IN THE HIGH COURT OF SOUTH AFRICA
KWAZULU -NATAL DIVISION, PIETERMARITZBURG
CASE NUMBER: 4426 /2011P
In the matters between:
ALAN GRAY LIMITED First Applicant
ALAN GRAY UNIT TRUST
MANAGEMENT LIMITED Second Applicant
ALAN GRAY LIFE LIMITED Third Applicant
ALAN GRAY SOUTH AFRICA
(PTY) LIMITED Fourth Applicant
And
THE CHAIRPERSON OF THE
KWAZULU -NATAL GAMBLING BOARD First Respondent
KWAZULU -NATAL GAMBLING BOARD Second Respondent
THE PREMIER, KWAZULU -NATAL
PROVINCIAL GOVERNMENT Third Respondent
AKANI MSUNDUZI (PTY) LIMITED Fourth Respondent
CASINOS AUSTRIA INTERNATIONAL Fifth Respondent
GOLD REEF RESORTS LIMITED Sixth Respondent
___________________________________________________________________
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JUDGEMENT
___________________________________________________________________
VAN ZYL, J.: -
[1] This application for review and declaratory orders concerns the dispo sal by
the fifth respondent Casinos Austria International (Casinos Austri a) of its
shareholding in the sixth respondent Gold Reef Resorts Limited (GRR) and whether
such disposal was within the ambit of and brought into operation the provisions of
section 50 of the KwaZulu -Natal Gambling Act 10 of 1996 (the 1996 Act). The
applicants contend that the disposal was not affected by s ection 50, while the first,
second and third respondents contend that it was.
[2] Section 50 of the 1996 Act provided that:
50. Financial and controlling interests
(1) A licensee shall not, without the consent of the Board, permit any other
person to acquire a controlling interest or a financial interest of five percent
(5%) or more in the business to which the licence relates.
(2) When a licensee applies to the Board for its consent as contemplated in
subsection (1), the provisions of sections 28 to 34 shall apply mutatis
mutandis to the person who proposes to acquire a controlling interest or a
financial interest of five percent ( 5%) or more in the business concerned.
[3] The 1996 Act did not define a “controlling interest” or a “financial interest”, but
a person was defined in s ection 1 as:
“person” means a natural or juristic person or group of such persons
unless the context shows a contrary intention;
[4] Sections 28 to 34 of the 1996 Act concerned the process and substance of
applications , including the grounds upon which a perso n could be disqualified from
being granted or holding a gambling licen ce, the nature and extent of investigations
which the second respondent (the Board) was obliged or entitled to make in
determining whether any manager of the business of a licensee , or any person who
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has or seeks to acquire a controlling interest, or an interest of five percent (5%) or
more in the business of the licensee , satisfies the relevant criteria . Also included
were the procedures involved in the hearings of applications , the summoning of
witnes ses and the obligation of the Chief Executive Officer of the Board to provide
reasons for decisions taken.
[5] Relevant to s ection 50 of the 1996 Act were Regulations 47 to 49 of the
KwaZulu -Natal Gambling Regulations promulgated in terms of s 87 of the 1996 Act .
Regulation 47 (1) cast upon the licensee the duty, upon becoming aware of the fact
that a person or entity had directly or indirectly procured an interest as contemplated
in section 50, immediately to fully inform the Board thereof. In addition, Regulation
47(2) required any person who directly or indirectly procured such an interest in a
licensee , to apply to the Board for its consent in the prescribed form within fourteen
(14) days .
[6] Regulation 48 and 49 provided , as follows:
48. Determination of suitability or unsuitability of an applicant
(1) The Board may grant an application contemplated in regulation 47(3)
subject to any condition or it may refuse an application.
(2) Whenever the Board finds an applicant to be unsuitable to hold an
interest in the business of a licensee , it shall refuse the application, in which
event the applicant shall dispose of his or her interest in the licensee in the
manner contemplated in regulation 49 of these regulations.
(3) The Board may, at any time after having found an applicant suitable to
hold an interest in the business of a licensee and after having given such
owner the opportunity to be heard , find that he or she is no longer suitable to
continue owning such an interest , in which event such owner shall dispose of
his or her interest in the licensee in the manner contemplated in Regulation 49
of these regulations.
(4) With effect from the date on which the Board serves notice on a person
who has been found unsuitable in terms of sub -regulations (2) and (3) of this
regulation, such person shall cease to e xercise , directly or through any trustee
or nominee , any voting right conferred by the ownership of his or her interest
in the licensee.
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49. Disposal of interest when applicant found unsu itable
Whenever the Board finds an applicant unsuitable , it may –
(a) Declare the agreement for the procurement of the relevant interest to be
null and void;
(b) Order the applicant to , within three months of the date of the Board’s
finding or such longer period as it may determine, dispose of the relevant
interest for no more than the applicant paid for such interest , or such
greater amount approved by the Board .
[7] The 1996 Act was repealed by section 150 read with Schedule 1 of the
KwaZulu -Natal Gaming and Betting Act 8 of 2010 (the 2010 Act) , which came into
force with effect from 1 April 2011 . However, s148 provided that the Board , as
constituted in terms of the 1996 Act , would continue in existence until a date
determined by the relevant Member of the Provincial Executive Council , whereafter it
would be replaced by the new Board appointed in terms of the 2010 Act. Likewise,
s150(a) of the 2010 Act provided that the Regulations in terms of the 1996 Act would
continue in force until amended, repealed or revoked.
[8] There are , in certain respects, significant similarities between the 1996 and
2010 Acts . Thus s ection 54 of the 2010 Act was essentially similar to s ection 50 of
the 1996 Act and provided that :
54. Financial and controlling interests
(1) A licensee A licensee may not, without the consent of the Board, permit
any other person to acquire a controlling interest or a financial interest of five
percent or more in the business to which the licence relates.
(2) When a licensee applies to the Board for its consent as contemplated in
subsection (1), the provisions of sections 32, 33, 34, 35, 36, 37 and 38 apply ,
with the necessary changes , to the person who proposes to acquire a
controlling interest or a financial interest of five percent or more in the
business concerned .
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[9] Sections 32 to 37 of the 2010 Act were also broadly similar to Sections 28 to
34 of the 1996 Act . However, the 2010 Act contained a definition of “Financial
interest ” corresponding with that of the National Gambling Act 7 of 2004 , as follows:
"financial interest" means –
(a) a right or entitlement to share in profits or revenue;
(b) a real right in respect of property of a company, corporation or business;
(c) a real or personal right in property used by a company, corporation or
business; or
(d) a direct or indirect interest in the voting shares, or voting rights attached to
shares, of a company or an interest in a close corporation;
[10] Against this background it becomes convenient to tu rn to the facts and events
giving rise to th e voluminous application papers in this matter. As indicated at the
inception hereof, the predominant issue is whether the disposal by Casinos Austria
of its twenty -comma six percent (20,6%) shares in GRR brought into operation the
provisions of s ection 50 of the 1996 Act .
[11] It is common cause that the relevant licensee in this matter is Akani Msunduzi
(Pty) limite d (Akani) , the fourth responde nt in these proceedings . In the founding
affidavit of the applicants and deposed to by Mr R W Dower in his capacity as the
Chief Operating Officer of the first applicant Alan Gray Ltd (AG) , it was explained that
GRR holds various gaming licences throughout the Republic, one of which related to
the Golden Horse Casino in Pietermaritzburg, KZN which is in the name of Akani , a
wholly owned subsidiary of GRR .
[12] When the fact of the sale of Casinos Austria’s shares in GRR came to the
notice of the Board , it raised the question of which person or persons , impliedly as
defined in s ection 1 of the 1996 Act , had acquired the shareholding in issue.
[13] Preliminary information available to the Board indicated that AG, or possibl y
one or more members of its group of entities , had purchased the shares from
Casinos Austria . As a result there of the Board sought to obtain clarity. Ultimately it
appears that it took the view that s ection 50 of the 1996 Act found application and
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unsuccessfully sought to compel compliance by demanding that an application for its
consent be brought .
[14] Whilst the deliberations of the Board appear to have suffered from a degree of
confusion, the real question remain ing is whether , in law, the acqui sition of the
shareholding of Casinos Austria in GRR is hit by the provisions of s ection 50 of the
1996 Act.
[15] The applicants contend that the provisions of section 50(1) were not triggered .
They assert ed that on or about 21 May 2009 AG negotiated the purchase of twenty
comma six ( 20,6% ) percent of the issued share capital of GRR from Casinos Austria
amounting to a total of 60,226,988 shares . It was explained that the Alan Gray Unit
Trust (AGUT) the second applicant , Alan Gray Life (AG Life) the third applicant and
Alan Gray South Africa Lt d (AGSA) the fourth Applicant had outsourced their
investment management functions to AG.
[16] In paragraph 2 of a letter dated 21 October 2010 by AG to the Board and
attached as annexure RD22 to the founding affidavit , the transaction was described
as an opportunity to acquire the shares cheaper off market , presumably a reference
to the Johannesburg Stock Exchange, due to the volume of shares involved . It was
claimed to be a market related transaction between two parties , namely Casinos
Austria as seller and AG acting on behalf of its clients as “purchasers” .
[17] The shares so acquired were then allocated to different entities within the AG
group , such as AGUT , AG Life and AGSA, who in turn allocated shares to different
clients or investors associated with those entities. In the result, so the applicants
contend, neither AG, nor any of its associated entitie s, or indeed their individual
clients or investors , acquired a holding of more than five percent ( 5%) of the shares
in GRR .
[18] The applicants argued that none of the applicants, by virtue of acting as
agents for their clients , acquired any shares of or a financial interest within the
contemplation of s ection 50(1) of the 1996 Act in GR R, or its subsidiary Akani . In this
regard emphasis was placed upon the fact that a financial interest was not defined in
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the 1996 Act and insofar as it was defined in the 2010 Act, their involvement in the
transaction did not fall within the definition of a financial interest in s ection 1 of the
2010 Act.
[19] The first three respondents, but effectively the Board as the second
respondent and as applicant in the counter application , contend that the provisions of
section 50 of the 1996 Act were triggered beca use the subject of the share
transaction exceeded the five percent thresh old of the shares of RCC, the holding
company of Akani , the licensee . Furthermore, that the conclusion is to be drawn that
AG acquired the shares in the first instance and that it is irrelevant for present
purposes upon whom the individual shares thereafter devolved and who effected
payment therefor .
[20] The primary object of the 1996 Act, as with the 2010 Act, as well as the
National Gambling Act , is to regulate and control the gambling and gaming
industries , in the case of the Board within the Province of KwaZulu -Natal. In order to
do so a system of licen ces are involved and applicants for licences are to be vetted
for suitability. Hence the Board was obliged and empowe red in applicable instances
to investigate and consider formal applications for authority to operate gambling or
gaming licen ces. In addition to the suitability of a licensee to receive a licen ce, the
Board also ha d oversight of existing licen ces and any change in the control , or a
change of five percent or more in the shareholding of a licensee.
[21] The question then arises whether the Board was justified in adopting the
attitude that a change in control of the holding company of a licensee company is the
equivalent of a change in the control, or a change of five percent or more in the
shareholding of a licensee itself. This issue is essentially a matter of law , so that the
view adopted by the Board in this regard is of secondary relev ance.
[22] There is no suggestion in the present matter that a shareholding of twenty
comma six percent of the issued shares in RCC would amount to a controlling
interest in it. However, i t would appear that a shareholding of five percent or more in
a licensee is considered sufficiently significant to influence the conduct of the
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licensee, hence the requirement for a formal application to the Board for authority to
acquire and hold such an interest.
[23] Section 50 (1) of the 1996 Act refers to a “financial interest of five percent or
more in the business to which the licence relates”. Clearly the phrase was not
intended to be limited to bodies corporate, but was intended for wider application. In
this regard the definition of a person in s ection 1 of the 1996 Act refers to a natural or
juristic person , or group of such persons , depending upon the context.
[24] Generally a financial interest may be considered to be an interest i n the
nature of the expectation of a monetary profit, gain, or benefit , to be derived by a
party from providing services, participating in dealings, or acquiring ownership of an
asset . If reference were to be had to the definition of a financial interest in the 2010
Act, then the acquisition of shares in a company would arguably fall at least within
the right or entitlement to share in its profits or revenue , as well as a direct or indirect
interest in the voting rights attached to its shares.
[25] In the present matter it can be inferred that the acquisition of the shares in
GRR was motivated by their investment and income potential and to profit thereby.
In my judgment the acquisition of the shares in GRR clearly represented a financial
interest of more than five percent . The question then arises whether the transaction
represented an interest in the business to which Akani’s licence related.
[26] Since GRR, at all material times held all the issued shares of Akani , it was in
absolute control of Akani and its casino business . It is not without significance that
Mr Dower, the deponent to the applicants’ founding affidavit, stated that GRR h eld
various gaming licences throughout the Republic, one of which related to the Golden
Horse Casino , which was held in the name of Akani . The suggestion is that the
effective licen see of the Golden Horse Casino was in fact GRR and that Akani was
merely the instrument through which it controlled the business.
[27] It is in my view a position akin to a situation where the so called corporate veil
could be lifted , thus to disclose the real or substantial licensee as GRR, while Akani
is merely nominally the licensee under its absolute control . Effectively , therefore , a
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change of ownership in five percent or more of RCC’s shareholding would, in my
judgment, be the equivalent of such a change also in the shareholding of Akani and
the provisions of s ection 50(1) of the 1996 Act would , as a matter of law, be
triggered, irrespective of whatever opinion the Board may have formed in the
circumstances.
[28] The next issue then arising is whether AG, in concluding the transaction for
the acquisition of Casino s Austria’s shares in GRR, acquired a financial interest in
GRR , considering its assertion that it acted as an agent for its clients. In the context
of the applicants ’ explanation of the nature of the transaction , the immediate clients
of AG were AGUT, AG Life and AGSA, who in turn represented their individual
clients or investors to whom they in turn devolved the RCC shares thus acquired and
allocated to them .
[29] That gives rise to the question as to the nature of AG’s agency at the time of
concluding the transaction with Casinos Austria . There is no suggestion that , in the
manner and in the circumstances that the transaction was concluded, AG would
have disclosed to Casinos Austria the identities of its clients , namely AGUT, AG Life
and AGSA, or indeed their individual clients or investors , who they in turn
represented . The most probable conclusion to be drawn is that AG acted as an
agent for undisclosed principals.
[30] In Botha vs Giyose trading as Paragon Fisheries (2007) SCA 73 (RSA) ,
Combrinck JA at para 8 explained the position as follows:
It would appear that the doctrine of the undisclosed principal was not
fully understood. The rights of the agent as against the third party are
succinctly summarised by Joubert, LAWSA 2ed paras 228 and 231 as
follows:
Par 228: ‘In a standard situation of representation the representative
acquires no rights and incurs no liabilities from the contract concluded
by him or her on behalf of his or her principal. The rights and
obligations come into being between the principal and the third person.
In an undisclosed principal situation the intermediary and the third
person create vincula iuris between themselves by the contract
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concluded in their own names, but also so it is said, alternative vincula
iuris between the undisclosed principal and the third person.’
Par 231: ‘The contract is concluded between the third person and the
intermediary acting in his or her own name. The third person is in
terms of the contract liable to the intermediary. He or she cannot avoid
liability to the intermediary on the ground that he or she is liable to the
undisclosed principal, unless and until the undisclosed principal elects
to hold him or her liable.’
[31] It follows that A G, as agent for undisclosed principals, would have been the
party which acquired the shares in RCC from Casinos Austria . To whom it thereafter
passed on the shares in terms of its agency obligations and who paid Casinos
Austria for them would not affect the fact of the contract for the acquisition of the
shares that was concluded as between AG and Casinos Austria.
[32] The i mportant point , however, is that for purposes of the application of s ection
50(1) of the 1996 Act AG acquired , in so contracting , at the very least at an apparent
or prima facie level, a financial interest in the business of the Golden Horse Casino,
which GRR held through its subsidiary licensee Akani .
[33] That, in my judgment triggered the provisions of section 50(1) of the 1996 Act
and required the licensee, whet her GRR itself or through its subsidiary Akani , to
have applied to the Board for its consent and in terms of the provisions of s ection
50(2) AG and its clients or principals would then have become the subject of
investigation as contemplated in the 1996 Act. It is d uring the course of that
application and concomitant investigation that the issues raised by the applicants in
the present application would be clarified. It follows that there is no justification for
this Court to hear or al evidence, or make final findings, upon any of these factual
issues . That would be to usurp the functions of the Board.
[34] In the lig ht of the conclusions to which I have come above it remains to
consider the various issues raised by the parties during the course of these
proceedings.
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[35] The applicants, in the first instance, sought to review and set aside the
decision s of the Board requiring AG and/or one or more of the other ap plicants , to
make an application to it for its consent to the acquisition of the shares in GRR from
Casinos Austria .
[36] In this regard Regulation 47(2) of the Regulations under the 1996 Act
provided that any person who directly or indirectly procured an interest of five
percent or more in the business of a licensee would be required, within fourteen
days, to apply to the board for its consent thereto. In view of the subsequent repeal
of the se Regulations , the applicants did not pursue their claim to declaring
Regulations 47 to 49 ultra vires , but contend that this remains relevant to the issue of
costs only.
[37] When regard is had to the provisions of s ection 50(2) of the 1996 Act, it
rendered the application provisio ns of sections 28 to 34 of the 1996 Act also
applicable the person which proposed to acquire the interest in the business to which
the licence related. Effectively such a person would become a party and thus a co -
applicant for such consent. In those circumstances I am not persuaded that that the
Regulation s were ultra vires. However, since the challenge to the validity of the
Regulations were not pursued , I need not make any formal finding in this regard.
[38] However, in view of my conclusion that , in terms of the provisions of s ection
50(1) of the 1996 Act , the Board ’s consent to the acquisition of Casinos Austr ia’s
shareholding by AG in GRR was required , the claim for the setting aside of the
Board ’s decision s relevant to requiring an application to be made to i t cannot
succeed.
[39] Since an application for consent needs to be made to the Board , or more
correctly, now to the new Board constituted in terms of the 2010 Act, any findings
regarding the suitability, or otherwise , effectively becomes moot and falls away.
[40] The prayer to declare Regulations 47 to 49 was, as already indicated , not
pursued and effectively also falls away.
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[41] The further order s sought (in paragraph s B4 and B5 of the notice of motion)
declaring that the applicants did not acquire a financial interest , as contemplated in
section 50(1) of the 1996 Act , or as defined in the 2010 Act or the National Gambling
Act, in the business of Akani are, for the reasons discussed, without merit.
[42] Likewise the declaratory relief sought in paragraph B6 of the notice of motion
cannot succeed , also for the reaso ns already discussed.
[43] The issue of costs will be addressed separately below and t he matter of the
joinder of Casinos Austria and GRR was resolved by their earlier formal joinder in
these proceedings .
[44] I turn now to the counter application, said to be by the Board as second
respondent. The strange situation came about where the original Board, as
constituted in terms of the 1996 Act , ceased to exist prior to the appointment of the
members of the new Board constituted in terms of the 2010 Act.
[45] During this interim period the actions and administrative functions of the
original Board were alleged to have been performed by its Acting Chief Ex ecutive
Officer in terms of powers delegated to him by the original Board. He, in turn,
purported to authorize Ms Stretch, the Board’s Legal Manager, to depose to its
answering affidavit and make its counter application for re lief.
[46] Subsequently and after the new Board was constituted in terms of the 2010
Act, it assumed the functions of its predecessor and by resolution adopted on 25
June 2012 resolved as per annexure R.1 at page 516 of the application papers , inter
alia, to oppose the application, adopt and ratify the actions of its predecessor and its
officials taken during the intervening period prior to the appointment of the new
Board and to pursue the re lief sought in the counter application.
[47] The a pplicants opposed the counter application and contended that the
attempted ratification of the actions of the officials purporting to act on behalf of the
Board was without force or effect. On behalf of the Board counsel submitted that
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though the Board did not exist during the hiatus , the subsequent ratification was valid
and of full force.
[48] In this regard reliance was placed upon the decision in Lynn NO v Coreejes
2011 (6) SA 507 ( SCA) at paras 14 and15 where Majiedt , JA held that the launching
of legal proceedings was a procedural step and where the actor expressed the
intention to act , not on her or his own behalf but on behalf of another, it was a
general rule of the law of agency that such an act of an “unauthorised agent” c ould
be ratified with retrospective effect.
[49] Also in Nampak Products Ltd t/a Nampak Flexible Packaging v Sweetcor (Pty)
Ltd 1981 (4) SA 919 (T) , Ackermann J held that 924D that in appropriate
circumstances a Court would allow a ratifying resolution or authorisation to be filed
when no authority existed previously to institute or to defend an action.
[50] In the circumstances I am of the view that the adoption and ratification by the
new Board of the actions taken by or on behalf of its predecessor is valid and that it
is permissible for it to pursue the relief sought in terms of the counter application.
[51] In the counter application (at page 234, paragraph 18) the Board seeks the
following order, namely:
18.1 An order declaring that section 5 0 of the KwaZulu -Natal Gambling Act
No.10 of 1996 applied and applies to the acquisition of the shares held by
Casinos Austria International Holdings Gmb H in Gold Reef Resorts Limited by
one or the other of the Applicants.
18.2 An order declaring the transaction referred to in the abovementioned
order to be illegal and of no force and effect without the consent of Second
Respondent in terms of Section 50 of the said Act.
There is no order sought with regard to costs.
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[52] In view of the conclusions to which I have come and as set out above, the
relief sought in paragraph 18.1 is competent, save that it should reflect the
acquisition of the shareholding by AG only.
[53] The 199 6 Act is in my view clear in its requirement that an affected interest in
the business of a licensee requires the Board’s consent in order to become effective.
Were it to be otherwise the essential object s of the Act to control the gaming and
gambling industry and to investigate and evaluate parties who participate therein ,
would be def eated.
[54] It follows that the relief sought in paragraph 18.2 is likewise competent and
that the cou nter application should succeed .
[55] There remains the issue of costs. In my view the papers have bee n unduly
voluminous and time and space devoted to either frivolous or unnecessary side
issues , instead of focussing upon the essential issue at stake, namely whether in the
circumstances of the transaction to acquire the shares of Casinos Austria and the
objects of the 1996 Act , the provisions of section 50(1) of the Act became applicable.
[56] The conduct of the Board acting under the 199 6 Act, was at times confusing
and open to criticism . On the other hand the determined and persistent conduct of
the respondents in resisting having to make an application as contemplated in
Section 50(2) of the 1996 Act does not reflect well upon them either .
[57] Having given serious consideration to the issue of costs and despite the
effective failure of the application relief sought by the applicants and the success of
the belated counter application by the Board, I have come to the conclusion that, in
the exercise of my discretion, I should make no order as to costs in favour of any of
the parties to the litigation.
[58] In the result the flowing order will issue, namely that:
a. The application by the applicants is dismissed.
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b. The counter application by the second respondent succeeds ; and
i. It is declared that section 50 (1) of the KwaZulu -Natal Gambling
Act No.10 of 1996 applied and applies to the acquisition of the
shares held by Casinos Austria International Holdings GmbH in
Gold Reef Resorts Limited by the First Applicant .
ii. It is further declared that the transaction referred to in sub-
paragraph (i) above is illegal and of no force and effect without
the consent of Second Respondent in terms of Section 50 (1) of
the said Act.
c. There will be no order as to costs, including any costs previously
reserved.
_________________
VAN ZYL, J.
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Appearances
Judgment reserved : 12 December 2012
Judgment delivered: 25 April 2025
For the First, Second , Third and Fourth Applicants :
Adv P Olsen SC and with him
Adv P Farlam
Adv R Garland
Instructed by:
Edward Nathan Sonnenbergs
Applicant s’ Attorneys
Cape Town
Care of:
Tatham Wilkes & Co
Pietermaritzburg
Ref: Mr H Drummond /Nadia/A925
Tel: 033 345 3501
For the First, Second and Third Respondents :
Adv A J Dickson SC
Instructed by: -
Venn Nemeth and Hart
Pietermaritzburg 3201
17
Ref: Mr M Motala/Nadia/13K020211
Tel: 033 355 3100