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2024
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[2024] ZAFSHC 268
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Basotho Meat Enterprise v Falcodor 199 cc t/a Iceburg Trading N.O and 2 others (847/2024) [2024] ZAFSHC 268 (27 August 2024)
IN
THE HIGH COURT OF SOUTH AFRICA
FREE
STATE DIVISION, BLOEMFONTEIN
Not
reportable
Case
no: 847/2024
In
the matter between
Basotho
Meat Enterprise (PTY) LTD
APPLICANT
(Registration
Number 64985, Tin Number: 200084530-1)
And
Falcodor
199 CC t/a Iceburg Trading N.O.
FIRST
RESPONDENT
(Registration
Number: 2003/1785541/23)
Elizabeth
Jacoba Engelbrecht
SECOND
RESPONDENT
Hermanus
Phillipus Van Reenen Steyn
THIRD
RESPIONDENT
Neutral
citation: Basotho Meat Enterprise v Falcodor 199 cc t/a Iceburg
Trading N.O and 2 others
Coram:
Gusha AJ
Heard:
8 August 2024
Delivered:
This judgment was handed down and released to
SAFLII. The date and time for hand-down is deemed to be 27 August
2024hg
Summary
:
declaratory order – ownership – moveable property –
point in limine – locus standi.
ORDER
1.
The point
in limine
is upheld.
2.
The applicant to pay the costs of this application on an attorney and
client scale. said
costs to include the respondents’ costs of
the order of Van Rhyn J, of 22 December 2023.
REASONS
FOR JUDGMENT
Gusha
AJ
[1]
The
applicant is a private company duly registered in terms of the laws
of the Kingdom of Lesotho (Lesotho) with its place of business
at
House No 5 Koenaneng Street, Thetsane West, Maseru, 100, Lesotho. Mr.
Mosito Nicholas Khethisa (hereinafter interchangeably
referred to as
Mr. Khethisa or the deponent) is in terms of the applicant’s
articles of incorporation, both a shareholder
and one of its
Directors, and purports to act on its behalf herein.
[1]
[2]
The
first respondent is a close corporation duly incorporated and
registered in terms of the laws of the Republic of South Africa
(the
Republic) with its place of business at 1 Swanepoel Street, Senekal,
Free State. The second respondent is the widow of the
late Mr. Stefan
Engelbrecht (the deceased), she is also the Executor of the deceased
estate. The deceased was a co-director and
co-shareholder in the
applicant.
[2]
The third
respondent is an adult male attorney and is cited herein in his
capacity as an Executor of the deceased’s estate.
[3]
It appears from the papers before me that
this matter has an arduous history. The parties have been involved in
litigation with
each other in Lesotho and here in the Republic for
some time. Relevant to these proceedings, however, are the urgent
proceedings
the applicant launched in this court on 22 December 2023
under case number 6843/2023 wherein it primarily sought an order that
the respondents be interdicted and restrained from selling,
transferring and or disposing any moveable properties stored at
certain
premises in Senekal. In those proceedings the parties were
cited as they are herein.
[4]
Having
heard the parties,
[3]
Van Rhyn J
granted an order (the order) on 22 December 2023 in the following
terms;
1.
Respondents are permitted to hold the sale of
moveable properties mentioned in annexure MNK 27 of the founding
affidavit, stored
at 1 Swanepoel street, Senekal at business premises
trading as L Torro Meat Company.
2.
The amount of monies accrued from the sale of the
properties mentioned in paragraph 1 above, be held in a trust account
of the attorneys
appointed by the parties or the Registrar of the
Honourable Court or the Sheriff of the Honourable Court until the
issue of dispute
over proceeds of the sale of the mentioned moveable
properties stored at 1 Swanepoel Street, Senekal at business premises
trading
as L Torro Meat Company is solved;
3.
The Respondents are ordered to provide the
Applicant’s attorneys with complete records of the sale
transaction within five
(05) days after the sale has been completed.
4.
The Applicant is ordered to institute legal
proceedings on or before the 15
th
February 2024 for the determination of the
ownership of the properties mentioned above.
5.
Costs of this application to be costs in the main
action / application.
[5]
The aforementioned order is the precursor
to the present proceedings which Mr. Khethisa launched on 14 February
2024.
The latter
asserts in his founding and replying affidavits that he is duly
authorized to launch these proceedings in terms of the
aforesaid
order as a shareholder of the applicant and states further that ‘I
have been duly and/or accordingly authorized
to launch and to proceed
with this application by the other shareholder by virtue of a
confirmatory/ratification affidavit deposed
to by Mrs. Xiaoyi Yao and
the power of attorney she compiled
.
’
[6]
In terms of its current notice of motion
the applicant seeks an order in the following terms;
i.
That
it be declared the owner of certain moveable property.
[4]
ii.
That any person in possession
of the monies accrued from the sale of the properties as mentioned in
paragraph 1 above is ordered
to pay the monies aforesaid to the Trust
account of the applicant’s attorneys of record within five days
of this order or
upon receipt of payment.
iii.
In the event there is no
successful bidder for the properties in disputes(
sic
)
the respondents are ordered to return the properties to the applicant
within ten after the date of the auction or this order and/or
pay the
applicant an amount of money it has incurred towards its business
within ten days of the auction or this order (
sic
).
iv.
Alternatively, in the event
the Honourable court find that the applicant is not the owner of the
properties mentioned in paragraph
1 above, then in that event, the
respondents are ordered to pay the applicant the amount of money it
has contributed to the business
operations and the amount of money it
has paid to first respondent to acquire the properties aforesaid to
the Trust account of
the applicant’s attorneys of record within
five days of this order or upon receipt of payment.
v.
Costs of suits in the event of
opposition (
sic
).
vi.
Further and/or alternative
relief.
[8]
The respondents oppose the relief sought and raised a point
in
limine
; that Mr. Khethisa lacked
locus
standi
to act on behalf of the
applicant. They further raised various factual disputes which
essentially go to the heart of ownership of
the moveable property for
which the applicant seeks a declaratory order. At the start of these
proceedings I directed that the
point
in
limine
be adjudicated on prior to
hearing the merits, as I held the view that in the event I upheld the
point
in limine
,
it would be dispositive of the present proceedings. Pursuant to
hearing arguments on the point
in
limine
, I upheld same and reserved the
reasons therefor, which I provide below.
[9]
The respondents submitted that Mr. Khethisa who launched these
proceedings and deposed
to a founding affidavit premising his
authority to act on behalf of the applicant on both his status as a
shareholder and the court
order, lacks
locus standi
. They
asserted that a proper reading of the order reveals that a reliance
thereon is misplaced.
[10]
In amplification of their opposition, the respondents furthermore
contended that Mr. Khethisa
elected, as is evident from his founding
affidavit, to approach the court as a shareholder and not as a duly
authorized director
of the applicant, as is required by s 66 of the
Companies Act 71 of 2008 (the Act).
[11]
Conversely, in addition to the court order, the deponent asserted
that he also had the necessary
locus
standi
to
act on behalf of the applicant, as he held a power of attorney from
Mrs. Xiao Yao (Mrs. Yao) who is also a shareholder and director
of
the applicant. He further asserted that regard being had to his and
Mrs. Yao’s shares in the applicant,
[5]
they were the majority shareholders and that, so the argument
progressed, armed with her power of attorney, he was entitled to
act
on behalf of the applicant. Counsel for the deponent further
submitted that in terms of the laws of Lesotho, Mr. Khethisa,
as a
shareholder and in terms with the Companies Act 18 of 2011 of Lesotho
(the Lesotho Act), was entitled to act on behalf of
the applicant
without any resolution from the board directors. In fact, he advanced
an argument that in Lesotho a company had no
distinct juristic
persona
,
it’s shareholders and directors were intrinsically intertwined.
This argument was however baldly advanced from the bar and
no
authority, legislation or case law from Lesotho was advanced in
support thereof.
[12]
I agree with the first assertion by the respondents. In my view, a
careful reading of the order
reveals that what Van Rhyn J authorized
was for the applicant (as a juristic person) to institute proceedings
on or before a certain
date. The court made no determination in its
order regarding the merits of the application, standing of or the
authority of the
deponent to act on behalf of the applicant in the
urgent application and beyond. In my view if Mr. Khethisa wanted to
act on behalf
of the applicant, he had to ensure that he was clothed
with the necessary authority to act. The order cannot and indeed did
not
clothe him with the authority to act on behalf of the applicant.
[13]
Central to the issue of
locus standi
as raised by the
respondents are the questions as to precisely who in law can
institute proceedings on behalf of a company, and
the purview and
position of a shareholder in relation to a company and its assets.
[14]
I had regard to both the Lesotho Act as well as the applicable
sections of our Companies Act.
Section 9 of the Lesotho Act provides
that;
‘
Legal
personality, capacity and powers of a company
9. (1) A company shall,
upon its incorporation,
be a person in its own right, separate
from its shareholders
, and shall continue in existence until it
is removed from the register of companies in accordance with this
Act. (my own emphasis).
(2) Subject to this Act
and its articles of incorporation, a company shall have the capacity,
rights, powers and privileges of a
natural person and may do anything
which it is permitted or required to do by its articles of
incorporation or under this Act,
including
a) the right to sue and
be sued;
b) the power to make or
amend by-laws not inconsistent with its articles of incorporation or
this Act;
c) the right or power to
acquire, hold, use or dispose of any interest in any property;
d) the right or power to
acquire, hold, use or dispose of any shares or obligations of any
other company;
e)
the power to enter into contracts, incur liabilities, issue bonds and
obligations and secure its obligations with its property;
f) the power to lend
money and invest its funds; and
g) the power to elect
directors and appoint employees and agents of the company to conduct
its business and exercise its powers
within or outside Lesotho. (3)
An act of a company shall not be invalid by reason that the act is
contrary to its articles of incorporation
or this Act. (4) Subsection
(3) does not limit the rights of shareholders to act against the
company or against its directors to
restrain the act.’
[15]
Similarly, section 59 of the Lesotho Act is instructive with regards
to the separate
nature of a company as a juristic person separate
from its shareholders;
‘
Management
of company 59. (1)
59. (1) The business and
affairs of a company shall be managed by, or under the direction or
supervision of the board of the company,
which shall have all the
powers necessary for managing, directing and supervising the
management of the business and affairs of
the company, subject to
modifications, exceptions or limitations in accordance with the
articles of incorporation.’
[16]
Section 66(1) of our Companies Act provides that;
‘
Board,
directors and prescribed officers
66. (1) The business and
affairs of a company must be managed by or under the direction of its
board, which has the authority to
exercise all of the powers and
perform any of the functions of the company, except to the extent
that this Act or the company’s
Memorandum of Incorporation
provides otherwise.’
[17]
In my view, nothing in the provisions of the Companies Acts of both
the Republic and Lesotho
seem to support the contention advanced by
the deponent. In my view, both provisions of the respective Companies
Acts are instructive;
the directors of companies are empowered by
legislation, as well as by their company’s articles of
incorporation to manage
the company’s business, to transact on
its behalf and to delegate their powers and functions. They exercise
their powers
collectively, by majority vote, as a board. The ultimate
power in a company is with the board of directors, and not with the
shareholders.
[6]
It has been
held that there are cogent reasons for this position, same being that
‘the conception of the existence of a company
as a separate
entity distinct from its shareholders is no merely artificial and
technical thing. It is a matter of substance; property
vested in the
company is not, and cannot be, regarded as vested in all or any of
its members’.
[7]
[18]
When proper regard is had to both pieces of legislation, it is
evident that the deponent’s
assertion is untenable. The pleaded
case and arguments advanced, that as a shareholder Mr. Khethisa, was
clothed with the authority
to act on behalf of the applicant is
erroneous and bad in law- he is simply not suited. The fact that he
is both a shareholder
and a director still does not make him suited.
The applicant and not Mr. Khethisa might have a claim for the relief
sought in the
notice of motion, in order to act on behalf of the
applicant as a director, he needs a resolution from the board of
directors,
absent this, he is simply not suited. In any event Mr.
Khethisa pleaded no such case, his case is premised solely on his
standing
as shareholder vested with the control of his shares and the
proxy from Mrs. Yao in respect of her shares. It needs restating that
a company acts through its duly authorized board of directors and not
through its shareholders. A shareholder has no authority
to act on
behalf of a company unless such authority is expressly conferred on
the shareholder(s) by the company’s articles
of incorporation.
Mr. Khethisa pleaded no such case in his founding affidavit and I
also could not discern same on the papers before
me. In both
countries’, shareholders are vested with limited rights and
duties which attach to their shares held in the company.
The point
in
limine
stands to be upheld for these reasons alone.
[19]
In my view, for the same reasons as enunciated above, not even the
power of attorney relied upon
is sufficient to clothe him with the
necessary authority to act. It is apposite, for purposes of this
judgment, to reproduce herein
without emendation, the special power
of attorney-
‘
SPECIAL
POWER OF ATTORNEY
I, the undersigned,
Mrs. XIAOYO YAO
Do
hereby nominate, constitute and appoint MOSITO NICHOLAS KHETHISA with
power of substitution to be my lawful Attorney / Representative
and
Agent in my place and stead, in the shareholders meeting with regard
to BASOTHO MEAT ENTERPRISES (PTY) LTD scheduled for Saturday,
10
th
September 2020 or anytime thereafter in the
event that the said meeting do not take place on the
said
date due to unforeseen circumstances, to participate, discuss,
negotiate, vote and take decisions thereat and sign all documents,
deal with and finalize all issues relating to the affairs of BASOTHO
MEAT ENTERPRISES (PTY) LTD within the spirit and scope of
the Agenda
tabled and adopted for the purposes of the said meeting.
AND generally for
effecting the purposes aforesaid, to do, or cause to be done
whatsoever shall be required as fully effectively,
for all intends
and purposes, as I might or could if personally present and acting
herein- hereby ratifying, allowing and confirming
and promising and
agreeing to ratify, allow and confirm all and whatever the said
Attorney and Agent shall lawfully do or cause
to be done by virtue of
these presents.
SIGNED AT MASERU THIS
09 DAY OF OCT 2020 IN THE PRESENCE OF THE UNDERSIGNED WITNESSES.’
[20]
Evidently, the power of attorney was granted to Mr. Khethisa to act
as a proxy for Mrs. Yao at
a shareholder’s meeting and not a
meeting of board of directors. Furthermore, at no stage does Mr.
Khethisa make out a case
that the said meeting materialized, either
on 10 September 2020 or anytime thereafter. If the said meeting
materialized, nowhere
is a case made out that a resolution was taken
that Mr. Khethisa was to launch these proceedings acting on behalf of
the applicant.
A bald reliance on this special power of attorney, in
his papers and during oral submissions, without anything more, does
not assist
Mr. Khethisa and cannot be countenanced.
[21]
In light of the foregoing, in my view the applicant has not shown the
requisite
locus standi
. Accordingly, the application cannot
succeed.
[22]
With regards to costs, it is a well-established principle of our law
that the general rule regarding
costs is that the unsuccessful party
pays the costs of the successful party on the party and party scale.
Equally established is
the principle that the court exercises a
discretion when considering an appropriate costs order and should of
necessity, exercise
same judiciously.
[8]
In the exercise of its discretion the court must carefully weigh the
issues in the case, the conduct of the parties and any other
circumstances which may have a bearing on the issue of costs and then
make such order as would be just and equitable.
[23]
In the present matter I awarded costs on a punitive scale. In my
view, the applicant and or the
deponent who purported to act on
behalf of the applicant, ought to, as early as 20 September 2021
[9]
and perhaps as late as the 10
th
April
2024
[10]
have realized that
the manner in which they approached this case was fatally flawed, not
only because of the lack of
locus
standi
but
also because, mindful and aware of the material factual disputes
between the parties, the applicant still elected to launch
motion
instead of action proceedings. Simply raising the aspect of referral
for oral evidence in the replying affidavit when same
was not
canvassed in the applicant’s founding papers can simply not be
countenanced. It is trite that a referral to oral
evidence is not
intended to cure the defects in the applicant’s founding papers
or close holes in it. It is further established
law that a court has
a discretion to decide whether to allow a referral oral evidence, a
court will however dismiss an application
if the applicant should
have realized, at the time it launched it application, that a dispute
of fact incapable of resolution on
the papers, would ensue.
[11]
[24]
In conclusion, even when the aspect of
locus standi
and the
material disputes of fact were raised in the respondents’
answering affidavit, the applicant still persisted with
the ill-fated
application in its current form. Under these circumstances in my view
it is apposite that the applicant be mulcted
with a punitive costs
order on an attorney-client scale as a way of showing the court’s
displeasure at the improper litigious
approach adopted by the
applicant.
[25]
In the result, I make the following order
1.
The point
in limine
is upheld.
2.
The applicant to pay the costs of this application on an attorney and
client
scale. said costs to include the respondents’ costs of
the order of Van Rhyn J, of 22 December 2023.
NG
GUSHA, AJ
Appearances
For
the Applicant:
Àdv
PS Mpholoane
Instructed
by:
Khambule
Attorneys
Bethlehem
C/O
Mokhomo Attorneys
Bloemfontein
For
the First to Third Respondents:
Adv
Donnely-Bornman
Instructed
by:
Symington
and De Kok Inc
Bloemfontein
[1]
Annexure
MNK 5 and 16 of the applicant’s founding affidavit.
[2]
Ibid.
[3]
The
respondents submit that due to the timing of the urgent application,
they were not in a position to oppose same and instead
elected to
agree to the order being made.
[4]
Notice
of motion, prayer 1 p2 as well annexure MNK 27 of the applicant’s
founding affidavit.
[5]
The
applicant holds 400 shares, Mrs. Yao holds 250 and the deceased
holds 250 shares.
[6]
Navigator
Property Investments (Pty) Ltd v Silver Lakes Crossing Shopping
Centre (Pty) Ltd and others
[2014]
3 All SA 591
(WCC) para 31.
Meskin
et
al
Henochsberg
on the
Companies Act, 71 of 2008
Vol
(1) 250(3) Service Issue 30.
[7]
Dadoo
Ltd v Krugersdorp Municipal Council
1920
AD 530.
[8]
Trencon
Construction (Pty) Limited v Industrial Development Corporation of
South Africa Limited and Another
[2015] ZACC 22
;
2015 (5) SA 245
(CC) para 85.
[9]
The
date on which the first order was granted by the Lesotho High Court
(Commercial Division) in this arduous litigious history
between the
parties.
[10]
The
date on which the applicant’s replying affidavit was deposed
on.
[11]
Room
Hire Co (Pty) Ltd v Jeppe Street Mansions (Pty) Ltd
1949
(3) SA 1155
(T);
Plascon-Evans
Paints (Ltd)
v
Van Riebeeck Paints (Pty)
Ltd
[1984] ZASCA 51
;
1984 (3) SA 623
(A);
National
Director of Public Prosecutions v Zuma
[2009]
ZASCA 1
;
[2009] 2 All SA 243
(SCA).