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[2015] ZAWCHC 173
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Du Plooy N.O and Others v De Hollandsche Molen Share Block Ltd and Another (4308/2015) [2015] ZAWCHC 173; [2016] 1 All SA 748 (WCC); 2017 (3) SA 274 (WCC) (11 November 2015)
IN THE HIGH COURT OF
SOUTH AFRICA
(WESTERN CAPE DIVISION,
CAPE TOWN)
CASE NO: 4308/2015
DATE: 11 NOVEMBER 2015
Reportable
In the matter between:
NICOLAAS JOHANNES DU PLOOY
N.O
..................................................................
First
Applicant
CATHERINA MAGDALENA DU PLOOY
N.O
.......................................................
Second
Applicant
NICOLAAS JOHANNES DU
PLOOY
........................................................................
Third
Applicant
HAROLD MEYER
LIVERSAGE
..............................................................................
Fourth
Applicant
SANDRA VAN DER
WESTHUIZEN
............................................................................
Fifth
Applicant
And
DE HOLLANDSCHE MOLEN SHARE BLOCK
LTD
...........................................
First
Respondent
THE SHAREHOLDERS OF ORDINARY A CLASS
SHARES IN DE HOLLANDSCHE
MOLEN SHARE BLOCK
LTD
..............................................................................
Second
Respondent
JUDGMENT: 11 November 2015
DAVIS J
Introduction
[1] This case has been fuelled by a
major feud between third applicant personally as well as in his
capacity as a representative
of the NJ Du Plooy Trust (“the
trust”), which is the majority shareholder of first respondent
on the one hand and the
board of directors of the first respondent
(“the board’) on the other. This feud has not only
created significant
problems for the running of first respondent, a
share block company, but it has now raised a veritable hast of
intricate legal
questions which, in some cases, go to the heart of
company law.
[2] In essence, the first and second
applicants seek an order that the trust, as a registered owner of a
series of shares of first
respondent, and alternatively, in the event
of it being found that the trust has not been entered into the
security register of
the first respondent as the owner of these
shares, that the first respondent be ordered to enter the name of the
trust in the first
respondent’s security register as the owner
of all the shares referred to as class B - F shares. In the
alternative, applicants
seek an order that the trust is entitled to
exercise voting rights in respect of the shares at any meeting of the
shareholders
of the first respondent.
The broad factual background
[3] It appears to be common cause that
first respondent was incorporated and registered as a company on 18
November 1991 with an
authorised share capital of 35 600 shares
comprising of the following classes of shares of 1c each:
6 980 class A shares,
540 class B shares,
10 000 class C shares,
6 000 class D shares,
2 080 class E shares, and
10 000 class F shares
[4] At all relevant times since 2004,
the first respondent and the board recognised the trust as a majority
shareholder of first
respondent and the registered owner of all the
class B – F shares. In September 2014, the board adopted the
position that
the trust was not the shareholder of first respondent
because its name had not appeared on the document that the board
contended
is the share register of first respondent.
[5] Although the board adopted this
decision in September 2014, the dispute had begun to brew somewhat
earlier. During 2011 a dispute
arose between the trust and the first
respondent when the board took the position that the first respondent
was obliged in terms
of the
Companies Act of 2008
to amend its
memorandum and articles of association. The first respondent
appointed Werksmans Attorneys to advise it on the implications
of
this amendment. On 10 July 2012 an attorney from Werksmans attended
a board meeting to advise first respondent on these matters.
[6] First respondent alleged that,
prior to this meeting, it had already engaged in discussions with the
applicant with regard to
various issues, inter alia, “greater
voting rights” and “greater representation of the board”
for class
A shareholders.
[7] In 2012 negotiations took place
between the board and the trust concerning the proposed draft of the
new memorandum of incorporation
in terms of the 2008
Companies Act.
[8
] First respondent alleged that since
early 2013 it “attempted to align its founding documents”,
that is the existing
memorandum and articles of association with the
provisions of the 2008
Companies Act. These
negotiations between the
trust and first respondent were protracted but ultimately proved to
be unsuccessful. The board then began
to raise a number of
complaints with regard to third applicant’s conduct as a
director of first respondent. On 14 August
2014, in order to
protect its interest, the trust requested first respondent, in terms
of article 11.2 of the Articles read together
with s 61 (3) of the
2008
Companies Act, to
convene a general shareholders meeting in
order to consider and vote upon a resolution for the removal of the
then directors and
the appointment of new directors in their stead.
In the header to this notice the trust informed first respondent that
it requested
a shareholders meeting in its capacity as “the
holder of 82% of the issued shared capital” of the first
respondent.
[9] First respondent complied with this
request and gave notice of a special general meeting of shareholders
to be scheduled for
20 September 2014. It added to this notice a
series of items that first respondent intended to put to the vote.
The first order
of business was ‘to resolve the impasses
between the board and the majority shareholder in the company, the Du
Toit Plooy
Trust relating to the company’s memorandum of
incorporation’. The first respondent attached a voluminous
bundle of
annexures to this notice, inter alia, a memorandum to the
shareholders that contained the following paragraph:
‘Company’s share register
It has furthermore come to the
attention of the board that due to the amendments to the share blocks
and the registered Plan, the
Company’s share register is
incorrect for the reasons more fully set forth in Werkmans’
e-mail dated 4 April 2014.
(my emphasis)
In paragraph 9.1 of this memorandum,
the shareholders were informed of the following matters that needed
to be resolved:
‘9. To be resolved by
shareholders
9.1 Whether or not the Outstanding
Matters and any other matter to be raised by the Trust, as majority
shareholder (approximately
83% shareholding) and contributor of
approximately 4.3% to the levies raised by the Company from time to
time, should simply be
accepted, to ensure that the MOI is finalised
and registered as soon as possible, OR should the Company seek the
appropriate relief
against Du Plooy and/or the Trust to ensure the
finalisation of the revised MOI…’ (my emphasis)
On 1 September 2014 the trust’s
attorney directed the following inquiry to the first respondent in
regard to this paragraph:
‘In view of the content of para
9.1 of the aforesaid memorandum, we require confirmation from the
Board of Directors of the
Company, that the Trust holds approximately
83% of the shareholding in the company and that they will be entitled
to exercise their
vote at the meeting to be held on 20 September
2014. If this is not the case, kindly inform us what according to
the Board of
Directors, is the shareholding of the Trust and/or (on)
what basis the Trust would not be able to vote on the basis of such
shareholding.’
The first respondent’s attorney
replied, inter alia, as follows:
‘Lastly, your client will be
permitted to vote in accordance with the provisions of the
Companies
Act, 71 of 2008
, and your client’s shareholding will be
determined in accordance therewith at the envisaged meeting.’
[10] At the meeting of 20 September
2014 discussions took place which culminated in an agreement that the
meeting be postponed and
that the parties attempt to settle the
issues pertaining to the amendment of the company’s founding
documents and the use
agreement. It was during these discussions
that first respondent’s attorney stated that, according to his
client, the
trust was not reflected in the share register as a
shareholder and, as a consequence, the trust would not be permitted
to be present
and vote at any shareholders meeting.
[11] A further meeting was held on 25
September 2014 to discuss the proposed terms of the Memorandum of
Incorporation (MOI) and
related issues. The trust attorney made it
clear that the trust was not prepared to commence any discussions
with first respondent
on the basis that, in the event that the
discussions were unsuccessful, the board would persist in its
attitude that the trust
was not entitled to be present and to vote at
any reconvened meeting of shareholders.
[12] Pursuant thereto, first
respondent’s attorney informed the trust’s attorney that,
regardless of the outcome of
the settlement negotiations, first
respondent would not persist in the positions adopted, namely that
the trust may not be present
and vote at any reconvened shareholders
meeting. However, it appears that the board did reconvene the
postponed meeting which
had been scheduled for 11 October 2014. At
this meeting the trust was allowed to vote, although upon the
instructions of the
board, the respective votes of the A class
shareholders and the trust were counted and recorded separately. The
outcome was that
the majority of the A class shareholders voted for
the adoption of the six proposals put up by the board and the trust,
as well
as the fourth and fifth applicants, and a substantial number
of A class shareholders voted for the removal of the directors.
Given
the fact that the votes of the trust, supported by the fourth
and fifth applicants, constituted the majority vote of the
shareholders
present at the meeting, the result was that the
proposals of the board were not adopted but in their stead the
proposals of the
trust with regard to the removal of directors were
adopted.
[13] This result elicited a further
letter from first respondent’s attorney emphasising that the
trust was not reflected on
first respondent’s share register as
a shareholder and further that:
‘tot tyd en wyl hy (i.e. the
Trust) nie in die Maatskappy se sekuritieitsregister aangetoon word
as ‘n aandeelhouer
van the Maatskappy nie, ons Kliënt hom
nie as ‘n aandeelhouer sal erken nie.’
[14] On 13 November 2014 the parties’
legal representatives again attended a meeting with a view to
addressing the board’s
contention that the share register had
not reflected the trust as a shareholder so that the trust could do
whatever was required
in order to remove this impediment to its
status as a shareholder. According to the applicants, the board’s
attorney did
not generate any such response to the trust’s
attorney. However, on 28 November 2014, the board’s attorney
generated
a letter in which he informed the latter as follows:
‘Ons ontken dat skrywer onderneem
het om u te voorsien van ‘n skrywe waarin die maatskappy, (ons
Kliënt) se sogenaamde
vereistes vervat is ten eninde ons Kliënt
se aandele register reg te stel. Wat wel gesê is, was dat ons
u van ‘n
skrywe sal voorsien waarin die vereistes waaraan
voldoen moet word (en hier is na wetlike en praktiese vereistes
vereis, en nie
na iets wat ons Kliënt na willekeur wil uitdink
nie) ten einde u Kliënt as ‘n aandeelhouer in die aandele
register
in te skryf, uiteengesit word.’
[15] According to the first applicant,
he became aware on 27 February 2015 that the board had given notice
to the shareholders of
a special general meeting as well as an annual
general meeting of shareholders to be convened on 21 March 2015.
The purpose of
this meeting was to adopt, inter alia, a special
resolution that the ordinary class A shareholders be increased from 6
980 to 256
980.
[16] Central to this dispute is the
allegation that the purpose and modus operandi of the board in
adopting this resolution was
to substantially increase the number of
class A shares and the combined voting rights in terms thereof,
before making any further
attempts to address and resolve the issue
pertaining to the status of the trust as a shareholder.
The central questions in this case
[17] Mr Vivier, who appeared on behalf
of the applicants, correctly observed that there were three important
initial questions which
required determination, namely the status of
the original subscribers to shares in first respondent, the transfer
of the shares
from the so called Schoeman employees to the applicants
and the further transfer of the shares from the applicants to the
trust.
He then raised two further issues, namely the implications of
s 161
and
163
of the
Companies Act of 2008
as well as the doctrine of
estoppel.
The initial allotment of shares
[18] It is common cause that according
to the Memorandum and Articles of Association, the seven subscribers
to first respondent
were the three subscriber applicants and four
employees of Arthur Schoeman, then a practicing attorney and
conveyancer, who practiced
as a director of Arthur Schoeman
Incorporated. Mr Schoeman specialised in property law, including
share blocks and sectional titles.
It was he who had been instructed
to attend to the registration of the share block company. On 18
November 1991 Mr Schoeman
caused the first respondent to be
registered as a share block company in terms of the provisions of the
Share Block Companies Act
59 of 1980. According to a clause
entitled “Association Clause”, which appeared in the
Memorandum of Association
read together with sub paragraphs 1 to 7
thereof, the following persons were the initial subscribers: third
applicant, fourth applicant,
the fifth applicant as well as Ms
Samantha Hall, Ms Cynthia Louw, Ms Isla Bouwer and Ms Verena Bull.
The latter four subscribers
were employed as secretarial personnel in
Mr Schoeman’s office. It is they who have been referred to in
these proceedings
as the “Schoeman employees”.
[19] Mr Vivier submitted that, upon
incorporation of the first respondent, and without more, the
subscriber applicants and the Schoeman
employees became shareholders
of first respondent and acquired the shareholding in a company as set
out in the association clause
in the Memorandum.
[20] In support of this proposition, Mr
Vivier referred to Blackman’s Commentary on the Companies Act
at 5-291 which developes
an analysis of s 103 of the 1973 Companies
Act, which section provided for ‘who are members of a company’.
Professor
Blackman writes thus:
‘Although it is generally
accepted that, in terms of s 103 (1), the subscribers of a company’s
memorandum become members
of the company on incorporation (ie neither
entry in the register not allotment of shares is a condition
precedent to their becoming
members of the company), s 103 (1) in
fact does not say that; it merely says that such subscribers are
deemed to have agreed to
become members of the company upon its
incorporation. And indeed there is very little authority for the
proposition that the
subscribers of the memorandum become members of
the company on its incorporation. Perhaps the better view is that
the subscribers
of the memorandum do indeed become members on the
incorporation, not by virtue of s 103 (1), but by virtue of s 65.
Section 103
(1), then, merely accepts that that is the case and
insist that the names of the subscribers be placed forthwith on the
register.
This, admittedly, leaves unexplained why s 103 (1) deems
the subscribers to have agreed to become members. Perhaps this
provisions
was inserted merely to make it clear that, unlike other
persons who subsequently become members, the subscribers are members
regardless
of whether or not they actually agreed to become members.’
[21] In support of this proposition,
Blackman cites the case of Moosa v Lalloo
1957 (4) SA 207
(D) at 210,
particularly where Caney J said:
‘Even however if they were not so
entered (as members) they are “‘to be treated as having
become members of the
company, without the need for any allotment of
shares.’
See also Baytrust Holdings v IRC
[1971]
WLR 1333
(ChD) and Gower and Davies’ Principles of Modern
Company Law (7th ed) at 639.
[22] Mr Le Grange, who appeared
together with Mr De Wet on behalf of the respondents, submitted that,
at best for the applicants,
the third to fifth applicants and the
Schoeman employees recorded the agreement to take up shares for a
company to be formed; that
is an application to take up an allotment
of a certain number of shares.
[23] The association clause to which
they appended their signatures went no further than a mere recordal
of a statement of future
intent to the effect that they agreed to
take up the number of shares in the capital of the company, as set
out opposite our respective
names.’ There was no evidence to
suggest that any of these signatories to the association clause made
good on their promises;
in particular it was not even contended that
the shares to which they subscribed were actually taken up by any of
them and, importantly,
they were never allotted nor issued to them.
[24] In addition Mr Le Grange submitted
that the support derived by applicants from the decision in Moosa,
supra was at best an
obiter dictum as was evident from the following
passage of that judgment at 210 C – F:
‘Before proceeding any further, I
should make some observations in regard to the one share each for
which Mohideen and Noor
had subscribed to the Memorandum. It has not
appeared in evidence whether they ever paid for those shares, nor
whether share certificates
were ever issued to them, but, clearly, by
reason of the provisions of s 24 (1) of the Act, they are to “be
deemed to have
agreed to become members of the Company”, and
upon its registration they should have provisions of s 25 (1) the
Company was
required to keep. Even, however, if they were not so
entered, they are to be treated as having become members of the
Company,
without the need of any allotment of shares. Nicol’s
case.
29 Ch.D. 421
at pp 444, 445 (C.A.); Longs Executrix v Rosemount
G.M. Syndicate Ltd. (in Liq.),
1905 T.S. 563
at pp. 566, 567. The
facts in relation to these two shares were, however not fully
canvassed.’
[25] Mr Le Grange also referred to s 92
of the 1973 Companies Act to the effect that no company shall allot
or issue shares, unless
the full issue price of or other
consideration for the share has been paid to and received by the
company. Any allotment or issue
of a share which is contrary to s 92
is void.
[26] On the contested points, the
balance of authorities appear to be in favour of applicant. Apart
from the authority from Blackman,
to which I have already made
reference, Henochsberg on the
Companies Act 71 of 2008
at para 15
states the following with regard to the relevant provision of the
1973 Act:
‘The Companies Act, 1973, used to
provide that subscribers of a company’s memorandum were deemed
to have agreed to become
and in law become, members of the company
upon its incorporation. There is no exact counterpart to his
provision in the
Companies Act, 2008
. Indeed, the latter Act
generally eschews the wider term “member” in favour of
the narrower but more widely understood
term, “shareholder”,
but of necessity retains the term “member” in relation to
non-profit companies that
elect to have members, since such companies
do not issue shares and such persons cannot properly be called
shareholders. Although
the
Companies Act 2008
defines “securities
register” but not “members’ register”, it
implicitly contemplates the creation
and maintenance of a members’
register by a non-profit company that has members. Under the
Companies Act 1973, as soon as
the company was incorporated, the
subscribers had to be entered as members in its register of members;
but neither entry in the
register nor allotment of shares was a
condition precedent to their becoming members of the company.’
[27] Relying on the old case of
Alexander v Automatic Telephone Company [1900] 2 (CH) 56, Palmer
Company Law Volume 2 at 7.005,
contends that every subscriber to the
memorandum of association on incorporation of the company becomes a
member. No allotment
is required, although it is a requirement that,
on registration of the company, the name of each subscriber must be
entered into
the register of members. Thus, no entry on the register
was formally necessary in order to constitute membership, although a
legislative
intervention has now made it clear that entry is such a
requirement.
[28] In short, the relevant authorities
appear to draw a distinction between an allotment which takes place
after the company has
effectively been born and the position with
regard to the initial subscribers who become members in terms of the
founding memorandum
of association. Although Caney J’s
observation, in Moosa, supra at 210 D to which I have made reference,
can be construed
to be an obiter dictum, the position as set out
therein is supported by all the authorities to which I have made
reference. See
the express examination of this position in English
law in the decision in Baytrust Holdings Ltd at 90 and 96-97.
The transfer of the shares by the
Schoeman employees to the applicants
[29] It is clear that the Schoeman
employees transferred their membership of first respondent to the
fourth, fifth and third applicants.
Mr Le Grange submitted that, in
terms of the explanation provided in the founding affidavit, the
process that was followed entailed
that the Schoeman employees signed
simultaneously with the signature of the registration documents,
further documents to effect
the transfer in due course (as soon as a
number of members to the first respondent exceeded the minimum
requirement) of all their
rights, title and interest of subscribers
to the originally intended subscribers. He submitted that these
subscribers had no title
in or to the shares. At best, they had a
right to take up the shares allotted and issued to them provided that
they had paid
for their shares once the company was incorporated.
As the Schoeman employees had never taken up, nor were allotted or
issued
with any shares in first respondent, a fact supported by the
omission to enter their names into the share register of the first
respondent, they were in no position to transfer shares to the
applicants.
[30] From the applicants founding
affidavit, it is clear that the subscriber applicants had instructed
Mr Schoeman to attend to
the registration of first respondent. On
this account the Schoeman employees became subscribers expressly in
order to comply with
the statutory requirement of the 1973 Companies
Act, namely that a public company must have at least seven members at
the time
of its incorporation. This requirement necessitated four
additional subscribers to make up the total of the statutory minimum
of seven members.
[31] The Schoeman employees,
simultaneously with the signing of the relevant registration
documents, signed a further document to
effect the transfer of the
shareholding in first respondent to the “nominee”
subscribers, as soon as the number of
members of first respondent
exceeded seven.
[32] According to Mr Schoeman’s
recollection, as well as one of the Schoeman employees Ms Bull, this
was the procedure which
was often followed in these transactions.
To the argument that this transaction was a sham, applicants provide
a series of affidavits
by Ms Du Plessis and Mr Dwinger, the latter
who was head of the legal division employed at the Registrar of
Companies. He confirmed
that the office of the registrar of
companies was aware of this practice followed by practitioners
specialising in the registration
of companies to use employees in the
registration process in order to ensure compliance with the relevant
provision in the 1973
Companies Act namely, that a public company
must be registered with at least seven subscribers.
[33] Notwithstanding my previous
finding, the question again arises, insofar as the disposition of
this leg of the case is concerned,
as to whether ownership of shares
is dependent upon registration thereof in a company’s share
register. In this connection
Blackman at 5-169 notes, in a passage
clearly supportative of applicants’ position:
‘In the case of certificated
shares, the complex of incorporeal personal rights which constitute a
share is transferrable
by way of cession. Thus the owner (may also
be the registered member) can sell such shares and cede the rights
attached to them,
passing the property in them independently of and
prior to the registration of the purchaser. See also Oakland
Nominees Ltd v
Gelria Mining and Investment Company Limited
1976 (1)
SA 441
(A) at 453 A.’
The relevant passage in Oakland, supra
at 453 A is extremely pertinent, for Holmes JA said:
‘A nominee is an agent with
limited authority: he holds shares in name only. He does this on
behalf of his nominator or principal,
form who he takes his
instructions; see Sammel and Others v President Brand Gold Mining Co.
Ltd.,
1969 (3) S.A. 629
(A.D.) at p 666. The principal, whose name
does not appear on the register, is usually described as the
“beneficial owner”.
This is not, juristically speaking,
wholly accurate; but it is a convenient and well-understood label.
Ownership of shares does
not depend upon registration. On the other
hand, the company recognises only its registered shareholders.’
The absence of the use agreement
[34] Mr Le Grange referred to s 16 and
17 of the Share Blocks Control Act 59 of 1980 (‘Shareblock
Act’). Section 16
provides as follows:
‘A contract for the acquisition
of a share and a use agreement entered into, and any amendment or
cession of any such contract
or agreement, after the commencement of
this Act, shall be reduced to writing and signed by the parties
thereto or by their representatives
acting on their written
authority, failing which the contract, agreement, amendment or
cession, as the case may be, shall, subject
to the provisions of s
18, be of no force of effect.’
Section 17 (1) provides that a contract
for the acquisition of a share shall state the matter as required by
Schedule 2 and be accompanied
by the documents referred to in this
Schedule. This schedule provides for matters to be stated in a
contract for the acquisition
of the share.
[35] Mr Le Grange then referred to
clauses 5.3 and 5.6 of the Articles of Association. Clause 5.3
reads:
‘The holder of a share block in
the company shall not transfer or alienate or in any way dispose of
the shares comprising
such share block or any rights therein, except
insofar as permitted in terms of the relevant use agreement between
the company
and him, and these articles.’
Clause 5.6 reads:
‘No transfer of any shares shall
be registered in the Share Register of the company, unless and until
proof has been produced
to the satisfaction of the directors that any
existing agreement, including the relevant Use Agreement between the
company and
the transferor has been duly assigned by the transferor
to the transferee, and the transferee has duly assumed all the
transferor’s
rights and obligations to the company thereunder.’
[36] On the strength of these articles
and the relevant provision of the Shareblock Act, Mr Le Grange
submitted that the transfers
of shares from the Schoeman employees to
the applicants was in breach of the Shareblock Act and the provisions
of the Association
agreement set out above and accordingly the
transfer had to be regarded as void.
[37] By contrast, Mr Vivier submitted
that, upon a proper interpretation of articles 5.3 and 5.6 and having
regard to the purpose
of a use agreement, these clauses applied to
formalities with which there must be compliance and did not
constitute conditional
restrictions against the alienation of the
shares. Further, it did not have the effect that merely because of
the subscriber applicants,
the share block developer had not
concluded a use agreement in respect of the unused share blocks
linked to all the shares owned
by them, the omission of which would
have invalidated any transaction in terms of which they transferred
shares to the relevant
entity, that is to the trust.
[38] Unquestionably there is a
significant problem for first respondent and its future operations if
the arguments advanced by Mr
Le Grange are correct. It would mean
that the title of all the current class A shareholders is materially
defective.
[39] Aware of this problem, Mr Le
Grange contended that
s 163
(2) of the
Companies Act 71 of 2008
could be applied to justify an exercise by the court of a discretion
in favour of the class A shareholders, because at all relevant
times
there had been use agreements which regulated the use of their
respective share blocks. These shareholders paid the bulk
of the
levies and they had paid value for their shares, albeit to the
applicants. Accordingly, a failure to exercise the relevant
discretion would mean that the class A shareholders would otherwise
be victims of a breach of the relevant law, all of which has
now
given rise to this litigation.
[40] To this question I wish to return
presently but only after examining the next aspect which has been
raised in this case, namely
the transfer of the shares by applicants
to the trust.
The transfer of the shares to the
trust
[41] Mr Vivier referred to events that
took place prior to the special meeting of shareholders which was
scheduled to take place
on 20 September 2014. The trust’s
attorney contacted Mr Slabbert, who was described as the person who
regularly attended
to the administration of first respondent’s
affairs, with the view to obtaining a copy of first respondent’s
share
register. Mr Slabbert provided him with a document entitled
“De Hollandsche Molen Aandele Blokke Maatskappy BPK” in
compliance with this request. In terms of this document, the trust
reflected was a shareholder of the trust; in particular of
the B –
F class shares in the amount of 33 620 shares. Significantly, at
the end of 2013 and at the beginning of 2014,
the board instructed
forensic investigators Nolands Forensics to investigate “the
financial and administrative integrity”
of first respondent
together with certain other issues. After completion of its
investigation Nolands furnished a report to first
respondent on 18
March 2014. Of particular relevance to the present inquiry was the
following finding: ‘The N J Du Plooy
Family Trust holds
approximately 80% of the issued share capital of the company
excluding the A class shares.’ In the same
context on 27
February 2014 a letter was generated by respondent’s attorney
which confirmed inter alia ‘the developer
of the share block
scheme is the registered owner of all the issued B, C, D, E and F
class share’.
[42] On the available evidence, it
appears difficult to hold that the shares were not transferred to the
trust. All of the B,
D, E, F class shares were transferred to the
trust in July 2004, pursuant to a further agreement that had been
entered into between
the members of the Du Plooy family in terms of
which all the shares held by the subscriber applicants and first
respondent were
transferred to and consolidated in the trust. The
justification for this was to secure the financing that was required
for the
construction of 15 holiday chalets on the property.
Pursuant to these agreements, share certificates in respect of these
shares
were issued to the trust. It is therefore difficult to
conclude otherwise than that the trust is the holder of the share
certificates
in respect of all the class B – F shares of first
respondent.
The argument regarding fractions
[43] This conclusion is subject to one
final argument which was raised, namely that the C – F shares
could never have been
issued or allocated to the applicants and the
Schoeman employees as they would then have received fractions of
share blocks.
According to Mr Le Grange, the number of shares
comprising a single block varied and was determined by the articles
as follows:
‘Class A: 20 shares
Class B: 30 shares
Class C: 10 000 shares
Class D: 2 000 shares
Class E: 2 080 shares
Class F: 10 000 shares’
[44] Mr Le Grange contended that this
decision meant that it would be impossible for any single shareholder
legitimately to obtain
or earn a fraction of a share block or
anything less than a defined share block. For example, 10 class A
shares or 25 class B
shares. It would be impossible for any person
or entity to own less than 10 000 class C shares, less than 2 000
class C share,
less than 2 000 class D shares, less than 2 080 class
E shares or less than 10 000 class F shares. The articles,
particularly
article 5.1, required that the rights and obligations in
terms of the use agreement and occupancy rights connected to the
share
block had to be transferred simultaneously with the shares.
[45] This argument compels a return to
an analysis of the initial subscription for shares. In the
association clause, signatories
to the memorandum of association were
allocated an uneven number of shares. Take first applicant: he
received 997 ordinary A class
shares, 77 B class shares, 1 429 C
class shares, 857 D class shares, 297 E class shares and 1 429 F
class shares. Similar calculations
can be done for the other
subscribers.
[46] Significantly clause 4.3 of the
articles of association provides thus:
‘Every member shall be entitled
without payment to one (1) certificate for all his shares or to
several certificates each
for one (1) or more of his share blocks.
Every certificate of shares shall specify the shares in respect of
which it is issued.
Where shares are registered in the name of two
(2) or more persons they shall be treated as one (1) member for the
purposes of
this article.’
[47] It was envisaged that the shares
should be consolidated in one certificate. All of the shares
registered in the name of two
or more persons were to be treated as
one for the purpose of this article. In any event, in terms of the
securities transfer
form (CM 42), it is clear that the relevant
shares had been transferred into the trust which meets the objection
raised by the
respondents. In summary, if the finding is, as I have
set it out, that the trust is the owner of the B – F class
shares,
then these arguments which had been raised by the respondents
cannot gainsay, this legal position.
The application of ss 161 and 163 of
the 2008
Companies Act
>
[48] The class C shares were
transferred to the trust in April 1998 pursuant to an agreement that
had been entered into between
the members of the Du Plooy family as
subscribers and founder members of first respondent on 12 April 1998,
in terms of which the
C class shares linked to the original mill
building on the property were transferred to the third applicant.
Third applicant
and his wife would reside in this building, which
they had renovated and converted into a family residence at their own
expense
since 1988. The class B, D, E, F shares had been
transferred to the trust in July 2004, pursuant to a further
agreement that
had been entered into between members of the Du Plooy
family in terms of which all the shares held by the subscriber
applicants
in the first respondent were transferred to and
consolidated in the trust for purposes of the financing which was
required for
the construction of 15 holiday chalets on the property.
There can be no doubt that the share certificates in respect of all
of
these shares had been issued to the trust.
[49] This background allows for an
examination of the further argument that this Court should apply
ss
161
and
163
of the 2008 Companies Act. Section 161 of the 2008
Companies Act provides
, inter alia, as follows:
(1) A holder of issued securities of a
company may apply to a court for –
(a) an order determining any rights of
that securities holder in terms of this Act, the company’s
Memorandum of Incorporation,
any rules of the company, or any
applicable debt instrument, or
(b) any appropriate order necessary to-
(i) protect any right contemplated in
paragraph (a); or
(ii) rectify any harm done to the
securities holder by –
(aa) the company as a consequence of an
act or omission that contravened this Act or the company’s
Memorandum of Incorporation,
rules or applicable debt instrument, or
violated any right contemplated in paragraph (a), or
(bb) any of its directors to the
extent that they are or may be held liable in terms of section 7.7.
[50] The aim of this provision is to
provide a shareholder with the means to protect his or her rights.
The manner in which this
section is couched is that it affords
protection to a shareholder to obtain a declaratory order to
determine his or her rights,
whether in terms of the Act, “company’s
MOI, any rules of the company or any applicable debt instrument.
Although
I have been unable to find a decision dealing directly with
s 161, there is the decision in Barnard v Carl Greaves Brokers Ltd
and 2 other cases
[2007] ZAWCHC 2
;
2008 (3) SA 663
(C) which canvasses the
implications of the predecessor provisions, s 252 of the 1973 Act.
Insofar as this section is relevant
it provided thus:
‘(1) Any member of a company who
complains that any particular act or omission of a company is
unfairly prejudicial, unjust
or inequitable, or that the affairs for
the company are being conducted in a manner unfairly prejudicial,
unjust or inequitable
to him or to some part of the members of the
company, may, subject to the provisions of subsection (2), make an
application to
the court for an order under this section.’
[51] Binns-Ward AJ (as he then was)
applied this section to provide relief for an owner of shares who had
not obtained registration
of his membership in the company because of
opposition or lack of cooperation by a company. Accordingly the
learned judge granted
an order directing the enrolment on the
register of members in terms of s 252 of the 1973
Companies Act.
[52
] It appears to me to be equally
appropriate in this case to bring clarity and certainty to the legal
position, namely that the
trust is the owner of all class B – F
shares in first respondent. To order otherwise, as respondents
would have it, would
be to create chaos, where at present there is
only ambiguity which arguably can be cured. Take for example the
submission of Mr
Le Grange that it was possible to have issued 14 of
the 18 class B shares to the initial shareholders, being two share
blocks each.
The remaining share blocks could only be issued in
fractions. As a result, these shares would revert back to the first
respondent
to be reflected as authorised but unissued shared capital.
Further, given that there were no use agreements for the class B
shares,
these shares could not have been transferred to the
applicant’s by the Schoeman employees. The question would then
arise
as to whether the Schoeman employees were still the
shareholders of these shares or would the first respondent be
possessed of
the authorised but unissued shared capital. Even on
respondent’s argument, six class A share blocks would
immediately revert
back to first respondent as authorised unissued
share capital.
[53] Mr Le Grange was forced to concede
further that, if his argument was correct, namely that there was no
evidence that the initial
shareholders ever paid for the shares and
that there was a disconnect between the individual share blocks and
the registered lay
out plan (the fractional argument) this would be
fatal to the existence of any rights of these shareholders. He thus
contended
that 163 of the 2008
Companies Act should
be employed in
favour of the class A shareholders, notwithstanding that no counter
application had been brought in the present
case by the individual
shareholders as opposed to the first respondent which, as I shall
show, does not have locus standi itself,
to gain relief in terms of
s163 (1) of the Act.
Section 163
[54] Both parties invoked s 163 of the
2008
Companies Act for
relief.
Section 163 (1) of the 2008
Companies
Act provides
:
a) Any act or omission of a company or
related person that has had a result that is oppressive or unfairly
prejudicial to or that
unfairly disregards the interest of the
applicant.
b) The business of a company or related
person being or has been carried on or conduct in a manner that is
oppressive or unfairly
prejudicial to or that unfairly disregards the
interest of the applicant or (the powers of a director or prescribed
officer of
a company or a person related to a company are being or
have been exercised in a manner that is oppressive or unfairly
prejudicial
to or that unfairly disregards the interest of the
applicant.
[55] The section clearly provides that
a shareholder or director of a company may make an application in
terms of
s 163
(1) for relief from any act in omission which has the
result that is oppressive or unfairly prejudicial to the applicant as
defined.
Respondents contend that this Court should exercise a
discretion in terms of
s 163
(2) (d), (e) and (k) in favour of the
class A shareholders for the following reasons:
1. At all relevant times there had been
use agreements which regulated use of their respective share blocks;
2. These shareholders paid the bulk of
the levies;
3. They actually paid value for their
shares, albeit to the applicants;
4. They did not cause the problems,
they were victims of it.
However there is simply no legally
competent application brought by respondents which is before this
Court in terms of
s 163
(1).
[56] A competent application would
require it to be brought by an applicant as specified in the section
and would provide for a
precise formulation of the relief sought.
Louw v Nel
2011 (2) SA 172
(SCA) at para 32. None of this has been
done by respondents.
[57] By contrast, in terms of
s 163
(2)
(k), first applicant is entitled, as it sought in its papers, for an
order directing first respondent to reflect first respondent
as the
shareholder of the class B – F shares. First respondent has
for all practical purposes always acknowledged the trust
as the
holder of all the class B – F shares. Having discovering the
absence of the name of the trust on its share register,
and declaring
that it was prepared to cooperate with the trust to rectify the
matter (which it merely viewed as a “technicality”),
applicants contend that if they are entitled to
s 163
relief. In
applicants’ view the about-turn by first respondent in February
2015 by taking position that the trust is not
a shareholder, and by
proceeding with the steps to increase the class A shares and to
dilute the trust’s voting rights, has
a result that is
unreasonably prejudicial to, alternatively unreasonably disregards,
the interest of the trust.
Conclusion
[58] In summary, the applicant has made
out a case in terms of
s 161.
It is common cause that Mr Slabbert,
originally from Boland Rekendienste and thereafter as owner of the
accounting firm Boland
Finansiëlle Dienste, has since 1993
provided all the secretarial and administrative services required by
first respondent,
including the issues of share certificates and the
updating of the first respondents share register. The papers show
that Mr Slabbert
acted as the secretary of first respondent even
though it does not appear that he was appointed to this position.
The share certificates,
to which I have made reference, were issued
on behalf of first respondent by its “transfer secretaries”
at first respondents
“transfer office” being Boland
Financial Services (BFS) 15 Ottowa Street Paarl. There can be no
doubt, on these papers,
that the share certificates held by the trust
were issued by first respondent duly represented by Mr Slabbert and
or BFS at the
latest by 29 July 2004. A document entitled
“Ooreenkoms” signed by all board members recorded ‘dat
Nico Du Plooy
Trust die regmatige eienaar is van die eindom ter
sprake onderneem om die voorwaardes na te kom per huur kontrakte soos
gewys.’
Attached to the founding papers was a document
entitled ‘De Hollandsche Molen Aandeleblok Maatskappy BPK’
to the trust
attorney by Mr Slabbert which reflects the shareholders
in first respondent, including the trust as a shareholder of the B –
F shares.
[59] Without having to canvass the
various arguments with regard to estoppel, manifestly the court
should exercise a discretion
in terms of s 161 of the Act to clarify
the position and thereby ensure that the securities register reflects
the trust as the
holder of the class B – F shares. There is
nothing to gainsay third applicants claim in his replying affidavit :
‘Be that as it may, it is evident
that on the Company’s version it does not have a share
register, and I leave it to
the Company to address the consequences
of such conclusion as the hearing of this matter.’
[60] Had the respondents brought a
counter application in terms of s 163 it would have been possible to
arrive at a decision to
order that a use agreement be entered into in
order to regulate the use of the class B – F share blocks.
However, to date
the parties, as in the Barnard case, have been
unable to cooperate sensibly in the best interests of first
respondent. In particular,
it cannot be in the interests of first
respondent nor, I might add in the interests of the applicants, to
continue with this impasse,
in circumstances where no use agreement
to regulate the use of a class B – F share block. The Noland
report, to the extent
that it is material, indicates the urgent need
to bring certainty to the present position and break the existing
impasse.
[61] Given that s 161 was invoked by
applicant, I propose to utilise the scope of this section in order to
bring some harmony to
first respondent and attempt by way of crafting
the appropriate order to ensure an end to this litigation which
cannot on any basis,
enure to anyone’s advantage whether
applicants or respondents.
The order
[62] It is declared that the N J Du
Plooy Trust is the registered owner of the following shares in the
first respondent namely:
1.1 540 B – class shares
1.2 10 000 C – class shares
1.3 6000 D – class shares
1.4 280 E – class shares; and
1.5 10 000 F – class shares.
2. The N J Du Plooy Trust as holder of
the class B – F shares shall enter into a use agreement with
the first respondent in
respect of each of the share blocks
established in respect of the class B – F shares.
3. In the event that an agreement is
not reached between the NJ Du Plooy Trust and first respondent in
respect of the use agreements
as set out in paragraph 2 above, the
parties shall appoint an arbitrator whose decision in respect of the
use agreement shall be
final. In the event that the parties are
unable to agree upon the identity of an arbitrator, the decision to
appoint an arbitrator
shall be made by the chairperson of the Cape
Bar Council whose decision shall be final.
4. First respondent is ordered to pay
the cost of the application.
DAVIS J