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[2014] ZANCHC 26
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NC Housing Services and Development Company v Matshoba and Others (1577/2012) [2014] ZANCHC 26 (8 August 2014)
IN
THE HIGH COURT OF SOUTH AFRICA
(Northern
Cape High Court, Kimberley)
Case
No: 1577/2012
Heard:
23/05/2014
Delivered:
08/08/2014
In
the matter between:
NC
HOUSING SERVICES & DEVELOPMENT COMPANY APPLICANT
AND
MTHUTHUZELI
JOSEPH MATSHOBA
1
st
RESPONDENT
KEITUMETSE
JEANETTE MOTHIBI
2
nd
RESPONDENT
SCHOLTZ
JACOB
BABUSENG
3
rd
RESPONDENT
SEODI
JULIUS MONGWAKETSI
4
th
RESPONDENT
MOSALA
SUPING PHILLIP MORUDI
5
th
RESPONDENT
DONALD
JAMES
JACOBS 6
th
RESPONDENT
FRANKLIN
ARNOLD GEORGE ADAMS 7
th
RESPONDENT
VIVEIROS
ALLEN
GOLIATH
8
th
RESPONDENT
Coram:
Mamosebo
AJ
JUDGMENT
MAMOSEBO
AJ
[1]
In an application dated 26 August 2013, which was issued by
the Registrar on 26 August 2013, the applicant, NC Housing Services &
Development Company, brought an application on urgency in which it
sought the following relief:
1.1
That the meeting that was held on 19 April 2013 at the
Kimberley Library purporting to be a shareholders meeting be declared
unlawful;
1.2
That all resolutions
adopted at the meeting
in question purporting to be the resolutions
of the Company be declared
unlawful
and be set aside;
1.3
That the first and second respondents (Joseph Matshoba and
Jeanete Mothibi, respectively), be ordered to pay the costs on an
attorney
and client scale. Matshoba and Mothibi are not directors of
the applicant company.
[2]
The third respondent, Scholtz Babuseng, is the Chairman of the
Company. The fourth to eighth respondents are directors of the
Company.
They are, respectively, Seodi Mongwaketse, Mosalasuping
Morudi, Donald Jacobs, Franklin Adams and Viveiros Goliath.
[3]
Morudi (the fifth respondent) is also the deponent on
behalf of
the applicant
Company. He claims to derive his authority from the "Resolution
of the Board of Directors: NC Housing Services
& Dev
Co" dated 16 August 2013 at
which the
following directors were present:
"(l)
MrM
Morudi; (2) Mr D Jacobs; (3) Mr F Adams".
At which It was resolved that:
"1
The meeting held on the 19
th
of April 2013 purporting to
be a meeting of the
shareholders of the company be declared illegitimate and unlawful
together with the resolutions[thereof].
2.
That the firm TOWELL & GROENEWALDT ATTORNEYS is appointed to
represent the company
in this matter.
3.
That Mosalasuping Phillip Morudi is authorized to
depose to all affidavits in Opposition of this application. "
[4]
A brief history of the applicant Company NC Housing Services &
Development Company is a registered Public Company. It was acquired
by a group of the present shareholders as a Shelf Company during
1997. It was then converted into a Public Company for purposes
of the
registration of more than 50 people as shareholders. The underlying
acquisition was to create a special purpose vehicle
for a broad-based
entity for a large group of predominantly poor and historically
disadvantaged Black people to
acquire
and control strategic
stakes in mineral and other enterprises.
[5]
On 04 January 2002 the Board of Directors passed a resolution
to sell shares to an investor to enable the company to purchase an
interest in Meriting Investments (Pty) Ltd. On 08 May 2004 the
shareholders passed a resolution to the effect that anyone wishing
to
increase their stake in the company could deposit money in the
Company Bank Account at Standard Bank, Kimberley. The understanding
was that the shareholder would then be issued a commensurate number
of shares with the deposit made.
[6]
NC Housing Services subsequently acquired an interest in
NWC Manganese (Pty) Ltd. The latter had a majority shareholding in
Northern Cape Manganese Company (Pty) Ltd.
The
last mentioned company in tum
held an interest in a
valuable prospecting
right for Manganese in the
Northern Cape under Department of Mineral Resources
Reference Number
52/2005 (PR).
[7]
Notwithstanding the aforegoing NC Housing Services &
Development was deregistered by the Registrar of Companies on 21
September
2007 for failure to submit Annual Statements and/or
returns. However, the company was restored to the Register of
Companies
by Order of Court on 13 April 2012.
[8]
The application now before me
(Case No 1577/2012) has been referred
to as the Interlocutory Application. There is a
pending Main Application registered under the
same case
number on 11
September
2012 in which the parties are as follows:
"Scholtz Jacob
Babuseng 1
st
Applicant
Seodi Julius
Mongwaketse 2
nd
Applicant
And
NC Housing Services &
Development 1
st
Respondent
Company
Mosalasuping Phillip
Morudi
2
nd
Respondent
APJacobs
3
rd
Respondent
Franklin Arnold George
Adams
4
th
Respondent
Viveiros Alen
Goliath 5
th
Respondent"
[9]
In the Main Application, the two applicants seek the following
relief:
"1.
An order declaring that the list of persons, attached
as Annexure "M" to the founding affidavit, to be the
list
of shareholders of the first respondent.
2.
An
order declaring that the number of persons
allotted to each shareholder listed in annexure "M" shall
be in
3.
The Board of Directors of first respondent is authorized and
compelled to amend the first respondent's Memorandum of Incorporation
to provide for the necessary increase of the number of authorized
shares, pro rata to a maximum of 2832 shares and
the issuing
thereof as contemplated in
section 36
of the
Companies Act, 71 of 2008
.
4.
The Board of Directors of the first respondent shall give
effect to the Resolutions passed on 22 February 2012 that
are
attached as annexure "P" to the founding affidavit.
5.
The costs of this application be paid by the first respondent,
alternatively
by such a respondent opposing this
application, jointly and severally with the first respondent;
[10]
Pertaining to the Main Application Williams
J
made the
following Interim Order by agreement between the parties on 16
October 2012, which Order
is
quoted in full because a
substantial
portion of its terms feature prominently in
the
Interlocutory
Application I am
seized
with:
"1.
The question whether annexure "M" to the founding affidavit
correctly reflects the shareholding in the first respondent
and
if not what changes should be effected
thereto is referred to
trial on a date to be determined.
2.
The Parties' affidavits shall stand as
pleadings.
3.
Each party shall be entitled to call a deponent as well
as any other person of whom it gives notice no less than 10 days
before
the hearing as a witness.
4.
The parties shall be entitled to discovery in terms of
the
Rules.
5.
Pending judgment in
the abovementioned trial; the
following interim order
is made:
5.1
The board of directors as referred to below, is
authorized to issue one (1) ordinary par
valueshare to each person
whose name appears on
annexure
"M";
5.2
The board
is
directed
to issue share certificates according to paragraph 5.1 above;
5.3
The board is directed to convene a
shareholders
meeting
on or before 16 November 2012 for purposes of voting on whether or
not to approve the sale of shares in NWC Manganese
(Pty) Ltd
referred to in annexure
"N" to the
founding
affidavit
and to take a resolution as envisaged in
sections 112 and 115 of the Companies Act 71 of 2008
("the Act);
5.4
The board of directors shall consist of the first
applicant [Babuseng] as the Chairperson, and the second to the fourth
respondents[Morudi,
Jacobs and Adams],
and no resolution to
the contrary shall be passed.
6.
Declaring that upon restoration of the first respondent on 13
April 2012, the board of directors as referred to
in paragraph 5.4 was restored to office and may carry
out all functions and obligations in terms of the Act.
7.
The proceeds of the sale of shares shall be deposited
in equal shares into the trust accounts of the respective attorneys
of the
parties, viz Towell & Groenewaldt and Van Zyl &
Groenewaldt, to be retained until final
judgment in this matter
subject to paragraph 8 below.
8.
The costs of the application to date shall be paid by
the first respondent [NC Housing Services & Development Company],
such
costs to include costs of two counsel in the case of the
applicants and the travelling and subsistence costs of the
respondents'
counsel.
"
[11]
At the meeting that was held on 19 April 2013 at the Kimberley
Library, which is sought to be declared unlawful and the
resolutions
adopted there be set aside (see para 1
above), the
following
resolutions were taken:
"RESOLUTION
OF THE SHAREHOLDERS OF THE NC HOUSING SERVICES & DEVELOPMENT
COMPANY, REGISTRATION
NUMBER
1997/005908/06 ("THE COMPANY")
TAKEN AT KIMBERLEY ON 19 APRIL 2013
"Now
therefore it
is
resolved
that:
5.
The mandate of the said Attorneys Towell &
Groenewaldt to represent the Company be terminated with immediate
effect;
6.
The Company immediately withdraw its opposition to
the
application
and henceforward support the application;
7.
Mthuthuzeli Joseph Matshoba, the lawful Proxy and
Agent
2 0
of Caroline
Nonzima Matshoba,
a shareholder
in
the
Company, be and is hereby authorized
in his capacity as
such
to, sign and depose to any necessary documentation or affidavits and
to take all necessary steps on behalf of the shareholders
and Company
to give effect to this Resolution and that any steps he may already
have taken in this regard be and are hereby
ratified;
8.
The powers granted in Paragraph
7
above include
but shall not be restricted
to
8.1
The
appointment of attorneys and advocates to represent the shareholders
and company and to appear in the High Court;
8.2The appointment of
Forensic Accountants or other suitably qualified experts to assist
the said attorneys and
advocates in the conduct
of these proceedings;
8.3The payment of all
fees of the attorneys, advocates and other experts used in these
proceedings;
8.4The making of all
other payments which may be necessary and desirable for the proper
conduct of the case;
8.5To proceed to the
final end and determination thereof; 8.6To move the Court
to vary the Interim Order
granted on
16 October 2012 to
provide that:
8.6.1
One third of the
proceeds of the sale
of
the Company's Shares in NWC Manganes (Pty)
Ltd
be paid into the
shareholders' Attorneys Trust Account and that this amount be
deducted from
the
amount
payable in terms of the said Order into the Trust Account of Messrs
Towel & Groenewalt;
8.6.2
The said Morudi, Jacobs, Adams and Goliath may be
suspended as Directors should investigations referred
to
in paragraph 9
result in
criminal
charges being brought against them pending the outcome of
those proceedings;
8.6.3
Should paragraph 8.6.2 become operative, the
shareholders be given the right to elect acting Directors pending
election of the new
Directors in the normal course.
9.
The Company investigate the possibility of commencing
criminal
proceedings against the
said Morudi,
Jacobs,
Adams and
Goliath in relation to irregularities that have been alleged to have
occurred in the issue of shares and
to mandate the
said Matshoba to take such steps as might be necessary to proceed in
this regard. Certified a true copy and signed
at Kimberley on 19
April 2013 by the following shareholders who were present at the
meeting."
[12]
Adv W Coetzee, for first and second respondents (Matshoba and
Mothibi), has taken two points
in limine.
The second point,
the non joinder issue, holds no water and will be dealt with in
passing at the end. The first objection goes
along the following
lines:
12.1
The purported authority to lodge the present (the
Interlocutory
Application) is
derived from a meeting dated 16 August 2013 at which meeting the
fifth, sixth and seventh respondents (Morudi, Jacobs
and Adams,
respectively) were present. See
para 3
above.
12.2
In this regard it is important to note that in terms of the
Order of Court of 16 October 2012, of the Main Application, the
third,
fifth, sixth, seventh and eighth respondents (Babuseng,
Morudi, Jacobs, Adams, and Goliath) were appointed directors. The
Court
Order in question is quoted in para 10 above. The relevant
paragraph (Clause) of the Court Order is 5.4 and reads as follows:
"5.4
The board of directors shall consist
of the first applicant [Babuseng]
as the Chairperson and
the second to fourth respondents [ Morudi, Jacobs and Adams],
and
no resolution to the contrary shall be passed."
(Own emphasis)
Mr Coetzee made an error
as far as Goliath is concerned. Order/Clause 5.4 does not mention him
but he was a director before the
Court Order.
12.3
The third respondent (Babuseng), having been appointed as
Chairperson of the Board by the Court, did not receive notice of the
meeting
of 16 August 2013 hence, it is submitted, that no enforceable
resolutions could be taken, Mr Coetzee submitted.
[13]
The third and fourth respondents (Babuseng: the
Chairman and Mongwaketse: a Director, respectively), applied to
Court
on 11 September 2012 for an order declaring that the list of
persons in Annexure "M" appended to the Resolution
taken on 19 April 2013
marked
Annexure "B" be the only persons entitled to shares in
proportion to the contributions they have made. This situation
would
obtain until the Board of Directors amend the Company's Memorandum of
Incorporation to increase the number of authorized
shares to 2832 for
proportional distribution to the listed persons.
[14]
The following is noteworthy and significant:
14.1
The application referred to in para 13 (above) was opposed by
the Company on the authority of a Resolution marked Annexure "MPM
l" dated 12 September 2012. The meeting was
attended by Morudi (the deponent),
Jacobs, Adams and
Goliath.
Conspicuous by his omission or absence is the Chairman
(Babuseng).
14.2
Annexure "PMM2" dated 16 August 2013, which
initiates the application now before me, demonstrates that Babuseng
was once
again overlooked because his name is not reflected thereon.
(See: para 3 above).
[15]
What is unmistakable is that there were clearly two camps
amongst the Board of Directors.
15.1
One camp is composed of Babuseng (the
Chairperson) who potentially owns
15.67%
of the shares in the
Company and Mongwaketse, who is
a
major, if not the major shareholder.
They are supported by the first and second respondents (Matshoba
and
Mothibi) who have been authorized from time to time to
guide the directors in the affairs of the
Company
They appear to be very
knowledgeable.
15.2
The other camp consists of Morudi, Jacobs, Adams
and Goliath. They are all directors and respondents in this
application.
What is striking about their conduct is that they not
only overlooked Babuseng in the meetings
referred
to paras
14.1 and 14.2 (above) but
a lot of correspondence was exchanged between them (the
Morudi-faction represented by Towell and Groenewaldt
Attorneys) and
the Babuseng-faction after 19 April 2013 and meeting
that the Morudi-faction called
on 16 August 2013.
However, nothing was said by the Morudi-faction to
Babuseng about the intended meeting of 16 August
2013 nor, as already
mentioned, was he officially notified like all the attendees.
[16]
There is no explanation in the Morudi-faction's founding
papers or Replying Affidavit for sidelining the Chairman as
aforesaid.
Mr Kgotlagomang, acting for the Morudi-faction which group
masqueraded as the NC Housing Services & Development Company (the
applicant) did not address this issue in his Heads of Argument.
This matter should have received
their
combined attention because
Mr
Babuseng drew attention to it as follows in his
opposing
affidavit:
16.1
"8.
The Board did not meet prior to 15 March 2013
to authorize Towell & Groenewaldt Attorneys to act on behalf of
the Board
or the applicant and to send the letter dated 15
March 2013, annexed to the founding affidavit as annexure "PMM4
".
I am
the Chairman of the
Board and did not receive any
notice toattend a
Board meeting where resolutions would
be taken.
9. The Directors, not
including me as Chairperson, purported to mandate the attorney to
send the letter. They had no authority to
do so and acted ultra
vires.
10.
On
12 July 2013, Mr Kgotlagomang sent a
letter to
the first
respondent [Matshoba] informing him that the board does not recognize
the resolutions taken at the shareholder's meeting.
I refer the Court
to annexure
"PMM9"appended
to the founding affidavit. I
was yet again not
informed of a Board
meeting where this was discussed and
decisions taken.
11.A period of
approximately three months lapsed between 19 April 2013 (the date of
the shareholders meeting) and 12 July
2013 when the letter
referred to in paragraph 10 supra was sent. There
is
no explanation for this delay.
12.On 22 April 2013
Michelle Kock sent an e-mail stating that a Board meeting
will be held on 23 April 2013 at which
a resolution will be sought to
bring an application to have the shareholders meeting declared
illegitimate. I refer the Honourable
Court to
annexure "PMM7" to the founding
affidavit. On the same date at approximately
17:00, I received a text
message from Morudi informing me that a Board meeting will be held at
16:00 on 23 April.2013 at the offices
of Towell and Groenewald. It
stated that Mr OC Koikanyang, an attorney who previously acted for
NWC Manganese, called the meeting.
13.I
replied to Morudi informing him that Mr Koikanyang was
not a Director and could not call a Board meeting. If the Board met,
it was
not properly constituted and any resolutions passed are of
no force and effect. force and effect.
14.
Annexure
"PMM2" purports to prove that a meeting of the Board took
place on 16 August 2013.
I
never
received notice of that meeting and Morudi was not duly authorized to
bring this application on behalf of the Company. The
Resolutions are
of no force and effect.
15.
It is respectfully submitted
that for these
reasons
no Morudi
and the other Directors had no authority
to bring this application
on behalf of
the Company and therefore lacks locus standi.
16.
I refer the Court to the time that lapsed between
the date of knowledge of the shareholders meeting (15 March 2013),
the letter
on 12 July 2013, the e-mail on 22 July 2013 and the
purported Board meeting on 16 August 2013."
(Own emphasis)
[17]
It is therefore safe to infer that the Morudi-faction
masquerading as the applicant has. no explanation
to proffer.
They must stand or fall by their founding papers. In
Swissborough
Diamond Mines (Pty) Ltd and Others v
Government of the Republic of South Africa and Others
1
999
(2) SA 279
(T) at 323 F - 324C Joffe
J
stated:
"It
is trite law that in motion proceedings the affidavits
serve not only to place evidence before
the Court
but also to define the issues between the parties. In so
doing the issues between the parties
are identified. This
is not only for the benefit of the Court but also, and primarily, for
the parties. The parties must know the
case that must be met and in
respect of which they must adduce
evidence in the
affidavits. In
Hart v Pinetown Drive-Inn Cinema (Pty)
Ltd 1972 (])
SA 464 (D) it was stated at 469C--E
that
'where
proceedings are brought by way of application, the petition is not
the equivalent of the declaration in proceedings by way
of action.
What might be sufficient in a declaration to foil an exception, would
not necessarily, in a petition, be sufficient
to resist an objection
that a case has not been adequately made out. The petition takes the
place not only of the declaration but
also of the essential evidence
which would be led at a trial and if there are
absent from the petition such facts
as would be necessary for
determination of the issue in
the petitioner's favour,
an objection
that it does not support the relief claimed
is sound.'
An
applicant must accordingly raise the issues upon which it would seek
to rely in the founding affidavit. It must do so by defining
the
relevant issues and by setting out the evidence
upon which it relies to discharge the onus of proof resting
on it
in respect thereof As was held in Prokureursorde
van Transvaal v Kleynhans
A 1995
(1) SA 839 (T) at 849B in
regard to a constitutional issue:
'Dit
is myns insiens vir die behoorlike ordening van die praktyk absoluut
noodsaaklik dat konstitusionele punte nie deur advokate
as laaste
debatspunt uit die mou geskud word maar pertinentin die stukke as
geskilpunt geopper word sodat dit volledig uitgepluis
kan word deur
die partye ten einde die Hof in staat te stel om dit behoorlik
te bereg.'
The
dictum is not only of application to constitutional issues - it
applies to all issues. Nor is the dictum only of application
in the
context of a founding affidavit- it applies equally to answering
affidavits and replying affidavits. "
See
MEC for Health, Gauteng v 3P Consulting (Pty) Ltd
2012
(2) SA 542
(SCA) at 550F - 55 lD.
[18]
Adv Zietsman SC was corect in his contention that it is not the case
of the applicant Company that the irregularity in excluding
the
Chairman of the Board (Babuseng) was caused by any subsequent lawful
ratification. He submitted that the three Directors (Morudi,
Jacobs
and Adams) who attended the meeting cannot be said to
have acted lawfully. It is a sound
principle
that an act executed
ultra vires
cannot
be
ratified.
18.1
In
African Organic
Fertilizers
&
Associated
Industries Ltd v Premier Fertilisers Ltd
1948
(3) SA 233
(N) at
241
Broome J
stated:
"I therefore
accept the principles that notice of
a directors' meeting
must be given to every director who
is
within reach, and that the question whether a director is
within reach depends upon the circumstances, including the nature of
the
business to be transacted If the business to be transacted were
contentious, the degree of inaccessibility would have to be very
great.
"
18.2
In
Damane v Central Energy Fund
2013 JDR
0915(GSJ) the Full Bench (Sutherland J, with Van Ooster J and Bedhesi
AJ concurring) held at paras 32- 33:
"32.
The principle in contention is that
unauthorised decisions may be ratified
with retrospective effect.
There is a distinction of importance between:
32.1.
the ratification of an authorised decision that
could have been validly taken if prior authority had been conferred,
and,
32.2.
the
impossibility of
an attempt to
'ratify' a decision which could not have been taken, even if the
decision maker
had
been
notionally
authorised.
The
difference is between the concept of an 'unauthorised decision' and
the concept of an 'incompetent decision'.
33.
The decision in Wessels & Smith v Vanugo Construction (Pty) Ltd
1964 (I) SA 635 (0) is an illustration of the latter type
of
decision, ie an incompetent decision: an invalidly constituted board
(improperly convened and without a quorum) cannot
take a valid
decision and nothing exists in law to ratify. The critical point is
that the decision maker was incompetent to make
the decision (at
638D). Similarly, the basis for the decision in Mathipa v Vista
University and others
2000 (1) SA 396
(T) was that the initial
decision by the rector to appoint a campus director was characterised
by the court as ultra vires the
statutory regime of the university
and that a ratification of an ultra vires act by an organ of the
university, ie the council,
that did have such
power to make an appointment,
was not in
law possible (see at 401A-E)."
18.3
In
Nyoka
v
Cricket South Africa
[2011] JOL 27198
(GSJ) delivered 15 April 2011 at page
35 para 71 Mojapelo DJP held:
"[71] The respondent
failed to give proper notice of the meeting to the applicant
who was entitled to same. The failure
is an irregularity which
invalidates the proceedings. Resolutions taken at a meeting where
persons who were entitled to receive
notice or required to receive
notice thereof did not receive such, are
ordinarily invalid (see
Mtshali v Mtambo 1962 (3)
SA 469 (G) at 472 (D-E; Wessels & Smith v Vanugo Construction
(Pty) Ltd 1964
(]) SA
635 (0) at 636
G - 637H; African Organic & Associated Industries Ltd v Premier
Fertilisers Ltd
1948 (3) SA 233
(N) at 239-241; Visser v
Minister of Labour 1954 (3) SA 975 (W)
at
Based
on the stated irregularity the result should be that the application
must
fail.
WHETHER
THE FIRST AND SECOND RESPONDENT WERE AUTHORISED TO CALL THE
MEETING OF 19 APRIL 2013.
[19]
Mr Morudi, on behalf of the Company, states as follows in para 49 of
the founding papers:
"49
I am advised that the business and the affairs of the
company must be managed by the directors of the company
through the
Board of Directors. The Board of Directors has the authority to
exercise all the powers and perform all the functions
to the extent
that same
is
authorized by the Act and the Memorandum
of Incorporation. Nobody but the Board may manage the affairs of the
applicant other than
the people that constitute the Board. The
resolution suspending the Board flies in the face of the provisions
of the Act and therefore
is unlawful. The first and second
respondents are not in a position to manage the affairs of the
applicant in this matter.
"
[20]
The first respondent's (Mr Matshoba's) response is as follows:
"41.2
I aver that 1 have been advised that the directors
hold office at the will of the
shareholders
and not the other way round and
that where directors fail to act in the
bona fide interests of the
Company, a General Meeting of Shareholders has an inherent and
statutory power to remove or override
them and that a resolution
to suspend
directors is therefore
not necessarily unlawful particularly when framed in the form
that the written resolution signed
by the shareholders
on the19th April 2012 was framed, namely
that the above Honourable Court
be moved to amend its Order on the
16
th
October 2012 to provide that the said directors
may be suspended in the event that investigations result in criminal
charges
being brought against them pending the outcome of the
criminal proceedings.
41.3 l further deny that
I am attempting to manage the Company. I am
only trying to extricate
the Company from ruinous and unjustifiable litigation for which I
have a Shareholder's Resolution and which
litigation has not been
pursued in the bona fide interests of the Company but by
certain directors in the pursuit of their
own interests which are
directly in conflict with the interests of the majority shareholders.
"
[21]
Where a company has an ineffective Board of Directors the
shareholders in a General Meeting have the residual right to invoke
the company's powers. Adv W Coetzee, for first and second respondents
(Matshoba and Mothibi), has argued that on this principle
Matshoba
has been validly authorized to appoint the current
attorneys of record for the Company and withdrew the Company's
Opposition to the Main Application for the relief sought
therein to be obtained on. an unopposed basis.
[22]
The withdrawal of the opposition
and the appointment of
first
respondent (Matshoba) referred to by
Mr Coetzee are contained in a legal document filed of record by Mr
Matshoba's attorneys, Adrian
B Horwitz & Associates who, by the
way, also represent Babuseng and Mongwaketse. To give the proper
context the full document
is quoted:
"In the
High Court of South Africa, Northern
Cape High
Court,
Kimberley,
Case No 1577/2012
Kimberley:
The 16
th
Day of October 2012
Before
the Honourable Ms Justice Williams
In
the Matter of
Scholtz
Jacob Babuseng 1
st
Applicant
Seodi
Julius Mongwaketse 2
nd
Applicant
And
NC
Housing Services & Development 1
st
Respondent
MP
Morudi
2
nd
Respondent
DJ
Jacobs
3
rd
Respondent
FAG
Adams
4
th
Respondent
VA
Goliath 5
th
Respondent
NOTICE
BY FIRST RESPONDENT OF
SUBSTITUTION OF ATTORNEYS OF RECORD AND
WITHDRAWAL OF OPPOSITION TO
APPLICATION
Please
take notice that pursuant to a Resolution passed at a duly
constituted General Meeting of Shareholders at Kimberley on 19
April
2013, first respondent in the above matter, NC Housing Services &
Development Company Limited, Registration Number 1997/005908/06
hereby:
i.
Substitutes Attorneys Adrian B Horwitz
& Associates,
Ground Floor, Barnet House,
45 Du Toitspan Road, Kimberley as its
Attorneys
of Record in these proceedings in place of Attorneys Towell
& Groenewaldt, 28 Roper Street, Kimberley.
ii.
Withdraws its opposition to the Application and will henceforward
support the application and file an affidavit to give effect to
such
support.
A
copy of the Resolution and Letter of appointment of first
respondent's [the Company's] new attorneys hereunto annexed marked
"A" and "B" respectively.
Please
take notice further that first respondent will henceforth accept
service of all Notices, Affidavits
and other Documents in these proceedings at the
offices of its substituted Attorneys. Dated at Kimberley on this
the
81 day of August 2013."
The
Resolution in question has been set out in full in para 11 of this
judgment.
[23]
Mr Willem Coetzee has cited the following
authority for his submission made in para 23 above:
23.1
Gohlke
&
Schneider
v
Westies
Minerale
1970(2) SA 685 (A) at 693 where Trollip JA
expounded:
"The articles,
therefore, only empower a general meeting
to appoint directors to fill vacancies
caused by retirement
or removal of directors, a
situation which did
not arise in the present
case. I agree however with Mr. Coetzee that the members must
have inherent or implied
general power to appoint directors to fill
other vacancies caused, for example, by resignation,
death, incapacity,
or disqualification. Usually, as a matter of
practice, they would exercise that power by ordinary resolution at a
general meeting.
But the articles neither require that nor prohibit
the power from being exercised by their unanimous assent achieved
otherwise
than at such a meeting. After all, the holding of a
general meeting is only the formal machinery for securing the
assent
of members or the required majority of them, and,
if the assent of all the members is otherwise
obtained, why should that
not be just as effective? Thus in the case of Salomon v Salomon and
Co. Ltd.,
1897 A.C. 22
, one of the questions that arose was whether
the agreement whereby the company purchased the vendor's business was
valid, since
there had been no independent board of directors to
render the company bound. No general meeting of members of the
company had
been held to approve the agreement, but according to the
evidence they all knew of its terms and accepted them.
"
23.2
Alexander Ward and Co Ltd v Samyang Navigation Co Ltd
[1975] 2 AIIER 424 (HL)
per Lord Hailsham at 428-429 that:
"With respect,
however this argument is a non sequitur which would
only become cogent if one adopted a false
and question begging
meaning to the word "competent." In my opinion,
at the relevant time the
*679 company was fully competent either to
lay arrestments or to raise proceedings in the Scottish courts. The
company could have
done so either by appointing directors, or, as I
think, by authorising proceedings in general meeting, which in the
absence of
an effective board, has a residual authority to use the
company's powers."
[24]
As I understood him correctly Mr Zietsman, for Babuseng and
Mongwaketse, supported the line of argument presented by Mr Coetzee
but he added an aspect that I will address in passing. That Mr
kgotlagomang has conceded. First, that the meeting took place without
a Chairperson which resulted in the lack of locus standi by the
applicants. He cited
s73
(4) (b) of the
Companies Act 71 of 2008
which is couched in peremptory terms. The second concession pointed
out by Mr Zietsman is that the Board of Directors was
dysfunctional.
This, he submitted, resulted in the shareholders having
a
clear right to intervene in the affairs of the Company.
[25]
Mr Kgotlagomang, for the Company and the Morudi-faction, made
the following submissions on these aspects. That even though it
is submitted that the Board was dysfunctional, the respondents
have failed to comply with
sections 61
(Shareholder's meetings), 62 (Notice of
the meetings) and 65 (Shareholder resolutions) of the
Companies Act.
Mr
Kgotlagomang argued that it is the Board that must refer issues to
the shareholders and the Board must convene a shareholders' meeting.
[26]
Mr Kgotlagomang's argument cuts both ways. If it holds true
against the Babuseng-faction for the meeting of 19 April 2013
then it is self- defeating in respect of the applicant
in respect of its meeting held on 16 August 2013. Be that as
it may,
I am satisfied that, on the facts of this case, Mr Coetzee's
authorities and argument is in point and must succeed on two
fronts,
as already discussed.
GOING
FORWARD: MATTERS OF CONCERN
[27]
The Babuseng and Morudi factions must reconcile. The Company
is fighting against itself and will self-destruct. They must agree on
someone neutral, qualified, experienced and competent m
commercial/company matters to mediate/arbitrate. The Shareholders and
Directors must bear in mind why the Company
was formed or
acquired;
to improve their socio-economic situation as
previously
disadvantaged
people. There seem to be signs of a smash-and-grab, get-
rich-quick mentality emerging.
[28]
Mr Zietsman has dedicated about
12 paragraphs of his Heads
of
Argument
to alleged incidents of impropriety on the part of attorney
Kgotlagomang. Kgotlagomang has elected not to respond to the
allegations merely stating that it is hearsay. It would be
undesirable to express myself on this issue on the papers before me.
What I am prepared to say, however, is that an untenable
situation for him and his firm has been precipitated.
This includes, leaving aside what Mr Zietsman has contended, on an
overview of the entire case, a
potential conflictual situation for the attorney and his firm.
Stepping aside may be the best
option.
THE
COSTS
ISSUE
[29]
It is unfair for the Company to be mulcted in costs and at the
shareholders' expense for the indiscretions of
the directors (Morudi,
Jacobs, Adams and Goliath) who seem to have acted in their
selfish interests. The exorbitant proposed payout to Directors and
some
Shareholders and Regional Representatives without proper
authorization are not signs that instill confidence.
[30]
Notwithstanding the fact that the name of the Company has been
used and abused it appears that the Company may have to bear the
costs. However, the errant directors are warned to desist. They will
in future bear the costs in person, possibly punitively.
[31]
In the result, the following order is made:
ORDER
1. The
application by NC HOUSING SERVICES
&
DEVELOPMENT COMPANY (the Applicant) is dismissed with costs on
a party and party scale. The costs shall include cost for two counsel
for the third and fourth respondents.
________________________
MC MAMOSEBO
ACTING
JUDGE: NORTHERN CAPE HIGH COURT
On
behalf of the Applicant:
Mr Kgotlagomang
Instructed
by:
Towell
& Groenewaldt Attorneys
On
behalf of the 1
st
&
2
nd
Respondents:
Adv
W Coetzee
Instructed
by:
Adrian B Horwitz & Associates
On
behalf of
3
rd
&
4
th
Respondent:
Adv
P Zietsman SC
Assisted
by:
Adv PR Cronje
Instructed
by:
Elliot
Maris Wilmans & Hay
Attorneys