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2015
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[2015] ZAFSHC 6
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Makanda and Others v Afrinnai Health (Pty) Ltd and Another (3590/2014) [2015] ZAFSHC 6 (5 February 2015)
IN
THE HIGH COURT OF SOUTH AFRICA
FREE
STATE DIVISION, BLOEMFONTEIN
Case
No. : 3590/2014
In
the matter between:-
MAKALIMENG
BELINAH MAKANDA
…................................................................
1
st
Applicant
PITSO
FAIRBRIDGE MOGOREGI
….......................................................................
2
nd
Applicant
MPATI
GRACE ERICA KALANE
…..........................................................................
3
rd
Applicant
MOSOEUNYANE
SHADRACK RAMATHE
….........................................................
4
th
Applicant
and
AFRINNAI
HEALTH (PTY) LTD
….........................................................................
1
st
Respondent
LEHLOHONOLO
MOSOTHO
…............................................................................
2
nd
Respondent
CORAM:
NAIDOO, J
JUDGMENT
BY:
NAIDOO, J
HEARD
ON:
20 NOVEMBER 2014
DELIVERED
ON:
5 FEBRUARY 2015
NAIDOO
J
[1]
The applicants seek an order against the respondents in the following
terms:
“
1.
That the first respondent be ordered to make
available the documents set out hereunder, within 14 days of
the date of this
order, by delivery of copies thereof to the
applicants’ attorneys of record, care of JH Conradie, Roussouws
Attorneys, 119
Pres Reitz Avenue, Westdene, Bloemfontein, to wit:
1.1
The first respondent’s memorandum of
Incorporation and any amendments to it, and any rules made by the
company as envisaged
by the provisions of
section 24(3)(a)
of the
Companies Act 71 of 2008
[
the Act
];
1.2
The records in respect of the first
respondent’s directors as envisaged by the provisions of
section 24(3)(c)(i)
;
1.3
The reports to annual meetings and annual
financial statements since inception of the first respondent to
date of this order
as envisaged by the provisions of
section
24(3)(c)(i)
and (ii) of the Act;
1.4
The notices and minutes of annual meetings
and communications of the first respondent as envisaged by the
provisions of
section 24(3)(d)
and (e) of the Act;
1.5
The securities register of the first
respondent as envisaged by the provisions of section24(4) of the Act;
1.6
Accounting records, including bank
statements of all accounts operated by the first respondent with any
bank, from date of the first
respondent’s inception to date of
the order;
2. The first and
second respondent pay the cost of the application on the scale as
between attorney and client, alternatively, party
and party scale,
jointly and severally, the one paying the other to be absolved;
3.
Such further and or alternative relief as the court deems meet.”
[2]
Mr N Snellenburg appeared for the applicants and Mr MDJ Steenkamp
appeared for the respondents. The applicants are shareholders
in the
first respondent and together hold 74 shares. The applicants’
case is that they have repeatedly, for a period of about
one year,
requested the first respondent to make available to them the
documents, financial statements and books of account, which
would
assist them gain insight into the manner in which the first
respondent was being run and to assess the financial standing
of the
company in order to ascertain the state of their investment in the
company.
[3]
There is no dispute that the first respondent is required by law to
keep all of the documents requested by the applicants, and
that the
latter are entitled to have access to and copies thereof. The
respondents’ case is that the first respondent is
an investment
company whose sole asset is approximately a 20% shareholding in a
Lesotho–based company called Tsepong. The
latter company
appears to have taken a loan of R20 million and some of its
shareholders are currently locked in a court case in
Lesotho to
obtain a forensic audit of the running of Tsepong. As a result,
no dividend was paid to Tsepong’s shareholders,
which in turn
resulted in the first respondent itself not being able to declare a
dividend or pay its shareholders.
[4]
The relevant sections of the Companies Act 71of 2008 (the Act) make
extensive provisions for the keeping of company records,
and the
manner and form in which such records must be kept, as well as for
the furnishing of information to persons entitled thereto.
The court
is indebted to Mr Snellenburg for a detailed and useful exposition of
the statutory framework in his Heads of Argument.
In summary,
-
Section 24
of the Act provides comprehensively for the types of documents, and
the manner, form and period that documents, accounts, books,
records
and other information are to be kept by the company. Such records
include annual financial statements, accounting records
and a full
and complete record of the details of its directors.
-
Section 25
provides that such records and documents must be accessible from the
company’s registered address or other locations, in
which case
the Registrar must be informed if the documents are kept at such
other locations.
-
Section 26
makes extensive provisions for access to company records by, amongst
others,
“
A person who holds or has a
beneficial interest in any securities issued by a profit company…has
a right to inspect and copy,
without any charge for any such
inspection or upon payment of no more than the prescribed maximum
charge for any such copy…”.
The
information that such a person is entitled to includes that contained
in the Memorandum of Incorporation, records relating to
the company’s
directors, reports to annual meetings, annual financial statements,
notices and minutes of annual meetings,
notices and minutes relating
to shareholders’ meetings and communications sent out by the
company generally to holders of
securities. Section 26 (5) and (6)
compel the company to respond to requests for information within 14
business days and to ensure
that the register of members and register
of directors is open for inspection by any member, free of charge,
during business hours,
respectively
-
Section 26(9)
makes
it an offence for a company to refuse to accommodate a reasonable
request for access or to unreasonably refuse access to any
record to
which a person is entitled, or to impede frustrate or interfere with
the reasonable exercise by any person of rights
set out in
section 26 or section 31 of the Act
-
Section 163
provides
for a shareholder or a director of a company to approach the court
for relief against conduct of the company which is oppressive
or
unfairly prejudicial to the interests of the applicant. Section
163(2) lists a variety of orders that a court may make, including
an
order restraining the conduct complained of, and an order requiring
the company, within a time specified by the court, to produce
financial statements as directed by the court or to account in any
manner stipulated by the court.
The
application before me rests on the provisions of the sections of the
Act I have listed above, as well as on the provisions of
sections
27-29 and section 163.
[5]
With regard to the first respondent’s affairs, the second
respondent, who deposed to the Opposing Affidavit on behalf
of the
first respondent, indicated that the first respondent has no official
premises, employees or infrastructure. It is run from
the living
rooms of the four non-executive directors and does not earn an
income. It is dependent on the return of its investment
in Tsepong to
generate income to enable it to pay its expenses, including the fees
of the auditors. Its inability to pay the latter
has resulted in the
auditors not performing many of the tasks in compliance with the
first respondent’s statutory obligations.
[6]
It also emerges from the Opposing Affidavit that a number of
documents were furnished to the applicants, and that the first,
second and fourth applicants attended at least one annual meeting of
the first respondent, in August 2012. This was not disclosed
in the
Founding Affidavit, nor was the fact that certain documents were in
fact furnished by the first respondent to the applicants
under cover
of a letter dated 11 October 2013. Having said that, however, I must
point out that although the fourth applicant’s
name appears on
the attendance list, which is relevant to the meeting on 17 August
2012, there is no signature against his name.
The applicants allege
that the fourth applicant resigned from the Board of the first
respondent in May 2010 and has not been involved
in the affairs of
the first respondent since then. It is also useful to record what
documents were allegedly furnished to the applicants
(page 115/6 of
the papers). These were:
6.1
Afrinnai Health (Pty) Ltd Resolution – Change of Address;
6.2
Afrinnai Health (Pty) Ltd Resolution – Appointment of MRB &
Partners as Auditors;
6.3
Special Power of Attorney for Change of Directors dated 27 February
2012.
6.4
Special resolution dated 14 June 2013;
6.5
Special Resolution dated 25 July 2013;
6.6
Notice of Annual General meeting held on 17 August 2013 at Garden
Court Hotel;
6.7
A Resolution dated 12 February 2009;
6.8
Minutes of a meeting by the board of Directors of Afrinnai Health
dated 5 November 2008;
6.9
Minutes of a meeting held on 17 December 2008;
6.10
Minutes of a meeting held on 22 April 2009;
6.11
Minutes of a meeting held on 31 August 2010;
6.12
Articles of Association of a company known as Silver Meadow
Trading193 (Pty) Ltd, registration number 2007/010157/07;
6.13
Copy of the Memorandum of Association of Silver
Meadow
Trading;
6.14
A copy of a Certificate of Incorporation of Silver Meadow;
6.15
A copy of a Certificate of change of name of company from Silver
Meadow Trading (Pty) Ltd to Afrinnai Health;
6.16
Articles of Incorporation of Afrinnai Health (Pty) Ltd;
6.17
A copy of a letter dated 26 July 2013 from Afrinnai Health addressed
to Rossouws Attorneys;
6.18
A copy of an e-mail dated 1 October 2013 from Rupert Bester addressed
to Dr L Mosotho.
In
addition, it is not disputed that the first and /or the second
respondent furnished the applicants’ attorneys with a list
of
shareholders with an indication of their shareholdings (paragraph 8.5
of the Opposing Affidavit). Remarkably, though, the respondents
allege that this is equivalent to a share register as there is no
share register in existence. The provisions of the Act are clear,
and
a list of shareholders, albeit one that reflects their respective
shareholding, cannot be regarded as a share register.
[7]
The letter under cover of which the abovementioned documents were
furnished refers to the Annual General Meeting held on 17
August
2013. An examination of the document, as well as the relevant
attendance register shows that the meeting was held on 17
August
2012. The contents of this “notice” appear to be a
recording of what was decided and resolved at such a meeting.
With
the exception of this notice, which purports to be a notice of an
annual general meeting held on 17 August 2012, the only
other notices
and minutes furnished to the applicants are notices and minutes of
meetings of the directors of the first respondent.
The applicants
seek notices and minutes of shareholders’ meetings. The
Articles of Incorporation furnished to the applicants
does not appear
to be a complete document. In any event, the applicant’s the
first respondent’s Memorandum of Incorporation,
together with
any amendments made thereto and any rules made by the first
respondent in terms of section 15 of the Act. The applicants
are not
in possession of such a document and are clearly entitled thereto.
[8]
The applicant’s point out a number of discrepancies in
different documents regarding the number of issued shares in the
first respondent, for example the Company and Intellectual Property
Commission (CIPC) report indicates that 1000 shares were authorised
but only 100 were issued. The applicants in this matter together hold
74 shares, hence 74% of the issued shares. The second respondent
deposed to the Answering affidavit in which he alleges that 1000
shares were issued. The applicants point out in reply that a list
of
shareholders provided for the meeting on 17 August 2012 (which does
not form part of the papers in this matter), which I have
referred to
above, reflects a shareholding1032 shares. I agree with the
submission of the applicants in this regard, which in essence
is that
the discrepancies create a sense of unease which raises a number of,
hitherto unanswered, questions. I also agree with
the submissions of
the applicants that the contents of the answering affidavit in this
matter are a clear indication that the first
respondent and/or the
second respondent have not complied with the statutory obligations
placed on the first respondent with regard
to the keeping of records
and books of account.
[9]
The contentions of the first respondent in the Opposing Affidavit
have understandably created, unease, suspicion and a sense
of
disquiet in the minds of the applicant, leading to a strong suspicion
that there is either mismanagement of the affairs of the
first
respondent or that there has been a deliberate attempt to mislead the
court regarding the financial standing of the first
respondent. Two
examples can be cited, firstly the alleged loan of R20 million that
Tsepong obtained from the Development Bank
of South Africa (DBSA).
From the correspondence put up by the first respondent in the
Opposing Affidavit, it is indeed clear that
the loan was taken by
Tsepong, although the second respondent claimed in a letter (also an
annexure to the Opposing Affidavit)
that the loan was taken by the
first respondent. When the second respondent attempted to obtain a
“letter of proof”
that the first respondent was the
recipient of the loan from DBSA, it was made clear to him that
Tsepong and not the first respondent
was in fact the recipient of the
loan or loans. What is not clear is how this has prevented the
first respondent from fulfilling
its statutory obligations,
especially with regard to the keeping of proper records and accounts,
and from finalising its financial
statements. The failure of the
first respondent, therefore, to finalise its financial statements for
several consecutive years,
is concerning. Another example is that the
Notice of Annual General Meeting purportedly held on 17 August 2012
(which I have referred
to above) indicates that there was agreement
that the second respondent and the other directors of the first
respondent should
receive remuneration totalling some R350 000.00 per
annum for their directorship in the first respondent, which belies
the allegation
that the first respondent is without funds. There is
no explanation in the Opposing Affidavit of the financial
difficulties faced
by the first respondent, or what its activities
are while it awaits the dividend from Tsepong, more specifically,
what the directors
of the first respondent are doing to justify the
remuneration that they receive.
[10]
It is common cause that the applicants have attempted for
approximately one year to obtain the documents that are the subject
matter of the order they seek in this application. I am also of the
view that such of the documents that the first and/or second
respondent have furnished to the applicants, although required by law
to be kept, are unhelpful in determining the financial position
of
the first respondent. The reluctance of the first respondent and/or
its directors to furnish the applicants with the banking
records
(including bank statements) of the first respondent, especially in
the absence of proper financial statements, is concerning.
The
applicants are justifiably anxious to enquire into the affairs of the
first respondent in order to protect their respective
investments in
the first respondent, and are entitled and empowered by the Act to do
so.
[11]
With regard to the issue of citing the second respondent as a party
to these proceedings, it does indeed appear from the papers
and other
documentation attached thereto, that the second respondent directed
all the actions of the first respondent, which in
any event can only
act through a natural person. The first respondent’s failure to
fulfil its statutory obligations is the
result of the second
respondent’s actions. I do not agree that joining him was a
misjoinder or that not joining the other
directors was a no-joinder.
The second respondent’s residential address is in fact cited as
the registered address of the
first respondent. It is also noteworthy
that the grounds set out in the founding affidavit for the joinder of
the second respondent
have not been refuted by him, other than to
allege that he is not the managing director. The applicant’s
will indeed be affected
by a costs order against the first respondent
and joined the second respondent in order to ensure that he is held
accountable for
his actions.
[12]
In the circumstances, I make the following order:
12.1.
That the first respondent is ordered to make available the documents
set out hereunder, within 14 days of the date of this
order, by
delivery of copies thereof to the applicants’ attorneys of
record, care of J H Conradie, Roussouws Attorneys, 119
Pres Reitz
Avenue, Westdene, Bloemfontein, to wit:
12.1.1
The first respondent’s Memorandum of Incorporation and any
amendments to it, and any rules made by the company as envisaged
by
the provisions of
section 24(3)(a)
of the
Companies Act 71 of 2008
[
the Act
];
12.1.2
The records in respect of the first respondent’s directors
as envisaged by the provisions of section 24(3)(c)(i)
of the Act;
12.1.3
The reports to annual meetings and annual financial statements since
inception of the first respondent to date of this order
as envisaged
by the provisions of section 24(3)(c)(i) and (ii) of the Act;
12.1.4
The notices and minutes of annual meetings and communications of the
first respondent as envisaged by the provisions of section
24(3)(d)
and (e) of the Act;
12.1.5
The securities register of the first respondent as envisaged by the
provisions of section24(4) of the Act;
12.1.6
Accounting records, including bank statements of all accounts
operated by the first respondent with any bank, from date of
the
first respondent’s inception to date of the order;
12.1.7 The first and
second respondent pay the costs of the application on the party and
party scale, jointly and severally, the
one paying the other to be
absolved.
_____________
S. NAIDOO, J
On behalf of the 1
st
– 4
th
Applicants: Adv, N. Snellenburg
Instructed
by:
J
H Conradie
c/o
Roussouws Attorneys
Bloemfontein
(KAL
17/0001(JHC/KJ)
On behalf of the
Respondents: Mr MDJ
Steenkamp
Instructed
by:
BLOEMFONTEIN
(Arno
Horn/tm/GC2543)