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[2016] ZANCHC 88
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Morudi and Others v NC Housing Services and Development Co. Ltd and Others (1735/2014) [2016] ZANCHC 88 (5 February 2016)
IN
THE HIGH COURT OF SOUTH AFRICA
(Northern
Cape Division, Kimberley)
Saakno
/ Case number:
1735/2014
Datums
aangehoor/Dates heard:
23/03/15;
04/06/2015
&
13/08/2015
Datum
gelewer / Date delivered:
05/02/2016
In
the matter between:
MOSALASUPING
PHILLIP MORUDI
1
st
Applicant
FURTHER
70
APPLICANTS
2
nd
to 71
st
Applicants
and
NC
HOUSING SERVICES
&
DEVELOPMENT
CO.
LTD
1
st
Respondent
SCHOLTZ
JACOB BABUSENG
2
nd
Respondent
SEODI
JULIUS
MONGWAKETSI
3
rd
Respondent
Coram:
L. Lever AJ
JUDGMENT
LEVER
AJ
1.
This is an application for rescission
of an Order made by agreement between
the
first respondent on the one hand and the second and
third respondents on the other. The said Order
was made by the Judge
President on 1 September 2014 under case number 1577/2012 ("the
main application"). The circumstances
in which the
aforementioned Order was made will become apparent when I set out an
overview of the events that led to the taking
of the said Order.
2.
The applicants seek rescission of the relevant Order both under the
common law and in terms of Rule 42(l)(a) of the
Uniform
Rules of Court.
3.
The applicants all claim to be entitled to
shares and/or different proportions of shares in the first
respondent. In short, the applicants claim that there is a dispute as
to who is entitled to shares and the number of shares to
be
held by certain individuals within the body of
shareholders or potential shareholders of the first Respondent.
4.
Together with the application for rescission, which was brought
as an urgent application, applicants sought certain
incidental and other relief, which included that:
4.1.
the fifth to seventy first applicants be joined as respondents in the
main application;
4.2.
they be granted 15 days to file their answering
affidavits in the main
application;
4.3.
pending the final determination of the main application
the respondents
be interdicted from:
4.3.1.
voting on a resolution to increase the share capital of the first
respondent;
4.3.2.
voting on a resolution to authorise the
directors
to be elected to allot shares in accordance with annexure
"M" to the main application; and
4.3.3.
voting on a resolution to authorise the
directors
to be elected to declare a
dividend arising from the sale of a certain asset.
5.
On 10 October 2014 the applicants obtained a
rule nisi
incorporating the interdicts referred to above. Applicants now
also seek confirmation of the said
rule
nisi.
6.
The relevant background that led to the present position needs to be
set out sufficiently to place the present application in
context and
allow one to deal with the issues raised by the relevant parties
7.
During or about 1997 a group of individuals decided to obtain a
shelf company with a view to
using it as a vehicle to exploit
commercial
opportunities within the Northern Cape for the benefit of
members of previously disadvantaged
communities. It was envisaged
that the shelf company so acquired would be converted to
a public company
in order to facilitate the
aim of empowering communities. Members of previously disadvantaged
8.
The aforesaid conversion was carried out and capital was
acquired from certain members of the previously disadvantaged
communities.
9.
Subsequently, the first respondent was de-registered as its
annual returns had not been submitted. Thereafter a successful
application was launched to re-register the first
respondent.
10.
After the first respondent was re-registered
difficulties arose in the management
of the
first respondent and the second and
third respondents hereto
launched the
main application (the subject of this
application for rescission),
in which they
sought
inter alia:
a declaratory order stating that the
persons whose names appeared on annexure "M" to be the
list of
the prospective shareholders of the first
respondent pending a decision of the Board of the first respondent to
increase the number
of authorised shares
pro rata
to a certain
maximum and to authorise the issuing of such shares
accordingly; that the said prospective shareholders
be
authorised to
vote
for the appointment of a new Board
of Directors
alternatively
that the Board
that existed prior to de-registration be reinstated; and that the
Board of Directors be authorised to convene
a meeting of shareholders
for the purpose of considering a special resolution to sell the first
respondent's main asset.
11.
On 16 October 2012 the main application came before my sister
Williams J and an Order which regulated the future conduct
of
the matter was taken by agreement between the second and third
respondents on the one hand and the first respondent together
with the first to the fourth applicants on the other.
12.
The said Order taken on the 16th October 2012 was to the effect that
the question of whether or not annexure "M" correctly
reflected the shareholding in the first respondent was
referred to trial. Pending the outcome of such trial
an
interim order was
made,
which: authorised the issue of one ordinary
par value share to each person whose name
appeared on annexure
"M"; directed the board to issue the relevant share
certificates; directed the board to convene
a meeting by a prescribed
date to consider a resolution to sell the first respondent's main
asset; directing that the board of
first respondent shall consist of
second respondent as chairperson together with the first to
fourth applicants and
that no resolution to the contrary shall be
passed.
13.
The said order then went on to provide that upon
re-registration the Board of Directors referred to
above was restored to office and could carry out and
perform all functions and obligations in terms of the Act; and
that
in the event of the sale of first respondent's main asset referred to
above, the proceeds of such sale will be divided equally
and be
deposited into the trust accounts of the respective attorneys of the
parties pending judgment in the matter, subject to
certain
conditions.
14.
In the main application, one of the disputes between the first
respondent and first to fourth applicants on the one hand and
the
second and third respondents on the other, related to the persons who
actually subscribed to the first respondent and contributed
capital
towards it and would thus be entitled to be registered in the share
register and be issued with share certificates in accordance
with
their capital contributions. A further dispute between them relates
to whether or not further capital contributions
were authorised, whether such further
capital contributions were indeed made
within the time allowed for such further capital contributions
and the actual extent of such further capital contributions.
15.
The final dispute between them relates to whether or not the then
Board of Directors authorised the seeking of an investor who,
it is
alleged, could acquire shares in the first respondent under certain
conditions. The allegation that such investor could acquire
shares in
the first respondent has also been placed in
dispute. The shares in issue or the right to such shares
have been
sold by the relevant investor to the
third respondent. It follows therefrom that
the entitlement of the
third respondent to such shares has also been placed in
dispute.
16.
Nonetheless, it is clear that the first respondent benefitted from
the capital raised from its subscribers, the further capital
contributions and the funds brought in by the investor. Such funds
enabled the first respondent to acquire valuable assets in both
the
mineral and entertainment industries within the Northern cape.
17.
In accordance with the said Order, on 16 November 2012, the persons
listed in annexure "M" were convened in a general
meeting
of the first respondent to approve the sale of the first respondent's
main asset. Consensus could not be reached
at this
meeting, it was adjourned and
reconvened on the 1 December 2012, where
the resolution relating to
the sale of the first respondent's main asset was passed.
18.
At this meeting the first respondent's shareholders, on their own
initiative,
established a sub-committee whose purpose was to
examine the disputes between the
first to the
fourth applicants on the one hand and the second and third
respondents on the other and to pursue the
possibility of
settling the main application.
19.
Apart from investigating the various claims, this sub-committee held
a number of meetings with the first to the third
applicants
on the one hand and with the second and third respondents on the
other. Various settlement proposals were discussed.
However, no
settlement was reached between the aforementioned parties.
20.
The shareholders meeting of 1 December 2012
was reconvened by the said sub-committee on 19 April 2013
where its
progress report was tabled and discussed. Following such discussion,
the meeting resolved that the first respondent
withdraw
its opposition to the main application.
21.
Thereafter, and in order to give effect to the aforementioned
resolution, the mandate of the first respondent's
original attorney was withdrawn and a new attorney was appointed. The
new attorney served and filed a notice of substitution
as
attorney of record and withdrawal of first
respondent's opposition to the main application on 12 August 2013.
22.
In the interim and on 8 February 2013 the second and third
respondents' attorney filed a Notice of Set down, setting down the
main application for trial on 1 to 5 September 2014.
23.
Then on 26 August 2013 the first to third applicants,
purporting to act on behalf of the first respondent,
launched an urgent application seeking the
following relief: a declaratory order
declaring
that the shareholders meeting of 19 April 2013 be declared unlawful;
that all resolutions adopted at the said meeting
be declared unlawful
and set aside; and certain ancillary relief. Some of the
parties have referred to this application as
an "interlocutory
application". I shall refrain from doing so as
it may be misleading
and
mischaracterises the nature of this application. Where it is
necessary to refer to this application, I shall refer
to it as "the
urgent application".
24.
On 8 August 2014 the urgent application was dismissed by my sister
Mamosebo AJ, as she then was. The consequences that flowed
from the
resolution of the first respondent
taken on 19 April 2013 and the dismissal
of the urgent
application to set aside such resolution have been the subject of
much debate in the rescission application, which
is now before me.
25.
On 28 August 2014 a conference took place in the chambers of
the Judge President. The purpose of this conference
was
to clarify who in fact represented the first respondent as
Towell & Groenewaldt, first respondent's original
attorney in the
main application, had not yet withdrawn as attorneys of record for
the first respondent. A minute of this
conference forms part
of the record in the rescission application.
26.
On 29 August 2014, the day
following the aforementioned conference,
Towell and Groenewaldt withdrew as
attorneys of record for the first respondent.
27.
The matter then came before the Judge President on 1 September 2014
and the Order which is the subject matter of
this
application for rescission was made.
28.
The
requirements for a successful application for rescission at common
law have been considered and re-stated by Miller JA in the
matter of
CHETTV
v LAW SOCIETY, TRANSVAAL
[1]
where he stated
that:
"
...the common law, which empowers the Court to rescind a judgment
obtained on default of appearance,
provided
sufficient cause therefor has been shown ."
[2]
(reference omitted).
29.
Miller JA then goes on to deal with what is meant by the term
"sufficient cause" and states:
''The
term 'sufficient cause' (or 'good cause') defies precise or
comprehensive definition, for many and various factors require
to be
considered. But it is clear that in principle and in long-standing
practice of our Courts two essential elements of 'sufficient
cause'
for rescission of a judgment by default are:
(i)
that the party seeking relief must present a reasonable and
acceptable explanation of his
default; and
(ii)
that on the merits such party has a bona tide defence which, prima
facie carries some prospect
of success.
It
is not sufficient if only one of these two
requirements is met; for obvious reasons
a
party showing no prospects of success
on the merits will fail in
an application
for rescission of a default judgment
against him, no matter how reasonable and
convincing the explanation
of his default. And ordered judicial
process would be negated
if, on the other hand, a
party who could offer no explanation
of
his default other than his disdain of the Rules was nevertheless
permitted to have a judgment against him rescinded
on the ground that he had reasonable prospects of
success on the merits."
[3]
(references omitted)
30.
In dealing with the first broad
requirement set out above namely,
a
reasonable and acceptable explanation for their default, the facts of
this matter make it necessary to deal with
the applicants
in two groups. The first group being the first to the
fourth applicants and the second group being the
fifth to the
seventy-first applicants.
31.
Dealing with the first to fourth applicants, their position is that
they were indeed cited in the main application in their
personal
capacities and not in their representative capacities as being
directors on the first respondent's
Board of Directors. It is submitted on
their behalf that when the Judge
President ruled that they had been cited in the main
application in their representative capacity, the Judge President
erred and that as parties to the main application they were
entitled to be heard.
32.
The respondents, on the other hand, submit that the first
to fourth applicants herein were indeed cited in the
main
application in their representative capacity as directors of
the first respondent herein. Accordingly, they
submit that when
the first respondent withdrew its opposition to the main application,
the first to fourth applicants herein ceased
to enjoy
locus standi
in the main application. Accordingly,
respondents maintain that in those circumstances,
the
Judge President was quite correct in refusing to hear their
representative, Mr Kgotlagomang, or them in the absence of a
substantive
application to be joined as parties to the main
application.
33.
The applicants and the respondents both cite passages, contentions
and allegations arising from both the main application
and the
urgent application to substantiate their respective points
of
view
relating to the status
of the first to
fourth
applicants herein in the main application at the
time the relevant order was made on the 1st September
2014.
34.
On the issue of the capacity in which the first to fourth
applicants herein acted in the main application, the applicants
make
the following submissions:
34.1.
The first to fourth applicants herein were
cited
in their
personal
capacities In the main application and that the reference to them
being directors of the first
respondent
was merely descriptive of them;
34.2.
Adv Van Niekerk SC, who appeared on behalf of the applicants,
submitted
that in the main application,
there was an inconsistency in the approach adopted by the second and
third
respondents herein in their citation of
the first to fourth applicants herein. Mr Van Niekerk points out that
in the main application, the first to third applicants
were referred to as directors, whilst
the
fourth applicant (Goliath) was referred to
as a
former
director. In these circumstances it was submitted
that fourth applicant could only have been cited in his
personal
capacity;
34.3.
The Notice of Opposition in the main application states that
appearance
to defend is entered on behalf of the first to
fourth applicants herein;
34.4.
The proceedings in the main application were never withdrawn against
the first to fourth applicants herein; and
34.5.
Mr Van Niekerk pointed out that in the Notice of
Motion in the main application, the second and third respondents
herein
sought a costs order against the first to fourth
applicants herein in their personal capacities.
35.
On the issue of the capacity in which first to fourth applicants
herein acted in the main application, the respondents make
the
following submissions:
35.1.
Adv Zietsman SC, who appeared on behalf of the respondents, pointed
out that
the deponent to the answering affidavit in the main
application, filed on behalf of the first to the fourth applicants
herein,
clearly describes his status as being a director and
the company secretary of the first respondent herein;
35.2.
The said answering affidavit gives no
indication of any
of
the first to fourth applicants acting in any capacity other than that
of a director of the first respondent;
35.3.
The resolution upon which the applicants herein rely to clothe them
with authority
to oppose the main application, lists the fourth
applicant herein (Goliath) as a director of the first respondent
herein and is
evidence that he participated in that decision in the
capacity of a director of the first respondent;
35.4.
The fourth applicant herein was cited in
the main application in an abundance of caution,
because there was uncertainty as to his status both
due
to the fact that he had resigned
shortly before the first
respondent was
de-registered and because of the uncertainty
as to the legal position of the
Board of Directors that
ser,J:2.- the first respondent prior to de-registration upon the
re-registration of the first respondent;
and
35.5.
It was also pointed out that the latest CM29 available from CIPRO (as
it was then referred to) before the first respondent was
de-registered still listed the fourth applicant herein as a director
of the first respondent.
36.
Dealing
with the submission by Mr Van Niekerk made on behalf of the
first to the third applicants that reference to their
being
directors in their citation in the
founding affidavit in the main
application
was merely descriptive, the basis for such submission was a passage
in Herbstein and Van Winsen.
[4]
The said passage states that whenever someone is sued in a
representative capacity, it must be explicitly set out in the
summons.
37.
Mr Van Niekerk argued that the same position applied in citing
persons in motion proceedings. No authority was referred to in
support of this argument. Mr Van Niekerk submitted that his position
was supported by the fact that in motion proceedings
the
papers formed both the pleadings and the evidence.
38.
The relevant passage in Herbstein and
Van Winsen is based upon the wording of Rule
17(4) of the
Uniform Rules of Court. This Rule applies exclusively to actions.
There is no corresponding provision in the Rules
relating to
applications.
39.
Whilst I would readily agree that
it is obviously desirable to explicitly
set
out in motion proceedings that a
party is being cited in a
representative
capacity, it is not governed by
Rule 17(4). The motivation for
Mr Van
Niekerk's position is that in motion
proceedings the papers form both the evidence and
the pleadings
can be used to support the opposite proposition.
In my view, this argument is not decisive
of the issue.
40.
The second point raised by Mr Van Niekerk deals with the position of
the fourth applicant (Goliath), who was cited in the main
application
as a former director. Mr Van Niekerk submitted that in those
circumstances, the fourth applicant could only
have been
cited in the main application in his personal capacity as a
shareholder or as a prospective shareholder.
41.
In response to this Mr Zietsman submitted that there was both legal
and factual uncertainty regarding the fourth applicant's
position
when the main application was launched. In those circumstances he
submitted that the fourth applicant was cited
in an abundance
of caution.
42.
Mr Zietsman's position that the second and third respondents
had to adopt a cautious approach
in the case of the fourth applicant herein,
when he was cited in the main application, is supported
by the following facts: The fourth
applicant clearly
acted
as a director in the resolution used by the first to
the fourth applicants herein, in opposing the main
application on
behalf of the first respondent herein; and in the
replying affidavit in the present
application (the rescission application) the deponent to such
affidavit on behalf of the relevant applicants
states
that the papers in the main application show that the
fourth applicant is still a director
of
the first respondent.
[5]
43.
In these circumstances the cautious approach adopted
by the second and third respondents herein,
in the
main application appears to be justified,
even though at the
time that
they cited him in the main application,
they could not have
known these facts.
It follows then that the citation of
the fourth applicant
herein
as a former director in the main
application does not show that
he and/or the other
directors were cited in the main application in their capacity as
shareholders or potential shareholders.
44. The next point raised by first
to fourth applicants is that the Notice of Opposition
indicates that appearance to
defend is being entered on
their behalf. Whilst this does indicate that the first to
fourth applicants intended
to oppose the main application
it does not assist in determining in what capacity they
intended to
oppose same.
45. The fourth argument
submitted on behalf of the aforementioned
applicants is that the main application was never withdrawn
against them. Mr Zietsman's position in this regard is
that if they were acting as directors in the main application,
then once the first respondent (the company) withdrew
its opposition to the main application, it
followed that the first
to fourth applicants had no standing to continue to
oppose the main application as directors. In my view Mr Zietsman
is
correct and this argument does not assist the first to the fourth
applicants.
46. Turning to the final argument
raised by the first to the fourth applicants in relation to the
capacity in which they
were cited and in which they
opposed the main application, relating to the fact that a costs order
was sought against the first
to fourth applicants herein
in the main application. Mr
Van
Niekerk submitted that the only way a
costs order could be sought against the
first
to fourth applicants herein in the main
application, was if they opposed in their personal capacities
as
shareholders or potential
shareholders.
47.
It is correct that as an alternative to an order of costs
against the first respondent alone, an order was sought
that if
any respondent should oppose the main application, that such
respondent be jointly and severally liable with the
first
respondent for costs. In my view, from the context, what this
prayer means is that
if any director should
oppose the application without proper authority
from
the first respondent company, then such director
will be jointly and severally liable
for costs with the
first respondent. Even if I am wrong in my conclusion the relevant
alternative prayer for costs in the main
application is at least
capable of being interpreted in that manner. In these circumstances
this argument is not decisive on the
capacity in which first to
fourth applicants were cited and opposed the main application.
48.
Turning now to the arguments raised by Mr Zietsman in this regard.
The first two arguments run together, it
is
correct that in the main application the deponent to the
answering affidavit on behalf of the first to fourth
applicants herein, described himself as a director and
the company secretary of the first respondent. The second to
fourth
applicants herein filed their confirmatory affidavits in the main
application in the usual terse terms simply
confirming
what was said by such deponent on
their
behalf. None of them raised any
positions that would clearly show
an
intention to have opposed the main application in their
capacity as shareholders or potential shareholders.
The
resolution they filed that clothes them with authority to oppose
the main application tends to support the argument
of the
respondents.
49.
Furthermore,
the transcript of the proceedings on 1 September 2014 forms part of
the record in the present application (the rescission
application).
This transcript reveals that when the Judge President canvassed this
issue with Mr Kgotlagomang, who appeared
for the
first to fourth applicants herein at
the
hearing of the main application
on 1 September 2014, Mr Kgotlagomang
answered that initially they were acting as directors, but they
always held dual capacities because their names were included in
annexure "M".
[6]
50.
In the submissions made by Mr Van Niekerk on
behalf of the first to the fourth applicants,
there was no
suggestion of them acting, at any stage of the proceedings in
the main application, in a dual capacity.
In my view this
answer given by Mr Kgotlagomang is revealing. It is the first time
that such applicants claim
to be acting in a personal
capacity as shareholders or potential shareholders. Furthermore, one
cannot claim to act "initially"
in a certain capacity and
claim at the eleventh hour that they are also acting in a different
capacity. If they claimed to act
in their personal capacity as
shareholders or potential shareholders, then they should have
taken this
position from the outset.
51.
Looking at all of the evidence relating to
the capacity in which first to fourth applicants
were cited and
acted in the main application, my conclusion
is that on the probabilities
they were cited and
acted as directors of the first respondent herein.
52.
It follows from this that the first to fourth applicants haven't
properly explained their default under the common law requirements
for an application to rescind the Order granted on
1 September 2014. If they wanted to be parties to the main
application in their personal capacities it was incumbent upon them
to bring an application to be joined in the main application
in
their personal capacities under Rule 12 of the Uniform Rules of
Court. In the present application they needed to both
bring
such application and explain why they did not do so timeously in the
main application. This they have not done.
53.
Turning now to the position of the fifth to seventy-first
applicants. The first applicant who
deposed
to the founding affidavit herein (the rescission
application) dealt with their position in a
broad
and generalised manner. The positions and/or
circumstances of particular individuals
within
this group are not set out at all.
54.
The contentions that were made on behalf of the fifth to
seventy-first respondents were that initially they
wished
to be joined to the main application. They
were assured that the first
to fourth applicants
were dealing with the issues that concerned them. Certain of these
applicants came from
difficult circumstances
and they would not have the means to litigate.
55.
The
allegations made on behalf of this
group of applicants were vague, terse and generalised.
Respondents made the
contention
that a number of the applicants in this group were connected to
a well-known family in the diamond mining
industry
[7]
and also, in argument it was submitted that given the
number of applicants in this group, their individual
exposure
to costs would not be significant. These applicants and/or those
making the case on their behalf did not deal with
these issues
satisfactorily or at
all.
56.
Furthermore, this group of applicants did not set out when and how
they first became aware that
the first
to fourth applicants were not in a position to
put the case for them. This aspect
has to be viewed
in the context that the Notice of Set Down for the main
application was served and filed on 8
February 2013.
In those circumstances the trial date for 1 September 2014 was
known for a very
long time.
57.
The resolution by the first respondent to settle the main
application was taken on 19 April 2013. The resolution
itself
ought to have spurred these applicants and/or those claiming to
represent their interests to clarify their position.
None of these
applicants state that they were not aware of this
resolution or that they were not aware of the
consequences that
must necessarily flow from this resolution.
58.
Furthermore, the urgent application to set aside this
resolution was dismissed on 8 August
2014. Again this ought to have
spurred this group of
applicants and/or those
claiming to represent their interests to take steps to
clarify their position. None of this is explained or
dealt with in any way by any of the applicants.
59.
The meeting on 28 August 2014 ought to have warned those claiming to
represent the interests of this second group of applicants
that they
needed to take further steps to protect whatever interests they might
have. Somebody took the trouble to
ensure that many of
this group of applicants would be in
court on 1 September 2014, but went
no further.
60.
None of the applicants that fall
into this second group of applicants,
nor those who claimed to represent
their interests, explain what they
knew
or appreciated from the events set
out above or when they came to learn of
or
appreciate the relevance of these facts.
61.
On the facts set out above, this group of applicants ought to have
been put on their enquiry on a number of occasions. Their
failure to
take this Court into their confidence means that they have not set
out and explained their default satisfactorily.
62.
Mr Zietsman argued that in these circumstances, this group of
applicants in effect tied their fate to the defence offered
by
the first respondent in the main application. He further
submitted that in doing so they made a free
choice and it
followed from this that they were the
authors of their own difficulties and that
in these
circumstances they should not be able to
change this choice at such a late stage of the
proceedings. In my
opinion, there is merit in these submissions made by Mr Zietsman.
63.
There
is a certain amount of flexibility in applying
the test set out in Chetty's case
[8]
,
for example if it appeared that the applicants had a defence
that appeared to be fairly convincing
or probable,
the court might allow a certain latitude in
considering the explanation of the default. I shall
consider
whether they should be given the benefit of this latitude after
considering the defence put forward by
them.
64.
This leads to the defence proffered by the applicants. In so far as
the defence is concerned, all applicants can be treated
as one group.
65.
Mr Van Niekerk submitted on behalf of the
applicants that the
mere fact that Williams J referred the question of whethr or
not annexure "M" correctly reflected the shareholding of
the first respondent to trial shows that the applicants have a
defence to the main application.
66.
This argument overlooks the fact that the shareholders of the
first respondent set up a sub-committee
to
investigate the claims relating to the shareholding in the
first respondent. This sub-committee investigated the
facts and filed
a report. The shareholders in the re-convened
general meeting considered
and debated
this report and adopted a resolution
on 19 April 2013 that the
first respondent should withdraw
its opposition to the main application. Effectively
settling the matter.
67.
The shareholders of the first respondent were entitled to step in
in this way and act in the interests of the first respondent
where
the Board of Directors was clearly dysfunctional on the issue. In
fact, this was one of the two key findings of Mamosebo
AJ in the
urgent application. It is indeed the key finding that has a direct
bearing on this application for rescission.
68.
Mr Van Niekerk submitted that the decision of Mamosebo AJ in the
urgent application was irrelevant
and
that I should simply ignore it. I am
afraid that I cannot agree
with this
submission.
In
my view the resolution of 19 April 2013
is central to the issues I have
to decide. It
effectively settled the disputes in the main
application.
69.
The applicants can only succeed
in pursuing their alleged
defences
if they can
have
such resolution set
aside In law. The application to set it aside failed. Whether it
failed on a technical ground such as
a lack of
locus standi
or
on some other ground does not affect the position that the resolution
of 19 April 2013 still stands as a valid resolution of
the first
respondent. It resolved the dispute/s that existed at the time. While
this resolution stands the applicants do not have
a valid defence to
the main application.
70.
The applicants have not appealed against the judgment handed
down by Mamosebo AJ in the urgent application, nor
have they
taken any further steps to set aside
the resolution of
19 April 2013.
71.
Mr Van Niekerk then changed tack and suggested that the resolution of
19 April 2013 had not been properly taken because no shares
had been
issued in the first respondent as contemplated in the Order made by
Williams J. Mr Van Niekerk submitted that it followed
from that, that
there could not have been a shareholders meeting on 19 April 2013 and
accordingly there could not have been a shareholders
resolution
adopted on that date. 72. I enquired from Mr Van
Niekerk whether this issue
had been
taken up in the urgent application that served before Mamosebo AJ and
he confirmed that same had not been
done. I then expressed the view
that I could not entertain that argument in these proceedings. Mr Van
Niekerk conceded that I could
not entertain such argument in the
circumstances. He nevertheless pressed on with that argument
and submitted that the finding
of Mamosebo AJ referred to above was
based on a fallacy.
73.
Even if the argument that there were no shareholders at the
time of the relevant resolution could be raised in these
circumstances, I have reached the conclusion that it is
completely without merit and I shall briefly explain why I have
reached
that conclusion.
74.
Mr Van Niekerk based his submission on paragraph
81 of the founding affidavit
of Mr
Morudi filed on behalf of the
applicants herein. The said paragraph
reads as follows:
"[81]
A shelf company was indeed acquired as
decided by the initial stakeholders and contributions
were invited and received by the first respondent. The process
of
issuing shares and share certificates and the compiling of a members
register has however to this day not taken place although
the said
company was soon after the acquisition converted into a public
company."
75.
In their answering affidavit herein, this was admitted by the
respondents in the following terms:
"[89]
Save and except to aver that it was due to
the
protracted litigation caused by
Morudi, Jacobs and Adams as directors in the Main
Application
that the shares could not be issued, the
contents of this paragraph under reply are
admitted."
76.
Mr Van Niekerk submitted on the strength of the two paragraphs set
out above that the respondents admitted that at the meeting
where the
resolution of 19 April 2013 was taken, shares had not been issued as
contemplated In the Order made by Williams J.
77.
I have two problems with this argument. Firstly, in
the paragraph quoted from Mr Morudi's affidavit, it is
clear that Mr
Morudi was dealing with the history of the first respondent.
In that context the issuing of shares he
refers to relates to
the issuing of shares in proportion to the capital contributions
of those who subscribed to the first
respondent. The response
thereto, set out in the passage quoted from the answering affidavit,
read in its context clearly shows
that this is what respondents
admitted. Secondly, the question of due compliance with the
Order issued by Williams
J was not pertinently raised. To
raise such argument in these circumstances is both unfair and
opportunistic.
78.
However, the applicants have a more serious difficulty on this
question of whether or 'lot shares were ever issued by the first
respondent. From the passage of the founding affidavit quoted above
and the argument raised by Mr Van Niekerk on behalf of the
applicants, it is clear that the applicants take the
attitude that no shares were ever issued by the first respondent.
Then in paragraph 23.6 of the replying affidavit, the deponent
on behalf of the applicants, Mr Morudi, says relating
to the
first respondent:
“
Shares
were indeed issued pursuant to this resolution (an earlier resolution
apparently taken in 2005) as is evident from a few
copies of
such share certificates attached hereto in a bundle as Annexure
'RA3'.”
79.
The actual share certificates are indeed annexed to the replying
affidavit and one of those share
certificates
belongs to Mr M.P. Morudi. The share
certificates on the face of them appear to relate to the first
respondent.
80.
Then, somewhat more surprising in the light of what is set out above,
when dealing with the judgment of Mamosebo AJ in their
replying
affidavit Mr Morudi states the following:
"[71]
There is in effect no shareholders of the company meaning
that the said finding was indeed of no real consequence. Full legal
argument in this regard will be addressed to the Court at the
hearing
of the matter."
81.
The question of whether or not the shares had been
issued in accordance with the Order made by Williams
J is only
raised obliquely in reply. This issue was not
pertinently raised in the founding
affidavit. It was raised in
a potentially misleading and confusing manner in reply. It ought to
have been raised directly and explicitly
in the applicants' founding
affidavit. Litigating in this manner ought not to be accepted nor
encouraged.
82.
The only conclusion I can come to considering the mutually
destructive versions set out by the applicants in their founding
and
replying affidavits as quoted above, is that on the question of
whether shares were issued or
not by
the first respondent, the applicants have absolutely no
credibility.
83.
In all of these circumstances, I conclude that
the applicants have not set out a
bona fide
defence
that has some prospects of success. The applicants
have therefore failed on both
aspects
that need to be established for
rescission under the common law. In these circumstances,
I cannot
exercise any discretion that I might have in their
favour and the application for
rescission
under the common law must fail.
84.
Turning now to the application for rescission under the
provisions of Rule 42(1)(a) of the Uniform Rules of Court.
The
said rule reads as follows:
"42(1)
The court may, in addition to any other powers it may have, mero moto
or upon the application of any party affected,
rescind or vary:
(a)
An order or judgment erroneously sought or erroneously granted in the
absence of any
party affected thereby;"
85.
The first argument presented by Mr Van Niekerk on behalf of the
applicants went along the following lines: The purpose
of
provision for a rescission of judgment process was to achieve
justice; and that whilst the applicants were physically present
in
court they were absent because they weren't given an
opportunity to be heard.
86.
Mr Van Niekerk then went on to provide an
example and he submitted that if
a
party to litigation was sitting in the back
of the court and did not come forward when his case was called
because he had received a threatening phone call that morning
threatening the welfare of his family should
he appear in court to oppose emanated the matter and it
later transpired that the threat
from
the opposing party, then that would be a
travesty of justice if such litigant was considered
not to be
absent for the purposes of Rule 42(1)(a).
87.
Mr
Zietsman argued on the strength of a decision of the High Court of
Botswana
[9]
based on a
similarly worded provision in their rules, that Rule 42(1)(a)
required that the Order be taken in their
physical
absence before rescission can be sought under the provisions of that
rule.
88.
Whilst
it may be possible to distinguish the present matter from the facts
in the judgment of the Botswana High Court in the
ROMELA
[10]
matter, I believe that an ordinary reading of Rule 42(1)(a)
contemplates an Order taken by default in the physical absence of a
party affected thereby. To impose the interpretation suggested
by Mr Van Niekerk would simply not be supported by the language
used
and the manner in which Rule 42(1)(a) has been set out. It then
follows that the applicants do not qualify for relief
under the
provisions of Rule
42(1)(a).
89.
In any event, there is a short and simple answer to the plight of the
unfortunate litigant in the scenario sketched by Mr Van
Niekerk.
Provided such a person could show good or sufficient cause he/she
would be afforded justice under the common law and there
would be no
need to do violence to the language of Rule 42(1)(a).
90.
Mr
Van Niekerk then argued that the applicants were not heard by the
Court and that their rights under section 34 of the Constitution
[11]
had been
infringed.
91.
In
response to this
Mr
Zietsman
submitted
that,
although everyone has the right to
have
their
disputes heard by a Court under the provisions of
section 34 of the Constitution,
such
access to court had to be governed by rules and in certain
circumstances such rules would compel parties to court proceedings
to take certain steps or risk
losing their right to proceed with
their defence. In making such submission he
relied
on the Constitutional Court decision of
GIDDEY
NO V JC BARNARD & PARTNERS
[12]
.
This
authority supports the argument made by Mr Zietsman, provided
that the relevant rules can be justified under
the
provisions of section 36 of the Constitution.
92.
The Rules of Court give standing to be heard to parties cited
who enter an appearance to oppose or defend or parties
who bring an
application for leave to intervene under the provisions of Rule
12 of the Uniform Rules of Court. It was
not argued that
these
Rules cannot be justified under section 36 of the Constitution.
93.
The Judge President made his ruling in circumstances where the first
to fourth applicants acted as directors of the
first
respondent and their authority to act fell away when the first
respondent company withdrew its opposition to the mainapplication.
The fifth to the seventy-first applicants took a conscious decision
not to seek joinder under the provisions of Rule 12. Whilst
the
applicants were in court, they were not before Court with
a right to be heard. In these circumstances, it cannot
be said that
the applicants' rights under and in terms of s34 of the Constitution
had been infringed.
94.
The Judge President during the proceedings
on 1 September 2014 adjourned
the
proceedings in a context where he gave
applicants an opportunity to
consider
an application of some sort. From the
context it is clear that this
would have
been an application for a postponement or leave to
join the proceedings. After the adjournment, their
legal
representative Mr Kgotlagomang simply withdrew without
bringing or indicating that the applicants
intended
to bring one of the applications mentioned above. He simply
indicated that the applicants wanted to
address the
Court directly. The Judge President refused to hear them on the
basis that they were not before Court.
95.
Taken in its proper context, the applicants were given an opportunity
to bring an application to postpone or seek leave to join
the
proceedings when Mr Kgotlagomang simply withdrew after the
adjournment and in doing so in effect spurned the opportunity
given
to the applicants. In this context it is
important to note that none of the applicants expressly
said
in the affidavits filed in the present application
that they intended to seek leave to be joined when
they
requested leave to address the court directly.
96.
The Judge president was severely criticised for expressing the
view that, if the applicants had sought leave to join,
a postponement
would be needed and that due to the lateness of such application, the
applicants would have had to bear
the costs
thereof, which in all probability might have included an
Order that such costs be paid before
the next hearing.
97.
In the context that:
97.1.
the matter had been set down for trial a substantial period
before the hearing;
97.2.
the resolution adopted by first
respondent on 19 April
2013 constituted a
warning that some action would be required from the
applicants;
97.3.
the failure of the urgent application before Mamosebo AJ ought to
have indicated to the
applicants that
some sort of action was required from them;
97.4.
the conference in the Judge
President's chambers on 28 August
2014 to address related
issues ought to have warned the applicants that they need to
take steps to place
themselves before the
Court; and
97.5.
the fact that the possible
postponement of the trial was raised
for the first time
on the day of the trial, the view taken by the
Judge President relating
to the costs
of a postponement cannot be categorised as unreasonable.
98.
The applicants have failed to establish grounds for rescission
under the provisions of Rule 42(1)(a).
In
these circumstances the application stands to
be dismissed.
99.
In the circumstances where the applicants have not established
a basis for rescission either under the common law or Rule
42(1)(a)
it would make no sense to order that the fifth to seventy-first
applicants be joined to the main application. In the circumstances
such relief is refused and the
Rule Nisi
issued on 10 October
2014 stands to be discharged.
100.
On considering the issue of costs,
the respondents occasioned a
postponement
on 4 June 2014 by producing an authority not provided in their Heads
of Argument. This authority was not given
to the applicants
before the hearing and it was simply referred to at the opening of
proceedings. The applicants objected
and the postponement
resulted. I have considered the representations made by both parties
on this issue and have decided that in
the prevailing circumstances
the respondents should pay the costs occasioned by the postponement
on 4 June 2014.
101.
Other than the costs of the said postponement, the
costs should follow the result and the applicants
will be
ordered to pay such costs. The respondents have asked for costs on an
attorney and client scale. In all of the circumstances
of the case I
have concluded that it would not be appropriate to
make such an Order and costs
will be awarded to the
respondents on an ordinary party and party basis.
In
the circumstances, the following Order is made:
1.
THE APPLICATION FOR RESCISSION IS DISMISSED.
2.
LEAVE TO INTERVENE SOUGHT
BY THE FIFTH TO SEVENTY FIRST APPLICANTS IS
REFUSED.
3.
THE
RULE NISI
ISSUED ON THE 10TH OCTOBER
2014 IS DISCHARGED.
4.
THE RESPONDENTS ARE TO PAY THE COSTS OCCASIONED BY THE
POSTPONEMENT ON THE 4TH JUNE
2014.
5.
ALL OTHER COSTS OF THIS
APPLICATION ARE TO BE
PAID
BY THE APPLICANTS JOINTLY AND
SEVERALLY,
THE ONE PAYING THE OTHERS TO BE ABSOLVED. SUCH COSTS SHALL
BE ON THE ORDINARY PARTY AND PARTY SCALE.
______________________
L.
LEVER
ACTING
JUDGE
Northern
Cape High Court.
Oba
Applicants:
Adv. van Niekerk SC (oio Towell & Groenewaldt)
Oba
Respondents: Adv. Zietsman SC
(oio Adrian B Horwitz & Associates)
Case
No: 1735/14
IN
THE HIGH COURT OF SOUTH-AFRICA
(NORTHERN
CAPE DIVISION)
KIMBERLEY:
THE 5
TH
DAY OF
FEBRUARY 2016
BEFORE
THE HONOURABLE MR ACTING JUSTICE LEVER
In
the matter of:
MOSALASUPING
PHILLIP
MORUDI
1
st
Applicant
FURTHER
70
APPLICANTS
2
nd
to 71
st
Applicant
And
NC
HOUSING SERVICES
&
DEVELOPMENT
CO.
LTD
1
st
Respondent
SCHOLTZ
JACOB BABUSENG
2
nd
Respondent
SEODI
JULIUS
MONGWAKETSI
3
rd
Respondent
HAVING
HEARD Advocate VAN NIEKERK, SC for the Applicants and Advocate
ZIETSMAN, SC on the 13
th
day of August 2015 and having
read documents filed of record;
JUDGMENT
IS RESERVED
THEREAFTER
ON THIS DAY
IT
IS ORDERED THAT:
1.
The application for rescission is dismissed.
2.
Leave to intervene sought by the fifth to seventy first applicants is
refused.
3.
The Rule Nisi issued on the 10
th
October
2014 is discharged.
4.
The respondents are to pay the costs occasioned by the postponement
on the
4th
June 2014.
5.
All other costs of this application are to be paid by the applicants
jointly and severally,
the one paying the others to be absolved. Such
costs shall be on the ordinary party and party
scale.
BY
THE COURT
MRS.
K MINNAAR
REGISTRAR
T&G
--- Mr S Groenewald
ABH
--- Mr AB Horwitz
EMW&H
--- Mr Haddad
[1]
1985 (2) SA 756 (A).
[2]
Above at
7641.
[3]
Above at 765
[4]
Herbstein & Van Winsen., The Civil Practice of the High Courts
of South Africa., vol. 1 p. 147.
[5]
Record
rescission application p. 481 para 31.2 replying affidavit.
[6]
Record p. 71 line 21 – 24.
[7]
Record p 330, answering affidavit para 124.3
[8]
Above.
[9]
ROMELA INTERNET COMMUNICATIONS (PTY) LTD & ANOTHER v IBM
BOTSWANA (PTY) LTD 2003 (1) BLR 206 (HC).
[10]
Above
[11]
Act 108 of 1996.
[12]
[2006] JOL 18229
(CC) at para 16.