the
shares may appoint one or more appraisers to assist the
Court in this
regard.
[23]
This is logical,
since the Court would not necessarily have the relevant technical
expertise to determine the fair value of the
shares. The Court is
therefore given access to these skills by appointing appraisers to
assist, more like experts envisaged in
rule 36(9) of the Uniform
Rules of this Court. The role that may be played by the appointed
appraiser or appraisers, in my view,
may, for example, include
collation of relevant information where the Court deems available
information insufficient or unreliable
for purposes of determining
fair value or even where there is no information at all. Therefore,
in my view, there will be no room
for the company or controlling
shareholders to refuse disclosure or access by the Court or the
appointed appraiser to information
necessary for determination of the
fair value of the shares of the dissenting shareholder. This, in my
view, equally applies for
both instances where the offer made is
considered inadequate or where there is no offer.
[24]
Although not specifically stated in section 164, it is conceivable
that the adjudicating Court, would have powers to summon
the parties
or the company to make available to the Court or the appraisers or
both, whatever information or documents necessary
for determination
of fair value. Also, the Court would be entitled to apply its normal
rules and practices, including those relating
to procurement of
documents or information, when hearing an application in terms of
section 164.
[25]
Therefore, it appears that section 164 has in-built mechanisms for a
dissenting shareholder to protect his rights to receive
fair value
for his shareholding when exiting a company whose resolution(s) he
finds objectionable. This is the background I will
use to analyse the
submissions by the parties, which follow after the general analysis
of the relevant provisions of PAIA.
Section
50 of PAIA
[26]
The respondents contend that the applicant's request does not meet
the requirements of section 50 of PAIA. They say in this
regard that
the impugned information is not "required" by the applicant
for the exercise or protection of his asserted
rights.
[27]
Our Courts have already made attempts at attaching precise meaning to
the word "required" contained in section 50(
I )(a) of
PAIA. There were also attempts to define similar words in other
similar or comparable legislation, as in the Supreme
Court of Appeal
decision of
Cape
Metropolitan Council v Metro Inspection Services (Western Cape)
CC
and
Others.
[24]
In the decision of
Clutchco
(Pty) Ltd v Davis
[25]
the Supreme Court of
Appeal borrowed from its earlier decision in
Cape
Metropolitan Council
decision
and stated the following regarding the meaning of "required":
"It seems to me
that Streicher JA's choice of the words 'assistance' and 'assist' in
the above passage indicates that 'required'
does not mean necessity,
let alone dire necessity. I think that
'reasonably
required'
in
the circumstances is about as precise a formulation as can be
achieved, provided that it is understood to connote
a
substantial advantage or an element of need.
It
appears to me, with respect, that this interpretation correctly
reflects the intention of the Legislature in s 50(1
)(a)
."
[26]
[underlining added
for emphasis]
[28]
The Supreme Court of Appeal had another opportunity to ascribe a
meaning to "required in the matter of
Unitas
Hospital v Van Wyk and Another.
[27]
Although the
majority ruling was arrived at through individual judgments by the
Supreme Court of Appeal,
[28]
the following is instructive from this decision:
"Closest to a
positive formulation is the one articulated as follows by Streicher
JA in
Cape Metropolitan Council v Metro Inspection Services
(Western Cape) CC and Others
2001 (3) SA 1013
(SCA) in para [28]:
'Information can
only be required for the exercise or protection of a right if it will
be of assistance in the exercise or protection
of the right. It
follows that, in order to make out a case for access to information
... an applicant has to state what the right
is that he wishes to
exercise or protect, what the information is which is required and
how that information would assist him in
exercising or protecting
that right.'
[17] The threshold
requirement of 'assistance' has thus been established.
If the
requester cannot show that the information will be of assistance for
the stated purpose, access to that information will
be denied.
Self-evidently, however, mere compliance with the threshold
requirement of 'assistance' will not be enough. The acceptance of any
notion to the contrary will, after all, be in conflict with the
postulate that mere usefulness to the requester will not suffice.
In
Clutchco
this Court was reluctant to go any further than to
confirm this threshold requirement. That appears from the following
statement
by Comrie AJA immediately after he had referred to the
above quoted
dictum
from
Cape Metropolitan Council
(in
para [13]):
'I think that
"reasonably required" in the circumstances is about as
precise a formulation as can be achieved, provided
that it is
understood to connote a substantial advantage or an element of need.
It appears to me, with respect, that this interpretation
correctly
reflects the intention of the Legislature ins
50(1)(a).'
[18] I respectfully
share the reluctance of Comrie AJA to venture a formulation of a
positive, generally applicable definition of
what 'require' means.
The reason is obvious. Potential applications of s 50 are countless.
Any redefinition of the term 'require'
with the purpose of
restricting its flexible meaning will do more harm than good. To
repeat the sentiment that I expressed earlier:
The
question whether the information sought in a particular case can be
said to be 'required' for the purpose of protecting or exercising
the
right concerned, can be answered only with reference to the facts of
that case, having regard to the broad parameters laid
down in the
judgments of our courts, albeit, for the most part, in a negative
form."
[29]
[underlining added
for emphasis]
[29]
Academic writers have also weighed in, so to speak with respect, on
what section 50(1)(a) entails. I find the discussion by
Cassim
[30]
regarding the right to inspect the books and records of a company in
terms of PAIA illuminating, although this was in different
context.
Submissions
made (specifically on provisions of PAJA and section 164)
[30]
Mr TP Kruger SC, appearing on behalf of the applicant with Mr A
Politis, confirmed, at the very beginning of the hearing, that
the
application is in terms of
section 164
of the
Companies Act. This
was
very important to establish in the light of what I have stated above
regarding the current status of the
section 164
procedure.
[31]
[31]
Mr Kruger further submitted that the applicant had accepted that he
is entitled to be paid the fair value of all his shares
in the
respondents,
[32]
which is
indicative of his intention to make a clean break with the
respondents. He pointed out that the applicant does not agree
with
the valuation methodology employed by the respondents' auditor in
calculation of the offer made by the respondents to the
applicant.
This is the reason why the applicant approached an independent
auditor. The auditor wants the information to determine
the fair
value of his shares, even though the auditor had already furnished a
valuation report.
[32]
Without the impugned information the applicant submits that he will
not be able to exercise his rights in terms of
section 164.
Mr Kruger
further submitted that the information sought by his client is
“reasonably required" as envisaged in the
Clutchco
decision.
[33]
Therefore, the applicant was entitled to come to Court for access to
the information in terms of PAIA.
[33]
It is submitted that the provisions of PAIA are not excluded by the
application of
section 164
, including
section 164(14).
Emphasis is
placed on the inclusion of the word "may" in
section
164(14)
as indication of the applicant's choice to approach the Court
in this regard. I do not agree with this interpretation, but nothing
really turns on this.
[34]
Mr OM Leathern SC, appearing for the respondents together with Mr J
Eastes, submitted that it was incorrect to say that the
applicant's
auditor requires the information for his valuation. The auditor has
produced a report and nowhere in the report, is
it stated that the
information stated in the applicant's notice of motion is required.
The auditor already has what he required
and the difference of
opinion with the respondents' auditor is one of the methodologies
applied. Therefore, the current application
is clearly a fishing
expedition and the applicant has an effective alternative remedy in
terms of
sections 164(14)
and
164
(15) of the
Companies Act, it
is
submitted. It is not the auditor who requires the information, but
the applicant. But, even if it is the auditor who requires
the
information for valuation purposes, it is of no consequence as the
Court is the appropriate body to determine the value of
the shares in
terms of
section 164.
[35]
Mr Leathern submitted that the information is not "reasonably
required" as defined in the
Clutchco
decision.
The applicant failed to show any "element of need" or a
"substantial advantage" and to lay a basis
why the
information is reasonably required.
[34]
Besides,
section 164(14)
doesn't require an applicant to have any
information before approaching the Court to get fair value. The
procedures in terms of
section 164
, particularly at
sections 164(14)
and (15), clearly provide for what is to happen for a dissenting
shareholder exercising his appraisal rights. Therefore, the current
application is ill-conceived as the applicant is not entitled to some
pre-action discovery.
[36]
The respondents also say they are entitled to exclude commercial
information in terms of
section 68
of PAIA, as the applicant is
employed by a competitor of the respondents. The applicant says the
Court should avail itself of its
wide and extensive powers on
application,
[35]
to order that
the information be released only to the applicant's auditor and not
to competitors. Also, there could be omission
of the confidential
parts. The respondents reject both suggestions and submit that the
applicant should have known that the information
is confidential.
[37]
In my view, the submissions made on behalf of the parties, could be
analysed along the following rubrics: first, can an applicant
exercising rights in terms of
section 164
access information in terms
of PAIA, and second, if so has the applicant made out a case for
access in terms of PAIA? I use these
questions for purposes of the
analysis.
Can an applicant
exercising rights in terms of section 164 access information in terms
of PAIA?
[38]
It is clear that a shareholder is only entitled to invoke appraisal
remedy in terms of
section 164
, when triggered by action of the
company, in the form of proposed resolutions, as contemplated in
section 164(2).
[36]
However,
once the shareholder has noted his or her objection to the proposed
resolution, can he or she still access remedies or
procedures outside
of
section 164
, albeit for the exercise of the appraisal rights? This
is one leg of the determination required in this matter. Put
differently:
do the provisions of
section 164
preclude the dissenting
shareholder from exercising rights in terms of the provisions of
PAIA?
[39]
A superficial reading of the provisions of
section 164
, does not
justify a conclusion that the dissenting shareholder is precluded
from exercising or accessing other legal remedies outside
of this
statutory provision.
[40]
However, I have indicated above that this provision appears to have
in-built mechanisms for dissenting shareholders to protect
their
rights to receive fair value for their shareholding, when exiting
companies whose proposed resolutions they find objectionable.
[37]
These mechanisms include launching an application to court for
determination of the fair value of shares. I have already indicated
above as to how the adjudicating court would be able to access the
requested information for purposes of determination of fair
value. I
do not intend revisiting the issues here. But, to avoid doubt, in my
mind there is no impediment within
section 164
for exercising rights
of access to information contemplated by PAIA.
Has the applicant
made out a case for access to the information in terms of PAIA?
[41]
Without any impediment within
section 164.
then the second leg of the
determination is necessary. Did the applicant make out a case that he
requires the impugned information
for the exercise of his appraisal
rights?
[42]
From the discussion of the legal authorities above it is clear
what is meant by the word "require". I do not intend
repeating
that part of the discussion.
[43]
On the basis of the above authorities, I hold the view that the
applicant does not require access to the requisite information
simply
because of existence of the right and the information, but whether
the information is reasonably required for the exercise
of the right.
Put differently, the mere existence of the right does not entitle the
requester to "require" the information.
It would very much
depend on what entails the protection or exercise of the particular
rights.
[44]
In this matter the right or rights are in the form of appraisal
rights of dissenting shareholders in terms of
section 164.
These are
commercial rights aimed at protecting minority shareholders from
escaping the effects of majority rule and to remove
their investment
when some specified objectionable events occur. Therefore, the
exercise of this right or the protection thereof
has to be considered
within the four comers of this provision.
[45]
In my view the applicant has not established or laid a basis why the
information is reasonably required for the exercise of
his rights of
appraisal. To determine whether the information is required for the
exercise of the appraisal rights the Court which
is not sitting as
the adjudicator Court for purposes of determining the fair value of
the shares in terms of
section 164
, has to be enabled to determine
whether or not access is required to be granted to this or the other
information or records for
the exercise of the right in terms of
section 164
, unless access is to be granted for the asking. This, in
my view, would also unnecessarily add parallel processes to the
process
in terms of
section 164
and with that unnecessary costs and
burdens on the company, including those relating to maintenance of
confidentiality. There is
also potential for abuse as forewarned in
the
Clutchco
decision.
[38]
[46]
I agree with the views contained in the
dicta
by
Comrie AJA in the
Clutchco
decision
that the
Companies Act ought
to be "viewed holistically" as
it is replete with provisions designed to protect the interests of
shareholders.
[39]
Therefore,
the applicant is despite the findings herein, not without possible
relief.
Conclusion and Costs
[47]
Both sides have contended that costs granted should include costs
consequent to the appointment of two counsel. It was submitted
that
this is actually an important matter to justify employment of two
counsel on both sides. I agree and will make an order on
this basis.
Order
[48]
In the premises, 1 make the following order:
(a) the application
is dismissed; and
(b) the applicant is
directed to pay costs of the application, including costs consequent
upon the employment of two counsel, save
for costs relating to the
striking-out application which are to be borne by the first and
second respondents, jointly and severally.
…
..........................................
K. La M. Manamela
Acting
Judge of the High Court
DATE
OF HEARING:
07 DECEMBER 2016
DATE
OF JUDGMENT: 03 MARCH 2017
Appearances:
For
the Applicant: Adv TP Kruger SC
Adv
A Politis
Instructed
by: Molenaar & Griffiths Inc, Pretoria
For
the Respondent: Adv OM Leathern SC
Adv
J Eastes
Instructed
by: Mame Coetzee Attorneys, Pretoria
[1]
See the notice of motion at indexed pp 1-2.
[2]
See par 18 below for a reading of section 164 of the Companies Act
71 of2008 (the
Companies Act.
[3
]
Ibid.
[4]
See par 53 below for a reading of section 53 of the Promotion of
Access to Information Act 2 of 2000 (PAIA).
[5]
See indexed pp 560-564.
[6]
See pars 5.1-52 of the founding affidavit on indexed p 9; annexures
"HL6" and "HL7" to the founding affidavit
on
indexed pp 114-115 and 116-117, respectively.
[7]
See par 5.1 of the founding affidavit on indexed p 9.
[8]
The respondents deny that the applicant is currently a shareholder.
See, among others, pars 5-6 of the opposing affidavit on
indexed pp
442-443.
[9]
See par 6.1 of the founding affidavit on indexed p 9.
[10]
See par 6.3 of the founding affidavit on indexed pp 10-11; annexures
"HL12" and "HL13" to the founding affidavit
on
indexed pp 145-152 and 153-160, respectively.
[11]
See annexures "HL10", "'HL10A", "HL11"
and ''HL11A" to the founding affidavit on indexed pp
133-135,
136-138, 139-141 and 142-144, respectively.
[12]
See annexures "HL8" and "HL9" to the founding
affidavit on indexed pp 118-130 and 131-132, respectively.
[13]
See annexures "HL14" and "HL15" to the founding
affidavit on indexed pp 161 and 162, respectively.
[14]
See annexures "HL18" and "HL19" to the founding
affidavit on indexed pp 175-178 and 179-182, respectively.
[15]
See par 9 of the founding affidavit on indexed pp 14-18.
[16]
Section 35(5) reads as follows: "(5) Shares of a company that
have been issued and subsequently (a) acquired by that company,
as
contemplated in section 48; or (b) surrendered to that company in
the exercise of appraisal rights in terms of section 164,
have the
same status as shares that have been authorised but not issued."
[17]
See par 18 below for a reading of
section 164(9)
of the
Companies
Act.
[18
]
See
section 164(9).
[19]
See
sections 164(9)
and
164
(10).
[20]
See
section 56(3)
of PAIA.
[21]
However, according to Delport P and Vorster Q
Henochsberg
on the Companies Act 71 of 2008
(LexisNexis
October 2016) at 577 section 164 has a comparable provision in
section 390 of the Companies Act 61 of 1973.
[22]
See section 164(14).
[23]
See section 165(15).
[24]
2001 (3) SA 1013 (SCA).
[25]
2005 (3) SA 486.
[26]
See
Clutchco
at par [13] (pp
491I-492B).
[27]
2006 (4) SA 436.
[28]
Brand JA penned what could be considered the main judgment to which
Cameron JA dissented, but Cloete and Conradie JJA concurred
with
Brand JA, and Harms JA who didn't write anything concurred with
Conradie and Cloete JJA.
[29]
See Unitas at pars 16-18 (pp 4448-I) per Brand JA.
[30]
See Cassim R
Contesting
the removal of a director by the board of directors under the
Companies Act
2016
SALJ 133.
[31]
See par 15 above.
[32]
See par 8 of the founding affidavit on indexed p 14.
[33]
Clutchco
at pars 13 and 14
(pp 491J-492F.
[34]
See
Clutchco
at par 12 (p
491H-I).
[35]
Note: See footnote 33 of the applicant's HOA.
[36]
See Beukes HGJ An introduction to the appraisal remedy in the
Companies Act 2008
: the Standing and the appraisal procedure (20 I
0) 22 SAMLJ 176.
[37]
See
section 25
above.
[38]
See
Clutchco
at par 17 (page
499C-D).
[39]
See
Clutchco
at par [15] (p
492F-G).