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[2016] ZAGPPHC 1109
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Potgieter and Others v Blyvoor Gold (Pty) Ltd and Others (80516/16) [2016] ZAGPPHC 1109 (3 November 2016)
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
DIVISION, PRETORIA
DATE:
3/11/2016
CASE
NO.: 80516/16
KAREL
FREDERIK GOITLIEB POTGIETER
First
Applicant
FREDERIK
DANE
VILJOEN
Second Applicant
GERRIT
BASTIAT
VILJOEN
Third Applicant
and
BLYVOOR
GOLD (PTY)
LTD First
Respondent
RANDLORD
CAPITAL (PTY) LTD
Second
Respondent
RANDLORD
GOLD (PTY)
LTD
Third Respondent
BLYVOOR
GOLD OPERATIONS (PTY)
LTD
Fourth Respondent
BLYVOOR
GOLD RESOURCES (PTY)
LTD
Fifth Respondent
RANDLORD
UNDERGROUND OPERATIONS (PTY) LTD
Sixth Respondent
RANDLORD
GROUP (PTY) LTD
Seventh
Respondent
RICHARD
LLEWELLYN FLOYD
Eighth
Respondent
STRATOCORP
(PTY) LTD
Ninth Respondent
RANDLORD
HOLDINGS (PTY)
LTD
Tenth Respondent
COMPANIES
AND INTELLECTUAL PROPERTY COMMISSION
Eleventh Respondent
JUDGMENT
VAN
DER WESTHUIZEN, A J
1.
This application comes before me by way of urgency. It relates to a
dispute amongst directors of a number of companies and the
holding of
shareholders' meetings at which it is intended to remove some of the
directors as directors of the companies listed
as respondents.
2.
The applicants seek to restrain the eighth respondent, a fellow
director, from holding himself out as the sole director of the
companies. They also seek to interdict the shareholders of the
companies from holding shareholders' meetings that are allegedly
unauthorised.
3.
The ninth respondent filed a counter application. At the hearing of
the matter, leave was sought to amend the notice of the counter
application to limit the relief sought therein to the first
respondent.
4.
At the hearing of the matter, Mr Badenhorst SC, who appears on behalf
of the first to ninth respondents, sought to limit the
dispute to the
first respondent, conceding to the relief against the second to
seventh respondents.
5.
The background leading to this application can be summarised as
follows:
(a)
Seven companies have been for the past two years involved in the
envisaged reclamation of gold at the Blyvooruitsicht Mine and slimes
dams;
(b)
These companies are the first respondent, the holding company, and
the second to seventh respondent, its six subsidiaries;
(c)
The estimated reclamation of gold in the slimes dams and underground
reserves would lead to the tenth largest gold mining and reclamation
in the world and thus is an extremely valuable corporate opportunity;
(d)
The said operation has been thus far funded through the ninth
respondent,
by one Peter Skeat, the father in law of the eighth
respondent;
(e)
The applicants and the eighth respondent are the four directors of
the first to seventh respondents;
(f)
The tenth respondent together with the ninth respondent hold 100%
of
the shares in the first respondent;
(g)
The applicants are the shareholders of the tenth respondent and have
pledged their shares in the tenth respondent
in securitatem debiti
to the ninth respondent. They may thus not vote at shareholders'
meetings;
(h)
The relationship between the applicants on the one hand and the
eighth
respondent and Mr Skeat on the other has become strained. The
applicants were suspected of theft of company assets and criminal
charges were preferred against them. Criminal investigations are
underway. The applicants deny any wrong doing;
(i)
The applicants made an offer to Messrs Skeat and Floyd
in respect of
repayment of the loan and to part ways. That offer seems to have been
the catalyst and resulted in attempts to have
the applicants removed
as directors;
(j)
The attempts at removing the applicants as directors are the
following:
(1)
The eighth respondent, Mr Floyd, lodged documents on10 October 2016
at the offices
of the eleventh respondent to change the directors of
the first to seventh respondents;
(2)
Mr Floyd threatened to hold a meeting on the same day for
the purpose of removing the applicants
as directors, but that attempt was foiled by the applicants;
(3)
Further on 10 October 2016, Mr Floyd unilaterally terminated the
appointment
of CMV Auditors as auditors of the first respondent,
indicating in the letter that the board of directors had terminated
the said
appointment. The board of directors never held a meeting at
which such decision was taken;
(4)
On 11 October 2016, Mr Floyd, purportedly in terms of a resolution of
a shareholders' meeting, unilaterally appointed Mr Alan Smith as CEO
of the first respondent. No such shareholders' meeting had
been
convened. Mr Floyd personally signed the resolution as director. It
was not signed by the chairperson of the alleged meeting;
(5)
On the same day, Mr Floyd caused attorneys, Messrs Tabacks, to
address
a letter to First National Bank incorrectly alleging that the
applicants had resigned as directors on 7 October 2016 and that Mr
Floyd was the only authorised signatory on the bank account.
(k)
In the evening of 10 October 2016, the applicants received
an e
mail from Messrs Tabacks with the heading
"Notice of an
extraordinary
shareholders'
meeting
to be held
on 26 October 2016".
Attached to this e-mail were seven notices of general meetings of
the first to seventh respondents. All the said notices informed
the
applicants that,
"notice
is
hereby
given of an extraordinary
general
meeting
of
the
shareholders
of
the Company
convened
by
the
Board
to be held".
Noticeably, Mr
Floyd signed the notices, purporting to act on behalf of the Board.
The meeting was said to be held on 26 October
2016.
(I)
Neither of the applicants participated in the purported
resolution to
convene the said meeting of shareholders. No board meeting was ever
held at which such purported resolution could
have been taken.
6.
The foregoing appears to be common cause between the parties.
7.
The
lis
between the parties, in the application and the
counter application, primarily concerns the removal of the directors
of the first
to seventh respondents and the procedure to be followed
in that regard. The amended notice in respect of the counter
application
limits the relief to the first respondent.
8.
Mr Preis SC, who appears on behalf of the applicants, contends with
reference to the provisions of sections 71 and 61 of the
Companies
Act, 71 of 2008 (the Act), that the incorrect procedure was followed
in the present instance. The argument is
inter alia
premised
upon the common cause facts set out above.
9.
Mr Badenhorst, on the other hand, relying on the provisions of
section 71 of the Act, contends that nothing untoward has occurred
in
convening the extraordinary shareholders' meeting for 26 October
2016. He submits, with reference to the English law and the
corresponding legislation in that regard, that the nub of the issue
is a "contest" between the persons entitled to exercise
100% of the voting rights in an election of the director or
proprietors of the first respondent on the one hand, and the three
applicants who are resisting the shareholders' desire to hold the
said meeting. Furthermore, reliance is placed upon the provisions
of
section 61(12) of the Act in support of the counter application.
10.
Further in this regard, Mr
Badenhorst relies, in
the
alternative, upon
the
doctrine of unanimous assent.
11.
It will be prudent to record the provisions of the aforesaid
sections of the Act relied upon. In this regard, section 71 of the
Act, the section providing for the removal of a director, provides as
follows:
"(1)
Despite anything to the contrary in a company's Memorandum of
Incorporation or rules, or any agreement between a company
and a
director, or between any shareholders and a director, a director may
be removed by an ordinary resolution adopted at a shareholders
meeting by the persons entitled to exercise voting rights in an
election of that director, subject to subsection (2).
(2)
Before the shareholders of a company may consider a resolution
contemplated in subsection (1)-
(a)
the director concerned must be given notice of the meeting and the
resolution, at least equivalent to
that which a shareholder is
entitled to receive, irrespective of whether or not the director is a
shareholder of the company; and
(b)
the director must be afforded a reasonable opportunity to make a
presentation, in person or through
a representative, to the meeting,
before the resolution is put to a vote.
(3)
If a company has more than two directors, and a shareholder or
director
has alleged that a director of the company-
(a)
has become-
(i)
ineligible or disqualified in terms of section 69, other
than on the grounds
contemplated in section 69 (8) (a); or
(ii)
incapacitated to the extent that the director is
unable
to perform the
functions of a director, and is unlikely to regain that capacity
within a reasonable time;
or
(b)
has neglected, or been derelict in the performance of, the functions
of director, the board, other than the director concerned,
must
determine the matter by resolution, and may remove a director whom it
has determined to be ineligible or disqualified, incapacitated,
or
negligent or derelict, as the case may be.
(4)
Before the board of a company may consider a resolution contemplated
in subsection (3), the director
concerned must be given-
(a)
notice of the meeting, including a copy of the proposed resolution
and a statement setting out reasons
for the resolution, with
sufficient specificity to reasonably permit the director to prepare
and present a response; and
(b)
a reasonable opportunity to make a presentation, in person or through
a representative, to the meeting
before the resolution is put to a
vote.
(5)
If, in terms of subsection (3), the board of a company has determined
that a director is ineligible
or disqualified, incapacitated, or has
been negligent or derelict, as the case may be, the director
concerned, or a person who
appointed that director as contemplated in
section 66 (4) (a) (i), if applicable, may apply within 20 business
days to a court
to review the determination of the board.
(6)
If, in terms of subsection (3), the board of a company has determined
that a director is
not ineligible or disqualified,
incapacitated, or has not been negligent or derelict, as the case may
be-
(a)
any director who voted otherwise on the resolution, or
any holder of voting rights entitled
to be exercised in the election
of that director, may apply to a court to review the determination of
the board; and
(b)
the court, on application in terms of paragraph (a), may-
(i)
confirm the determination of the board; or
(ii)
remove the director from office, if the court is satisfied that the
director is ineligible or disqualified, incapacitated,
or has
been negligent or derelict.
(7)
An applicant in terms of subsection (6) must compensate the company,
and any other party, for costs
incurred in relation to the
application, unless the court reverses the decision of the board.
(8)
If a company has fewer than three directors-
(a)
subsection (3) does not apply to the company;
(b)
in any circumstances contemplated in subsection (3), any director or
shareholder of the company may apply to the Companies Tribunal,
to
make a determination contemplated in that subsection; and
(c)
subsections (4), (5) and (6), each read with the changes required by
the context, apply to the determination of the matter by
the
Companies Tribunal.
(9)
Nothing in this section deprives a person removed from office as a
director in terms of this section of any right
that person may have
at common law or otherwise to apply to a court for damages or other
compensation for-
(a)
loss of office as a director; or
(b)
loss of any other office as a consequence of being removed as a
director.
(10)
This section is in addition to the right of a person, in terms of
section 162, to apply to a court for an order declaring a
director
delinquent, or placing a director on probation."
12.
Shareholders' meetings
are
governed by
the
provisions of
section
61
of
the Act, and provides as follows:
"(1)
The
board
of
a
company,
or
any
other
person
specified
in
the
company's
Memorandum
of
Incorporation
or
rules,
may
call
a shareholders meeting at
any
time.
(2)
Subject
to section
60,
a
company must hold a shareholders meeting-
(a)
at any time that the board is required by this
Act
or the Memorandum
of Incorporation
to
refer a matter to
shareholders
for
decision;
(b)
whenever
required
in terms of section
70
(3) to fill
a vacancy on the board; and
(c)
when otherwise
required-
(i)
in terms of subsection
(3) or
(7);
or
(ii)
by
the
company's
Memorandum
of Incorporation.
(3)
Subject to subsection
(5) and (6), the board of
a company,
or any other
person
specified in
the
company's
Memorandum
of Incorporation
or
rules,
must
call
a
shareholders
meeting
if
one
or more written and signed demands
for
such a meeting are delivered to the
company,
and-
(a)
each such demand
describes
the
specific purpose
for which the meeting i
s
proposed; and
(b)
in aggregate,
demands
for
substantially
the same purpose
are
made and signed
by the holders,
as the
earliest time specified in
any of those demands, of at
least 10% of the voting rights entitled to be exercised in
relation to the matter proposed to be considered at the meeting.
(4)
A
company's
Memorandum
of
Incorporation
may specify
a lower
percentage
in substitution
for
that set out in subsection
(3) (b).
(5)
A
company,
or
any
shareholder
of
the
company,
may
apply
to
a cour
t
for
an order setting aside a demand made
in terms of subsection (3) on the grounds
that
the demand is frivolous, calls for
a meeting
for
no
other purpose than
to
reconsider
a
matter
that
has
already
been decided by the
shareholders, or is otherwise vexatious.
(6)
At
any time before the start
of a
shareholders
meeting contemplated in
subsection
(3)-
(a)
a shareholder
who submitted
a
demand for
that meeting may withdraw that
demand,' and
(b)
the
company
must
cancel
the
meeting if, as
a
result
of one or more demands being withdrawn, the voting rights of any
remaining shareholders continuing to demand the meeting,
in
aggregate, fall below the minimum percentage of voting rights
required to call a meeting.
(7)
A public
company
must
convene
an annual general
meeting
of its shareholders-
(a)
initially,
no
more
than
18 months
after
the company's date
of incorporation,' and
(b)
thereafter,
once
in every
calendar year,
but
no more than 15
months after the
date of
the
previous annual
general
meeting,
or
within
an
extended time
allowed by
the Companies Tribunal, on
good
cause shown.
(8)
A meeting convened in
terms of subsection (7)
must, at a minimum, provide
for the following business
to
be transacted:
(a)
Presentation
of-
(i)
the
directors'
report;
(ii)
audited financial statements for the
immediately
preceding
financial year; and
(iii)
an audit committee
report;
(b)
election
of directors,
to the
extent
required
by this Act
or
the company's
Memorandum
of Incorporation;
(c)
appointment
of-
(i)
an auditor for the
ensuing
financial year; and
(ii)
an
audit
committee; and
(d)
any matters raised
by
shareholders,
with or
without advance notice
to
the
company.
(9)
Except
to the extent that the Memorandum
of Incorporation
of a company provides
otherwise-
(a)
the
board
of
the
company
may
determine the location
for
any shareholders
meeting of
the company; and
(b)
a shareholders
meeting of the company may be
held in
the Republic or in
any foreign
country.
(10)
Every
shareholders
meeting
of a
public
company
must
be reasonably accessible within the Republic
for
electronic participation by shareholders
in the
manner
contemplated
in section
63 (2), irrespective
of whether
the
meeting
is held
in the
Republic
or elsewhere.
(11)
If
a company is unable to convene a meeting as
required in terms of
this
section
because
it
has
no
directors, or
because
all
of
its directors are incapacitated-
(a)
any other person
authorised
by the
company's Memorandum of
Incorporation may
convene
the meeting; or
(b)
if no
person
has been authorised
as contemplated
in
paragraph
(a), the
Companies Tribunal,
on
a
request by
any
shareholder, may
issue
an
admini-strative order
for a
shareholders
meeting to
be convened on a date, and subject to any
terms, that the Tribunal considers appropriate
in the
circumstances.
(12)
If
a company
fails to
convene a meeting
for any
reason
other than as
contemplated in
subsection
(11)-
(a)
at
a
time
required
in accordance
with
its Memorandum
of Incorporation;
(b)
when required
by shareholders
in
terms of subsection
(3);
or
(c)
within
the
time
required
by
subsection (7),
a shareholder may apply
to a court for an order requiring the company to convene a meeting on
a date, and subject to any terms,
that the court considers
appropriate in the circumstances.
(13)
The company must compensate a shareholder who applies to the
Companies Tribunal in
terms of
subsection
(11),
or to
a court in terms of
subsection
(12),
respectively,
for the
costs
of
those
proceedings.
(14)
Any
failure
to hold a meeting as
required by this section does not affect the existence of a company,
or the validity of any action by the company."
13.
Contextually, and purposively read, sections 71 and 61 of the Act are
to be read conjunctively.
14.
The notice convening the extraordinary general meeting of
shareholders requires consideration. In this regard, the meeting was
convened upon the following basis:
"The
company, having received a written and signed demand from a
shareholder representing at least 10% of the voting rights
entitled
to be exercised in relation to the proposed resolutions, herewith
convenes the meeting in accordance with the provisions
of
section
61(3)
of the
Companies Act."
15.
The
demand referred to, relates to the demand by the tenth
respondent, Stratocorp (Pty) Ltd (Stratocorp). That demand was held
back
until 10 October 2016, when the procedures were put in place to
remove the applicants as directors as referred to above.
16.
From the aforementioned background, the following appears:
(a)
No board meeting was convened at which the demand had served;
(b)
No resolution was taken by the board to convene the extraordinary
meeting of shareholders;
(c)
The applicants were not aware of the demand, nor were they
present at
any board meeting before which the demand had served;
(d)
The eighth respondent, Mr Floyd, had acted in his own stead,
purporting
to be the sole director of the first to seventh
respondents.
17.
It follows from the actions on the part of Mr Floyd, that there has
been non-compliance with the provisions of section 71 of
the Act, and
in particular in respect of subsection (2) thereof, in purporting to
have the applicants removed as directors on 10
October 2016.
Accordingly, that attempt is
contra
the provisions of the Act,
invalid and of no consequence.
18.
Mr Badenhorst further submitted that there is no continued threat
that the eighth respondent would further act in the manner
complained
of, the eighth respondent conceding in the answering affidavit that
the applicants remain directors of the first to
seventh respondent
companies. However, Mr Preis correctly submitted that, at least, Mr
Floyd has not withdrawn the letter to First
National Bank, thus
constituting a continued misrepresentation of the true facts.
19.
It follows that the applicants are entitled to the relief they seek
in restraining the eighth respondent from holding himself
out as the
sole director of the first to seventh respondents and that the
applicants are no longer directors of the first to seventh
respondents.
20.
The issue whether the meeting scheduled for 26 October 2016 has been
correctly convened in terms of the provisions of the Act,
requires
consideration.
21.
I have set out the provisions of sections 71 and 61 of the Act above.
In respect of the convening of a shareholders' meeting,
the following
requirements can be gleaned there from.
(a)
The board of a company, or a person specified in the company's
Memorandum
of Incorporation or rules may call a shareholders'
meeting;
(b)
A company must hold a shareholder's meeting in specified instances;
(c)
A shareholders' meeting must be held where a written and signed
demand for such a meeting is delivered to the company by a
shareholder who holds at least 10% of the voting shares.
22.
Section 59 of the Act provides that the board of directors of a
company is to determine a record date for the meeting of
shareholders.
23.
Further in this regard, section 61(12) provides that where a company
fails to convene a shareholders' meeting on receiving a
demand, a
shareholder shall apply to a court for an order requiring the company
to convene a meeting date, subject to any terms,
that the court
considers appropriate in the circumstances.
24.
Mr Badenhorst submits that the tenth respondent, Stratocorp, owning
58
percent of the shares in the first respondent, has delivered a demand
to convene a general meeting of its shareholders. He further
submits
that the company has refused to convene the required meeting as
demanded.
25.
It is apparent form the procedure followed by Mr Floyd to have the
applicants removed as directors on 10 October 2016, that
such
attempts were ineffective and constituted a nullity. The applicants
remain directors of the first to seventh respondents.
26.
Accordingly, no demand for the convening of a shareholders' meeting
served before the board of directors of any of the first
to seventh
respondents and no decision thereon could have been taken.
27.
It follows that the boards of directors of first to seventh
respondents could not and have not recorded the date of the meeting
of shareholders to be 26 October 2016.
28.
In respect of the provisions of section 61(3) of the Act, it is clear
that the board of directors of the first to seventh respondents
were
never in a position to call the required and obligatory shareholders'
meeting. The eighth respondent had unilaterally acceded
to the demand
without ever presenting the board of directors with the demand.
29.
Mr Badenhorst submits that the demand for the shareholders.' meeting
had been delivered to the first respondent, it being received
by the
eighth respondent. That, in my view, is of no consequence. The demand
is to be considered by the board of directors who
is obliged to
record the date of the shareholders' meeting. In the absence of the
boards of directors of the first to seventh respondents
not having
knowledge of receipt of the demand, it could not have complied with
the provisions of section 61(3) of the Act.
30.
The purported notice of the meeting of 26 October 2016 is of no force
or effect.
31.
The further submission that the demand was posted to the registered
addresses of each of the first to seventh respondents is
without
merit. It is pointed out that some of the registered addresses are
incorrect. Furthermore, the acknowledgement by one of
the applicants
that he received the registered letter on 24 October 2016 in respect
of the first respondent, does not constitute
compliance with the
prescribed requirements, at least in respect of the provisions of
section 71(2) of the Act.
32.
It follows further that Stratocorp cannot invoke the provisions of
section 61(12) of the Act.
33.
As a further string to Mr Badenhorst's bow, he relies on the doctrine
of unanimous assent. In terms of that doctrine, the will
of the
shareholders must prevail over all technical defences raised by the
applicants. The reliance of
the said doctrine
is in respect of the counter application.
34.
Applying the said doctrine in the present instance will refute the
requirements of section 17(2) of the Act and will be to the
detriment
of the applicants. The contrived attempts to comply with the
prescribed requirements constitute an attempt to prevent
the
applicants from enforcing their rights enshrined in section 71(2) of
the Act.
35.
It is common cause that insufficient time has been allotted to the
applicants in respect of their rights in terms of section
71(2) of
the Act.
36.
Invoking the doctrine of unanimous assent cannot salvage the failure
to comply with the prescribed requirements of sections
71 and 61 of
the Act in the present instance.
37.
It follows that the counter application cannot be entertained and
stands to be dismissed.
38.
It being conceded that the applicants are entitled to the relief
sought in respect of second to seventh respondents, and having
found
that the counter application cannot succeed, the applicants are
entitled to the relief sought in respect of the first respondent
for
the aforesaid reasons.
I
grant the following order:
(a)
The application is to be heard on an urgent basis and that the
applicants' failure to comply with the ordinary rules governing
service of application and time frames be hereby condoned;
(b)
The first to tenth respondents are interdicted from proceeding with
the proposed extraordinary shareholders' meetings of the first
to
seventh respondents scheduled to take place on 26 October
2016, or on the dates to which the meeting is to be adjourned
in
terms of the undertaking given by the ninth and tenth respondents;
(c)
The eighth respondent is interdicted from holding himself out as the
sole director of the first to seventh respondents or from
holding out
that the applicants are no longer directors of the first to the
seventh respondents;
(d)
The counter application is dismissed with costs;
(e)
The eighth respondent is ordered to pay the costs, such costs to
include the costs of senior counsel.
_____________________________
C
J VAN DER WESTHUIZEN
ACTING
JUDGE OF THE HIGH COURT
On
behalf of Applicants:
D A Preis SC
Instructed
by:
Macrobert Attorneys
On
behalf of First to Ninth Respondents: C H J Badenthorst SC
Instructed
by:
Mervyn Taback Inc.