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[2000] ZASCA 178
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LSA UK Ltd (formerly Curtainz Ltd) and Others v Impala Platinum Holdings Ltd and Others (222/98) [2000] ZASCA 178 (28 March 2000)
CASE NO. 222/98
IN
THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
In
the matter between
LSA
UK Ltd (formerly Curtainz Ltd)
First Appellant
Western
Platinum Ltd
Second Appellant
Lonrho
Management Services (Pty) Ltd Third Appellant
and
Impala
Platinum Holdings Ltd
First Respondent
Gazelle
Platinum Ltd Second
Respondent
Impala
Platinum Ltd
Third Respondent
Messina
Holdings Ltd
Fourth Respondent
Gencor
Ltd Fifth Respondent
BEFORE: SMALBERGER, MARAIS, SCHUTZ, ZULMAN JJA AND
MTHIYANE AJA
HEARD: 9 MARCH 2000
DELIVERED: 28 MARCH 2000
Company
law - respective competencies of organs of company - interpretation
of shareholders’ agreement and articles of association.
W P SCHUTZ
_____________________________________________________________
J U D G M E N T
________________________________________________________________
SCHUTZ
JA:
This appeal is concerned with which of three organs or
instruments of a
company,
Western Platinum Ltd (“WPL”), was entitled to instruct
the institution of particular legal proceedings: whether
the board
of directors or the general meeting of shareholders or another
company appointed as manager. WPL is the second appellant.
The
management company is the third appellant Lonrho Management Services
(Pty) Ltd (“LMS”). The first appellant
LSA UK Ltd (“LSA
UK” - formerly Curtainz Ltd) controls 72.6% of WPL’s
ordinary shares. Together with it,
it forms part of the Lonrho
Group.
The
first four respondents form part of the Implats Group. It is not
necessary to specify their identities further, save to
say that the
second respondent Gazelle Platinum Ltd (“Gazelle”) owns
slightly more than 25% of the ordinary shares
in WPL. By virtue of
that holding it is able to block a special resolution moved at a
general meeting of WPL and thus an amendment
of the articles of
association. This excess over 25% is no accident.
The
circumstances in which the two groups (to which I shall refer simply
as “Lonrho” and “Implats”)
came to be
associated in WPL are these. Each owned platinum and ancillary
rights on the Merensky reef. In order to constitute
a workable
mining proposition, so as to enable WPL to apply for a mining lease,
it was agreed that Implats would sell its Karee
Mine on the farm
Rooikoppies to WPL. The purchase price was about R367,5 million.
In addition Implats was to subscribe in
cash for its slightly over
25% holding in WPL. The agreement in terms of which this was done
was concluded in January 1990 and
is known as “the main
agreement.”
One
of the conditions precedent contained in this agreement was that a
shareholders’ agreement, known as “the principals’
agreement” should be concluded. This was done in the same
month. In terms of that agreement the parties were to procure
that
an annexed management agreement between WPL and LMS should be
concluded. This also was done in January 1990. The principals’
agreement further provided that in the event of an inconsistency
between its terms and those of the articles, the former would
prevail as between the parties and the directors appointed by them
(cl 12.1). The parties were to hold 99.44% of the shares.
An
obligation was cast upon them to amend the articles to reflect the
provisions of the principals’ agreement (cl 12.2).
This took
place only in September 1992, but that did not derogate from the
operation of cl 12.1, just mentioned.
The
detailed provisions of these contracts will have to be set out
later, but it is convenient to mention at this point that,
notwithstanding their unequal shareholdings, an equality at board
level was stipulated. The two groups were to have equal
representation and voting powers on the board. The chairman was not
to have a casting vote and, in the event of deadlock, it
was
(unusually) provided that this would not constitute a ground for
winding up. The mechanism provided for resolution of a
deadlock
was a reference to a committee consisting of the chief executives
of Lonrho PLC (of the Lonrho Group - a respondent
below but not a
party to the appeal) and Gencor Ltd (the ultimate controller of the
Implats Group - an applicant below and the
fifth respondent on
appeal). The argument was largely concerned with what the powers of
the board were. The answer to this
question would define the extent
of the equality protection given to Implats as a minority
shareholder and determine the issue
in the case, to which I shall
now proceed.
During
1994 a dispute arose between the two groups. Lonrho complained
that part of the ore body on Rooikoppies was affected
by ultramafic
pegmatoid intrusions having an adverse bearing on metal yields.
Implats was accused of having known this fact
and having failed to
disclose it, notwithstanding that this information would have been
relevant to the calculation of the price
to be paid for the Karee
Mine. Payment of damages in the sum of R203 million was sought.
Implats has disclaimed liability,
denying particularly that it
misled anyone. The merits of this dispute are not before us.
What
is before us are the consequences of what happened next. On 31 May
1995 a resolution was successfully moved before the
WPL board that
arbitration proceedings claiming the damages mentioned be instituted
against four companies in the Implats Group,
being the first four
respondents on appeal. The reason why there was not an equality of
voting when this resolution was put
to the vote was that one of the
Implats appointed directors, Mr McMahon, considered that he was not
sufficiently informed of
the facts to be able to cast a vote.
Consequently he did not vote against the resolution. At a later
meeting, on 10 September
1996, McMahon raised the matter again,
saying that he was now better informed and was of the view that the
claim had no merit.
He accordingly moved a resolution that the
proceedings (which for various reasons had not yet been instituted)
not be proceeded
with. This time the voting was three all and, the
chairman not having a casting vote, deadlock ensued. At the
suggestion of
McMahon the board then referred the matter to the
committee consisting of the two chief executives. They were Mr D
Bock of Lonrho
PLC and Mr B P Gilbertson of Gencor Ltd. Their
decision was that proceedings should not be instituted. Implats
says that
that is the end of the matter. Subsequently to the
decision Lonrho adopted the stance that the deadlocked resolution
was not
within the board’s competence, so that the later
decision of Messrs Bock and Gilbertson was a nullity. The correct
body
to decide on the institution of proceedings, says Lonrho, is
the management company, LMS, and, failing that, the general meeting
of WPL.
Upon
Lonrho’s intimating late in 1996 that it would not recognise
the decision of the deadlock committee and would propose
a
resolution at a general meeting of WPL to ratify the original
decision of the WPL board on 31 May 1995 to institute proceedings,
members of Implats launched an urgent application, which came
before Stegmann J in the Witwatersrand Local Division. The learned
judge found in favour of Implats, declaring that the decision of
Bock and Gilbertson was binding, interdicting the passing of
the
abovementioned resolution at a general meeting and ordering Curtainz
Ltd (as it then was), WPL and LMS to pay the costs jointly
and
severally, including the costs of two counsel. Subsequently
Stegmann J granted leave to appeal to this court.
Particularly
because of their unusual nature and because of the close scrutiny
that they must bear, it is necessary to set out
some of the
contractual provisions in detail. It would be ill-judged to
commence the enquiry in this appeal with company law
generalisations
about the respective powers and provinces of the various organs and
instruments through which a company may function.
First, there is the
principals’
agreement
. To
deal with its more detailed terms: I have already referred to the
equal rights of representation and voting power (cl 6.1).
The party
having the right to nominate a director also had the right to remove
and replace him (cl 6.2). While Lonrho continued
to hold more
than 50% of the shares, Lonrho South Africa Ltd (“LSA”)
could appoint the chairman and managing director
(cl 6.3). But as
already mentioned the chairman did not have a casting vote (cl 7.6).
However, cl 11.6.2 provided that if a
change of control should
occur, Implats could compel Lonrho to sell sufficient shares to it
to raise the Gencor Group’s
holding to 51% and give it voting
control. A mechanism was provided for determining the price. In
such a case Implats would
be entitled to appoint an additional
director, thus giving it voting control also on the board, and would
be entitled to take
over the management of WPL and the marketing of
its products in an orderly manner and over a reasonable period of
time. (Clause
4.1. of the management agreement and the new article
6 (b) also dealt with what would happen should Lonrho lose control
of WPL.
These provisions will be mentioned below.) Reverting to
the case where Lonrho held more than 50% of the shares, as has been
the case at all times relevant to this appeal, clauses 7.6 to 8.4 of
the principals’ agreement need to be quoted extensively:
“7.6 Resolutions of the board
shall be passed by majority vote of those present and in the case of
an equality of votes,
the chairman shall not have a second or
casting vote. Should the voting at any board meeting
on
any matter
result
in an equality of votes such matter shall be resolved in terms of
8.1. The failure to reach a decision on any matter
before the board
or before such committee shall not constitute grounds for the
winding up of the company concerned.
8
MANAGEMENT
AND CONTROL OF THE BUSINESS OF THE COMPANIES
8.1 The parties recognise that the
equal voting powers established in terms of 6.1
for
the control of the companies
might lead to a deadlock on
important
issues
. Should
the voting at any board meeting
on
any matter
result
in an equality of votes, either LSA or Implats shall be entitled to
require that such matter be referred for decision
to a committee
comprising the chief executive of Lonrho for the time being and the
chief executive of Gencor Limited for the
time being. The decision
of such committee shall constitute the decision of the board in
respect of the matter in question and
the parties shall procure that
the board passes the necessary resolution to give effect to such
decision.
8.2
The
ordinary and day to day management and control of the business,
undertaking and affairs
of
each of the companies
will vest in LMS in terms of the management agreements
and the parties shall procure that on the signature date, the
companies will conclude the management agreements with LMS pursuant
to which such management of the affairs of the companies will be
carried out by LMS.
LSA shall procure that LMS shall inform the board of each of the
companies regularly and fully regarding all material aspects
of the
business
of each
of the companies by means of (inter alia) monthly management
accounts.
8.3 Any further major investment above the already
approved programme in relation to the business of any of the
companies including
the financing thereof and major divestment
decisions will be a matter for agreement between the shareholders.
Should the shareholders
fail to agree on any such matter, the
shareholders will seek the views of a mutually acceptable
independent expert whose views
will be taken into account.
8.4
Notwithstanding
anything contained in the articles of association
of each of the companies,
the
powers and functions of the board
of each of the companies
shall
be the consideration and, as appropriate, approval of the following
:
8.4.1 Diversification investment;
8.4.2 The level of dividend to be declared in respect
of each financial year of the company after taking into account,
inter alia,
redemption of loans and interest thereon, capital
expenditure including replacement costs and cash flow requirements;
provided
that should the board fail to reach agreement in respect of
any dividend to be declared, the board shall declare a dividend of
not less than 50% of the profits available for distribution . . .;
8.4.3 The annual strategic plan and budget for each of
the companies;
8.4.4 The annual financial statements of each company;
8.4.5 Changes to the levels of fees payable to
shareholders in respect of the management agreements and to WMS, the
marketing/sales
agents.” (Emphasis added.)
Clauses
12 and 13 also need to be quoted:
“
12
ARTICLES
OF ASSOCIATION
12.1
Notwithstanding
anything herein implied or contained to the contrary, in the event
of there being any inconsistency between the
rights and obligations
of the shareholders under the memorandum and articles of association
of any of the companies for the time
being and this agreement, the
provisions of this agreement shall prevail as between the
shareholders
and
as between their respective appointees as directors of the company
concerned.
12.2 The parties shall procure that the articles of
association of the companies are forthwith after the commencement
date amended
to give effect to and reflect the relevant provisions
of this agreement.
13
VOTING
SUPPORT
The shareholders mutually undertake in favour of each
other to exercise their respective voting rights in the companies to
implement
and maintain the provisions of this agreement.”
(Emphasis added.)
Clause
17 provided that the relationship of the shareholders between
themselves would be governed by the terms of the agreement,
and
nothing contained therein would be deemed to constitute a
partnership, joint venture or the like. Clause 23.1 provided that
no party would be bound by any express or implied term,
representation, warranty, promise or the like, not recorded therein.
Clause 2.4 stated that the annexed
management
agreement
between
WPL and LMS formed an integral part of the principals’
agreement. According to cl 2.1 of the management agreement,
headnotes to its clauses were inserted for reference purposes only
and would not govern or affect its interpretation. Clause
4.1
provided that the agreement would come to an end should Lonrho cease
to hold more than 50% of the shares in WPL. Clauses
5 and 6 read in
part:
“
5
APPOINTMENT
AS MANAGER
WPL hereby appoints LMS
to
manage and control the ordinary and day to day business,
undertakings and affairs of WPL
.
6
APPOINTMENT
AS (ADVISERS AND CONSULTANTS)
6.1
WPL
hereby appoints
LMS to be its secretaries, transfer secretaries, head office
accountants and technical, financial, legal and administrative
advisers and
consultants
.
6.2 LMS undertakes that it shall:
6.2.1 carry out and perform the said functions,
services and duties for and on behalf of WPL;
6.2.2 place at the disposal of WPL and maintain at
LMS’s offices (at which the registered office of WPL will
continue to
be situate) a board room . . .;
6.2.3
when
so required by WPL
or when it deems it necessary in order to carry out its duties
hereunder, to
appoint
and engage at the expense of WPL
professional,
technical, commercial
and
industrial
experts and advisers
on behalf of WPL for or in connection with the business, affairs and
undertaking of WPL;
6.2.4 make available to WPL an organisation capable of
providing the following services, namely:
6.2.4.1 an administration and secretarial service which
shall execute and perform all work of a secretarial nature, . . .;
6.2.4.2 a service of providing all
work of a head office accounting nature for WPL, including the
keeping of certain records,
the preparation and distribution of
interim and annual financial statements and
which
shall advise WPL on all matters relating to the investment of its
funds, the handling of its finances and taxation as it
relates to
WPL
;
6.2.4.3
technical
services
which
shall make available to WPL the services of LMS’s consulting
mining engineers, geologist and consulting metallurgist
which shall
be
so made available
whenever
requested by WPL
,
provided that services referred to herein shall exclude any work
required to be done for development or research which work
shall be
undertaken on a separate basis to be agreed upon between WPL and
LMS;
6.2.4.4
legal
services
which
shall include the preparation and scrutinising of all agreements in
respect of which it shall be intended that WPL shall
be a party and
which shall
represent or cause WPL to be represented in all legal or other
proceedings and advise WPL upon all matters relating
to its holding
and ownership of its movable property
including
mining rights
;
and generally to provide WPL
with such advice and services as may reasonably be necessary for the
proper carrying on of the business and affairs of WPL or
as may be
requested by WPL including and without detracting from the
generality of the foregoing matters relating to management
services
and personnel
.”
(Emphasis added.)
Clause
8 read:
“
8
MANAGEMENT
INFORMATION
LMS
shall inform the board regularly and fully regarding all material
aspects of the company’s business
,
inter alia, via the medium of the monthly management accounts.”
(Emphasis added.)
Clauses
12.1 and 2 provided that the agreement constituted the sole record
of what had been agreed with regard to its subject
matter and that
neither party would be bound by any express or implied term etc as
in the case of the principals’ agreement.
The
Articles
,
it will be recalled, were subordinated to the latter agreement in
terms of cl 12.1. Article 2 again stated that headnotes did
not
affect construction. The original (pre 1992) article 6 needs to be
quoted:
“
BUSINESS
6 (a)
Any
branch or kind of business which the Company is either expressly or
by implication authorised to undertake may be undertaken
by the
directors
at such
time or times as they shall think fit, and further may be suffered
by them to be in abeyance, whether such branch or
kind of business
may have been actually commenced or not, so long as the directors
may deem it expedient not to commence or proceed
with the same.
(b)
The
management and control of any business of the Company shall be
vested in the directors who in addition to the powers and
authorities by these articles expressly conferred upon them
,
may
exercise all
such powers and do all such acts and things as may be
exercised
or done
by the Company, and are not hereby or by the Statutes expressly
directed or required to be exercised or done by the Company
in
general meeting
,
but subject nevertheless to such management and control not being
inconsistent with these articles
nor
with any resolution passed by the Company in general meeting
;
but so that no such resolution shall invalidate any prior act of
the directors which would have been valid if such resolution
had not
been passed. The general powers given by this article shall not be
limited or restricted by any special authority or
power given to the
directors by any other article.
(c) The directors may arrange that any branch of the
business carried on by the Company or any other business in which
the Company
may be interested, shall be carried on by or through one
or more Company Controlled Companies or subsidiaries of the Company
and they may on behalf of the Company make such arrangements as they
think advisable for taking the profits or bearing the losses
of any
branch or business so carried on, or for financing, assisting or
subsidising any such Company Controlled Company or subsidiary
or
guaranteeing its contracts, obligations or liabilities.”
The
amendment in 1992 entailed the deletion of article 6 (b) and the
substitution in its place of the following:
“
6(b) For so long as the
Lonrho Group owns 50% or more of the issued share capital of the
Company,
the
ordinary and day to day management and control of the business,
undertaking and affairs of the Company shall vest in Lonrho
Management Services (Proprietary) Limited
.”
Articles
6 (d) and (e) were added.
“
6(d)
Notwithstanding
anything to the contrary contained in these articles, the powers and
functions of the board shall be the consideration
and,
as
appropriate,
approval
of
the following
:
(i) Diversification investment;
(ii) The level of dividend to be declared in respect of
each financial year of the Company . . . ;
(iii) The annual strategic plan and budget for the
Company;
(iv) The annual financial statements of the Company;
(v) Changes to the levels of fees payable to members in
respect of management and to Western Metals Sales Limited, the
marketing/sales
agents;
(vi)
The
determination of the Company’s marketing and selling policy
with respect to its mining production from time to time
;
(vii) The repayment of all loans to the Company by or
procured by the shareholders of the Company from time to time;
provided
that no shareholder’s loan with the Company shall be
repaid in whole or in part unless the other shareholders’
loans
are simultaneously repaid proportionately;
(viii)
Such
other matters as may be agreed upon between the members of the
Company from time to time as requiring board consideration
and,
where appropriate, approval
.
6(e) Any further major investment above an approved
programme in relation to the business of the Company including the
financing
thereof and major divestment decisions will be a matter
for agreement between the members of the Company.” (All
emphases
in article 6 added.)
Provision
for equal representation and voting powers and for the appointment
of the chairman and managing director by LSA was
made in a new
article 75. The original article 77(d) remained. It allowed for
the removal of a director by resolution of the
company (that is by
ordinary resolution) pursuant to s 220 of the Companies Act 61 of
1973 (“the Act”). The original
article 96 remained. It
read:
“
LOCAL BOARDS, AGENTS AND COMMITTEES OF THE BOARD
96
The
directors may establish any local boards
or agencies in South Africa or elsewhere
for
managing any of the affairs of the Company
and
may appoint any persons to be members of such local boards, or any
managers or agents and may fix their remuneration,
and
may delegate
[to]
any local board, manager or agent
any
of the powers, authorities and discretions vested in the directors
with power to sub-delegate, and may authorise the members of any
local board or any of them to fill any vacancies therein and
to act
notwithstanding vacancies, and any such appointment or delegation
may be made upon such terms and subject to such conditions
as the
directors may think fit, and the directors may remove any person so
appointed and may annul or vary any such delegation,
but no person
dealing in good faith and without notice of any such annulment or
variation shall be affected thereby.” (Emphasis
added.)
Article
103 was replaced. The new article 103(g) provided that the
chairman of the board would not have a casting vote and
that in the
event of there being an equality of votes the matter would be
determined in terms of article 103(h). It also
repeated that a
deadlock would not be a ground for winding up. The new article
103(h) repeated the procedure for the resolution
of a deadlock by
the deadlock committee.
What the Lonrho argument comes to
is this. The one body that does
not
have ultimate authority to initiate proceedings by WPL is the board
of WPL. Lonrho’s first choice for the one who does
have the
authority is the manager, LMS, which is not subject to the WPL board
in this respect. Lonrho’s second choice
is the general
meeting of WPL, which also is not subject to the wishes or decision
of the WPL board. The general meeting would
make its decision by
means of an ordinary resolution. Because Lonrho controls the
majority of the ordinary shares, its will
would prevail and the
equal control conferred on Implats at board level would effectively
be as nothing.
Our law recognises what has been
called “the doctrine of ‘supremacy of the articles of
association’ ”
(see du Plessis
Beskikkingsvryheid
oor interne bestuursorganisasie, interne bevoegdheidsverdeling en
die prominensie van die statute in die maatskappyereg
1992 TSAR 94
at 99). What it amounts to is that the founding
members, and also a later body of members by special resolution, may
order the
internal affairs of their company in the way that suits
them best, subject to such prohibitions as may exist in the Act or
any other law, statutory or common. This dispensation is
unsurprising when one statute governs many diverse forms of company.
Some examples of the range of possible ways of arranging the
management of a company may be gathered from the speech of Lord
Reid
in
Tesco
Supermarkets Ltd v Nattrass
[1971] UKHL 1
;
[1972] AC 153
(HL) at 171 C - H. (See also Pennington’s
Company Law
(7 ed) p 765.) One of them is that
“
[The] board of directors may delegate some part
of their functions of management giving their delegate full
discretion to act
independently of instructions from them. I see no
difficulty in holding that they have thereby put such a delegate in
their
place so that within the scope of the delegation he can act as
the company.”
Apart from the articles there is
another institution which is frequently used to regulate the
exercise of powers within a company.
It is the shareholders’
agreement, of which the principals’ agreement in this case is
an example. Of course, such
an agreement binds only such persons
as are parties to it. Unlike the articles it is not a public
document and the
Turquand
rule does not apply to it. Here again the parties are free to
contract as they will. The object is frequently to vary the
operation of the articles, and in most instances, at least, it is
permissible to do so. Again, common and statutory law in their
general terms may place limits on what may be agreed. More
specifically the Act may forbid certain forms of agreement.
However,
in each case the particular conduct and the particular
statutory provision will have to be examined in order to ascertain
whether
what is sought to be done is indeed forbidden (see Beuthin
A director firmly in the saddle
(1969) 86 SALJ 489
esp at 491 - 2). Some examples of shareholders
agreements in our reports are
Flegg
v McCarthy & Flegg
1942 CPD 109
at 116 - 7,
Stewart
v Schwab and Others
1956 (4) SA 791
(T) at 793 G and
Bellairs
v Hodnett and Another
1978 (1) SA 1109
(A) at 1130 E - 1132
in
fine.
From
what has been said it flows that the answers to the issues raised
must be sought in the correct interpretation of the contractual
documents, but in construing them it should be remembered that in
case of inconsistency the principals’ agreement has primacy
over the articles.
Stegmann J resolved the question of where the power to sue lay in a
simple way, in favour of Implats. The broad terms of the
unamended
article 6(a) “Any branch or kind of business which the Company
is . . . authorised to undertake may be undertaken
by the
directors . . .” he held, conferred the necessary authority on
the board. Would that the matter were so simple.
But in my opinion
it is not. Before the 1992 amendments article 6(a) had a meaning
and there is no reason to suppose that its
meaning changed and
expanded just because article 6 (b) was drastically altered. Before
the amendments it had to be read together
with 6(b) and it was 6(b)
which in plain terms conferred defined powers of management and
control on the board. The role of
6(a) was different. It
conferred on the directors the right to decide which branches or
kinds of business would be undertaken,
proceeded with or terminated,
out of those which fell within their competence. Article 6(a)
does not purport to specify what
powers of management the board
would have in the course of so doing. Article 6(b) fulfilled that
function.
So
the solution must be sought elsewhere. What strikes one immediately
is the gap between the original broad management powers
conferred on
the WPL board under the old article 6(b) on the one hand and the
much more circumscribed “ordinary and day
to day management
and control” conferred on LMS by cl 8.2 of the principals’
agreement and the new article 6(b).
To some extent the gap has been
filled by the powers expressly conferred on the board by cl 8.4 of
that agreement and 6(d)
of the amended articles. But there is
still a gap and the question arises, how did the parties intend that
it should be filled?
Implats stresses clauses 8.2 of the
principals’ agreement and 8 of the management agreement, which
require LMS to inform
the board fully regarding all material aspects
of the business of WPL by means,
inter
alia
, of monthly
management accounts; and the numerous clauses in the management
agreement, which clauses I have italicised above,
that require LMS
to provide a range of services and advice to WPL. This
demonstrates, argues Implats, that the board is, in
the last resort,
the master of LMS and a board of directors in the normal sense,
exercising ultimate management control. The
difficulty with this
argument is that the advice and services might in any event be
required for the board to exercise its undisputed
powers set out in
cl 8.4 and article 6 (d), such as the consideration and approval of
the annual strategic plan and budget.
Nor do expressions such as
“on behalf of WPL for or in connection with the business,
affairs and undertaking of WPL”,
contained in cl 6.2.3 of the
management agreement, take the matter further, because the question
is begged whether the company
WPL will be acting through its board
as the ultimate manager or through LMS as its day to day manager.
Accordingly I think that
the provisions relied upon are ambiguous
and do not advance Implats’s case.
Lonrho places emphasis on the
similarly inspired and worded cl 8.4 and article 6 (d). They
contain, so it is argued, a restricted
number of powers conferred on
the board. Emphasis is placed on the words “the powers and
functions of the board . . .
shall
be
. . .”.
Why such a construction might have been intended is not difficult
to imagine. Lonrho was by far the larger shareholder.
It might
have been prepared to give a limited minority protection to Implats
by granting it equal authority on certain matters
of common
interest, without surrendering overall management control, to which
its majority holding would ordinarily have entitled
it. So this is
something that the parties might be thought to have intended. Nor
do I think that a particular argument advanced
by
Mr
Slomowitz,
for
Implats, decisively demonstrates that this was not the intention.
The argument is that cl 8.4 and article 6 (d) were not
intended to
provide a demarcation line between the board and the manager, LMS,
but between the board and the general meeting.
This is so, it is
argued, because of their content and because of the need to define
the boards’ powers as against the
general meeting, now that
the power vested in the latter to override the board by a mere
ordinary resolution, contained in the
old article 6 (b), was to be
taken away, whilst the new 6 (b) did not deal with the relationship
of the board and the general
meeting at all. Undermining this
argument is the power numbered (vi) in article 6 (d) which reads
“The determination of
the Company’s marketing and
selling policy with respect to its mining production from time to
time”. This looks
more like a demarcation between the board
and the manager, than the board and the general meeting, and, if
that is so, the argument
falls to the ground. But Implats has a
simpler argument. It is that expressions such as “only”
or “shall
be limited to” were not used, to show clearly
that this board was quite unlike other boards, in particular in that
it had
no control over its manager. This was something that might,
if intended, have been thought to call for emphasis.
Nor
do I think that article 6 (d) (viii) takes the matter further. This
article lists as one of the powers of the board “such
other
matters as may be agreed upon between the members . . . as requiring
board consideration and, where appropriate, approval.”
The
wording is not such as to suggest that the board is limited to the
powers set out in articles 6 (d) (i) to (vii) if there
is no
agreement between members. Rather does the wording suggest an
intention that the members may increase the powers reserved
exclusively to the board. It should also be noticed that this
article is not to be found in the principals’ agreement,
so
that if it contradicts that agreement it is to be ignored.
If
cl 8.4 and article 6 (d) (further I shall refer only to 8.4) are not
to be interpreted in the manner contended for by Lonrho,
important
consequences would follow. Lonrho seeks to counter the impact of cl
8.1 of the principals’ agreement and the
unamended article 96
by arguing that the procedure laid down in the former and the powers
conferred on the board by the latter
must be read as confined in
their application to those board powers expressly conferred on the
board by cl 8.4. Let me explain.
Clause 8.1 commences “the
parties recognize that the equal voting powers established in terms
of 6.1
for the
control of the
[WPL]
might lead to a deadlock on
important
issues
. Should
the voting at any board meeting
on
any matter
result
in an equality of votes . . .”. Then follows a setting out of
the deadlock-breaking procedure. The amended article
103 (g) also
uses the phrase “on any matter”. As has been said so
often, “any” is a word of wide and
unqualified
generality - see eg
R
v Hugo
1926 AD 268
at 271. If the phrase “any matter” be given its natural
meaning, then not only cl 8.4 matters but also other matters
may be
referred to the deadlock committee, which pre-supposes that the
board has dealt with and become deadlocked on matters
that go beyond
cl 8.4. For Lonrho to succeed the phrase would have to read
something like “matters with which the board
may deal by
virtue of cl 8.4.” I can see no compelling reason, whether
contextual, verbal or purposive for doing so.
Purpose does not
help, because although a purpose to protect the minority is made
manifest, the extent of that purpose, whether
wide or narrow, is the
issue, and can only be resolved by a contextual and verbal
treatment. And it should be remembered that
the context is “equal
voting powers . . .
for
the control
”
of WPL. The matter is compounded by the use of the expression
“important issues.” These words also are not
limited,
and on the face of them bear a general meaning. And the context,
again, is the same. So for the second time Lonrho’s
counsel,
Mr Beckerling
,
was driven to argue that words appropriate to the conclusion for
which he contended have to be read in.
A similar difficulty is presented
by the unamended article 96.
Mr Beckerling
does
not argue that it is in conflict with the other provisions of the
articles or with the principals’ agreement. He
contends that
it must be read in conformity with them, that is, so as to introduce
an 8.4/6(d) qualification. The expressions
“any of the
affairs of the Company” and “any of the powers . . . of
the directors” are again, of the
widest generality. As in the
former case there is no compelling reason for reading in qualifying
words. In addition, one is
again driven to ask, if the board’s
powers were to be so unusually limited as against its manager as is
involved in Lonrho’s
contention, why this article also was not
amended so as to make this intention clear.
What has been said and what has not
been said in clauses 8.1 and 8.4 and article 96, in the sense
discussed above, contain sufficiently
clear indications, when looked
at separately or together, which indications, in my opinion, show
that Implats’s argument
is correct and Lonrho’s is not.
This is a case rather like
Capnorizas
v Webber
Road
Mansions (Pty) Ltd
1967 (2) SA 425
(A) at 433, where, even though the intention of the
parties may not be expressed in clear words, their intention may
nonetheless
be inferred from the general pattern and context of the
contract.
Further,
when viewing the much debated competition for power between the
board and the manager, there is the striking change
in wording
compared with the old articles when the manager’s powers are
expressly limited to “ordinary and day to
day management”,
suggesting that other aspects of management and control are left to
another organ of the company. And
although ordinary and day to day
management and control is “vested” in LMS, it is nowhere
expressly said that in
the exercise of its functions it will in no
way be subject to the board, i e that it has exclusive powers in the
sphere allocated
to it. Again, such an unusual situation might have
been expected to be expressed.
What Lonrho’s main argument
finally comes down to is that LMS is not a mere manager or agent or
instrument of the company,
WPL, but one of its organs, having
original and exclusive powers which may not be exercised or
supervised by the usual organs
of the company, the board and the
general meeting (save, of course, where the general meeting alters
the articles by special
resolution). If Lonrho’s argument be
correct it would go well beyond what was contemplated by Lord Reid
in the
Tesco
case (above), as the “super-manager” there postulated
would have gained his powers merely from an extended delegation
of
its powers by the board.
In
an alternative argument, Implats has contended that a third organ of
this kind is simply not possible, either because LMS
would become a
“director” as defined in s 1 of the Act, whereas,
Implats submits, s 218 (1) disqualifies a company
from being a
director; or because, having regard to the structure of the Act as a
whole, a third organ of this sort simply is
not contemplated,
competent nor allowed. As I have concluded, for the reasons already
expressed, that as a matter of construction
the agreements and
articles do not purport to create such an organ, it is unnecessary
to pursue this alternative argument further.
Lonrho’s
case is not, however, at an end. In the further alternative it
contends that if powers of general management
and control are not
vested in LMS, then they are vested in the general meeting, which is
dominated by Lonrho. Two alternative
bases are advanced for this
conclusion, the first based on construction of the agreements and
articles, the second on some supposed
inherent power of the general
meeting to decide on litigation, notwithstanding the wishes of the
board (the latter basis was
hardly pressed on appeal).
As
far as construction is concerned, what is conspicuously absent from
the restructured article 6 (b), or any other article,
is a
provision, such as the old article 6 (b) contained, giving the
general meeting the power to override the board by means
of an
ordinary resolution. Nor was it expressly agreed that the powers
conferred on the board by cl 8.4 and article 6 (d) were
to be
limited to those powers. I have discussed this above. Given these
facts and the structure of the principals’ agreement
and
articles I can see no reason for introducing or implying powers of
management and control in favour of the general meeting
which would
leave Implats at the mercy of the Lonrho majority.
The
exercise in construction for which I am responsible may be an arid
labour in verbalism. But the reason does not, I hope,
lie in me.
The contractual documents give an impression of those negotiating on
behalf of the parties behaving like two pugilists
circling one
another, wary, but with neither ready to venture the first blow. A
proposal for the inclusion of a few unambiguous
and decisive words
would either have led to disagreement or would have avoided the
torrent of words that has followed.
Turning to the inherent powers of
the general meeting, it was at one stage argued that the meeting has
a power to assume control
when the board is unable to function.
This falls away, because of the fact that the board was able to
function, that is, in
conjunction with the deadlock committee, which
resolved the deadlock. As to the principle upon which the argument
was based,
it has been recognised that where a company lacks an
effective board, for instance where all the directors have resigned
or are
deadlocked, or a quorum of them cannot be obtained, the
general meeting may step in: see eg Henochsberg
On
The Companies Act
(5 ed) Vol 1 p 327, Cilliers et al
Corporate
Law
(2 ed) p 83
and Pennington (op cit) pp 771-775. One of the reasons why meetings
of directors may be rendered inquorate is that
some of them are
disqualified from participating because doing so would clash with
their fiduciary duties. In this case it
has not been suggested that
any of the directors were so disqualified.
That leaves Lonrho’s final
argument, hardly persisted in, that the general meeting always has
the inherent power to institute
proceedings, even when the board is
not unable to do so. In the course of a careful and lengthy
judgment Stegmann J rejected
this contention, correctly in my view.
The reasons for my concurring view can be quite briefly stated. The
board of directors
and the general meeting are both organs of the
company, each having its own original powers. The directors do not
receive their
powers as agents of the company, so that in the
absence of a contrary provision in the memorandum or articles, even
a unanimous
general meeting may not supersede the directors’
powers. (The general meeting may ultimately be able to remove or
not
re-elect directors, or alter the articles, but those are other
matters.) However, it is possible for a board and the general
meeting to have concurrent powers. But courts are disinclined to
treat managerial and executive powers as concurrent and, unless
the
articles otherwise provide, they are exercisable exclusively by the
directors. For these broad propositions see Pennington
(op cit) pp
765-768 and Cilliers et al paras 7.05 and 7.06 pp 80-82. The
reasoning of Neville J in
Marshall’s
Valve Gear Co Ltd v Manning, Wardle & Co Ltd
[1909] 1 Ch 267
, to the extent that it is inconsistent with the
above, is to be regarded as an aberration. The correct position is
as stated
by Greer LJ in
John
Shaw & Sons (Salford) Ltd v Shaw
[1935] 2 KB 113
(CA) at 134:
“A company is an entity distinct alike from its
shareholders and its
directors. Some of its powers may, according to its
articles, be exercised by directors, certain other powers may be
reserved
for the shareholders in general meeting. If powers of
management are vested in the directors, they and they alone can
exercise
these powers. The only way in which the general body of
the shareholders can control the exercise of the powers vested by
the
articles in the directors is by altering their articles, or, if
opportunity arises under the articles, by refusing to re-elect
the
directors of whose actions they disapprove. They cannot themselves
usurp the powers which by the articles are vested in
the directors
any more than the directors can usurp the powers vested by the
articles in the general body of shareholders.”
See also
Scott
v Scott
[1943] 1
All ER 582
(Ch) at 584 B-585 E,
Wessels
& Smith v Vanugo Construction (Pty) Ltd
1964 (1) SA 635
(O)at 637 F - G and
van
Tonder v Pienaar and Others
1982 (2) SA 336
(SEC) at 341 E-G.
The
appeal is dismissed with costs including the costs consequent upon
the employment of two counsel, the costs to be paid jointly
and
severally by
the
three appellants.
W
P SCHUTZ
JUDGE OF APPEAL
CONCUR
SMALBERGER
JA
ZULMAN
JA
MTHIYANE
AJA
MARAIS JA/
MARAIS JA :
[1] I find this to be a very difficult case. Despite the
benefit of having read the judgment of my brother Schutz I remained
doubtful about the right answer. In the course of setting out my
concerns my doubts have hardened into a conviction that, regrettably
and with respect, I cannot share in the conclusion reached. Let me
say why. I agree with what has been said about Stegmann J’s
reliance upon article 6(a) and Mr Slomowitz’s submission that
article 6(d) was intended to provide a demarcation line,
not between
the board and LMS, but between the board and the general meeting. I
agree too that the deadlock provision is not
confined to those
matters listed in article 6(d) but extends to any matter
subject
to the proviso that the matter is properly within the powers of the
board. If
a particular power
has been vested in a board of directors by the articles, I agree
that the shareholders in general meeting cannot
usurp that power. I
turn to my concerns.
[2] Lord Reid’s remarks in
Tesco Supermarkets
are not, in my view,
in
pari materia
. He
was stating the obvious. But that is not what happened here. This
is not a case of a delegation by a board of powers to
a manager; it
is a case of the articles empowering the manager. No question of
delegation by the board arises. Lord Reid’s
remarks were not
attuned to the latter situation. The fact that Lonrho’s
argument goes beyond what Lord Reid contemplated
seems to me to be
of no significance. He was not purporting to demarcate the outer
limits or boundaries beyond which a distribution
of powers in a
company’s articles could not go.
[3] Whatever rights arising from
a shareholders’ agreement between some of the members of a
company regarding an allocation
of power may be contractually
enforceable
inter
se
, unless the
articles are in fact and in law altered to conform to it, the
allocation of power for which the articles provide
remains what it
was.
[4]
I have difficulty with the notion that an agreement between
most, but not all, of the shareholders of a company as to
how and by
whom the company’s powers are to be exercised can have any
effect upon the objective location in law of those
powers according
to the articles. Unless and until the articles are amended to
mirror accurately their agreement, the disposition
of power for
which they provide prevails. Where such amendments purport to have
been made, I have the same difficulty in seeing
how the
interpretation of the amended articles can be influenced by what was
in the agreement. The shareholders who are not
party to the
agreement or who may become such only after the making of the
amendments cannot have thrust upon them a construction
of the
amended articles different from that which would have been
appropriate if there had been no such agreement. The articles
cannot mean different things to different shareholders. Their
meaning must be taken to be constant.
[5]
A provision in the agreement that, in the event of conflict, the
agreement is to prevail is, so it seems to me, legally
ineffective
in so far as it purports to disturb the distribution of power for
which the articles, objectively interpreted, provide.
There
can be no “subordination of the articles to the agreement”.
I think that one must confine oneself therefore
to an
interpretation of the amended articles without regard to the
provisions of the principals’ agreement. Such a provision
may
of course oblige the parties to the agreement to use their combined
voting power to amend the articles until there is no
such conflict
and interdictory relief may be available pending enforcement of the
obligation, but that is beside the point.
[6] The fact that, if Lonrho is
right, it could use its dominant voting power at a general meeting
to outvote Implats on the
question of whether or not proceedings
should be instituted, or could cause LMS to institute proceedings,
does not necessarily
mean that “the equal control conferred on
Implats at board level would be as nothing”. It would exist
in relation
to all matters which
are
within the board’s competence and upon which the chief
executives reach agreement in the case of deadlock. I think it
is
fallacious to answer the question whether a decision to institute
legal proceedings is within the board’s competence
by pointing
to the consequences of it not being within its competence unless of
course they result in absurdity which could never
have been
intended. Whether or not there was to be equality of control in
respect of the exercise of this particular power is
the very matter
in issue. If it was not so intended, then the reference to the loss
of “equal control” has no significance.
[7] In any event, on any view of
the matter, it is plain that the articles as amended do leave Lonrho
with the upper hand
in circumstances which can easily be imagined.
Assume that the chief executives fail to reach an agreed decision
and deadlock
persists. That is not a remote possibility. If in a
given case Lonrho’s chief executive was convinced that it was
not
in the company’s interests to do what his counterpart
wished to do, he would have to decline to agree to it. There would
then be no deemed resolution of the board. A resort to a general
meeting would be the only way in which the impasse could be
resolved
and Lonrho would triumph. I am therefore sceptical of the strength
of arguments resting upon the
petitio principii
that Lonrho’s case is subversive of protection which Implats
was plainly intended to have. Whether it was indeed intended
to
have it in this particular respect and to the extent contended for
is the issue.
[8] For the reasons I have given
earlier I do not think that article 6(d) (viii) can be ignored
because it is not to be found
in the principals’ agreement. I
am unpersuaded that its wording actually advances Implats’s
case. At best for Implats
it is neutral; at worst it tends to
militate against Implats’s case. When read with the opening
words of article 6(d)
(“notwithstanding anything to the
contrary contained in these articles, the powers and functions of
the board shall be”),
its wording, to my mind, is more
consistent with 6 (d) being a
numerus
clausus
of powers
for the board capable of enlargement only by agreement “between
the members of the Company”.
[9] Article 96 does not seem to
me to help one way or another. Its meaning both before and after
the amendment of the articles
is the same. The directors have the
powers therein specified. Their power to delegate their own
directorial powers is obviously
limited to, at most, those which are
vested in them by the articles from time to time. What these are
must be found in other
provisions; article 96 is not definitive of
their directorial powers. Where they agree upon a course mentioned
in article 96
the position is as it always was. The only change
wrought by the amendment is that if there is disagreement in that
regard and
a deadlock ensues, the deadlock breaking mechanism may be
invoked. The power of members in general meeting to overrule or
give
directions to the board in that regard was also removed.
However, if the chief executives are unable to agree then a resort
to a general meeting will be necessary and again Lonrho’s
superior voting power will ensure its dominance. The
interpretation
of the articles cannot be influenced by an assessment of the risk of
the chief executives not reaching agreement actually eventuating.
As long as it is inherent in the scheme of things that it
could
happen and the contingency is not fanciful or remote that will have
to be borne in mind when interpreting the articles.
[10]
This shows that an all pervasive equality of power with the
concomitant inability of either Implats or Lonrho to enforce
its
will, whatever the circumstances and whatever the issue, has not
been provided for in the articles. Nor, I may add, (and
for the
same reason) can it be said to have been provided for in the
agreement (if the agreement is indeed relevant). I should
perhaps
make it clear that even if, contrary to my view, the agreement is
admissible in interpretation of the articles, I find
nothing in it
which is of any real assistance.
[11] Articles 151(f) (ii) and
(h) (ii) (b) speak of the Implats Group being entitled to a majority
on the board in the circumstances
there postulated and it “shall
be entitled to
take
over ..........the management of the company
and the marketing of its products”. If the circumstances
contemplated in (h) (i) arise and the provisions of (h) (ii)
(a) are
not followed, there has to be a “transfer of
management
control
(if
applicable) as set out in (f)” which is to apply
mutatis mutandis.
(Emphases
in quotations supplied.) The use of this wide and unqualified
expression tends to show that what was vested in LMS
, and would
have to be transferred to Implats, was management control in the
fullest sense (minus of course the powers specifically
vested in the
board by 6(d), 96 and any other article expressly empowering the
board) and not management in the narrower sense
which the use of the
expression “ordinary and day to day management and control”
in 6(b) might superficially suggest.
If that be so, the latter
expression must be regarded as having been used as a catch-all
phrase to encompass all those powers
of management which had not
been specifically conferred upon the board in 6(d) or in other
articles. I elaborate on this in
the next paragraph.
[12]
I am not sure that the “gap” referred to in the
judgment of Schutz JA can be said to be immediately apparent.
There
is only a gap if one gives a restrictive interpretation to the words
“ordinary and day to day management and control”
in
article 6(b). If one takes the view that the amendments to the
articles were intended to distribute power between LMS and
the board
comprehensively in a manner which left no gaps (which seems a
reasonable assumption), then it is difficult to see how
it can be
said that 6(d) covers what would otherwise have been a gap, but that
6(b) does not. Of the two provisions 6(b) is
at least capable of
covering such a gap. Article 6(d) is not. And if one takes the
view that neither covers the gap, what justification
is there for
selecting the board as the repository of the powers which are the
subject of the gap? Why not the members? They
are in law the
repository of all residual powers which have not been specifically
allocated by the articles or the Companies
Act. If there was
intended to be a gap and if it was intended that the board should
have the powers which are the subject of
the gap, why was that not
said? It would have been a simple matter to use the well-worn
phraseology previously used in article
6(b), namely, “in
addition to the powers and authorities by these articles expressly
conferred upon them, [the directors]
may exercise all such powers
and do all such acts and things as may be exercised or done by the
Company”. Far from there
being such a provision there is 6(d)
(viii) which postulates that there are powers which the board does
not have but may be given
by the members at some time in the future.
[13] The absence in 6(d) of
words such as “only” or “shall be limited to”
has little persuasive force
in my opinion. The very fact that this
highly unusual distribution of power and enshrinement in the
articles of the status and
powers of a Lonrho management company has
been resorted to, and that the wide powers originally entrusted to
the board by 6(b)
were brought to an end by its total elimination,
is a potent indication that none of the usual easy assumptions as to
the powers
and functions of a board of directors can be made or
were intended to be made. After all, even prior to amendment of the
articles,
all the powers of the board were, most unusually,
subordinated to the decisions of the members in general meeting.
While not
in a permanent sense a eunuch the board could have been
emasculated
ad hoc
whenever the shareholders so chose. Was it really intended to
transform it into a fully autonomous organ with power to overrule
the management company whenever it so chose, with power to do
whatever the company itself could do, and without there being
any
resort to the members in general meeting? I doubt it. In the end
the powers of the board must be found in the articles
as amended or
not at all. If no article can be found which empowers the board to
take a decision of the kind under consideration
there is no
justification for concluding that it has such power. The use in
6(d) of words such as “only” or “shall
be limited
to” would be otiose. Indeed, they could not have been used
because that would have created a conflict with
other articles
conferring other specific powers upon the board.
[14]
The articles do not empower the board to do anything other than
that which is spelt out in the articles or that which
is reasonably
incidental to the exercise of those powers. None of the powers so
spelt out would include the power to commit
the company to institute
or defend legal proceedings of the kind involved here. Nor is such
a power reasonably incidental to
the exercise of the expressly
conferred powers.
[15] The width of the words “on
any matter” in the amended article 103(g) cannot be taken too
literally. For
example, they obviously cannot justify an assumption
of power by the board in respect of a matter which is indisputably
not within
the province of the board. In fact the words do not
purport to be and are not determinative or definitive of what the
board’s
powers are. They postulate that the matter in respect
of which deadlock exists is a matter within the board’s powers
of
decision. Whether or not that is indeed so must be determined by
reference to the
other
provisions in the articles.
[16]
The position of LMS is unique. Its managerial status and powers
are conferred by the articles and not by the board.
Its powers may
not be terminated by the board. Only the members in general meeting
may do that and then only by amending the
articles appropriately.
Lonrho, by virtue of its large shareholding, is in a position to
block any attempt to remove LMS or
to curtail or terminate its
powers. One’s point of departure can therefore not be that
the board’s ordinary function
is to manage and that therefore
it may oversee and regulate the manner in which anyone upon whom the
articles have conferred
powers of management exercises those powers.
[17] The suggestion that LMS
would then be functioning as a director and that the interpretation
of the articles should be
such as to prevent such a result appears
to be unsound. If that is indeed the clear result of what has been
done then “interpretations”
which purport to avoid that
result are simply not justifiable. The consequences in law of that
may be that the amendments are
ultra
vires
or otherwise
unlawful but they would not extend to conferring upon the board
powers which are nowhere to be found elsewhere in
the articles or in
regularising what was done under the deadlock provision. If, on the
other hand, it is not clear that LMS
is to function as a director,
then there is no reason to approach the interpretation of the
articles with any particular bias
in accordance with the
ut
res magis valeat quam pereat
maxim.
[18] In any event it seems clear
that, unless forbidden to do so by the articles, directors may
lawfully delegate their managerial
functions. (Article 98
specifically empowers them to delegate “any of their powers”
to an executive or other committee
whether or not it consists of any
of them.) In so doing they do not slough off their responsibility
and potential liability
as directors. I have never heard it
suggested ere now that a management company to which managerial
powers have been delegated
by a board,
ipso
facto
functions as
a director in contravention of the law. Why should it be different
because the source of its authority is not the
board but the
articles? If anything, it is an
a
fortiori
case
because no delegation is involved.
[19]
These are the things which cause me concern. The question is
whether, if the points I have made are not demonstrably
invalid or
unsound or irrelevant, there are sufficient remaining countervailing
factors or considerations to show that the conclusion
favoured by
Schutz JA is the correct one.
[20] The most potentially
persuasive factor is the use of the expression “ordinary and
day to day management and control”
in 6(b). I can well see
that this may suggest a relatively modest role for LMS when viewed
in isolation. However, when seen
in the context of all that I have
drawn attention to, I think that its impact is greatly diminished.
One does not lightly conclude
that there is a substantial
lacuna
in the disposition of power in a company’s articles. If, as I
believe to be the case, no
lacuna
was intended, then I think that there are only two possible
interpretations of the articles.
[21]
One is that 6(b) was intended to vest all residual powers of
management not specifically conferred upon the board by
6(d) or
other articles in LMS and that it has the power to decide the issue
in question. The other is that it was not so intended
and that
there were powers which were not to be exercised by either the board
or LMS, but by the members of the company. That
is of course where
residual power would reside as a matter of law in the absence of its
allocation to either the board or to
LMS. On either view appellant
would be entitled to succeed.
[22]
A third possibility, that 6(d) was intended to vest the board
with a panoply of unspecified powers to do what the company
itself
could do (including deciding whether or not to litigate), seems to
me to be untenable. It is linguistically incapable
of serving that
purpose. Not only is the language incompatible with the notion but
it would amount to reinvesting the board
with the same powers which
6(b) in its unamended form had given it, but without it being
ultimately subject to the wishes of
members expressed at a general
meeting. In my view, the deliberate deletion of 6(b) in its
original form and the decision not
to re-enact it or any part of it
in any recognizable shape or form make it very difficult to justify
the conclusion that 6(d)
was intended to fulfil substantially the
same role i e to confer the widest of powers upon the board.
[23] Thus, whatever the answer
may be to whether it is LMS or the members in general meeting who
have the power to decide
whether or not to litigate in the
particular matter, I am persuaded that the board does not have that
power. The fact that the
Lonhro directors and its chief executive
have participated in the board’s assumption of power in that
regard cannot convert
the decision not to go to arbitration into an
intra vires
decision if, objectively regarded, it was
ultra
vires
. Nor can
the fact that both Lonhro and Implats behaved as they did influence
the interpretation to be given to the articles.
I would allow the
appeal and make the usual order as to costs in both courts.
R
M MARAIS
JUDGE
OF APPEAL