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[2012] ZAKZDHC 59
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Thornton and Others v Accelerated Christian Education South Africa and Another (9038/11) [2012] ZAKZDHC 59 (2 October 2012)
In
the KwaZulu-Natal High Court, Durban
NOT
REPORTABLE
Republic
of South Africa
Case
No : 9038/11
In
the matter between :
Edwin
Hugh Thornton
................................................................................
First
Applicant
Marcel
Christian Kwaan
........................................................................
Second
Applicant
Barry
Glen Stead
.
.....................................................................................
Third
Applicant
Northside
Christian Fellowship
...............................................................
Fourth
Applicant
and
Accelerated
Christian Education South Africa
.......................................
First
Respondent
Victory
Christian Academy
...............................................................
Second
Respondent
Judgment
Lopes J
[1] This is an application which
concerns the ownership and administration of the second respondent,
Victory Christian Academy (‘the
school’) which is a
school with a religious educational curriculum based on Christian
principles.
[2] The history of the school as
disclosed by the papers and which is relevant to the relief sought,
may be summarised as follows
:
the school was started in
approximately 1991. It was started by the fourth applicant, the
Northside Christian Fellowship church
(‘the church’) a
voluntary association, which started out in Durban North as the
Rhema Church, which then became
the Rhema Lighthouse Church, which
thereafter became the Rhema Bible Church, and which eventually
became the Northside Christian
Fellowship. When the church was
called the Rhema Bible Church during or about 1991, it decided to
start the school;
the school moved from place to place
but eventually settled on the piece of land at 34 Ronan Road, La
Lucia (‘the property’).
A 20 year lease over the
property was secured from the KwaZulu-Natal Department of Education;
in 1993 and pursuant to negotiations
between the church and the Department of Housing and Water, the
property was donated to the
school in terms of a deed of donation,
and transferred to the school in whose name the property remains;
as the school expanded, funds were
raised in the form of donations from the parents of scholars, and
families of the church, to
provide for the provision of classrooms
and a multi-purpose hall;
during 2006 a mortgage bond was
passed over the property in favour of ABSA Bank Limited to provide
funds for the completion of
a new administrative block and further
classrooms;
during or about 2008 the senior
pastor of the church, one Graham Temlett, stepped down and a
transitional period ensued when the
leadership of the church was run
by a transitional team. In 2008, the transitional team handed over
the administrative control
of the school to the first respondent,
Accelerated Christian Education, South Africa (‘ACE’).
ACE is an association
incorporated not for gain in terms of s 21 of
the Companies Act, 1973, and which has as its main objective the
promotion of religious
educational curricula throughout South
Africa;
in January of 2009 the first
applicant, Edwin Hugh Thornton (‘Thornton’) assumed the
position of Senior Pastor of
the church. Thornton had his own vision
for the future development of the school;
a power struggle developed between
the church and ACE with rumours abounding of ACE intending to
sub-divide and sell off a portion
of the property on which the
school was situated, and to that end one Graham Yoko of ACE was
perceived as attempting to gain
ultimate control of the school and
hand it over to ACE;
that power struggle has escalated to
the point where Thornton, the second applicant who is Marcel
Christian Kwaan (‘Kwaan’),
the third applicant who is
Barry Glen Stead (‘Stead’) and the church have brought
an application seeking an order
:
(aa) interdicting ACE and the school
from alienating or encumbering the school’s immovable property
without the consent of
the church;
(bb) interdicting ACE and any and all
persons claiming membership or office of the school from performing
any executive or management
decisions in respect of the school’s
business without the prior approval of the church;
(cc) a declaratory order that the
church’s constitution dated the28
th
May 2007 is the
legitimate and valid constitution of the school and that the school
is a ‘ministry’ of the church and
that the membership of
the school is constituted by the members of the church’s
congregation.
[3] The application is opposed by ACE
which has, in the meantime, instituted an action out of this court
against the church and
the Registrar of Deeds under case number
2358/2012, seeking a declaratory order that the school is an
‘institution’
of ACE, together with further orders
declaring ACE to be the owner of the property on which the school is
situated, and directing
the Registrar of Deeds to effect the relevant
endorsements necessary to give effect to that order.
[4] This application brought by
Thornton, Kwaan, Stead and the church against ACE and the school came
before me on the 26
th
September 2012. Mr
Singh
SC,
who appeared for the applicants submitted that because of the
disputes revealed in the affidavits in the application, that
this was
an appropriate case to be referred for the hearing of oral evidence
to enable the deponents to the respondents’
affidavits to be
cross-examined. To that end he did not persist with prayer 1 of the
notice of motion, but sought, instead, an
order referring the matter
for the hearing of oral evidence.
[5] Mr
Potgieter
SC, who
together with Mr
van der Merwe
appeared for the respondents,
submitted that two points in limine fell to be decided. With regard
to the merits of the application,
his submission was that those
should be decided at a trial in due course, submitting that the
action of ACE against the church
and the Registrar of Deeds under
case number 2358/2012, was not
in pari materia
with this
application. The two points in limine were :
the locus standi of all four
applicants; and
that the applicants’ case was
excipiable on the basis that it was vague and embarrassing.
[6] With regard to the locus standi
point, his submissions were as follows :
The first to third applicants
Mr
Potgieter
submitted that
there were insufficient averments in the founding papers to establish
locus standi on behalf of the first three
applicants because, on
their own admission, the church was a separate legal persona. I was
referred to the rule in
Foss v Harbottle
[1843] EngR 478
;
(1843) 2 Hare 461
(67
ER 189)
as authority for the proposition that the first three
applicants did not possess rights in respect of the relief sought by
the
church.
[7] The rule in
Foss v Harbottle
was summarised in
Prudential Assurance Co Ltd v Newman Industries
Ltd and Others (No 2)
[1982] CH 204
at 210 F – H as follows
:
‘
The classic
definition of the rule in
Foss
v Harbottle
is
stated in the judgment of Jenkins L.J. in
Edwards
v Halliwell
[1950]
2 All E.R. 1064
as follows. (1) The proper plaintiff in an action in
respect of a wrong alleged to be done to a corporation is, prima
facie, the
corporation. (2) Where the alleged wrong is a transaction
which might be made binding on the corporation and on all its members
by a simple majority of the members, no individual member of the
corporation is allowed to maintain an action in respect of that
matter because, if the majority confirms the transaction, cadit
quaestio; or, if the majority challenges the transaction, there
is no
valid reason why the company should not sue.’
[8] The rule was
considered in a number of South African cases. In
McLelland
v Hulett and Others
1992 (1) SA 456
(D)
Booysen J considered the application of the rule in circumstances
where the plaintiff, a 10% shareholder, sued for a loss suffered
by
the company as a result of the failure of the majority shareholders
and directors to conclude a particular transaction. The
plaintiff’s
loss was easily ascertainable, as a percentage of the loss to the
company, as a result of the failure to conclude
the transaction.
[9] At page 467B - J Booysen J stated
:
‘
The
rule in
Foss
v Harbottle
is
not an absolute rule ... Whilst it is clear that the primary rule
that a company must sue for a loss such as that in question
in this
case, and not the shareholder, is a logical reflection of the concept
of limited liability, in practice the real reason
why the rule must
exist is linked more fundamentally to the separate existence of the
company, with the result that, if the shareholder
is allowed to sue,
any wrongdoer will be subject to “double jeopardy”.
Where,
as in the present case, that risk is non-existent, and a shareholder
is left with a diminished patrimony, the continued application
of the
rule would amount to an unwarranted and technical obstruction to the
course of justice. There is no basis for saying that
the rule in
Foss
v Harbottle
has
been received into our law without the exceptions together with which
it is framed. Having regard to the peculiar facts in this
case, I
take the view that that aspect of the rule which requires the relief
to be sought for the company does not apply.’
[10] I am by no means persuaded that
the rule in
Foss v Harbottle
is applicable in the present
matter because the situation of the members of the church and their
relationship with the church cannot
easily be equated to that of
shareholders in a commercial corporation. That must be so because in
the constitution of the church
it is accepted that the leadership
will vest in the Pastor (as leader) with all ecclesiastical functions
being determined by him,
which situation prevails unless and until a
new Pastor is elected by the congregation. The Pastor also has the
right to appoint
persons to assist in the leadership of the church
(referred to as ‘the Leadership’). The financial affairs
of the church
are regulated by a financial board consisting of the
Pastor and other persons, which may include members of the
Leadership. Although
this model appears to have been tempered by
recent events leading to a wider form of leadership being accepted,
the church remains
theocratic in its governance and the members have
followed their constitution in accepting that form of leadership and
control.
In those circumstances, comparisons with a corporate
structure and the principle in
Foss v Harbottle
do not find
application.
[11] Mr
Potgieter
also referred
me to the matter of
Vandenhende v Minister of Agriculture,
Planning and Tourism, Western Cape, and Others
2000 (4) SA 681
(CPD). That case concerned the locus standi of a purchaser and
prospective owner of property to apply to review the decision of
the
Minister of Agriculture, Planning and Tourism to dismiss an appeal
against the local authority’s refusal of an application
for
rezoning of the property. In this regard Thring J stated at 690 I –
691 B :
‘
For
the applicant to have
locus
standi
to
bring this application, then, it seems to me that it must be
established that :
he has a direct and
substantial interest;
in the right which is
the subject-matter of this litigation;
which is not merely a
commercial or financial interest, but which constitutes a legal
interest; and
which could be
prejudicially affected by the outcome of the litigation.’
[12] Mr
Potgieter
submitted
that the first to third applicants had failed to demonstrate any of
the requirements set forth above. He queried why
this particular
litigation should be burdened with the submissions of these
applicants in their individual capacities, and ultimately
the costs
incurred by their participation.
[13] Mr
Singh
, on the other
hand, emphasised that it was necessary in considering the locus
standi of the applicants to examine the factual matrix
of their
involvement in the matter. He referred in particular to the fact that
the first to third applicants are members of a voluntary
association.
[14] He referred me to
Molotlegi
and Another v President of Bophuthatswana and Others
1989 (3) SA
119
(BGD) at 125 A – B where Friedman J stated :
‘
In
any event, he submitted that the first applicant, as the president of
the club, has a real and substantial interest in ensuring
that the
property of the association is properly dealt with. He contended that
the first applicant is entitled, as of right, to
approach the Court
to restrain any person who wrongfully and unlawfully prevents the
club or association from dealing with its
property, or indulging in
its activities. See
Pillay
v Harry and Others
1966
(1) SA 801
(D) at 807 B.
Furthermore, the first
applicant, in her capacity as aforesaid, has duties to perform under
the club’s constitution, and consequently
has the right to
approach the Court to restrain anyone who improperly prevents her
from performing those duties.’
[15] As the Senior Pastor of the
church, I am satisfied that Thornton falls within the category of
persons entitled to safeguard
the interests of the church. Kwaan and
Stead, as members of the Leadership are also in my view correctly
cited as applicants in
the application.
See also
:
Sewmungal and
Another NN.O. v Regent Cinema
1976 (3) SA 91
(NPD)
[16]
The fourth applicant
With regard to the locus standi of the
fourth applicant, Mr
Potgieter
referred me to
Hart v
Pinetown Drive-In Cinema (Pty) Ltd
1972 (1) SA 464
(D&CLD)
where minority shareholders sought the winding up of a company. A
point in limine was taken that the petition and supporting
affidavit
and documents did not contain sufficient information to support the
relief sought. It was accepted by counsel for the
applicant that the
objection fell to be decided on the sufficiency or otherwise of the
material in the petition and its annexures.
This was on the basis
that the respondents’ opposing affidavits had been filed as a
‘plea over’ in the event
that the objection be overruled.
[17] Accordingly, Mr
Potgieter
submitted that in order to decide whether or not the church could
litigate, it was permissible only to examine the founding affidavit
and annexures, and in that regard to look at its constitution. He
conceded that it was implicit in the church’s constitution
that
it could litigate, but there was no indication of how that was to be
authorised. He submitted that the only way in which there
could be
such authorisation was for a meeting of members to be held, and a
resolution passed with regard to the litigation. For
reasons set
forth above, and in view of the theocratic nature of the structure of
the church, I do not believe that to be correct.
[18] Mr
Singh
submitted that
the views in
Hart
had been overtaken in
Valentino Globe BV
v Phillips and Another
[1998] ZASCA 43
;
1998 (3) SA 775
(SCA), where Harms JA
referred to the right of a respondent, in spite of having filed an
answering affidavit, to argue at the outset
that the founding
affidavits do not make out a prima facie case for the relief claimed.
This is normally done on the basis that
the procedure is akin to that
of an exception, where the founding affidavits alone are considered
and the allegations therein accepted
as true.
[19] The learned judge of appeal
however, pointed to an important difference between that procedure
and an exception, in that an
application contains evidence, and not
only allegations of fact, and what might be sufficient in a summons
may be insufficient
in a founding affidavit. He considered the
analogy with an exception procedure to be inappropriate and likened
the taking of points
in limine rather to applications for absolution
from the instance in a trial action.
[20] In this regard, in my view,
sufficient evidence has been established in the founding papers –
see
Msunduzi Municipality v Natal Joint Municipal
Pension/Provident Fund and Others
2007 (1) SA 142
(NPD) at 147 G
– I. In any event it is the practice, as I understand it, in
this division that where authority is challenged
in answering
affidavits, it can be dealt with in reply – see also
National
Co-op Dairies Ltd V Smith
1996 (2) SA 717
(NPD)
[21] Given the contents of the
applicants’ affidavits regarding the nature and style of the
governance of the church, I am
satisfied that the applicants have the
requisite authority to institute proceedings in the name of the
church. In this regard :
(a) the applicants have demonstrated
in their affidavits that the church is a
universitas personarum
with no limitation on the right to institute proceedings, and that it
has a real, direct and substantial interest in the subject
matter of
the application.
See
:
Molotlegi
(supra).
(b) the respondents have not followed
the correct procedure to object to the authority of the other
applicants to bring proceedings
in the name of the church. Should
they have wished to do so, they were bound to follow the procedure
set forth in Rule 7(1) of
the Uniform Rules of this Court.
See
:
ANC Umvoti Council
Caucus and Others v Umvoti Municipality
2010 (3) SA 31
(KZP) at
43 E - I
[22]
That the applicants’
case is excipiable
Mr
Potgieter
further referred
to prayer 2.2.2 of the applicants’ notice of motion which seeks
an order that the school be declared a ‘ministry’
of the
church and that the membership of the school is constituted by the
members of the church’s congregation. I was referred
to the
dictionary definition of ‘ministry’, and Mr
Potgieter
submitted that a ‘ministry’ was an area of work
pertaining to a priest, and perhaps contained a proprietary interest.
He submitted that the prayer sought is vague and embarrassing because
the respondents are unable to determine what precisely is
referred to
by the use of the word ‘ministry’.
[23] It is interesting in this regard
to note that in the action instituted by ACE against the church and
the Registrar of Deeds,
it seeks a similar order declaring that the
school is an ‘institution’ of the plaintiff. It seems
clear that the competing
views are :
(a) the applicants view the school as
a separate and independent entity, but that the members of the
universitas
comprising the school are the same persons who
constitute the
universitas
comprising the church;
(b) ACE contends that it is the owner
of the school.
[24] If one considers the way in which
the school has conducted itself over the years, it is evident that it
has an independent
existence with an estate separate from its
members. It has perpetual succession because it continues to exist as
its members are
replaced by others. Mr
Singh
drew attention to
the following factors :
that the school has been in
existence for 20 years;
that it employs people as a separate
institution;
that it concluded an agreement with
the government for the donation of property;
that the property has been
registered in the name of the school;
that the school has, in its own
right, bonded the property in favour of ABSA Bank Limited by
granting it a mortgage bond;
all of which indicate the separate and
independent existence of the school as a voluntary association.
[25] With regard to the definition of
‘ministry’ Mr
Singh
submits that it is no more
than an area of work, with its own calling as a ministry for children
– it is controlled by the
common desire of persons to be bound
by an agreed constitution, as are other churches and religious
organisations.
See
:
Church of the Province
of Southern Africa (Diocese of Cape Town) v CCMA and Others
[2001] 11
BLLR 1213
(LC) paragraph 7
[26] In my view the word ‘ministry’
is no more than a label denoting an association between the church
and the school.
It is clear from the applicants’ affidavits,
that the case which it seeks to make is that the control of, and
authority over,
the running of the school vests in the church by
virtue of the co-incidence of persons forming each
universitas
.
Whether that is the case, or whether ACE owns the school, is
something which can only be determined after the matter is fully
ventilated at a hearing. Suffice it to say that that is something
which I should not, and cannot, decide at this stage. I do not,
however, accept that the church’s case is so insufficiently
made out that its claim is excipiable.
Future proceedings
[27] Mr
Potgieter
submitted
that the matter should be referred to trial. Mr
Singh
urged me
to refer the matter for the hearing of oral evidence for the
cross-examination of the respondents’ witnesses, as
per the
annexure to his heads of argument. In my view, it would be best if
the entire matter were to be aired at a full trial.
Once pleadings
have been exchanged it seems probable that the parties will wish to
consolidate the matter with the action instituted
by ACE.
Costs
[28] With regard to costs, Mr
Potgieter
conceded that costs of an application to stay
proceedings, which had been brought by ACE, but abandoned, should be
paid for by
the respondents. In this regard and with regard to the
litigation generally, I see no reason why the school should be
mulcted in
costs when the fight is really between ACE and the church.
In those circumstances ACE should bear the costs of that application.
The costs of this hearing should be decided by the Court hearing the
action.
[29] I accordingly make the following
order :
(a) The application under case number
9038/2011 is referred to trial on the 11
th
to the 15
th
days of March 2013.
(b) The first to fourth applicants as
plaintiffs are to deliver a declaration by no later than the 19
th
October 2012.
(c) The first and/or second
respondents as defendants are to deliver their pleas by no later than
the 17
th
November 2012.
(d) Any application for consolidation
of the action referred to trial, with the action under case number
2358/2012, is to be delivered
by no later than the 29
th
November 2012.
(e) The costs of this application are
referred for decision by the trial court.
(f) The applicants’ costs of
opposing the application to stay proceedings, which application was
dated the 26
th
April 2012, are to be paid by the first
respondent.
Date of hearing :26
th
September 2012
Date of judgment : 2
nd
October 2012
Counsel for the Applicants : N Singh
SC (instructed by Woodhead Bigby & Irving Inc)
Counsel for the Respondents : MvR
Potgieter SC with H A van der Merwe (instructed by Senekal Simmonds
Inc)