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[2020] ZASCA 95
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Women in Capital Growth (Pty) Ltd and Another v Scott and Others (1193/2019) [2020] ZASCA 95 (20 August 2020)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Non-Reportable
Case no: 1193/2019
In
the matter between:
WOMEN
IN CAPITAL GROWTH (PTY) LTD
FIRST APPELLANT
AKHONA
TRADE & INVESTMENT (PTY) LTD
SECOND APPELLANT
and
MPHO
INNOCENT SCOTT
FIRST RESPONDENT
ABDOOLRAWOOF
AHMED
SECOND RESPONDENT
AFRICAN
LEGEND INVESTMENT (PTY) LTD
THIRD RESPONDENT
Neutral
citation:
Women
in Capital Growth (Pty) Ltd and Another v Scott and Others
(1193/2019)
[2020] ZASCA 95
(20 August 2020)
Bench:
Wallis,
Mbha and Nicholls JJA and Weiner and Unterhalter AJJA
Heard:
Matter
disposed of without a hearing in terms of
s 19(a)
of the
Superior Courts Act 10 of 2013
.
Delivered:
This
judgment was handed down electronically by circulation to the
parties’ representatives by email, publication on the Supreme
Court of Appeal website and release to SAFLII. The date and time for
hand-down is deemed to be 11h00 on 20 August 2020.
Summary:
Proxy
undertakings to vote at company meeting – such meetings held
and resolutions passed and implemented – undertakings
due to
expire – decision on appeal would not have a practical effect
or result – appeal dismissed in terms of
s 16(2)(a)
of
Superior Courts Act 10 of 2013
.
ORDER
On
appeal from
:
Gauteng Division of the High Court, Johannesburg (Dippenaar J sitting
as court of first instance):
The
appeal is dismissed with costs, including the costs occasioned by the
employment of two counsel, such costs to be paid by the
Appellants
jointly and severally, the one paying, the other to be absolved.
JUDGMENT
Unterhalter
AJA (Wallis, Mbha, Nicholls JJA and Weiner AJA concurring):
[1]
The
appellants are shareholders of the third respondent (ALI). In
February 2019, the appellants each gave an irrevocable undertaking
in
favour of the first and second respondents (Messrs Scott and Ahmed)
to vote their shares in ALI, at any meeting of the shareholders
of
ALI, in favour of certain resolutions. Messrs Scott and Ahmed were
directors of ALI and procured the undertakings on behalf
of ALI, and
for its benefit.
[2]
Among
the resolutions referenced in the undertakings, two are relevant.
First, the appellants undertook to vote in favour of the
performance
and implementation of certain agreements (the transaction
agreements). The transaction agreements arose from the funding
by
Glencore South Africa Oil Investments (Pty) Ltd (Glencore SA) of the
acquisition by Off The Shelf Investment Fifty Six (RF)
(Pty) Ltd
(OTS56) of the shares in the companies that owned Chevron’s
assets in South Africa and Botswana, and the sale and
transfer to
Glencore SA of these shares by OTS56. ALI controls OTS56.
Undertakings were obtained from ALI shareholders, including
the
appellants, so as to ensure that ALI implemented the sale of shares
by OTS56 to Glencore SA. Second, the appellants undertook
to vote in
favour of the removal of Mr. Mashudu Ramano as a director of ALI.
[3]
Messrs
Scott and Ahmed, fearing that Mr. Ramano was seeking to take control
of the board of ALI and derail the implementation of
the transaction
agreements, sought assurances from the appellants that they would
honour their undertakings. Correspondence followed
from which it
became apparent that the appellants did not consider their
undertakings valid and enforceable.
[4]
A
meeting of the shareholders of ALI was called to take place on 4
April 2019. Resolutions were proposed that included a special
resolution to approve the sale of shares to Glencore SA and an
ordinary resolution to remove Mr. Ramano as a director and the
chairperson of ALI. While the appellants were willing to give fresh
undertakings to support the special resolution, they maintained
their
position that their irrevocable undertakings were invalid and
unenforceable. Hence, they would not vote their shares in support
of
the resolution to remove Mr. Ramano.
[5]
This
caused Messrs Scott and Ahmed to bring an urgent application seeking
declaratory relief that would oblige the appellants to
honour their
irrevocable undertakings at the shareholders’ meeting to be
held on 4 April 2019. The appellants opposed the
application and
sought by way of a counter application that the irrevocable
undertakings be declared unlawful, invalid and unenforceable.
Mr.
Ramano, cited as the third respondent in the application, did not
oppose the relief.
[6]
Dippenaar
J heard the urgent application and, on 3 April 2019, made an order.
In relevant part, the order declared the appellants
bound by their
irrevocable undertakings; required the appellants in terms of these
undertakings to procure the implementation and
performance of the
transaction agreements; and obliged the appellants to attend the
general meeting of shareholders to be held
on 4 April 2019, or any
postponed meeting, and at that meeting cast their votes, in
person or by proxy, in favour of the
special resolution to approve
the sale of shares by OTS56 to Glencore SA and the ordinary
resolution to remove Mr. Ramano as a
director of ALI. It dismissed
the counter application and ordered the appellants to pay the costs.
[7]
Dippenaar
J considered the challenge to the validity and enforceability of the
appellants’ irrevocable undertakings. First
it was contended
that the undertakings contravened s 58(8)(c) of the Companies Act.
This provision stipulates that if a company
issues an invitation to
shareholders to appoint one or more persons named by the company as a
proxy, it must not require the proxy
appointment to be made
irrevocable. Second, the appellants submitted that the irrevocable
undertaking requiring them to vote in
support of the removal of Mr.
Ramano as a director offended the requirement of s 71(2)(b) of the
Companies Act that a director
must be heard before a vote is taken to
remove them. The requirement to support the removal resolution, it
was submitted, negated
the purpose of a hearing.
[8]
These
challenges found no favour with the court below. Dippenaar J held
that s 58(8)(c) is only of application if the company issues
an
invitation to shareholders to appoint persons named by the company as
a proxy. This was not so on the facts – ALI had
issued no such
invitation. The proxy provision in the undertakings was, in any
event, severable. As to the s 71(2)(b) challenge,
citing cases of
some pedigree,
[1]
the court
below held there was no prohibition upon agreements between
shareholders as to how they will vote at a general meeting.
[9]
With
the leave of the court below, granted on 9 August 2019, the
appellants appeal to this court.
[10]
As
the application of Messrs Scott and Ahmed was brought on an urgent
basis, in contemplation of the general meeting of shareholders,
to be
held on 4 April 2019, this court enquired of the parties what had
transpired since the grant of the order by the court below
on 3 April
2019. We were informed that the general meeting took place on 4 April
2019. The special resolution to approve
the sale of shares by
OTS58 to Glencore SA was passed. The resolution to remove Mr. Ramano
as a director was not put to a vote.
The shareholders adopted a
resolution to refer the matter to a shareholders’ oversight
committee. However, at the annual
general meeting of ALI, held
on 27 February 2020, the resolution to remove Mr. Ramano was carried.
[11]
These
facts, taken together with the fact that the irrevocable undertakings
are binding for a period of 18 months, and thus would
have expired
before the determination of this appeal, led us to require the
parties to file short supplementary heads of argument
to address the
issue as to whether this appeal was moot, as contemplated in
s
16(2)(a)(i)
of the
Superior Courts Act 10 of 2013
.
[12]
The
parties adopted contrasting positions. The first appellant contends
that the validity of the irrevocable undertakings remains
a live
issue. The appellants in this appeal, together with seven other
shareholders of ALI, have launched an application in the
high court
in which they seek the rectification of the share register of ALI and
that the results of the votes cast by the shareholders
of ALI at the
annual general meeting should accord with the voting rights reflected
in the rectified share register. Messrs Scott
and Ahmed have opposed
the rectification application and have reserved the right to set
aside the votes cast by the appellants
at the annual general meeting
on the basis that the appellants cast their votes in breach of their
undertakings. This, it is submitted,
renders the appeal of practical
effect.
[13]
The
second appellant accepted that there is no longer a live dispute
between the parties. It urged us nevertheless to determine
the appeal
in the interests of justice. That interest was said to arise from the
need to decide whether the interpretation given
by the court below to
ss 58(8)(c) and 71(2)(b) of the Companies Act is correct.
[14]
Messrs
Scott and Ahmed explained that at the annual general meeting of 27
February 2020 a resolution was proposed to remove Mr.
Ramano. This
resolution was carried. Contrary resolutions were also proposed to
remove other directors and appoint directors aligned
to Mr. Ramano.
These resolutions failed. The appellants voted against the resolution
to remove Mr. Ramano and for the appointment
of persons aligned to
Mr. Ramano. Mr. Ramano and certain other shareholders, including the
appellants, then brought the rectification
application to set aside
an issue of shares in ALI, together with consequential relief that
would reinstate Mr. Ramano as a director
and appoint persons aligned
to him as directors. Alternatively, these applicants sought an order
to convene another general meeting
to consider again the resolutions
that were put to the annual general meeting on 27 February 2020. In
opposing this relief, Messrs
Scott and Ahmed contended that, even if
the share register is rectified, Mr. Ramano should not be reinstated
because had the appellants
and two other shareholders not voted
contrary to their undertakings at the annual general meeting, the
outcome of the voting at
that meeting would not have been different.
Accordingly, the only relief that should be issued is that a general
meeting of shareholders
be convened to reconsider the resolutions.
Should the high court ever make such an order, by the time the
general meeting takes
place, the undertakings would have lapsed.
Consequently, the decision sought of this court will have no
practical effect.
[15]
I
proceed to consider the issue of mootness. If there are no longer
live issues between the parties, then the appeal has no practical
effect and the matter is moot.
[2]
Section 16(2)(
a
)(i)
of the
Superior Courts Act 10 of 2013
provides that where the issues
in an appeal are of such a nature that the decision sought will have
no practical effect or result,
the appeal may be dismissed on this
ground alone. The point of principle has been formulated as follows:
‘This principle
is based on the notion that judicial resources
should be efficiently employed and not be used for advisory opinion
or abstract
propositions of law.
[3]
’
[16]
The
urgent application sought to exact compliance from the appellants
with their irrevocable undertakings so as to implement the
sales of
shares to Glencore SA and secure the removal Mr. Ramano as a director
of ALI. The high court made the order in contemplation
of the general
meeting of shareholders to be held the following day.
[17]
The
purpose for which the order was sought has been achieved; the sale of
shares has taken place and Mr. Ramano has been removed
as a director.
The terms of the order made by the high court concerned the
implementation of the transactions and, in particular,
the special
resolution to approve the sale of shares to Glencore SA and the
ordinary resolution to remove Mr. Ramano as a director.
These
resolutions have been voted upon and were carried. That this was
achieved without the concurrence of the appellants as to
Mr. Ramano’s
removal does not alter the fact that the outcome sought to be
achieved by the order has taken place.
[18]
This
would indicate that our consideration of the validity of the
irrevocable undertakings will have no practical effect or result.
However, the first appellant contended that the validity of the
irrevocable undertakings has again become a live issue because
of the
opposition offered in the rectification application to certain of the
consequential relief sought by the applicants in that
application. It
will be recalled that the applicants seek the reinstatement of Mr.
Ramano. That relief is resisted on the basis
that had the appellants,
and two other shareholders, not voted at the annual general meeting
in breach of their undertakings, the
result, being the removal of Mr.
Ramano as a director, would have been the same.
[19]
The
contention of the first applicant is unavailing. First, it requires
us to determine the validity of the undertakings in the
appeal before
us on the basis that this issue might have relevance in other
proceedings that are not before us. Second, whether
the undertakings
were of application for the purpose of the resolution proposed at the
annual general meeting of 27 February 2020
is a mixed question of
fact and the proper interpretation of the undertakings that we are
not called upon to determine in this
appeal. Third, whether the court
that hears the rectification application ever reaches the proposition
as to what would have been
required of the appellants in terms of
their undertakings had they not voted as they did is a matter of
conjecture, too speculative
to warrant this court entertaining the
appeal. Fourth, and upon the assumption that the rectification of the
share register is
ordered and a meeting of shareholders is convened
to consider afresh the resolutions that served before the annual
general meeting,
the undertakings will, by then, have lapsed. The
validity of the undertakings is thus rendered academic.
[20]
For
these reasons, I find that the decision sought from this court on
appeal has no practical effect or result.
[21]
I
turn to consider the submission of the second appellant. The second
appellant accepted that the appeal was moot, but it contended
that it
would be in the interests of justice to determine whether the high
court was correct in the interpretations it gave to
the provisions of
the Companies Act that were debated in the urgent application.
[22]
The
interests of justice are not engaged on the basis of
res
iudicata
or
issue estoppel. In
Goldex,
[4]
this court explained that the plea of the
exceptio
res iudicata
requires that the question raised has been finally adjudicated upon
in proceedings between the same parties, for the same relief,
based
upon the same cause of action. The less exacting defence of issue
estoppel requires that the parties must be the same and
the same
issue of fact or law must be an essential element of the judgment
already rendered.
[23]
Neither
res
iudicata
nor
issue estoppel arise in respect of the rectification application that
serves before the high court. Distinctive relief is sought
in that
application, at the instance of parties that include, but are not
confined to, the appellants, and the validity of the
undertakings
will figure, if at all, as an ancillary issue concerning an
appropriate remedy. Accordingly, the rectification application
can be
determined on its merits, without reference to the judgment in the
urgent application.
[24]
There
is also no reason why the judgment of the court below enjoys such
strong precedential value that its review by this court
is necessary.
First, the judgment of the court below was given in an application
brought as a matter of urgency, thus allowing
less time for
deliberation than a court would ordinarily desire. This is not in any
way to denigrate the judgment, but simply to
recognize the
circumstances in which it was rendered. Second, the judgment relied
principally upon whether the factual predicate
for the application of
s 58(8)(c) of the Companies Act had been met, a matter of no
precedential significance. As to s 71(2)(b),
the court below
interpreted the provision in the light of well-known principles,
entailing little novelty. Should another court
consider these
principles of less interpretative significance to a proper
understanding of s 71(2)(b), it will no doubt say so.
[25]
I
do not consider, therefore, that the interests of justice should
incline this court to entertain the appeal.
[26]
The
remaining issue is that of costs. The first appellant referenced the
fact that substantial costs were incurred by the parties
in the court
below as a result of the length of the papers, the heads of argument
filed in the matter, the briefing of senior and
junior counsel, and
the heads filed in the application for leave to appeal. These were
said to amount to exceptional circumstances
that warrant this court
taking account of the costs incurred by the parties in deciding
whether our decision on appeal would have
a practical effect or
result. This submission was made to bring this matter within the
savings provision of
s 16(2)(a)(ii)
of the
Superior Courts Act.
[27
]
The
submission failed to do so. The costs that were referenced are those
ordinarily incurred by parties who engage upon litigation
of
commercial importance in urgent circumstances. No exceptional
circumstances were disclosed. Hence this court, in terms of
s
16(2)(a)(ii)
, cannot attach any weight to the costs incurred as a
basis to hold that our decision on appeal would have a practical
effect or
result.
[28]
The
parties before us did not raise the question of mootness. The court
did so. However, the appellants elected to pursue this appeal.
They
should have been aware from the outcome of the annual general meeting
held on 27 February 2020 that their efforts to defend
the position of
Mr. Ramano had been unsuccessful and that the second of the two
resolutions that occasioned the urgent application
and the judgment
of the court below had been determined. The appellants chose to
prosecute the appeal, notwithstanding. They are
liable for the costs
occasioned by that choice.
[29]
In
the result I make the following order:
The appeal is dismissed with costs, including the costs
occasioned by the employment of two counsel, such costs to be paid by
the
Appellants jointly and severally, the one paying, the other to be
absolved.
_________________
David Unterhalter
Acting Judge of
Appeal
APPEARANCES:
For
First Appellant:
J G Wasserman
SC
Instructed
by:
Assheton-Smith
Ginsberg Inc, Cape Town
Lovius
Block Attorneys, Bloemfontein
For
Second Appellant:
A A Gabriel SC (with him I Veerasamy)
Instructed
by:
Pather
and Pather, Durban
Claude
Reid Incorporated, Bloemfontein
For
First to Third Respondents: J G Dickerson SC (with him J D Mackenzie)
Instructed
by:
Cliffe
Dekker Hofmeyer Inc, Cape Town
Honey
Attorneys, Bloemfontein
[1]
Amoils v
Fuel Transport (Pty) Ltd and Others
1978
(4) SA 343
(W) at 347 A-G;
Stewart
v Schwab and Others
1956
(4) SA 791
(T);
Desai
and Others v Greyridge Investments (Pty) Ltd
1974
(1) SA 509
(A);
Ben-Tovim
v Ben-Tovim and Others
2001
(3) SA 1074
(C).
[2]
Independent Electoral
Commission v Langeberg Municipality
2001
(9) BCLR 883 (CC); 2001 (3) SA 925 (CC).
[3]
JT Publishing (Pty) Ltd v
Minister of Safety and Security
[1996]
ZACC 23
;
1197 (3) SA 514
(CC);
1996 (12) BCLR 1599
(CC) para 15.
[4]
Prinsloo
NO and Others v Goldex 15 (Pty) Ltd and Another
[2012]
ZASCA 28
;
2014 (5) SA 297
(SCA) para [10].