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[2019] ZASCA 1
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Recycling and Economic Development Initiative of South Africa v Minister of Environmental Affairs; Kusaga Taka Consulting (Pty) Ltd v Minister of Environmental Affairs (1260/2017; 188/2018; 1279/2017; 187/2018) [2019] ZASCA 1; [2019] 2 All SA 1 (SCA); 2019 (3) SA 251 (SCA) (24 January 2019)

THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
No’s: 1260/2017 and 188/2018
In
the matter between:
RECYCLING
AND ECONOMIC DEVELOPMENT
INITIATIVE
OF SOUTH
AFRICA                                                                      APPELLANT
and
THE
MINISTER OF ENVIRONMENTAL
AFFAIRS                                       RESPONDENT
AND
Case
No’s: 1279/2017 and 187/2018
In
the matter between:
KUSAGA
TAKA CONSULTING (PTY)
LTD                                                     APPELLANT
and
THE
MINISTER OF ENVIRONMENTAL
AFFAIRS                                       RESPONDENT
Neutral
citation:
Recycling and Economic Development Initiative of
South Africa v The Minister of Environmental Affairs
(1260/2017
and 188/2018) and
Kusaga Taka Consulting (Pty) Ltd v The Minister
of Environmental Affairs
(1279/2017 and 187/2018)
[2018] ZASCA 01
(24 January 2019)
Coram:
Cachalia, Saldulker, Van der Merwe and Molemela JJA and Rogers
AJA
Heard:
1 and 2 November 2018
Delivered:
24 January 2019
Summary:
Application to wind up solvent companies in terms of s 81 of
Companies Act 71 of 2008 (the 2008 Act); whether Minister of
Environmental
Affairs may invoke s 157(1)
(d)
of the Act for
standing in the public interest – whether
ex parte
proceedings and failure to disclose material facts warrants
discharge of provisional orders – whether just and equitable
for
companies to be wound up.
ORDER
On
appeal from:
Western Cape Division of the High Court, Cape Town
(Henney J sitting as court of first instance): judgment reported
sub
nom Minister of Environmental Affairs v Recycling and Economic
Development Initiative of South Africa NPC
2018 (3) SA 604
(WCC).
The
following order is made in case no’s 1260/2017 and 188/2018:
(a)
The appeal succeeds with costs including the costs of two counsel.
(b)
The order of the court a quo on 15 September 2017 finally winding up
the appellant (Redisa) is set aside and replaced
with the following:
‘
The
order of 1 June 2017, placing the respondent (Recycling and Economic
Development Initiative of South Africa) under provisional
liquidation
is discharged and the Minister’s application is dismissed with
costs, including the costs of two counsel.’
The
following order is made in case no’s 1279/2017 and 187/2018:
(a)
The appeal succeeds with costs including the costs of two counsel.
(b)
The order of the court a quo on 15 September 2017 finally winding up
the appellant (KT) is set aside and replaced with
the following:
‘
The
order of 8 June 2017 placing the respondent (Kusaga Taka Consulting
(Pty) Ltd) under provisional liquidation is discharged and
the
Minister’s application is dismissed with costs, including the
costs of two counsel.’
JUDGMENT
Cachalia
JA (Saldulker and Van der Merwe JJA and Rogers AJA concurring)
Table
of Contents
Introduction                                                                                                                           4
Background                                                                                                                          7
The
Redisa
Plan                                                                                                                   7
The
management contract with
KT                                                                                       8
The
iSolveit ‘review’ (and events leading to the
ex parte
applications)                               12
Disclosure
– legal
principles                                                                                               16
The
Minister’s breach of
non-disclosure.                                                                            18
The
Western Cape and Gauteng
litigation                                                                          19
The
non-disclosures regarding the relationship between Redisa and
KT                          22
The
presentation of 23 May
2017                                                                                       25
The
Minister’s letter of 30 May
2017                                                                                  27
Ex
Parte
proceedings                                                                                                         29
The
Minister’s recourse to
ex parte
proceedings                                                                31
Conclusion
in relation to the
ex parte
proceedings                                                             32
Whether
the winding-up was just and
equitable                                                                 33
The
Minister’s new
case                                                                                                     35
The
abuse of corporate personality and contravention of item 1(3) of
Schedule
1 of the 2008
Act                                                                                                 37
The
A@L
report                                                                                                                  38
Loss
of the substratum of Redisa and
KT                                                                          41
Conclusion
on just and equitable
grounds                                                                          43
The
Minister’s Standing in terms of s 157(1)
(d)
of the 2008
Act                                         43
An
Intergovernmental
dispute                                                                                             53
Conclusion                                                                                                                          55
Minority
judgment                                                                                                               57
Introduction
[1]
This appeal arises from
two consolidated applications in the Western Cape Division of the
High Court Cape Town,
[1]
in which two solvent companies were placed under final liquidation at
the instance of the Minister of Water and Environmental Affairs.
[2]
For convenience I shall hereafter refer to the said Minister as ‘the
Minister’ or as the ‘Environment Minister’
where it
is necessary to distinguish between ministers of different
departments. The first, Recycling and Economic Development
Initiative
of South Africa (Redisa), is a non-profit company; and the second,
Kusaga Taka Consulting (Pty) Ltd (KT), a private
company. They are
the appellants. The Minister opposes both appeals.
[2]
Redisa was responsible
for the implementation of a waste tyre recycling scheme – the
only one of its kind in South Africa
– under the ‘Redisa
Plan’ since 2012.
[3]
The Plan entailed the creation and management of a national network
for collecting waste tyres, storing them and delivering them
to
recyclers for processing. This was envisaged as the beginning of a
nascent waste tyre recycling industry, and the foundation
of
secondary industries for the use of products created by recyclers.
The Plan was funded from a waste tyre management fee that
tyre
manufacturers paid to Redisa in terms of the Waste Tyre
Regulations
[4]
promulgated under the Environment Conservation Act 73 of 1989 (ECA).
The operative provisions of the ECA have been repealed, but
the
regulations remain valid under the National Environmental Management:
Waste Act 59 of 2008 (the Waste Act). They provide for
the
preparation, content, approval and review of waste tyre management
plans, referred to as ‘integrated industry waste tyre

management plans’, which are ‘industry waste management
plans’ under the Waste Act. Their purpose is to control
the
management of waste tyres and direct the manner in which waste tyres
are to be collected and remediated.
[3]
On 29 November 2012, the Minister approved an ‘industry
waste tyre management plan’ that Redisa had conceptualised and

submitted to her under the Waste Act. This is the ‘Redisa Plan’
hereafter ‘the Plan’. It was the product
of several years
of development by its creators and was published in the Government
Gazette on 30 November 2012. As the Minister
states, it is or was, at
the time of the proceedings in the court a quo, ‘currently the
only waste management measure in
place for the management of waste
tyres’. The Redisa Plan operates indefinitely, subject to a
review conducted every five
years. The first was in November 2017.
Redisa contracted KT to manage the implementation of the Plan. The
Minister approved all
of this and publicly commended its
implementation ‘as an important case study on how (to) . . .
turn waste to worth’.
[4]
But, three weeks after making this statement, on 1 June 2017,
the Minister sought and obtained an
ex parte
‘extremely
urgent’ provisional order; first against Redisa and then
against KT, on the same basis, a week later. When
Redisa and KT
learnt of this, they applied, also urgently, for the provisional
orders to be discharged. The applications were heard
on 5 and 6 July
2017 and judgment was given on 15 September 2017 finally winding-up
both entities, on ‘just and equitable’
grounds. In
addition, the court ordered that their assets be distributed to the
Waste Management Bureau (WMB), a public body established
under the
Waste Act. In this regard the court a quo seems to have overlooked
the fact that the Minister had abandoned this extraordinary
relief at
the beginning of the hearing. The order was patently unlawful as it
amounted to an arbitrary deprivation of Redisa’s
and KT’s
assets in violation of s 25 of the Constitution. The orders were
formally abandoned after the judgment.
[5]
In finding that it was just and equitable to wind-up the
appellants, the court a quo upheld the Minister’s broad
contention
that certain of Redisa’s directors had not disclosed
their relationship with or significant shareholding in KT and that
this
had enabled them to misappropriate public funds by using KT as
their vehicle to unlawfully channel funds collected by Redisa under

the Plan for their personal benefit. It also upheld the Minister’s
second ground for winding up Redisa, which was that Redisa’s

business plan on 23 May 2017 had acknowledged that it would have to
begin to ‘wind down’ from 1 June 2017, if the Department

of Water and Environmental Affairs (the Department) allocated
insufficient funds to meet its operational requirements. So, once

Redisa was wound up, KT had to follow as its existence was entirely
dependent upon the money it generated through the Plan. The
reasons
for the cessation of Redisa’s funding as contemplated in the
Plan will be explained below.
[6]
The appellants applied for leave to appeal against the
judgment and orders on several grounds: First, they said, the factual
findings
of impropriety against them were not sustainable having been
comprehensively refuted in their answering papers; secondly, they
asserted, there were no proper grounds for the resort to
ex parte
proceedings on the basis of bald assertions that they would
dissipate public funds or tamper with evidence if notified of the
application;
thirdly, and crucially, they pointed out that having
elected to proceed
ex parte
, the Minister had failed in her
strict duty to disclose all relevant material to the court. In
particular, they emphasised that
she had not disclosed that her
application to wind up Redisa was the latest in a series of attempts
by her to close down Redisa
and terminate the Redisa Plan, which
Redisa had challenged by way of review on three occasions in the high
court. The first was
successful and the two other applications were
pending and well advanced when she launched this application. The
Minister’s
conduct, they complained, warranted, without more, a
discharge of the provisional orders against them. They also contended
that
it was in any event not shown that it was just and equitable to
order their winding-up. Finally, they argued that the court a quo
had
erred in conferring standing on the Minister, purportedly in terms of
s 157(1)
(d)
of the Companies Act 71 of 2008 (the 2008 Act), to
wind up the two solvent companies.
[7]
The court a quo granted leave to appeal to this court only on
the fourth ground the
locus standi
point, but refused leave on
the other grounds. This court subsequently granted leave on those
grounds as well. It is now necessary
to explore the facts in more
detail. As most of the facts are common to both applications it will
be convenient to recount them
in a single narrative.
Background
The
Redisa Plan
[8]
The Waste Act is intended to give effect to the environmental
rights in s 24 of the Bill of Rights. Its objects include providing

for reasonable measures for recycling and recovering waste, treating
and safely disposing of waste as a last resort, and promising

ecologically sustainable development while promoting justifiable
economic and social development.
[9]
Section 6 obliges the Minister to establish a binding national
waste management strategy to give effect to the objects of the Act.

Part 7 of Chapter 4 provides for the establishment of ‘industry
waste management plans’, which can be formulated by
a private
entity or by an organ of state. They regulate how an industry’s
waste is to be avoided, minimised, recycled, developed
and disposed
of.
[10]
Waste tyres are an environmental problem and pose health risks
if not disposed of safely. Approximately one million waste tyres are

generated each month in South Africa. In addition, a large stockpile
of waste tyres has accumulated over a few decades. The purpose
of the
Plan is to manage this problem.
[11]
The Plan was self-funding. Regulation 9(1)(k) of the Waste
Tyre Regulations required producers to pay a fee to Redisa of R2,30
(excluding
VAT) per kg of manufactured or imported tyres, for the
collection, storage and processing of waste tyres. This endured until
February
2017, when the regulation was repealed, the circumstances of
which are discussed later.
[12]
Redisa was obliged to report to the Minister at regular
intervals on certain key metrics and to submit annual audits to
explain
Redisa’s finances and the ‘extent of the
independence of the Redisa Board’. It did so. Its audited
financial
statements were unqualified.
The
management contract with KT
[13]
The Plan explicitly states that an ‘external management
company’ shall be responsible for its implementation and
management.
Redisa’s memorandum of incorporation (MOI) also
provides for this. The rationale for the appointment of a management
company
was to ensure ‘confidentiality through the separation
of functions [which] . . . is of vital importance to the
competitiveness
of the entire industry’.
[14]
The functions to be performed by the management company are
extensive and include: managing Redisa’s financial affairs;
monitoring
compliance by tyre manufacturers; furnishing consolidated
management accounts and reporting; managing Redisa’s
operations;
implementing and managing a National Centralised Computer
System (NCCS); and reporting annually to the Department on all
aspects
of the Plan. The Plan stipulates that 20 per cent of the
levies collected from tyre manufacturers, ie of the R2,30 per kg,
will
be allocated to administration (of which KT’s management
fee would form part). The Minister was obviously aware of all of
this
from the outset.
[15]
Pursuant to the management agreement, KT employed more than
100 administrative employees, who were engaged on a full-time basis
in the administration of the Plan. It administered some 440 contracts
between Redisa and more than 120 transporters, depot operators
and
waste tyre processors, and also roughly 3 000 waste tyre collection
points throughout South Africa. It did so by arranging
depots to
collect waste tyres; co-ordinated the transportation of waste tyres
(via transporters) to waste tyre processors; and
managed the
distribution of the final processed products.
[16]
KT used sophisticated proprietary hardware and software to
track and monitor all waste tyres from their initial collection to
their
processing into end-products. It also provided training to the
various participants in the Plan, including transporters, depot
operators and processors, and monitored their compliance (and the
compliance of tyre manufacturers) with environmental and other

aspects of the Plan.
[17]
The management contract between KT and Redisa provided for
Redisa to pay KT a management fee of 18 per cent of the total levy
from
tyre manufacturers, which was less than the 20 per cent
stipulated under the Plan. The Minister could not but have been aware
of
this from the beginning. The remaining two per cent of the 20 per
cent, which the Plan earmarked for administration, would cover

Redisa’s separate overheads.
[18]
KT’s evidence was that it received fees strictly in
accordance with the management agreement. The Minister disputed this
in
her replying affidavit on the basis of a ‘cursory’ and
‘preliminary’ report by a firm called Accountants
@ Law
(Pty) Ltd (A@L) – dealt with in detail below – in which
it was claimed that management fees amounted to 19.24
per cent. In
Redisa’s rebutting affidavit – filed in response to the
Minister’s new evidence – it was pointed
out that A@L’s
calculation was incorrect, and that properly calculated, fees paid to
KT amount to 17.64 per cent of Redisa’s
turnover. This dispute
of fact aside, it was thus common cause that the fees KT received
from Redisa fell within the 20 per cent
allocation the Minister had
approved.
[19]
The management agreement contemplated that KT would incur
start-up costs in respect of the Plan, which would be passed on to
Redisa.
KT also invoiced Redisa for expenses and disbursements made
on Redisa’s behalf, but which fell outside of the scope of the

administration and implementation of the Plan. These were invoiced on
a ‘strict cost basis’ – ie, on the basis
that these
costs were simply passed on to Redisa without a mark-up – and
were reflected as such in KT’s annual financial
statements.
KT’s income and expenditure was audited by external auditors,
and, like Redisa, it received unqualified audits
each year. This too
the Minister could not dispute.
[20]
It is common cause that three of Redisa’s executive
directors, Mr Herman Erdmann, Ms Charlene Kirk and Ms Stacey-Inger
Davidson,
are indirect shareholders of KT. Also not in dispute is
that none of Redisa’s directors are directors of KT (or
vice
versa
), and there is not and never has been any overlap between
the Redisa and KT boards.
[21]
Further, Mr Erdmann of Redisa and Mr Christopher Crozier of KT
both testified in their affidavits that the Minister and officials

within the Department were well aware that certain of Redisa’s
executive directors had interests in KT. According to them,
this was
discussed with officials in the Department before the Plan was
promulgated.
[22]
Redisa’s directors’ report for the financial year
ended 28 February 2014, which was provided to the Minister,
corroborates
their testimony. It reads thus:
‘
The
executive directors are shareholders of Kusaga Taka Consulting
Proprietary Limited, which has been contracted as service provider
by
REDISA to support it in the implementation of the Plan that has been
promulgated by Gazette. The executive directors excused
themselves
and the non-executive directors concluded the contract.
This
interest had furthermore been declared to the relevant government
institutions and industry bodies beforehand
.’ (My
emphasis.)
[23]
The notes to Redisa’s audited financial statements for
the same year also disclosed the relationship between Redisa’s

executive directors and KT, in these terms:
‘
The
management company, Kusaga Taka consulting Proprietary Limited is
related to [Redisa] as the executive directors of Redisa are

shareholders of this company.’
[24]
Faced with this evidence, the Minister conceded in argument
before the court a quo that her claim to have become aware of the
relationship
between Redisa’s directors and KT only in May
2016, was wrong. The Minister also alleged in her founding affidavit
that a
copy of the management contract between Redisa and KT had been
withheld by the parties.
[25]
This too was misleading. The Minister did not disclose that in
a letter from Redisa to her dated 30 November 2016 (which was
attached
to her founding affidavit in both the Redisa and KT
applications), Redisa informed her that a copy of the management
contract had
been provided to iSolveit and the Department on 17 March
2016, 21 July 2016 and 7 September 2016. The Minister did not reply
to
this letter. The Minister’s founding affidavit did not draw
the court’s attention to this portion of the letter, which

contradicted what she had said in her affidavit, even though she had
dealt with other aspects of the letter in detail. There remains
a
dispute of fact on the papers as to whether the management contract
was withheld from the Minister and the Department. But, in
accordance
with the rule regarding evidence in motion proceedings, Redisa’s
version must be accepted.
[26]
As I have said, the Plan provided for Redisa to fund its
operations from the tyre levy collected from producers. Midway
through
the first five-year period of the Plan, however, the
government began exploring changes to the funding model for waste
management
plans in general, of which Redisa’s Plan was at the
time the only one in operation so far as we know. The legislative
foundation
for this new model was s 13A of the National Environmental
Management: Waste Amendment Act 26 of 2014 which came into force on 2

June 2014. This section required the Environment Minister, in
concurrence with the Minister of Finance, to publish in the
Government Gazette
a pricing strategy to achieve the
objectives of the Act in relation to waste management. Section 17 of
the Amendment Act stipulated
that existing industry waste management
plans were subject to the provisions of the Amendment Act and the
pricing strategy, and
that a plan operator had to align its plan with
the provisions of the Act and the pricing strategy.
[27]
Redisa opposed the change in the funding model but it was
eventually implemented. The principal instruments by which this was
achieved
were the National Pricing Strategy (the Strategy)
promulgated on 11 August 2016 and amendments to the Waste Tyre
Regulations which
were promulgated on 2 December 2016. A new
regulation, 9(1)(jA), required that a waste management plan (meaning,
practically speaking,
the Redisa Plan) had to be aligned to the
Strategy for waste management charges. The effect of this was that as
from 1 February
2017 Redisa was no longer entitled to collect tyre
levies from producers. Instead, it became dependent on an allocation
of funds
from the Department (which in the event was not
forthcoming). Since tyre levies in terms of the Plan were payable
several months
in arrears, the last payments Redisa were entitled to
receive were in May 2017.
[28]
During the latter part of 2016, Redisa launched two review
applications in the North Gauteng Division of the High Court, the
first
application directed at the Strategy, the later, at the amended
regulations. Those review applications were pending when the ex
parte
orders were made for the provisional winding-up of Redisa and KT.
The
iSolveit ‘review’ (and events leading to the ex parte
applications)
[29]
In February 2016, the Department appointed a firm called
iSolveit Consulting to conduct an ‘audit on Redisa for
alignment
with the Amendment Act’. ISolveit is not an
accredited auditing firm.
[30]
In her founding affidavit, the Minister alleged that she and
the Department had only ‘discovered during May 2016, when the

Department received a report from iSolveit Consulting’ that
certain of Redisa’s executive directors have an interest
in KT.
This was not correct. In reply, and in response to the answering
papers, she adjusted her version, accepting that the executives’

interest had been known since at least receipt of Redisa’s
financial statements for the 2014 financial year.
[31]
Between February and June 2016, iSolveit audited Redisa and
sought documentation from it. On 11 June 2016, iSolveit provided the

Department with a document misleadingly called a ‘Final
Report’, a copy of which was provided to Redisa on 13 June

2016. The report was not final. It claimed that Redisa had not
provided certain documents, which is disputed.
[32]
Following this, Redisa provided iSolveit and the Department
with further documentation and information. Mr Erdmann and Ms
Davidson,
two of Redisa’s directors, say that on 21 July 2016,
while Redisa was compiling information and documentation for
submission,
Dr Padayachee of iSolveit advised them that continued
participation in the review was a ‘waste of time’ because
the
Minister was intent on removing Redisa’s ability to collect
a fee through the tyre levy. Neither the Minister, nor Dr Padayachee,

denied this allegation. More disturbingly, Dr Padayachee does not
deny another allegation made by Redisa, that iSolveit sought
a R1
million ‘sponsorship’ from Redisa.
[33]
On 12 August 2016, iSolveit produced another document titled
‘Key Findings Report’, which it said was based on a
‘cursory
perusal’ of the documentation supplied by
Redisa. It states that upon receipt of additional information,
‘further recommendations’
would be made. Redisa
maintained that it had provided all of the information requested at
that stage. On the same day, Redisa met
with the Department.
Nonetheless, Redisa was asked to furnish further information and
documentation; it insists it did so on 2
and 7 September 2016.
[34]
During October 2016, the Department’s Director-General
wrote to Redisa about its alleged non-cooperation with the iSolveit

audit. Redisa firmly denied this. Thereafter, on 1 November 2016, in
a letter dated 31 October 2016, the Minister informed Redisa
of the
Department’s ‘conclusions’ regarding Redisa’s
performance in light of ‘the iSolveit report’.
She said
that Redisa had deviated from the Plan, had not complied with certain
regulatory instruments, and was guilty of a ‘lack
of
accountability’. The Minister called upon Redisa, within 15
working days, to produce ‘written reasons, substantiated
with
documentary evidence’, why she should not withdraw the Plan.
[35]
The Minister granted Redisa an extension until 30 November
2016 to respond. Redisa met the deadline with a comprehensive
response.
However, on 29 November 2016, the day before the response
was due and thus without having considered such response, the
Minister
issued a ‘directive’, purportedly in terms of s
32(1)
(a)
of the Waste Act, in which she supposedly took
control of Redisa and its operations. The directive required Redisa,
except with
her approval, to cease ‘any process for the
acquisition or disposal of its assets’; refrain from concluding
‘any
new contract with any party whatsoever’, and desist
from incurring ‘any liabilities whatsoever’.
[36]
In response to the directive Redisa instituted urgent
proceedings in the Western Cape Division of the High Court to
interdict its
implementation pending a review to set it aside. The
Minister disingenuously argued
in limine
that she was not
aware of the directive in question because Redisa had erroneously
said in its notice of motion that the directive
was dated 14 November
2016, instead of 29 November 2016. The Western Cape Division (Davis
J) trenchantly criticised the point taken
as a ‘form of
litigation’ that was ‘extremely disturbing coming from a
Minister of State’. Redisa’s
application for interdictory
relief was granted with costs on 28 December 2016. The Minister
subsequently withdrew the directive.
[37]
Neither the Minister nor iSolveit responded to Redisa’s
submissions of 30 November 2016. The first time that Redisa had sight

of iSolveit’s report, dated 3 February 2017 (upon which the
Minister relied in June 2017 for
ex parte
relief), was when it
received the Minister’s founding affidavit, after the
provisional winding- up order had been made.
[38]
As I have said, the Strategy was promulgated in August 2016
and the amended regulations in early December 2016, both of which
were
attacked in the review proceedings Redisa had instituted in the
North Gauteng Division.
[39]
The Minister filed lengthy, but incomplete answering
affidavits, which delayed the finalisation of these applications.
Redisa was
about to file replying affidavits in both matters when the
Minister obtained the
ex parte
provisional order, effectively
stymieing the litigation in both matters.
[40]
On 22 February 2017, an Appropriation Bill was published. It
envisaged that Redisa was to receive R210 million from the Department

by way of funding from the new tyre tax. However, it did not receive
any amount and was expected to survive on its reserves until
an
uncertain future date when its funding model was resolved.
[41]
On 23 May 2017 Redisa
presented a business plan to the Department in which it explained
that unless the funding issues were resolved,
Redisa would scale back
its operations from 1 June 2017 and that it had already informed
stakeholders that it would have to ‘wind
down’ its
operations. The Minister said in her founding affidavit that the
document reflected an alarming and sinister dissipation
of cash,
which prompted her to institute the
ex
parte
proceedings on 1 June
2017. But, as I shall show below, she understood that the difficult
financial position in which Redisa found
itself was directly related
to her attempts to cut off its funding source – the tyre levy –
and she also misrepresented
Redisa’s actual financial
position.
[5]
[42]
At the presentation Redisa undertook to present a transitional
business plan to support a request for transitional funding of R220

million. The plan would also deal with its alignment with the amended
Waste Act, the Strategy and the amended Waste Tyre Regulations,
for
the Minister’s consideration. The business plan was delivered
to the Department on 31 May 2017, but was not attached
to the
Minister’s founding papers.
[43]
On 30 May 2017, at the same time she deposed to her founding
affidavit in the Redisa winding-up application, the Minister wrote to

Redisa, advising of her intention to amend the Plan, and calling upon
it to ‘participate in the public participation phase
of this
process’ by submitting comments. But, on her own version she
had already decided to institute winding-up proceedings
against
Redisa, which she would have known, would have the effect that Redisa
would not be able to participate in this process.
On 31 May 2017
Redisa published notices indicating that it was suspending its
services as from 1 June 2017.
[44]
This, then, is the background to the Minister’s
ex
parte
application to wind-up Redisa first, and then KT. It is
convenient now to consider the complaint by the appellants regarding
the
Minister’s use of
ex parte
proceedings and her
failure to disclose material facts to the court. I deal with the
principles relating to non- disclosure first.
Disclosure
– legal principles
[45]
The principle of
disclosure in
ex parte
proceedings is clear. In
NDPP v Basson
[6]
this court said:
‘
Where
an order is sought
ex parte
it is well established that the
utmost good faith must be observed. All material facts must be
disclosed which might influence a
court in coming to its decision,
and the withholding or suppression of material facts, by itself,
entitles a court to set aside
an order, even if the non-disclosure or
suppression was not wilful or
mala fide
(
Schlesinger v
Schlesinger
1979 (4) SA 342
(W) at 348E–349B).’
[46]
The duty of the utmost good faith, and in particular the duty
of full and fair disclosure, is imposed because orders granted
without
notice to affected parties are a departure from a fundamental
principle of the administration of justice, namely,
audi alteram
partem
. The law sometimes allows a departure from this principle
in the interests of justice but in those exceptional circumstances
the
ex parte
applicant assumes a heavy responsibility to
neutralise the prejudice the affected party suffers by his or her
absence.
[47]
The applicant must thus
be scrupulously fair in presenting her own case. She must also speak
for the absent party by disclosing
all relevant facts she knows or
reasonably expects the absent party would want placed before the
court. The applicant must disclose
and deal fairly with any defences
of which she is aware or which she may reasonably anticipate. She
must disclose all relevant
adverse material that the absent
respondent might have put up in opposition to the order. She must
also exercise due care and make
such enquiries and conduct such
investigations as are reasonable in the circumstances before seeking
ex parte
relief.
She may not refrain from disclosing matter asserted by the absent
party because she believes it to be untrue. And even where
the
ex
parte
applicant has
endeavoured in good faith to discharge her duty, she will be held to
have fallen short if the court finds that matter
she regarded as
irrelevant was sufficiently material to require disclosure. The test
is objective.
[7]
[48]
As Waller J said in
Arab
Business Consortium
,
[8]
points in favour of the absent party should not only be drawn to the
Judge’s attention, but must be done clearly:
‘
There
should be no thought in the mind of those preparing affidavits that
provided that somewhere in the exhibits or in the affidavit
a point
of materiality can be discerned, that is good enough.’
[49]
The
ex parte
litigant should not be guided by any
notion of doing the bare minimum. She should not make disclosure in a
way calculated to deflect
the Judge’s attention from the force
and substance of the absent respondent’s known or likely stance
on the matters
in issue. Generally this will require disclosure in
the body of the affidavit. The Judge, who hears an
ex parte
application, particularly if urgent and voluminous, is rarely
able to study the papers at length and cannot be expected to trawl

through annexures in order to find material favouring the absent
party.
[50]
In regard to the court’s
discretion as to whether to set aside an
ex
parte
order because of
non-disclosure, Le Roux J said in
Schlesinger
v Schlesinger
[9]
‘
.
. . [U]nless there are very cogent practical reasons why an order
should not be rescinded, the Court will always frown on an order

obtained ex parte on incomplete information and will set it aside
even if relief could be obtained on a subsequent application
by the
same applicant.’
[51]
This is consistent with
the approach in English law, that if material non- disclosure is
established a court will be ‘astute
to ensure that a plaintiff
who obtains [an
ex parte
order] without full
disclosure, is deprived of any advantage he may have derived by that
breach of duty’.
[10]
[52]
As to the factors that
are relevant in the court’s exercise of its discretion whether
or not to set aside an
ex
parte
order on grounds of
non-disclosure, in
NDPP v
Phillips
[11]
this court said that regard must be had to the extent of the non-
disclosure, the question whether the Judge hearing the
ex
parte
application might
have been influenced by proper disclosure, the reasons for
non-disclosure and the consequences of setting the
provisional order
aside
.
The
Minister’s breach of disclosure duty
[53]
The Minister’s founding papers in the Redisa application
run into almost 200 pages and the annexures another 800. It is
voluminous
and difficult to read. The case made out by the Minister
and upon which the court granted the provisional order in the Redisa
application
was broadly this: Redisa and KT were involved in a covert
scheme to divert and misappropriate public funds. They did this by
witholding
information from the Minister and the Department
pertaining to the management contract between the parties and the
financial interests
that certain of Redisa’s directors had in
KT. The extent of the misappropriation became apparent only when
Redisa presented
its business plan to the Department on 23 May 2017
revealing that cash and reserves were being rapidly depleted, which
prompted
the
ex parte
application.
[54]
The Minister’s founding affidavit, however, fell far
short of the disclosure required in
ex parte
proceedings.
Where she made disclosure, it was one-sided. There was also material
non-disclosure. She dealt at great length with
the contents of the
reports, adverse to Redisa, which she had obtained from iSolveit and
WMB. To the extent that she disclosed
responses from Redisa or
reports it had obtained from PricewaterhouseCoopers (PwC), she
glossed over them or picked out points
that could be used against
Redisa, largely ignoring the rest. In her treatment of minutes of
operational and other meetings, she
highlighted aspects she regarded
as adverse to Redisa, disregarding everything else.
[55]
The unrelentingly adverse picture the Minister painted of
Redisa in her founding affidavit is not consistent with several
public
utterances she made, the latest barely weeks before she
obtained the
ex parte
order, lauding the innovation and
viability of the Plan. She did not disclose these public accolades.
In her replying affidavit
she said that her misplaced praise was
based on false information supplied by Redisa in respect of its
performance. This is difficult
to credit. By the time the Minister
made her last statement, on 10 May 2017, she had iSolveit’s
final report and both reports
issued by the WMB. In fact, by then she
had all the documents on which she relied in her founding affidavit
apart from the presentation
of 23 May 2017.
[56]
But there are more serious instances of inadequate disclosure.
These examples, by no means exhaustive, are taken from the Redisa

application. Save in one respect, these criticisms apply equally to
the KT application.
The
Western Cape and Gauteng litigation
[57]
As appears from the earlier narrative there were three
instances where Redisa had instituted review proceedings against the
Minister,
one in the Western Cape, and two in Gauteng. In each case
the review was prompted by Ministerial decisions that posed an
existential
threat to Redisa and were important to understand how and
why Redisa was now facing a threat to its financial viability.
Crucially
they were part of a series of attempts by the Minister to
take over or close down Redisa. She did not disclose this.
[58]
The Western Cape
litigation arose from the Minister’s directive in which she
purported to take control of Redisa. In granting
interdictory relief
the court issued a stinging rebuke for the way the Minister had
conducted the litigation. It is discussed earlier
in this
judgment.
[12]
Subsequently the Minister withdrew the directive. In terms
of
an agreed order, Redisa then withdrew its review application on the
basis that the Minister would pay its costs.
[59]
The Minister referred to the directive briefly, only to say
that a report, which Mr Erdmann had made to the Redisa Board claiming

that he had provided the Department with the information requested in
the directive, was false. She did not describe the contents
of the
directive and made no reference whatsoever to these court proceedings
and their outcome.
[60]
It was argued on the Minister’s behalf that the
litigation in the Western Cape Division was not germane to the relief
claimed
in the founding papers. But that is not correct. The
Minister’s object in the liquidation application was to
preclude Redisa’s
board from managing its business and to have
Redisa’s net assets transferred to the WMB. The directive was
her first –
in the event unsuccessful – attempt to seize
control of Redisa. She must or ought reasonably to have realised that
Redisa,
if given notice of the liquidation application, would allege
that the liquidation application was simply another stage in the
Minister’s
unjustified attempt to remove Redisa from the
management of waste tyres.
[61]
The Gauteng litigation
is also mentioned earlier in my judgment.
[13]
One major theme of the Minister’s founding affidavit was
Redisa’s failure to align itself to the new funding model

brought about by the promulgation of the Strategy and the amended
regulations. Another was the scaling down of its operations because

its funding had dried up, culminating in the notices Redisa
circulated on 31 May 2016.
[14]
[62]
In her founding affidavit the Minister referred to a Redisa
circular of 30 January 2017 in which Redisa had informed
manufacturers
and importers that they remained bound by the Plan and
had to pay tyre levies in respect of the period up to and including
January
2017 (the latter levies being due for payment in April 2017).
She concluded her brief summary of the circular by saying: ‘According

to [Redisa], all of this had to be complied with pending litigation
aimed at having the change in the funding model set aside’.
[63]
What the Minister did not disclose, and which the Judge seized
with this application would not have learnt without navigating her

way to the annexed circular, was that by way of the circular Redisa
had notified all interested parties that it had received legal
advice
that the government’s decision to change the funding model was
unlawful, irrational and procedurally unfair and that
Redisa had
already instituted two Gauteng applications in the latter part of
2016 to challenge the Strategy and amended regulations
respectively.
The Minister launched the liquidation application about four months
after the circular had been issued. She did not
disclose that the
review proceedings in Gauteng were reasonably advanced – she
had already filed answering affidavits, albeit
late, and Redisa was
on the verge of filing its replying papers.
[64]
The Minister did not alert the court to the fact that a
provisional liquidation order would have had a material effect on the
Gauteng
litigation. It would mean that Redisa no longer had control
of the litigation; that the litigation would be suspended until the

appointment of final liquidators; and that whether the litigation
continued at all would depend on liquidators who might have less

incentive to do so than Redisa. Crucially it would have a direct
impact on Redisa’s funding and the case being made for its

provisional liquidation. It follows that the Minister’s
contention in this court that the litigation was not a relevant
matter for disclosure, has no merit.
[65]
In the KT application the Minister did disclose the pending
review proceedings in Gauteng, but not their consequences. By then
the
damage was done. It was Redisa’s provisional liquidation,
rather than KT’s, that brought a halt to the Gauteng
litigation.
The fact that Redisa had been provisionally liquidated
would have satisfied the Judge who heard the
ex parte
application
for KT’s provisional liquidation that it should follow suit.
The
non-disclosures regarding the relationship between Redisa and KT
[66]
As I pointed out earlier, the Minister’s founding
affidavit portrayed Redisa and KT as having been involved in a covert
scheme
to divert and misappropriate public funds. She claimed that
Redisa had refused to provide a copy of the management contract to
iSolveit and withheld information regarding the financial interests
that certain of Redisa’s directors had in KT. She repeatedly

described the fees Redisa’s directors earned as ‘staggering’.
These serious allegations would have weighed heavily
with both Judges
when they ordered the provisional liquidation of the two entities.
[67]
The Minister failed to draw the court’s attention to the
fact that the Plan expressly contemplated, indeed required, that its

operations were to be outsourced to a management company; that the
Plan stated the reasons for this outsourcing; and that in terms
of
this model the management company would have extensive involvement in
the implementation of the Plan.
[68]
The Minister told the court, albeit in passing towards the end
of her affidavit and after she had already poisoned the waters, that

the Plan allowed for management fees of up to 20 per cent of Redisa’s
turnover but claimed instead that the management fees
Redisa had paid
to KT were about 26 per cent of gross revenue. This was wrong. It was
common cause, once all affidavits had been
filed, that the management
fees came to around 18 per cent. The founding affidavit did not
disclose that the assertion that KT
had supposedly been paid 26 per
cent was made in iSolveit’s final report of 2 February 2017 and
that – despite the
lapse of four months until the launching of
the
ex parte
application – the final report was not
given to Redisa for comment. ISolveit’s 26 per cent figure was
supposedly based
on Redisa’s 2015 financial statements.
ISolveit does not explain how it calculated its figure. The financial
statements in
question in fact reflect revenue from tyre levies of
R575.065 million and management fees of R108.347 million (around 18.8
per
cent of revenue).
[69]
The Minister attached to her founding affidavit Redisa’s
audited financial statements for the year ended 28 February 2015 and

noted as one of her concerns that the amount of R108.347 million was
paid in management fees to KT. She did not attach or refer
to the
financial statements for the year ended 28 February 2014 that
disclosed management fees of R107.572 million. The directors’

report in the 2014 financial statements recorded the interest of the
executive directors in KT and that they had recused themselves
when
the appointment was discussed. It was also stated that the interest
had been declared to the relevant government institutions
and
industry bodies beforehand. The interest of the executive directors
in KT was repeated in a note saying: ‘Transactions
with related
parties take place on terms no more favourable than transactions with
unrelated parties’.
[70]
The 2015 financial statements repeated these disclosures, as
did the 2016 financial statements. These recordals were not drawn to

the court’s attention. The Minister also failed to present
Redisa’s assertions on these matters in its letter of 30

November 2016 fairly. One of the comments in the interim iSolveit
report on which Redisa commented was an assertion that Redisa
had
failed to provide a breakdown of the management fees paid to KT. In
response, Redisa said that all this information had been
made
available to the Department in the monthly management meetings and
monthly reports. Redisa attached a sample report. The income

statement reflected revenue from tyre levies and the KT management
fee. By simple calculation one can see that the management fee
in
each month was exactly 18 per cent of the revenue.
[71]
The letter of 30 November 2016 dealt at length with the
reasons for KT’s appointment and the way in which potential
conflicts
of interest were managed in accordance with good corporate
governance, as KPMG had confirmed. Redisa also stated that the
structure
had always been fully disclosed to the Department. The
question is not whether all of these statements are correct. In
ex
parte
proceedings the Minister was bound to disclose them fairly.
[72]
The Minister repeatedly claimed in her founding affidavit that
Redisa had deliberately refused to supply iSolveit with a copy of
the
management contract. Having regard to all the affidavits, it is not
possible to resolve the factual dispute as to whether the
management
contract was or was not supplied. What is clear is that the Minister
failed, in her founding affidavit, fairly to present
what she knew
Redisa’s position to be. Among the material to which she did
not draw the court’s attention were the
following:
(i)
The Minister claimed, with reference to the iSolveit interim report
of May 2016, that Redisa had failed to supply proof of its

contractual relationship with KT. ISolveit did not in fact make such
a complaint. The relevant part of iSolveit’s report
claimed
that it had not been privy to the contractual agreements between
Redisa and KT on the one hand and their staff and management
on the
other.
(ii)
The reason that iSolveit did not claim to not have received the
management contract may be explained by other documents
that the
Minister did not disclose. From a Redisa letter of 7 September 2016
the Minister attached to her founding affidavit, it
appeared that one
Shirish Bhoola attended at Redisa’s offices over the period
16-18 March 2016 as part of the iSolveit investigation.
Following the
visit, Mr Bhoola e-mailed Ms Davidson, one of Redisa’s
directors on 30 March 2016, requesting a copy of KT’s
annual
financial statements. On 1 April 2016 Ms Davidson replied, stating
that KT and Redisa were independent companies and that
their
relationship was governed by a management contract, ‘a copy of
which you have seen’. KT’s financial statements
were thus
not in Redisa’s possession. Ms Davidson suggested that Mr
Bhoola direct his enquiry to KT. In a follow-up e-mail,
Ms Davidson
supplied the relevant contact details.
(iii)
The above e-mail exchanges were or should have been known to the
Minister because they were attached as part of Redisa’s
letter
of 30 November 2016. There is no indication that Mr Bhoola refuted
them.
(iv)
At a meeting on 15 July 2016 iSolveit requested Redisa to furnish
copies of various documents. The management contract was
among those
requested. On 21- 22 July 2016 Redisa supplied much of the requested
information in a series of e- mails. Other documents
were delivered
by courier. Redisa’s case is that the management contract was
provided on this occasion and again on 7 September
2016 in response
to a further complaint from the Department.
(v)
In its letter of 30 November 2016, and by way of its interpolated
comments on the Minister’s letter of 31 October
2016, Redisa
said that the management contract was provided to iSolveit during a
site visit on 17 March 2016, resubmitted electronically
on 21 July
2016 and again with the letter of 7 September 2016. The Minister did
not draw the court’s attention to these statements
or to the
fact that the statement regarding the March 2016 visit accorded with
the e-mail exchanges between Mr Bhoola and Ms Davidson.
The
presentation of 23 May 2017
[73]
The Minister claimed in her founding affidavit that it was
Redisa’s presentation of 23 May 2017 that prompted her to bring

the urgent
ex parte
liquidation application. The Minister’s
portrayal of this document was that it reflected an alarming and
sinister dissipation
of cash. The Minister said that this
presentation reflected Redisa’s cash balance to be only R150
million. The reason this
was supposedly a cause of concern is that
Redisa’s presentation to the National Treasury in February 2016
had shown cash
balances of R276.5 million, while Redisa’s
monthly report to the Department of February 2017 showed reserves as
at January
2017 of R426.339 million, which did not include the
further collection of levies payable in arrears for the period
February-May
2017. This was even more disturbing, according to the
Minister, bearing in mind that Redisa had always collected more than
R151
million per month in tyre levies.
[74]
These allegations would also have weighed heavily with the
court considering the application for a provisional winding-up order.

But they were seriously misleading and in certain respects plainly
wrong, for the following reasons:
(i)
The February 2016 presentation referred to cash on hand of R48.587
million and cash investments of R227.895 million, totalling
R276.482
million. The presentation described the cash investments of R227.895
million as a fund required to meet Redisa’s
contingent
liability (or remediation reserve) arising from its ongoing
obligation to remediate tyres for which fees had already
been
received from producers.
(ii)
The figure of R426.339 million as at January 2017 was the total of
Redisa’s current assets, comprising cash of
R59.220 million,
cash investments of R206.144 million and accounts receivable of
R160.975 million. This appeared from the report.
So, contrary to the
Minister’s assertion, the figure of R426.339 million indeed
included the arrear levies (accounts receivable)
that Redisa
anticipated collecting over the period February to May 2017.
Operational cash on hand was R59.220 million while the
cash
investments earmarked for the remediation reserve stood at R206.144
million.
(iii)
As the Minister knew, Redisa had no further source of funding after 1
February 2017. Accordingly, its operating expenditure
for the months
February to May 2017 would in the first place have been met from the
cash on hand in January 2017 and from cash
received as producers paid
the arrear levies.
(iv)
What was left after these sources were exhausted were the cash
investments (remediation reserve) which, as at January 2017,
had been
R206.144 million. This is precisely what Redisa’s presentation
of 23 May 2017 said: Redisa was ‘currently
operating off its
remediation reserve’. This is the cash balance mentioned in the
presentation.
(v)
So, if any comparison was to be made, it should have been between a
remediation reserve of R206.144 million as at January
2017 and a
reduced reserve of R150 million as at 23 May 2017. Nothing sinister
about that reduction has been demonstrated.
(vi)
The Minister’s statement that Redisa always collected more than
R151 million per month in tyre levies is simply wrong.
The Minister
had multiple documents in her possession showing that monthly
collections were around R40 million.
[75]
During the presentation on 23 May 2017 Redisa told the
Department that a detailed transitional business plan would be
delivered
as soon as possible. This was done on 31 May 2017 to
support a request for transitional funding of R220 million. The
Minister did
not annex this document to her founding papers. In her
replying affidavit she said she was unaware of it when she signed her
founding
affidavit due to her being abroad. However the Department
should have drawn it to the attention of the Minister and her legal
advisors.
Objectively, it was a relevant document that had to be
disclosed. At the hearing of the
ex parte
application on 1
June 2017 the Minister’s counsel handed in supplementary
affidavits attaching the circulars issued by Redisa
on 31 May 2017.
The circulars were deployed in support of the provisional
liquidation. If those documents could have been submitted
to the
Judge, there was no excuse for the transitional business plan to not
also have been handed up. The transitional plan set
out at some
length Redisa’s assertions as to the successes it had achieved
and the dire consequences for waste tyre management
if it were not
able to continue operating the Plan.
The
Minister’s letter of 30 May 2017
[76]
Although the Minister attached her letter to Redisa of 30 May
2017 to her founding affidavit, she did not mention it in the body
of
the affidavit. In this letter she dealt at some length with her
criticisms of Redisa. She attached to this letter a copy of

iSolveit’s final report of 3 February 2017 without explaining
why she had waited four months to provide it to Redisa. She
said it
was her intention to consider the possible withdrawal of her approval
of the Plan. She would in due course publish a notice
to call for
consultation on this intention. By way of her letter, she invited
Redisa to participate ‘in the public participation
phase of
this process and to timeously submit to the Department your comments
in this regard’.
[77]
As I said previously,
the Minister signed her founding affidavit for Redisa’s
liquidation on the same day.
[15]
Clearly, Redisa would be unable to participate in the process
envisaged by the letter for as long as it was under liquidation.
It
was at any rate the Minister’s duty to disclose to the court
that she had issued this invitation to Redisa. The court
may well
have sought an explanation for the apparently contradictory courses
the Minister was following.
[78]
There were other instances of material non-disclosure, for
example in relation to:
(i)
Supposedly excessive executive remuneration of Redisa’s
directors (the PwC benchmarking reports of June 2013 and the
explanations contained in the letter of 30 November 2016 were not
disclosed, including that executive remuneration had been set
by a
committee on which the executive directors did not serve).
(ii)
The supposed unlawful exporting and insufficient local recycling
demand to absorb all surplus tyres (the detailed minutes
of a meeting
held on 15 September 2016 were not annexed; the Minister made claims
about the WMB reports where she wrongly confused
capacity with
demand).
(iii)
The supposed unlawful establishment of the Product Testing Institute
(PTI) in Coega (the Minister failed to disclose the report
furnished
to her in that regard in December 2013 and Redisa’s repeated
statements that the Minister had known about the project
from at
least that time; that in Redisa’s view the project was
permitted by clause 25.12 of the Plan; that it had been described
by
Redisa’s non- executive chairman as ‘one of the most
fundamental outcomes of the Redisa legacy’; and that
in a
recent meeting with the Department the remark had been made that the
establishment of the PTI was a game changer).
[79]
I shall not burden this already burgeoning judgment with other
instances of non-disclosure. However, before addressing the
consequences
of the Minister’s failure to make proper
disclosure, I must turn to the other issue identified earlier, namely
the use of
ex parte
proceedings to obtain provisional orders.
Ex
parte
proceedings
[80]
It is a fundamental
principle of the administration of justice that relief should not be
granted against a person without allowing
such person to be heard.
Very rarely is a case so urgent that there is no time to give notice.
In other cases, there may be a reasonable
and substantiated
apprehension that giving notice would defeat the applicant’s
legitimate purpose in seeking relief, for
example because the
respondent would dispose of property or evidence that the applicant
wishes to claim or have preserved. In cases
of this kind a court may
be willing to dispense with the need to give notice but this power
should be exercised with great caution
and only in exceptional
circumstances.
[16]
The procedure adopted is even more objectionable if the applicant's
case rests largely on untested hearsay, which it was in this
case.
[81]
This approach also
accords with the way in which English courts deal with
ex
parte
applications. In
Re
First Express Ltd
[17]
Hoffmann J said the following of the claimant’s use of ex parte
proceedings:
‘
I
am firmly of the view that it was wrong for the application to be
made
ex parte
. It is a basic principle of justice that an
order should not be made against a party without giving him an
opportunity to be heard.
The only exception is when two conditions
are satisfied. First, that giving him such an opportunity appears
likely to cause injustice
to the applicant, by reason either of the
delay involved or the action which it appears likely that the
respondent or others would
take before the order can be made.
Secondly, when the court is satisfied that any damage which the
respondent may suffer through
having to comply with the order is
compensatable under the cross-undertaking or that the risk of
uncompensatable loss is clearly
outweighed by the risk of injustice
to the applicant if the order is not made.
There
is, I think, a tendency among applicants to think that a calculation
of the balance of advantage and disadvantage in accordance
with the
second condition is sufficient to justify an
ex parte
order.
In my view, this attitude should be discouraged. One does not reach
any balancing of advantage and disadvantage unless the
first
condition has been satisfied. The principle
audi alteram partem
does not yield to a mere utilitarian calculation. It can be
displaced only by invoking the overriding principle of justice which

enables the court to act at once when it appears likely that
otherwise injustice will be caused.’
[82]
This statement resonates in this case where the Minister’s
counsel contended that ‘the
ex parte
bird had flown’
and that no purpose would be served by discharging the provisional
order on this ground. It was contended
that a punitive costs order
may be more appropriate in the circumstances. But the law would be
deficient if the fundamental principle
of
audi alteram partem
had
to yield to a mere utilitarian analysis after the fact.
[83]
Since this court is determining appeals brought against final
liquidation orders, the question arises whether – if the
Minister’s
recourse to
ex parte
proceedings was
unjustified – there is anything that the Judge in the court a
quo could and should have done about the fact
that other single
Judges in his division had granted
ex parte
provisional
orders. It was argued on behalf of the Minister that the court a quo
could not have discharged the provisional orders
on this basis. He
could not, the argument continued, sit on appeal against the
decisions of his colleagues.
[84]
In my view the
submission is unsound. Given the centrality of the
audi
principle, which now gains
added force from s 34 of the Constitution, it would be most
unsatisfactory if, after hearing the respondent,
a Judge could not
discharge a provisional order obtained through the impermissible use
of
ex parte
proceedings.
Often an inappropriate recourse to ex parte proceedings is
accompanied by inadequate disclosure. However, even where
the
applicant’s disclosure cannot be faulted, her inappropriate use
of ex parte proceedings should attract the same disciplinary

jurisdiction. The
ex parte
litigant’s duty of
the utmost good faith requires not only complete and fair disclosure;
it imposes a more fundamental obligation
to give notice to the other
side unless, objectively, the absence of notice is justified.
[18]
The
Minister’s recourse to
ex parte
proceedings
[85]
Even taking the founding papers in isolation, the Minister
failed woefully to justify the
ex parte
proceedings. Her
expressed concerns about the unlawful dissipation of funds were
conclusions without factual foundation. Even if
she had reason to
suspect that Redisa’s funds had in the past been used for
impermissible purposes, it was entirely fanciful
to suppose that, in
the few days that might pass between the service of the application
and the hearing of an application for provisional
orders, Redisa
would make illicit payments to KT or others. Its directors would have
known that illicit payments made after service
of the application
would readily be exposed. Even if some temporary
ex parte
relief
was justified (which it was not), it should have been minimally
invasive. The Minister could have asked the court a quo to
issue a
rule calling on Redisa and KT to show cause why they should not be
provisionally or finally wound up, with an interim
ex parte
order
that pending the return day Redisa was to make no payments to KT and
that Redisa and KT were to make no payments to KT’s

shareholders.
[86]
The Minister’s own conduct shows that the iSolveit
reports did not raise sufficient concerns to cause her to act
urgently
or
ex parte
. The report of 3 February 2017
recommended that she consider appointing a curator or administrator
for Redisa so that the funds
collected were used properly; not that
it be urgently liquidated. She sought to justify the use of urgent
ex
parte
proceedings solely with reference to the presentation of 23
May 2017. As I have said, she drew wrong and unjustified conclusions

from that presentation, and misrepresented these to the court.
Conclusion
in relation to the
ex parte
proceedings
[87]
A trial court has a discretion to discharge a provisional
order in circumstances where the use of
ex parte
proceedings
was unjustified or where there has been non- disclosure. This is a
discretion in the true sense, meaning that on appeal
a court will
only interfere if the trial court exercised the discretion on a wrong
principle or made a decision that was not reasonably
open to it.
[88]
In regard to
non-disclosure, the court a quo said laconically that ‘nothing
turns on this point’, adding that it was
Redisa and KT, rather
than the Minister, who had been ‘economical with the
truth’.
[19]
It is apparent that the learned Judge exercised no discretion at all.
If he did, it was on wrong principle. To say that nothing
turns on
non- disclosure is to disregard the body of law I have summarised
regarding an
ex parte
litigant’s duties and
the consequences of violating them. And even if the answering papers
of Redisa and KT could be typified
as lacking in candour, this was
irrelevant to the question whether the Minister had failed to make
proper disclosure in her founding
affidavit.
[89]
In regard to the use of
ex parte
proceedings,
the court a quo said that the Minister had made out a sufficient case
that urgent and drastic action was needed in
view of the ‘underhand
and secretive manner’ in which Redisa’s executive
directors had acted.
[20]
In my view, and having regard to the rules in application
proceedings, this was not a conclusion that could reasonably be
reached
on the papers. On the contrary, I am firmly of the view that
it was an abuse to seek provisional orders
ex
parte
.
[90]
The Minister’s skewed disclosures and non-disclosures
were extensive. They related to matters that must have influenced the

Judges hearing the
ex parte
applications. Indeed I do not
think
ex parte
orders would have been granted if fair
disclosure had been made. The Minister gave no satisfactory
explanation for her inadequate
disclosures and material
non-disclosures.
[91]
The court a quo delivered judgment about three and a half
months after the provisional orders were granted. There is nothing to
indicate that discharging the provisional orders would have been an
inappropriate or disproportionate response to the abuse of
ex
parte
proceedings and the inadequate disclosure. I have no doubt
that this is a case where the court a quo should have vindicated the
principles of
audi alteram partem
and
uberrima fides
by
discharging the provisional orders. The liquidators have presumably
been maintaining Redisa and KT in a holding position pending
the
outcome of this appeal. There is no reason why we should not now make
the orders the court a quo should have made.
[92]
Although this disposes of the appeal, and it is not strictly
necessary to deal with the other grounds of appeal, namely whether it

was just and equitable to wind up the companies; and the Minister’s
standing in terms of s 157(1)
(d)
of the 2008 Act, it is
desirable to deal with both. This is because the court a quo upheld
the Minister’s contention that
Redisa and KT were involved in
an illegal operation to siphon off public funds, which justified
their winding-up. This is obviously
a profoundly serious finding
against both companies; their directors; and in KT’s case their
shareholders as well. The locus
standi point is novel and must also
be dealt with as it will bear on other applications in which the
government seeks to rely on
this provision in order to wind-up
solvent companies.
Whether
the winding-up was just and equitable
[93]
For present purposes I
shall assume, in favour of the Minister, her standing to bring the
present proceedings. To assist the reader
it is necessary to recall
the case made out by the Minister in her founding affidavit. It was
broadly this: First, Redisa’s
directors had not disclosed their
relationship with or significant shareholding in KT. In particular,
they withheld the management
contract and other information
pertaining to the financial interests that Redisa’s directors
had in KT. This enabled them
to misappropriate public funds by using
KT as their vehicle to unlawfully channel funds collected by Redisa
under the Plan for
their personal benefit. Secondly, Redisa’s
presentation of their business plan on 23 May 2017 revealed a rapid
depletion
of its cash and reserves.
[21]
[94]
I pointed out that these allegations were either incorrect or
unsustainable on the papers having regard to the rule on the
treatment
of evidence in application proceedings. In particular I
have found that:
(i)
Redisa reported regularly to
the Minister on its finances and the extent of the independence of
its board, receiving clean audits
every time.
[22]
(ii)
KT was appointed as the
management company under the Redisa Plan, and three of Redisa’s
executive directors are indirect shareholders
of KT. There is no
overlap between the two boards.
[23]
(iii)
The Minister and the Department
were aware of the management contract between Redisa and KT
throughout. They were also aware that
the management fees the latter
had charged fell within the 20 per cent of Redisa’s revenue
allowed in terms of the contract.
[24]
(iv)
While there was a dispute as to
whether Redisa had withheld the management contract from the Minister
it is unlikely that Redisa
would have done so deliberately. The Plan
envisaged just such a contract. Its existence was disclosed in the
financial statements.
The management fee stipulated in the contract
was in line with the Plan.
[25]
But in any event, to the extent that there was a dispute of fact on
the papers as to whether Redisa had given the management contract
to
iSolveit and the Department, this dispute had to be resolved in
favour of Redisa.
[26]
(v)
The Minister and the Department
were aware that Redisa’s directors had interests in KT through
their shareholding.
[27]
(vi)
The Minister’s portrayal
of the business plan that Redisa presented on 23 May 2017, which
prompted her to bring the
ex
parte
application, and
which according to her reflected alarming and sinister dissipation of
cash, was not only misleading, but wrong.
[28]
(vii)
Redisa’s executives’
remuneration was set by an independent committee on which the
executive directors did not serve.
They were not excessively
remunerated according to the PwC benchmarking reports of June 2013
and the explanations contained in
the 30 November 2016 letter.
[29]
The
Minister’s new case
[95]
Faced with a comprehensive refutation of the case made out in
her founding papers, the Minister changed tack, realising that the

management contract, in terms of which Redisa’s payments to KT
were made, posed an insurmountable hurdle to the thesis that
funds
were unlawfully diverted. The Minister’s new case, not made out
on the papers, but presented orally in the court a
quo and again on
appeal, was that Redisa’s directors had abused KT’s
corporate personality and contravened item 1(3)
of Schedule 1 of the
2008 Act, and the equivalent provisions in Redisa’s MOI.
[96]
The gravamen of the case, as I understood it, was this: First,
KT devised a scheme to have the Plan approved by the Minister. Its

purpose was to improperly divert public funds earned by Redisa to
KT’s shareholders by receiving management fees under the

management contract it had concluded with Redisa before the Plan had
been approved. The management agreement was therefore not
a bona fide
agreement as contemplated in item 1(3) of Schedule 1 of the 2008 Act.
[97]
Second, Redisa’s
executive directors, who indirectly own 92.5 per cent of KT,
[30]
abused KT’s corporate personality by unlawfully diverting
public funds generated by Redisa to themselves. This was done by:

Paying KT a management fee of some R430 million; renting office space
from KT, which in turn rents the same office space from Nine
Years
Investments (Pty) Ltd (NYI); Redisa paying R97 million to KTC to
acquire assets including the NCCS to the value of some R76
million,
even though it through the MOI contemplated that the computer systems
would be owned by Redisa and managed by the management
company.
[98]
Third, the income derived indirectly by Redisa’s
executive directors, as shareholders of KT was not justifiable and
contravened
item 1(3) of Schedule 1 of the 2008 Act; and, finally,
Redisa and KT had for all intents and purposes merged and that the
persons
in control of Redisa were effectively also in control of KT.
[99]
The foundation for this
case was the ‘new substantiating evidence’ raised only in
reply based on the findings of the
A@L referred to earlier.
[31]
However, before I consider this report it is necessary consider the
alleged unlawfulness of the management contract as it seems
to me
that it constitutes the foundation of the Minister’s case to
wind up the two entities. Closely related to this question
is the
contention that Redisa’s directors abused KT’s corporate
personality.
The
abuse of corporate personality and contravention of item 1(3) of
Schedule 1 of the 2008 Act
[100]
Item 1(3) of Schedule 1 reads as follows:
‘
A
non-profit company must not, directly or indirectly, pay any portion
of its income or transfer any of its assets, regardless how
the
income or asset was derived, to any person who is or was an
incorporator of the company, or who is a member or director, or

person appointing a director, of the company, except –
(a)
as reasonable –
(i)
remuneration for goods delivered or services rendered to, or
at the direction of, the company; or
(ii)
payment of, or reimbursement for, expenses incurred to advance
a stated object of the company;
(b)
as a payment of an amount due and payable by the
company in terms of a bona fide agreement between the company and
that person or
another;
(c)
as a payment in respect of any rights of that person, to
the extent that such rights are administered by the company in order
to
advance a stated object of the company; or
(d)
in respect of any legal obligation binding on the
company.’ (Emphasis added.)
[101]
Simply put, a non-profit company (such as Redisa) may not
transfer any portion of its income or assets to another person unless
it does so in accordance with a bona fide agreement between the
parties and the objects of the company. So if, as the Minister now

contends, the agreement was not bona fide there would be no lawful
basis for any of Redisa’s payments to KT spanning five
years.
[102]
I am afraid that this case – that the scheme was
developed by the creators of the Plan to misappropriate public funds
–
was neither pleaded in the founding affidavit nor in reply.
It does not get out of the starting blocks. First, the Minister would

have had to allege and prove that the management contract between
Redisa (a non-profit company) and KT was not a bona fide agreement
as
envisaged in item 1 of Schedule 1 of the 2008 Act, and second that
its true purpose was to divert funds to Redisa’s executive

directors rather than to provide fair remuneration for management
services to be provided by KT.
[103]
Not only was this case
not pleaded but to reach this conclusion a court would have to be
satisfied that there is no prejudice to
the parties and that the
order sought
–
the winding-up
of the two entities – can be justified on the undisputed facts.
In addition the more serious the allegation
– such as a
conspiracy to defraud the public purse – the stronger must the
evidence be before a court will find the
allegation established on a
balance of probability.
[32]
None of these requirements were satisfied and the court a quo was not
justified in ignoring these principles in coming to the conclusions

it did.
The
A@L report
[104]
I now consider the A@L report from which the Minister found
new substantiating evidence to support her new case.
[105]
Following receipt of Mr Erdmann’s and Mr Crozier’s
answering affidavits on behalf of Redisa and KT respectively on 20

June 2017, the Minister’s reply was due on 30 June 2017. But it
is quite evident that she was unable to reply to their answers
with
the existing evidence at hand.
[106]
So, on 23 June 2017, which was a Friday, she penned a letter
to the provisional liquidators demanding that they deliver urgently,

within 48 hours, ie, by Sunday at 14h00, ‘any provisional
report of the forensic auditor commissioned by the provisional

liquidators and any other available information/documentation that
would enable an assessment . . . of the Redisa Plan’.
She
threatened that non-compliance with her demand would be an offence
under the Waste Tyre Regulations. The provisional liquidators

commissioned A@L for this purpose. It is perfectly clear that the
Minister’s object at this stage was not to obtain any
information for purposes of fulfilling her administrative functions
in relation to the Plan but rather to obtain urgent information
she
could use in her replying papers.
[107]
The deadline of 25 June was not met. A@L prepared, what it
called a ‘cursory and preliminary report’ in the limited
time available on 28 June 2017. The authors of the report say that
they had not ‘provided the opportunity for the various
role
players identified in the report to provide their explanations’.
In other words they had not spoken to Redisa or KT’s
directors.
But even worse, they had not even ‘studied’ the opposing
affidavits in the two liquidation applications.
[108]
The report therefore has little evidential value. It
identifies various supposedly suspicious or unlawful transactions
without any
regard to Redisa’s explanations. Redisa’s
rebutting affidavit also responded to A@L’s findings
comprehensively.
The court a quo ignored this evidence and did not
deal with explanations for the alleged unlawful payments. The
following examples
demonstrate this:
(i)
The accommodation costs that were referred to as being suspicious
were squarely addressed in Redisa’s rebuttal. There,
Mr Erdmann
explained that Redisa’s board had decided that he should
relocate to Cape Town, and that a portion of the lease
costs should
be paid by Redisa.
(ii)
The payments made by Redisa in respect of security upgrades –
also flagged as suspicious and held by the court a quo
to be evidence
of a contravention of item 1(3) of Schedule 1 of the
Companies Act –
were
also explained. Mr Erdmann testified that he and other directors
of Redisa had received death threats, and that ENS Forensic Services

had advised that security measures be put in place at their
residences. The security upgrades were a risk mitigation exercise
paid for by Redisa. Mr Erdmann further explained that A@L had got its
facts wrong in respect of two properties: no security upgrades
were
made for a property owned by the HE and ME Family Trust, and Ms
Kirk’s residence did not receive security upgrades as
she lived
in a security estate.
(iii)
The issue of Redisa’s intellectual property was also addressed.
Mr Erdmann testified that KT paid for its Oracle computer
system
(being Oracle software and computer hardware), and that NYI, which is
KT’s majority shareholder, had laid claim to
the underlying
intellectual property, which it had developed. There was nothing
untoward about this at all.
(iv)
The allegation that KT’s shareholders received unlawful
dividend payments is similarly without any foundation. As stated,
it
is common cause that KT received fees strictly in accordance with the
Plan and, as contemplated, was reimbursed for start- up
costs
associated with its initial implementation. The fact that KT, which
had duly discharged its functions under the Plan, paid
dividends to
its shareholders was not unlawful. Its shareholders were entitled to
receive dividends. It is perhaps worth mentioning
that, according to
the A@L report, Redisa paid KT management fees of R432.832 million
over the years 2014-2017 and over the same
period KT paid its
shareholders dividends totalling R84 million, ie dividends equal to
around 19.4 per cent of the management fees.
Since the management
fees totalled 18 per cent of the tyre levies collected, a net amount
of around 3.5 per cent of the tyre levies
ultimately found its way to
KT’s shareholders as dividends.
(v)
The authors purport to find
that the executives of Redisa had abused their fiduciary duties
because they had not disclosed the relationship
between the
executives of Redisa and the management of KT, which would have
created a conflict of interest. I have shown earlier
that this is
simply wrong.
[33]
Both Mr Erdmann and Mr Crozier’s affidavits and the documentary
evidence show that the Minister and Department were aware
of the
intended structure and roles of Redisa and KT and that Redisa’s
executive directors had interests in KT as (indirect)
shareholders.
[109]
In short there was not one iota of evidence, let alone
undisputed facts, to support the allegation that the management
agreement
was not a genuine, bona fide agreement and that the
payments made by Redisa to KT were done in accordance with its tenor
and in
line with the objectives of the MOI or that the setting of
tyre levy at R2.30 was a manipulation. It was not shown that Redisa
or KT would have known, when the tyre levy was determined and the
management agreement concluded, precisely how the implementation
of
the Plan would pan out. They were working on best estimates.
Depending on the costs involved in administering the Plan (which
were
for KT’s account), and the time, effort and expense that Mr
Erdmann and others had put into developing and having it
approved by
the Department these estimates may have turned out to be more
conservative or generous.
[110]
The related claim regarding the abuse of KT’s corporate
personality must also founder:
(i)
Common ownership and control of two entities may demonstrate that the
separate legal personalities of the two entities are being
abused.
(ii)
In this case: (a) Redisa has no shareholders or members, while KT is
privately owned; and (b) Redisa and KT have no common
directors.
There is no common ownership and control.
(iii)
The Plan – which was approved by the Minister – expressly
provides for the outsourcing of certain functions by
Redisa to a
third-party. Agreements of this nature, including with a related
entity, are commonplace. The fact that a service provider,
by
agreement with its client, performs functions on behalf of the client
does not render the service provider the client’s
alter ego.
(iv)
The existence of the management agreement between Redisa and KT is
consistent with the fact that they are two separate entities
and
properly treated as such by each other. KT has not received any
payments from Redisa other than what is provided for under
the Plan.
Loss
of the substratum of Redisa and KT
[111]
As to the second ground for its holding that it was just and
equitable to wind up these entities, the court a quo found that, in

Redisa’s case, there had been a gradual disappearance of its
reserves and that it had already decided to ‘wind down’

its operations as from 1 June 2017, as appeared from the presentation
of its business plan on 23 May 2017. I showed earlier, regarding
the
alleged disappearance of Redisa’s reserves, that the Minister
had misconstrued the figures given at the presentation.
And, also
that the Minister’s reliance on Redisa’s statement that
it would be winding down was misleading, because
it was the direct
result of her actions in removing Redisa’s ability to collect
the waste management fee.
[112]
The court found that once Redisa’s substratum had fallen
away, KT should follow because it, in effect, had no independent
existence without Redisa. I have already found that there was no
proper ground to order the winding-up of Redisa. It follows, on
the
court a quo’s incorrect reasoning, this was not a proper ground
to wind up KT either.
[113]
But even if Redisa’s
winding-up was justified on this ground, KT’s was not. In KT’s
case the Minister was a stranger
to the company and sought its
winding-up against the wishes of its incorporators. No consideration
was given to KT’s shareholders,
[34]
or the impact of its winding-up on the Plan, or to the fact that the
provisional liquidators might wish to continue with the management

contract. In addition, no consideration was given to KT’s
assets, capital reserves or its intellectual property. Even worse,

the court a quo wrongly ordered its assets and liabilities, and also
its rights and obligations to be transferred to the WMB, which
I have
mentioned was abandoned after the judgment.
[114]
The fact is that KT’s
controllers were entitled to continue to utilise the company for such
lawful purposes as fell within
its objects. It was not alleged or
proved that KT’s MOI limited its business to administering the
Plan. The fact that hitherto
the incorporators chose to confine KT’s
operations to managing the Plan does not mean that that they could be
compelled,
against their wishes, so to confine its operations in the
future. There might be any number of reasons, including tax and
reputational
reasons or simple convenience, for wishing to make
continued use of the company. The winding up of a solvent company on
the basis
that its substratum has disappeared is the sort of ground a
shareholder advances where he finds that the business which he and
his ‘partners’ chose to conduct through a corporate
vehicle can no longer be pursued.
[35]
In those circumstances he may not wish to remain bound to his
‘partners’ for purposes they did not contemplate. The

substratum argument is not plausibly open to an outsider.
Conclusion
on just and equitable grounds
[115]
The Minister has failed to show that the management contract
between Redisa and KT was not
bona fide
; or that the payments
made to KT in accordance with the agreement were unlawful; or that a
feared loss of their substratum justified
their winding up. To this I
should add that another consideration for not winding up these
companies on just and equitable grounds,
and therefore discharging
the provisional orders, was the possible impact of Redisa being
successful in its Gauteng litigation
against the Minister, which
would restore its ability to fund its operations.
[116]
There is one more reason
why it was not just and equitable to wind up the appellants: the
court had to be satisfied that the Minister
had no alternative means
to address complaints before resorting to the drastic expedient of
winding up the appellants.
[36]
The court a quo did not address this requirement. It is discussed
further in the following section.
The
Minister’s standing in terms of s 157(1)
(d)
of the 2008
Act
[117]
This bring me to the last issue, whether the Minister was
properly held to have standing to institute these proceedings in the
‘public
interest’ in terms of s 157(1)
(d)
of the
2008 Act. This is a matter of considerable public importance and has
important consequences for the winding-up of solvent
companies.
[118]
The Minister brought the winding-up applications in terms of s
157(1)
(d)
read with s 81(1)
(c)
(ii), which entitles a
creditor to apply to court to wind up a company on the ground that it
is just and equitable to do so, and
s 81(1)
(d)
(iii), which
permits the company, a director or a shareholder to apply for the
winding-up on the same basis.
[119]
The Minister contended,
and the court a quo agreed, that s 157(1)
(d)
confers on her, as the
Minister responsible for the Plan, standing to apply for the
winding-up of the appellants. And having come
to this conclusion the
court found that the ‘Minister has made out a case in
substitution of the persons mentioned’
in ss 81(1)
(c)
(ii)
and 81(1)
(d)
(iii)
to wind up the appellants.
[37]
[120]
But the Minister is not a creditor, director nor shareholder
of Redisa or of KT, and does not purport to represent their interests

or step into their shoes. She has no standing to wind up a company in
the interests of any of these persons or for the companies

themselves. Counsel for the Minister, therefore, quite properly
abandoned this contention in this Court.
[121]
The appellants’ argument before us was that a
public-interest litigant with standing in terms of s 157(1)
(d)
is
entitled to rely on any of the substantive grounds for liquidating a
solvent company set out in s 81(1) of the Act. Such a litigant
does
not step into the shoes of the class of persons specified in s 81(1)
(creditor, member, director or company as the case may
be) and the
procedural limitations applicable to the specified class do not apply
to the public-interest litigant. Because s 81(1)
in several places
provides for the liquidation of solvent companies on the just and
equitable basis, the Minister – if public-interest
standing
were conferred on her – would be entitled to invoke the just
and equitable grounds without any limitation to that
concept as it
might apply to a creditor, shareholder, director or the company
itself. So all that the public interest litigant
has to show in these
circumstances is that it is just and equitable, and in the public
interest, to wind up the company. I shall
assume that this argument
is correct.
[122]
The question, therefore, is whether s 157(1)
(d)
permits
the Environment Minister the right to apply to court to wind up
solvent companies in the public interest on the grounds
that it is
just and equitable to do so in terms of s 81.
[123]
Under the 1973 Act the
Minister of Trade and Industry (for convenience hereafter ‘the
Trade Minister’) had the power
to institute winding-up
proceedings against a company, but only after a court had declared
that the affairs of the company required
investigation. An
investigation would be ordered if the circumstances suggested, among
others, that the business was formed or
being conducted for any
‘fraudulent or unlawful purpose.’
[38]
And if it appeared to the Trade Minister from the report following
the investigation that it was expedient to wind up the company,
the
Minister could apply to the court for its winding-up on the ground
that it was just and equitable to do so.
[39]
The Trade Minister’s power to investigate the affairs of a
company was described as ‘an important regulatory mechanism
for
ensuring probity in the management of companies’ affairs . . .
in the public interest’.
[40]
[124]
In addition, if it
appeared from the report that proceedings ought to be instituted in
the public interest for the recovery of damages
in respect of fraud,
delict or other misconduct in connection with the promotion or
formation of a company or the management of
its affairs, or for the
recovery of any property of the company that had been misapplied or
wrongfully retained, the Trade Minister
could do so in the name of
the company.
[41]
[125]
It is apparent, therefore, that there was no general power for
the winding-up of a company in the public interest. Only the Trade

Minister, purportedly acting in the public interest, could apply to
court for a company to be wound up in the circumstances discussed

above. And then only after it had appeared from an inspection report
that this was warranted. The inspection report was therefore
a pre-
condition for the exercise of this power. Those provisions have been
repealed in the 2008 Act.
[126]
There is no provision in the 2008 Act giving the Trade
Minister the power to apply to wind up a company, whether the company
is
insolvent or solvent. The Minister may only, in terms of ss
190(2)
(b)
(i) and 190(2)
(b)
(ii) of the 2008 Act, direct
the Companies and Intellectual Property Commission (the Commission)
to investigate contraventions of
the 2008 Act, which presumably
include the type of allegations with which we are concerned.
[127]
The Commission’s
power to investigate contraventions of the 2008 Act, as with the
Trade Minister’s power to conduct
investigations under the 1973
Act, is a regulatory mechanism to promote probity in the management
of a companies’ affairs
in the public interest. The Commission
also has the power, as the Trade Minister had under the 1973 Act, to
apply for the liquidation
of a solvent company, on the ground that
the company, or whoever controls it, is acting in a fraudulent or
otherwise illegal manner.
[42]
[128]
If there is no specific
provision giving the Trade Minister the power to wind up a solvent
company, and that power has been given
to the Commission (and the
Panel),
[43]
the question arises whether the Trade Minister, who is responsible
for the administration of the 2008 Act, may invoke s 157(1)
(d)
– the public interest
provision
–
for this
purpose. If that question is answered in the affirmative it may well
be that the Environment Minister also has that power,
as a
representative of the government. By parity of reasoning, if that
question is answered negatively, it is unlikely that the
Environment
Minister may invoke this power either.
[129]
Section 157(1)
(d)
permits ‘a person’
‘acting in the public interest’, ‘with leave of the
court’ to apply for ‘remedies’.
I shall assume, for
present purposes, that ‘remedies’ include winding up a
solvent company, although this is by no
means clear. The question is
whether ‘a person’ includes the Trade Minister. The
answer appears to be ‘no’
because as I have pointed out
the power of the Trade Minister to apply to wind up companies in the
1973 Act was removed and given
to the Commission and the Panel in the
2008 Act.
[130]
The 2008 Act defines ‘a
person’ as including a juristic person. This suggests that only
natural and juristic persons
have standing in terms of s 157(1)
(d)
,
not ministers on behalf of the government. In
Union
Government v Rosenberg
,
[44]
the Appellate Division was faced with precisely this question. In a
unanimous judgment, the court held that a ‘person’
does
not ordinarily signify ‘Government’ and as used in the
statute in issue in that case it did not do so either.
The other
indication that fortified this view, the court said, was in the
Interpretation Act 5 of 1910 where, in s 3, a person
was defined to
include – ‘(a) any divisional council, municipal council,
village management board or like authority;
or (b) any company
incorporated or registered as such under any law; or (c) any body of
persons corporate or unincorporate’.
No mention was made of the
government. The Interpretation Act 33 of 1957 retains these
categories, also without mentioning the
government. The presumption
is that the definition of ‘person’ was re-enacted in 1957
with knowledge of the authoritative
decision in
Rosenberg
.
[45]
[131]
Of course, there may be
indications in the statute itself that ‘person’ includes
the government as represented by a
minister. But there is no such
indication in the 2008 Act. It is apparent that when a minister or
regulatory agency established
by statute exercises a public power or
performs a public function they do so per se in the public interest.
When the lawmaker intends
to give a minister the power to bring
proceedings specifically in the public interest, it says so.
[46]
There is no indication in the Act, which, I have said, only gives the
Trade Minister the power to direct the Commission to investigate

contraventions of the Act, that the Trade Minister may apply for
remedies also as a ‘person’ acting in the public interest

outside of the regulatory framework in Chapter 7 of the 2008 Act.
[47]
If that is so it seems unlikely that any other government minister
has that power either. The conclusion is that the Environment

Minister could not rely on s 157(1)
(d)
to wind up the appellants
in the public interest.
[132]
But even if we assume that the Environment Minister had the
right to approach a court under s 157(1)
(d)
of the 2008 Act to
apply for the winding-up of a solvent company, the issue is whether
the court a quo (and the court that granted
the provisional orders)
was correct in conferring standing on her for this purpose.
[133]
Section 157 of the 2008
Act provides for ‘extending standing to apply for
remedies’.
[48]
It must be read together with s 156, which is headed ‘alternative
procedures for addressing complaints or securing rights’.
[49]
Section 156 addresses the fora in which a person seeking relief under
s 157 may seek redress for a contravention of the 2008 Act.
These are
the Commission, the Panel, the Tribunal and the courts. Section
157(1)
(d)
allows
a person ‘acting in the public interest, with leave of the
court’ to bring a matter before any of these fora.
[134]
In
Ferreira
v Levin
[50]
the Constitutional Court set out the criteria for evaluating whether
an applicant should be given leave to act in the ‘public

interest’. In the context of this case the evaluation includes
considering: (i) the nature of the allegations advanced as
to why the
public interest is implicated; (ii) the relevant provisions of the
2008 Act, which provide the context of the allegations;
(iii) the
provisions of the 2008 Act for addressing such allegations; (iv)
whether there other reasonable and effective ways in
which the
challenge may be brought; and (v) the range of persons or groups who
may be directly or indirectly affected by any order
of the court and
the opportunity that those persons or groups have had to present
evidence and argument to the court.
[135]
At the heart of the
inquiry of whether an applicant should be granted the right to seek
relief in the public interest, lies a consideration
of alternative
remedies, and this requires a close examination of the facts of the
case. In particular the prejudice that parties
affected by the order
may suffer if standing is granted must be taken into account.
[51]
[136]
In my view both applications should have failed at the
ex
parte
stage of the proceedings because the Minister had not
established the right to obtain this remedy
–
the provisional liquidation order – in the public
interest. My reasons are the same as those on the strength of which I
have
already concluded that a combination of non-disclosure of
material facts, the absence of any factual basis for urgency and the
pressing need for the appellants to have been notified of the
proceedings justified the discharge of the provisional orders. The

courts granting the Minister the right to seek provisional orders
clearly did not consider any of the criteria relevant to the

determination of whether the applications were genuinely in the
public interest. This is therefore a further reason why the
provisional
orders ought to have been discharged.
[137]
The court a quo ignored
the arguments proffered by the appellants regarding a consideration
of alternative remedies. It was not
justified in doing so. The
Minister had remedies available to her under the 2008 Act to address
her concerns. Since, in this part
of my judgment, I am assuming that
the Minister qualifies as a ‘person’ for purposes of s
157(1), the same assumption
must be made in relation to the rest of
the Act. On this basis, the Minister could have filed a complaint
directly with the Commission
in terms of s 168(1)
[52]
of the 2008 Act, or approached the Trade Minister to request that a
directive be issued to the Commission to undertake an investigation

in terms of s 168(3)
[53]
read with s 190(2)
(b)
.
[54]
This would have triggered the Commission’s investigative powers
under Part E of Chapter 7.
[138]
The Minister’s
primary complaint was that Redisa’s executive directors were
abusing their fiduciary positions to enrich
themselves. She could,
therefore, in the public interest have sought leave to obtain an
order to declare the implicated directors
delinquent or under
probation in terms of s 162. Alternatively, she could have brought
the information she had to the attention
of the Commission, the
latter being an agency with express
locus
standi
to seek such orders
(s 162(3)). The Department itself could have sought an order (s
162(4)).
[55]
The Minister’s complaints against the executive directors all
appear to fall within the categories of conduct which can give
rise
to orders of delinquency or probation.
[139]
The Minister could also have sought to interdict conduct on
the part of the appellants she considered unlawful or damaging to the

Plan, without seeking the drastic remedy of a winding-up order. If
grounds existed for an anti-dissipation interdict (which was
in
essence the basis on which the Minister urgently sought the
companies’ liquidation), she could have applied for such relief

without the extreme sanction of liquidation.
[140]
If the Commission found
any evidence of unlawful conduct, it could have pursued a range of
enforcement options: it could have invoked
s 22
[56]
to call on the company to show cause why it should not be wound up;
it could have referred the matter to the National Prosecuting

Authority; it could have issued compliance notices
–
backed up by
administrative penalties and the prospect of a winding-up order; and
it could have issued a notice of non-referral,
in which case the
Minister would have been entitled to approach the court for relief
under s 174.
[57]
[141]
In assessing these questions, it is as well to bear in mind
that the Minister at no stage said that the Plan was not a good one
and that its proper implementation was not in the public interest.
Redisa, as a solvent entity, was not in principle an inappropriate

entity for having responsibility for the Plan. The Minister’s
gripe was with the perceived impropriety of certain actions
of the
executive directors.
[142]
It bears mentioning,
also, that in regard to the Minister’s allegation that KT’s
corporate personality was being abused,
this was not a ground for
winding up KT. That remedy lies in s 20(9)
[58]
of the 2008 Act. In addition, and as I have mentioned earlier, the
Commission or Panel has the power to apply for the liquidation
of a
solvent company, on the ground that the company, or whoever controls
it, is acting in a fraudulent or otherwise illegal manner,
which is
broadly the allegation that was directed at Redisa’s directors.
But this power may only be used after a compliance
notice has been
issued and the company has failed to comply.
[143]
The Minister had made out no case for resorting to the drastic
remedy of a winding-up without having considered the extensive
alternative
remedies or enforcement procedures that were available to
her. It was, therefore, quite clearly, not in the public interest for

her to be given the right to pursue this relief in these
circumstances.
An
intergovernmental dispute
[144]
Before this appeal was
heard the parties were invited to prepare submissions on a point of
law not on the papers. This was whether
s 41(1)
(h)
and s 41(3) of the
Constitution had any bearing on this dispute.
[59]
This was because it was common cause between the parties in this
court that Redisa is an organ of state. That being so, the Minister,

as a representative of the national government, appears to have had a
duty to avoid legal proceedings against Redisa by attempting
to
settle the dispute first through recourse to other remedies before
resorting to litigation. That duty is given effect to in
s 40
of the
Intergovernmental Relations Framework Act 13 of 2005
, which is the
law enacted for this purpose. It provides:
‘
40
Duty to avoid intergovernmental disputes
(1)
All organs of state must make every reasonable effort-
(a)
to avoid intergovernmental disputes when exercising their
statutory powers or performing their statutory functions; and
(b)
to settle intergovernmental disputes without resorting to
judicial proceedings.
(2)
Any formal agreement between two or more organs of state in
different governments regulating the exercise of statutory powers or

performance of statutory functions, including any implementation
protocol or agency agreement, must include dispute-settlement

mechanisms or procedures that are appropriate to the nature of the
agreement and the matters that are likely to become the subject
of a
dispute.
41
Declaring disputes as formal intergovernmental disputes
(1)
An organ of state that is a party to an intergovernmental
dispute with another government or organ of state may declare the
dispute
a formal intergovernmental dispute by notifying the other
party of such declaration in writing.
(2)
Before declaring a formal intergovernmental dispute the organ
of state in question must, in good faith, make every reasonable
effort
to settle the dispute, including the initiation of direct
negotiations with the other party or negotiations through an
intermediary.’
[145]
It is clear that the
dispute
[60]
between the parties arose long before the Minister’s resort to
liquidation proceedings against Redisa. She therefore had
a
constitutional and a statutory duty to avoid judicial proceedings by
attempting to settle the dispute. The Minister’s conduct
shows
the opposite. She displayed considerable hostility towards Redisa
over a protracted period and resorted to prior litigation
by issuing
a directive, which in the event was found to be unlawful. Then she
resorted to the current litigation in circumstances
that I have
already found to be unjustified. She therefore breached her duty to
avoid legal proceedings against an organ of state.
The invitation in
her letter of 30 May 2017, if sincere, would have been an appropriate
step in seeking a non-litigious solution
to the grievances stated in
the letter. But I must regrettably conclude that the invitation was
not sincere, since on the same
day she signed her founding affidavit
for Redisa’s
ex parte
liquidation.
[146]
This particular consideration is, of course, only directly
applicable to Redisa and has the result that it was not in the public

interest for the Minister to be allowed to seek its liquidation.
Conclusion
[147]
The Minister brought two
ex parte
applications on an
‘extremely urgent’ basis for the provisional winding-up
of the appellants in terms of
s 81(1)
(c)
(ii) and or
s
81(1)
(d)
(iii) read with s 157(1)
(d)
of the Act, the
appointment of provisional liquidators to take control of the
businesses and ultimately for their final winding-up.
In addition she
sought orders directing the liquidators to ‘distribute the
entire net value of the appellants’ to the
WMB.
[148]
She was granted the provisional winding-up orders wrongly
because she had not justified her resort to
ex parte
proceedings
and had not disclosed material information to the court. She had also
not established any right, in terms of s 157(1)
(d)
, to pursue
this relief in the public interest. The court below therefore ought
to have discharged the provisional orders.
[149]
In this court, counsel for the Minister also abandoned
reliance on ‘s 81(1)
(c)
(ii) and or s 81(1)
(d)
(iii)’
to sustain the finding that it was ‘just and equitable’
to wind-up the appellants. Instead it was contended
that the
Minister, as a public interest litigant, could rely on any of the
substantive grounds in s 81 of the Act to apply to wind
up a solvent
company. On the assumption that this contention was correct, I
nevertheless concluded that the Minister had, on the
facts, not
established grounds for the winding-up of the appellants.
[150]
In the result the following order is made in case no’s
1260/2017 and 188/2018:
(a)
The appeal succeeds with costs including the costs of two counsel.
(b)
The order of the court a quo on 15 September 2017 finally winding up
the appellant (Redisa) is set aside and replaced with the
following:
‘
The
order of 1 June 2017, placing the respondent (Recycling and Economic
Development Initiative of South Africa) under provisional
liquidation
is discharged and the Minister’s application is dismissed with
costs, including the costs of two counsel.’
The
following order is made in case no’s 1279/2017 and 187/2018:
(a)
The appeal succeeds with costs including the costs of two counsel.
(b)
The order of the court a quo on 15 September 2017 finally winding up
the appellant (KT) is set aside and replaced with the following:
‘
The
order of 8 June 2017 placing the respondent (Kusaga Taka Consulting
(Pty) Ltd) under provisional liquidation is discharged and
the
Minister’s application is dismissed with costs, including the
costs of two counsel.’
________________
A
Cachalia
Judge
of Appeal
Molemela
JA
[151]
I have had the privilege
of reading the majority judgment, which upholds the appeal and sets
aside the orders granted by the court
a quo. For the reasons that
follow, I respectfully disagree with the majority judgment’s
analysis of evidence as well as
its reasoning and conclusion. I align
myself broadly with the court a quo’s reasoning as set out in
its detailed judgment.
I would therefore dismiss the appeal with
costs. For the sake of brevity, I will, as far as possible, refrain
from reiterating
what has already been stated in the court a quo’s
reported judgment.
[61]
Rather, I will focus on explaining why I disagree with the reasoning
and conclusions of the majority judgment and will bring out
the facts
that support my conclusion, some of which have not been alluded to in
the majority judgment or the judgment of the court
a quo.
Alleged
failure of the Minister to disclose material information
[152]
The appellants allege that the Minister failed to disclose
material information in the
ex parte
application that preceded
the application heard by the court a quo. The contention that the
litigation that was pending in the Gauteng
High Court was not
disclosed lacks merit. Firstly, that litigation was mentioned in the
body of the Minister’s affidavit
and more detailed reference to
it was made in one of the annexures to that affidavit. From my
perspective, the circumstances under
which reference to this
litigation was made in the Minister’s founding affidavit are
not analogous to a situation where no
reference whatsoever is made to
the annexure in the body of the affidavit or where the party to the
litigation is not aware of
what the annexure pertains to. Simply put,
the two applications pending in the Gauteng High Court were
sufficiently disclosed.
It therefore cannot be said that there was
any unnecessary trawling that the court hearing the provisional
application or the court
a quo had to do for purposes of establishing
the facts.
[153]
In any event, that litigation pertained to the review of the
Minister’s decision on the Pricing Strategy and on the
amendment
of the Tyre Regulations and had nothing to do with the
shocking allegations of impropriety arising out of the failure to
observe
corporate governance and to abide by the REDISA Plan, as
revealed in the iSolveit report. That litigation was clearly
unrelated
to the litigation brought before the court a quo. In my
view, a failure to disclose such unrelated litigation could never
constitute
a material non-disclosure warranting the setting aside of
the provisional winding-up order granted by the court a quo. This is
especially so because by the time the application was argued before
the court a quo, full sets of affidavits had been filed by all
the
parties and the issues were fully canvassed. It is also clear from
the judgment of the court a quo that it applied its mind
to that
litigation but concluded that it was not relevant to the issue raised
before it.
[154]
The Western Cape litigation, before Davis J, which culminated
in the withdrawal of the Minister’s directive, was also alluded

to in the founding affidavit, with the Minister even referring to
what Erdmann had stated in the affidavit filed in that application.

In my view, the lack of detail in the founding affidavit, if any,
cannot be equated with non-disclosure. Further, and in any event,

having gleaned the essence of that litigation from the parties’
averments in this matter, I respectfully disagree with the
majority
judgment’s conclusion that the aforesaid litigation was germane
to the issues in this matter. Davis J granted an
interim order and
issued a rule nisi. The remarks made in his judgment must be seen in
their proper perspective, as some of them
were not related to the
merits of the matter. It is clear from that judgment that the remark
that the justification for the directive
was ‘prima facie
irrational’ was, in the main, directed at the Minister’s
approach in not waiting for the extended
deadline to pass before
issuing the directive. The Minister’s decision to withdraw the
directive must be considered against
the following remarks, which
immediately preceded the interim order that was granted:
‘
I
offered the [Minister] an opportunity to file a further and more
detailed affidavit, which would have assisted this court in
determining whether the interim relief should be granted. . .
Regrettably, that invitation was declined. This means that this case

was argued on an extremely detailed founding affidavit and a very
skeletal answering affidavit. It is for this reason that I propose,

therefore, to have an extremely short return day, in order that this
matter be resolved comprehensively and fully with the benefit
of
comprehensive papers by both parties.’
Since
there was no material non-disclosure on the part of the Minister, the
approach laid down in the English law case of
Brink’s-Mat
Ltd v Elcombe & others
[62]
,
referred to in paragraph 51
of the majority judgment is inapposite.
The
approach to disputes of fact
[155]
It is trite that in motion proceedings, a court cannot draw
conclusions from probabilities but is entitled to draw inferences
from
facts that have not been disputed or that have been admitted. As
correctly stated in the majority judgment, by and large applications

on motion are decided on common cause facts. In the founding
affidavit the Minister inter alia asserted that KT and REDISA had

created a scheme to extract money from a non-profit company (REDISA)
to KT. She mentioned in broad terms that the entire scheme
had been
designed to circumvent statutory strictures to facilitate funnelling
large sums of money from REDISA to KT. She also described
REDISA as a
‘front’. This was the general thrust of the Minister’s
allegations, which were substantiated in the
replying affidavit.
Although REDISA and KT both denied these allegations.it must be borne
in mind that not every denial of allegations
serves to create a
material dispute of fact that warrants the dismissal of an
application or a referral for oral evidence.
[156]
This court, in
Wightman
v Headfour
,
[63]
stated as follows in relation to how disputes of facts ought to be
dealt with in application proceedings. It said:
‘
[12]
Recognising that the truth almost always lies beyond mere linguistic
determination the courts have said that an applicant who
seeks final
relief on motion must in the event of conflict, accept the version
set up by his opponent unless the latter’s
allegations are, in
the opinion of the court, not such as to raise a real, genuine or
bona fide
dispute of fact or are so far-fetched or clearly
untenable that the court is justified in rejecting them merely on the
papers:
Plascon-Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd
[1984] ZASCA 51
;
1984 (3) SA 623
(A) at 634E-635C.
[13]
A real, genuine and
bona fide
dispute of fact can exist only
where the court is satisfied that the party who purports to raise the
dispute has in his affidavit
seriously and unambiguously addressed
the fact said to be disputed. There will of course be instances where
a bare denial meets
the requirement because there is no other way
open to the disputing party and nothing more can therefore be
expected of him. But
even that may not be sufficient if the fact
averred lies purely within the knowledge of the averring party and no
basis is laid
for disputing the veracity or accuracy of the averment.
When the facts averred are such that the disputing party must
necessarily possess knowledge of them and be able to provide an
answer
(or countervailing evidence) if they be not true or accurate
but, instead of doing so, rests his case on a bare or ambiguous
denial
the court will generally have difficulty in finding that the
test is satisfied
. I say ‘generally’ because factual
averments seldom stand apart from a broader matrix of circumstances
all of which
needs to be borne in mind when arriving at a decision. A
litigant may not necessarily recognise or understand the nuances of a
bare or general denial as against a real attempt to grapple with all
relevant factual allegations made by the other party. But when
he
signs the answering affidavit, he commits himself to its contents,
inadequate as they may
be, and will only in exceptional
circumstances be permitted to disavow them. There is thus a serious
duty imposed upon a legal adviser
who settles an answering affidavit
to ascertain and engage with facts which his client disputes and to
reflect such disputes fully
and accurately in the answering
affidavit. If that does not happen it should come as no surprise that
the court takes a robust
view of the matter.’ (Own emphasis.)
[157]
In
Fakie NO v CCII
Systems,
[64]
this court further stated as follows:
‘
[55]
That conflicting affidavits are not a suitable means for determining
disputes of fact has been doctrine in this court for more
than 80
years. Yet motion proceedings are quicker and cheaper than trial
proceedings, and
in the interests of justice courts have been at
pains not to permit unvirtuous respondents to shelter behind patently
implausible
affidavit versions or bald denials
. More than sixty
years ago, this court determined that a judge should not allow a
respondent to raise ‘fictitious’
disputes of fact to
delay the hearing of the matter or to deny the applicant its order.
There had to be “a bona fide dispute
of fact on a material
matter”.
This means that an uncreditworthy denial, or a
palpably implausible version, can be rejected out of hand, without
recourse to oral
evidence.
In
Plascon-Evans Paints Ltd v Van
Riebeeck Paints (Pty) Ltd,
this court extended the ambit of
uncreditworthy denials. They now encompassed not merely those that
fail to raise a real, genuine
or bona fide dispute of fact, but also
allegations or denials that are so far-fetched or clearly untenable
that the Court is justified
in rejecting them merely on the papers.
[56]
Practice in this regard has become considerably more robust, and
rightly so. If it were otherwise, most of the busy motion
courts in
the country might cease functioning. But the limits remain, and
however robust a court may be inclined to be, a respondent’s

version can be rejected in motion proceedings only if it is
“fictitious” or so far-fetched and clearly untenable that

it can confidently be said, on the papers alone, that it is
demonstrably and clearly unworthy of credence.’ (Footnotes
omitted.)
(Own emphasis.)
[158]
A perusal of the court a quo’s
judgment shows that it was alive to the principles enunciated in the
afore-mentioned authorities.
It basically found, correctly in my
view, that even though the appellants had tried to raise a plethora
of factual disputes, the
Minister had, on the basis of the undisputed
evidence made a proper case for the granting of the liquidation
order. For the reasons
that will become evident later, I hold the
view that when the evidence that served before the court
a
quo
is considered in
totality, it cannot even remotely be said that the appellants raised
a genuine dispute of fact. The appellants
did not challenge a number
of serious allegations made by the Minister. Most of the appellants’
general denials were unsubstantiated
by any facts which suggested a
genuine basis for the denial. As correctly stated by the court a quo,
important matters were left
unanswered. It seems to me that those
general denials were a tactical approach of placing an obstacle in
the path of the Minister’s
application
[65]
with a view to creating a factual dispute that would be not be
resoluble on the papers, thus throwing a spanner in the works of
the
Minister’s application. However, the ‘dispute’
contained in the general denial turned out to have no substance.
The
salient provisions of the REDISA Plan, MOI, Management Agreement and
Companies Act, 2008
[159]
The correct approach to the
interpretation of documents is well-established.
[66]
Consideration must be paid to the document as a whole as well as
inter-related documents, if such exist. It serves no purpose to
look
in isolation at specific clauses of the aforesaid documents without
considering the whole document. Applying that approach
to the facts
of this case, it means that due consideration must be paid to the
REDISA Plan, which this court
[67]
described as an instrument of subordinate legislation, the REDISA
Memorandum of Incorporation, the Management Agreement and its

amendments, which all speak for themselves. Crucially, the importance
of tyre waste management plans, like the REDISA plan, was
described
by this court in the following terms: ‘Such plans are of
importance from the perspective of the fundamental right,
enjoyed by
everyone, “to an environment that is not harmful to their
health or well-being” entrenched in
s 24(
a
)
of the Constitution and the Minister’s obligations in terms of
s 7(2) of the Constitution to “respect, protect, promote
and
fulfil” this and the other rights contained in s 24.’
[68]
[160]
Prior to approving a plan, the
Minister is required by s 72(1) of the Waste Act to ‘follow
such consultative process as may
be appropriate in the
circumstances’. She is, in particular, obliged to consult with
other members of the cabinet whose portfolios
may be affected, MECs
in the provinces who may be affected, and members of the public
through a public participation process, which
must be conducted in
accordance with s 73.
[69]
[161]
Just over a year after the
coming into operation of the Waste Act, KT and REDISA were registered
with the Companies Intellectual
Property Commission. KT was
registered as a private company on 31 August 2010, while REDISA was
registered as a Non Profit Company
on 18 November 2010, with Erdmann,
Davidson and Kirk being its promoters.
[70]
The three REDISA executive directors, Erdmann, Davidson and Kirk
together with one of the directors of KT (Crozier) held shares
in two
companies that jointly held a 100% shareholding in KT. In February
2011, REDISA submitted a tyre waste management plan (REDISA
Plan) to
the Minister for her approval.
[71]
In April 2011, another non-profit company submitted its tyre waste
management plan to the Minister for approval, which was subsequently

rejected by the Minister. As it later turned out, REDISA and KT had,
on 10 November 2011, concluded a management agreement in terms
of
which KT would manage the REDISA Plan. The Minister approved the
REDISA Plan on 28 November 2011. Litigation ensued, culminating
in
the withdrawal of the Minister’s approval of the REDISA Plan.
REDISA later submitted another plan to the Minister, which
was
approved on 23 July 2012. This approval was again attacked in
litigation in the Gauteng High Court. The REDISA Plan which is
the
subject of this particular litigation is the one approved by the
Minister and published in the Government Gazette on 30 November
2012.
I pause to point out that it is evident from this chronology that
that the management agreement between KT and REDISA was
entered into
before
REDISA’s
re-submission of its tyre waste management plan to the Minister for
approval in April 2012. I will return later to
this aspect.
[162]
As stated before, the various
provisions of the REDISA Plan must be interpreted in the context of
the entire REDISA Plan and not
in isolation.
[72]
In paragraph 3 of the majority judgment it is stated that ‘The
Redisa Plan operates indefinitely, subject to a review conducted

every five years.’ It is, however, critical to also mention
that in terms of clause 28 of the Redisa Plan, the period of

appointment of the external management company, which later turned
out to be KT, is reflected as five years. In the letter written
by
the Minister approving the REDISA Plan dated 29 November 2012, she
clearly stated that the revised REDISA Plan ‘is hereby
approved
and will come into effect on the date of the publication in the
Government Gazette and will be valid for a period of 5
(five) years
from the said publication date.’ As the REDISA Plan was
gazetted on 30 November 2012, this means that the REDISA
Plan would
be valid until 30 November 2017 unless the Minister determined
otherwise. It is common cause that the Minister did not
extend the
validity period of REDISA.
[163]
Clause 2 of the REDISA Plan states as follows: ‘REDISA will
have a Memorandum of Incorporation (MOI) governing its activities.
An
organisation controlling a project of this magnitude must have
sustainability. A properly drafted MOI imposes codes of conduct
and
governance, and guards against narrow sectoral influences or private
enterprises taking over or high-jacking the aims of the

organisation.’ Clause 2 of the REDISA Plan further states that
REDISA would adopt a MOI that would ensure the independence
of the
REDISA Board. According to the PWC report, the MOI was approved and
duly forwarded to the Department in November 2012. The
REDISA Plan
further mandated REDISA to fulfil socio- economic objectives of job
creation and BBBEE development. The REDISA Plan
also provides as
follows:
‘
The
REDISA Board will be made up of:
·
two executive directors;
·
one legal expert;
·
one financial expert;
·
five captains of industry and higher learning;
·
one from the informal business sector.
No
board member may represent any waste stream managed by REDISA
.’
(Own emphasis).
[164]
The motivation for accepting the REDISA Plan is expressed by REDISA
as follows in clause 2.1 of the REDISA Plan: ‘The
REDISA Plan
is structured around there being only one waste tyre management plan,
on the basis that this is the only workable approach
. . . A single
plan approach, with a simple and equitable system for apportioning
the waste tyre management fee will level the
playing field, and
simplified administration and auditing will make it far less open to
suspicions of behind the scene manipulation
by the bigger
participants.’
[165]
Clause 3 of the REDISA Plan states that the main object of REDISA is
‘to engage in the conservation, rehabilitation
and/or
protection of the natural environment, specifically by creating and
procuring the implementation of the Waste Tyre Management
Plan as
contemplated in and pursuant to the Environmental Management Waste
Act and the Waste Regulations, subject to the Approval
Conditions.’
The Approval Conditions are described as ‘the conditions
imposed by the Minister when approving the Waste
Tyre Management Plan
as set out in the letter addressed by the Minister to the company
dated 18 July 2012 together with such further
conditions as the
Minister shall lawfully impose thereafter.’
[166]
Significantly, clause 14 of the REDISA Plan gives the assurance that
the input of all relevant stakeholders, including the
Department of
Environmental Affairs, would be considered in as far as the design of
the National Centralised Computer System (NCCS)
was concerned. The
REDISA Plan further provides that the NCCS would be designed to
capture information from beginning to end, would
be used to provide
the primary audit trail, would ‘keep accurate records on
logistics, support, and accounting of all waste
tyre movement
throughout the process’; would identify collection points and
would also identify anomalies and variances that
would trigger
investigations. A perusal of the REDISA Plan makes it plain that
while the management of the REDISA would be done
by an external
management company, the NCCS would belong to REDISA. Clause 16
provides that ‘in the initial years of operation,
there will be
over-recovery of operating costs from the Waste Management Fee as the
number of depots, transporters and Processors
will be less than the
targeted final numbers. The over-recovery will be accumulated as
provisions and will be used to fund establishment
and set-up costs.’
The same clause further stipulates that REDISA will undertake the
determination, imposition, collection,
management administration of
and disbursements from levies paid into the fund by subscribers.
[167]
The REDISA Plan further stipulates, under the heading of External
Management Company (clause 26.1.5), that ‘a detailed
audit plan
would be formulated in compliance with the Waste Tyre Regulations to
audit amongst others, the management of REDISA
within accepted
accounting standards’ and ‘its compliance with the
management contract’. According to clause
26.1.7, the external
auditing company would ‘audit the governance structures and
compliance to good corporate governance.’
As I see it, the
aforesaid provisions of the REDISA Plan make it abundantly clear that
the directors of both REDISA and its management
company were expected
to ensure compliance with good corporate governance.
[168]
Notably, s 15(1)(
a
) of the
Companies Act stipulates
that each
provision of a company’s Memorandum of Incorporation must be
consistent with that Act and is void to the extent
of its
inconsistency. REDISA’s MOI expressly bound REDISA to the
extended accountability and transparency provisions enshrined
in the
Companies Act. REDISA
’s MOI also put stringent measures in
place pertaining to its amendment. It stipulated that it could only
be amended with
approval of
all
directors and required that,
after its first anniversary, the amendment be effected with the
additional approval of an independent
attorney who certified that the
proposed amendment was ‘reasonable and in the interests of the
good governance of the company’.
Significantly, the management
agreement concluded between REDISA and KT stipulated that the
principles of good corporate governance
set out in the King III Code
of Corporate Governance (the King Code) would be observed.
[169]
The independence of the board
of REDISA was emphasised in both the REDISA Plan and the MOI. For its
part, the King Code defines
an independent director as someone who is
‘independent in character and judgment.’
[73]
It propounds that there should be no relationships which are likely
to affect or could appear to affect that independence. In
acknowledging that KT had been rendering services to Redisa for a
period of no less than two years prior to its signature and that

those services formed a central role in the decision to appoint KT as
the management company, the management agreement concluded
by the
appellants undeniably attests to the fact that the relationship
between the two companies affected the independence of the
implicated
executive directors of REDISA. They were not independent directors
despite REDISA having advocated for an independent
board in the
REDISA Plan. Furthermore, the MOI alludes to the eligibility
requirements contemplated in
s 69
of the
Companies Act
[74
]
and provides in detail, categories of persons who are not eligible to
be appointed as the directors of REDISA.
[170]
Clause 11.6 of the MOI provides as follows:
‘
In
addition to satisfying the qualification and eligibility requirements
set out in
s 69
[of the
Companies Act] and
in order to preserve the
independence of the Board as required by the Waste Tyre Management
Plan, and subject to clause 11.7, the
following persons may not be
appointed or serve as directors of the Company-
11.6.1
Any Plan Subscriber;
11.6.2
any other person engaged in any capacity in respect of which
the Company administers the Waste Tyre Management Plan;
11.6.3
where any director is also a director of any other company or
member of the governing or managing body of any other entity, whether

established for commercial purposes or otherwise, any other person
who is also a director of such company or member of the governing
or
managing body of such other entity;
11.6.4
any person who is a director or shareholder of a management
company referred to in clause 19, where such appointment would result

in more than 2 (two) such persons serving as directors of the
company; and
11.6.5
any person who is a related person or an inter-related person
(as those terms are defined in the Act) to any person referred to in

clauses 11.6.1 – 11.6.4, and in the event that any person
becomes disqualified from being appointed or serving as a director
in
accordance with the above provisions, such person shall forthwith
resign as a director of the company.’
[171]
It is evident from the provisions of clause 11.6.2 of the MOI that
Erdmann, Davidson and Kirk were ineligible to be appointed
as the
directors of REDISA for as long as KT was the company carrying out
the management functions for REDISA. Furthermore, in
terms of clause
11.6.3 of the MOI, Erdmann, Davidson and Kirk were ineligible to be
appointed as directors on account of a linked
series of relationships
as well as their appointment as directors of other companies, most of
which were involved in the tyre waste
stream. For example, Erdmann
and Crozier, were also the directors of another private company known
as Kusaga Taka International.
The third director of Kusaga Taka
International was Samuel Robertson, who is the same person who
represented KT when the management
agreement was amended in September
2013. Robertson, together with Erdmann, Davidson and Crozier were the
directors of a non-profit
company known as Circular Economy
Initiative of South Africa. Erdmann, Crozier and Erdmann’s son
were also the directors
of a private company known as NYI, a company
holding the main lease and which is REDISA’s landlord. NYI,
which holds a 75%
shareholding in KT, received R24.556 million from
REDISA.
[172]
Despite this and various queries set out in the iSolveit report, the
implicated directors remained the executive directors
of REDISA up to
the date of the litigation that served before the court a quo. This,
in my view, constituted a failure to manage
a conflict of interest.
It is evident from the various provisions of the REDISA Plan and the
MOI that sufficient safeguards were
built into the operation of the
REDISA Plan, more so because both the REDISA Plan and the MOI cannot
be amended without the input
of the executive authority. However, the
sustainability of the REDISA Plan obviously depended on bona fides in
the management of
REDISA. I will later show that bona fides in the
management of REDISA proved to be the proverbial pie in the sky.
[173]
As at the time of this litigation in the court a quo, Erdmann’s
son was also a director of KT. Both Erdmann and Davidson
were,
together with one S K Mosena, directors of a private company known as
Borala Recycling and Innovation Plant. Both Erdman
and Davidson,
together with one Reza Daniels, were directors of a private company
known as Imvelo Rubber Products. Both Erdmann
and Davidson were,
together with one B L Dube, directors of a private company known as
Mafukuzela Manufactures. Erdmann, Davidson
together with one Tshepo
Molai were together the directors of a private company known as
Ordigen. Erdmann and Davidson were together
with one E V Molete the
directors of a private company known as Ordipoint, which is alleged
to have received a whopping R17 million
from REDISA, reflected as
expenses. Erdmann, Davidson and one K C Moloi were the directors of a
private company known as Waste
Beneficiation, which was said to be in
the waste tyre beneficiation business. It is self-evident that
Erdmann and Davidson’s
acceptance of directorships in those
companies flouted the provisions of clause 3 of the REDISA Plan,
which stipulated that no
board member would represent any stream
managed by REDISA. I have consciously not made reference to other
companies alluded to
in the Minister’s papers but which were,
according to CIPC, in the process of deregistration. I have only
alluded to those
described in the CIPC documents as ‘in
business’. Even on the acceptance Erdmann’s explanation
that some of the
companies mentioned were dormant, I am of the view
that their dormant status is immaterial: the bottom line is that the
Erdmann,
Davidson and / or Kirk were the directors of those companies
in contravention of the REDISA Plan and the MOI.
[174]
Erdmann was also one of the directors of a non-profit company known
as Product Testing Institute, which received R61 852 000.00
from
REDISA. Erdmann and Davidson were also the directors of a private
company known as REDISA SPV Holdings. Erdmann, Davidson
and Kirk were
also the directors of a non-profit company known as REDISA Academy.
It is quite evident that Erdmann, Kirk and Davidson
held multiple
directorships in various companies which were formed subsequent to
the publication of the REDISA Plan. All the above-mentioned
facts are
undisputed and self-evident from the REDISA Plan and REDISA’s
MOI. Erdmann, Davidson and Kirk were also ineligible
in terms of
clause 11.6.5 of the MOI because they were inter-related persons as
contemplated in sections 1, 2 and 75(1)
(
b
)
of the
Companies Act.
The
untenable conflict of interest
[175]
It is appropriate to preface the discussion on conflict of interest
by giving a brief historical background pertaining to
the importance
of a director’s common-law duty to avoid a conflict of
interest.
[176]
Lord Herschell in
Bray v Ford
[1896] AC 44
at 51 issued this
warning: ‘Human nature being what it is, there is a danger, in
such circumstances, of the person holding
a fiduciary position being
swayed by interest rather than duty and thus prejudicing those who he
is bound to protect.’ In
Robinson v Randfontein Estates Gold
Mining Co Ltd
1921 AD 168
at 178-179, Innes CJ reasoned that the
test pertaining to conflict of interest ‘rests upon the broad
doctrine that a man,
who stands in a position of trust towards
another, cannot, in matters affected by that position, advance his
own interest (e.g.
by making a profit) at that other’s
expense.’
[177]
The common-law position has now been codified.
Section 75(5)
of the
Companies Act states
:
‘
If
a director of a company, other than a company contemplated in
subsection (2)(b) or (3), has a personal financial interest in

respect of a matter to be considered at a meeting of the board or
knows that a related person has a personal financial interest
in the
matter, the director –
(a)
must disclose the interest and its general nature before the
matter is considered at the meeting;
(b)
must disclose to the meeting any material information relating
to the matter and known to the director;
(c)
may disclose any observations or pertinent insights relating
to the matter if requested to do so by the other directors;
(d)
If present at the meeting must leave the meeting immediately
after making any disclosure contemplated in paragraph (b) or (c);
(e)
must not take part in the consideration of the matter except
to the extent contemplated in paragraph (b) and (c);
(f)
while absent from the meeting in terms of the subsection
(i)
is to be regarded as being present at the meeting for the
purposes of determining whether sufficient directors are present to
constitute
the meeting; and
(ii)
is not to be regarded as being present at the meeting for the
purpose of determining whether the resolution has sufficient support

to be adopted; and
(g)
must not execute any document on behalf of the company in
relation to the matter unless specifically requested or directed to
do
so by the board.’
It
is clear from this provision, which must be read in conjunction with
the definition of ‘personal financial interest’
[75]
contained in
s 1
of that Act, that disclosure must be made
beforehand.
[178]
Section 76
(3) of the
Companies Act provides
:
‘
Subject
to subsections (4) and (5), a director of a company, when acting in
that capacity, must exercise the powers and perform
the functions of
a director-
(a)
in good faith and for a proper purpose;
(b)
in the best interests of a company; and
(c)
with the degree of care, skill and diligence that may
reasonably be expected of a person-
(i)
carrying out the same functions in relation to the company as
those carried out by that director; and
(ii)
having the general knowledge, skill and experience of that
director.’
Section
76
(4) of the
Companies Act states
:
‘
In
respect of any particular matter arising in the exercise of the
powers or the performance of the functions of a director, a
particular director of a company –
(a)
will have satisfied the obligations of subsection (3)
(
b
)
and
(
c
)
if –
(i)
the director has taken reasonably diligent steps to be
informed about the matter;
(ii)
either –
(aa)
the director had no material personal financial interest in the
subject matter of the decision, and had no material personal

financial interests in the subject matter of the decision, and had no
reasonable basis to know that any related person had a personal

financial interest in the matter; or the director complied with the
requirements of
section 75
with respect to any matter contemplated in
sub-paragraph (aa); . . .’
[179]
It is evident from the
afore-mentioned provisions that company directors have a duty to take
all necessary steps to act in the best
interests of the company.
Furthermore, the King Code, to which REDISA and KT bound themselves,
provides that certain conflicts
of interests ‘are fundamental
and should be avoided’.
[76]
Granted, it is not a completely unusual occurrence for a director of
one company to be a director or shareholder of another company,
and
there is no law that prohibits that. However, a conflict of interests
certainly arises in a situation where a director of one
company is
party to a decision to conclude a contract with another company in
which he or she is a shareholder but fails to disclose
this. This
amounts to a breach of the director’s fiduciary duties. A
breach of fiduciary duty is mitigated if the director
in question
makes a full disclosure of his or her personal interests in a
contract prior to such contract being concluded with
the company. As
I see it, where the contract was not disclosed before-hand, then it
ought to be ratified in compliance with the
MOI or the
Companies Act,
as
the case may be.
[180]
Turning to the facts of this
matter, it is undisputed that there was a conflict of interest
arising from indirect shareholding held
by three REDISA directors in
KT (Erdmann, Davidson and Kirk). Curiously, during the appeal hearing
it was obliquely argued on the
appellants’ behalf that Erdmann,
Davidson and Kirk’s shareholding in KT did not in fact
constitute a conflict of interest.
This argument has no merit, for
REDISA, on its own version, acknowledges that there was a conflict of
interest. It acknowledged
that it (REDISA) is ‘related’
to KT. The following was stated in REDISA’s financial
statements: ‘The management
company, [KT] is related to
[REDISA] as the executive directors are shareholders of this
company.’ That relationship falls
squarely within the
provisions of clause 11.6.5 of the MOI, read with the provisions of
s
2(1)
of the
Companies Act.
[77
]
[181]
The majority judgment mentions that there was no overlap of directors
between the KT and REDISA boards. While this is indeed
so, it is
really of no moment, in my respectful view, considering the stringent
provisions of the MOI pertaining to the eligibility
of directors and
the provisions of
s 1
,
s 2
and
s 75
of the
Companies Act with
reference to the personal interests of related and inter-related
persons and the element of control. Furthermore, it is clear from
the
provisions of the MOI that the eligibility of directors was a
stringent requirement that could only be condoned if (i) it was

disclosed beforehand, (ii) it is unanimously agreed to by all the
remaining directors and (iii) it is not against the law or the

directive issued by the Minister. Clearly, non-compliance with the
provisions of MOI and the REDISA Plan relating to the independence
of
the board of REDISA was considered in a very serious light.
[182]
As stated before, the existence of a conflict of interest caused by
the appointment of KT as REDISA’s external management
company
is not disputed. From my point of view, this conflict of interest was
fundamental and went to the heart of the relationship
between REDISA
and KT, given the fact that KT was appointed to manage the operations
of REDISA for the entire duration of the REDISA
Plan, The crisp
question is whether this conflict of interest was properly disclosed
as required by the
Companies Act and
MOI. If not, the logical
question would be whether the non-disclosure was subsequently
ratified.
[183]
The appellants’ case is that the conflict of interest was
disclosed to the Department and to the Minister. They have
not
substantiated this allegation and claim that the disclosure was done
‘at informal meetings that have not been minuted’.
For
the reasons that will become evident later in this dissenting
judgment, I find it ‘palpably implausible’ that such
a
fundamental conflict of interest would be disclosed informally to the
point of not being recorded in the minutes of any meeting.
Accepting
that it was, this begs the question why the same Minister
subsequently sent correspondence bemoaning the conflict of
interest
resulting from the shareholding held by the REDISA executive
directors in KT. It simply defies logic that she would query
this
aspect if she had previously given it her blessing. Like the court a
quo, my conclusion on this aspect is that the conflict
of interest
was not disclosed. I also find that in any event, even if it were to
be accepted that such a conflict of interest was
disclosed to the
Minister and she did not demur, that would not assist the appellants
in any way, given the specific requirements
of
s 75(5)
and (7) of the
Companies Act. The
Minister simply has no powers to override the
provisions of the
Companies Act. Her
acquiescence in the unlawful
scheme would not validate the unlawful acts. The fact that a party
agrees to an illegality does not
make the prohibited act lawful. This
much was conceded by the appellants’ counsel during the
exchange with the bench.
[184]
REDISA’s flouting of various principles of corporate governance
was revealed by the iSolveit report. The majority judgment
states
that iSolveit is not an accredited auditing firm. This, however, does
not detract from the fact that it was a special forensic
accounting
firm that was mandated by the Minister to do a specific task and its
findings about the lack of independence of the
REDISA board are
self-evident. Significantly, these findings were, to a large extent,
later confirmed by an accredited accounting
firm, namely Ernst and
Young. The fact that REDISA did not receive the final report of
iSolveit and that its directors saw it for
the first time as an
annexure to the papers is therefore neither here nor there. This is
because on REDISA’s own version,
in June 2016 REDISA knew that
iSolveit had raised an issue about the lack of independence of its
board, i.e. its hopelessly conflicted
relationship with KT, as well
as its non-compliance with the REDISA Plan. Those are issues that
were at the crux of the initial
iSolveit report. Clearly, this was
information peculiarly in REDISA and KT’s knowledge. The
additional report was merely
an elaboration on the findings. The
appellants’ assertion that the report was only brought to their
attention during litigation
is therefore of no avail. The fact of the
matter is that nothing was ever done by REDISA to mitigate the
conflict of interest.
All it did was to maintain that it had
disclosed that the REDISA Executive Directors were indirect
shareholders in KT.
[185]
A perusal of the management agreement reveals that it was signed on
10 November 2011. As stated before, the REDISA Plan was
re-submitted
to the Minister in May 2012. Logic dictates that if the identity of
the management company had already been disclosed
to the Minister or
officials of the department, then its identity would, in the
interests of transparency, have been disclosed
in the REDISA Plan
that was re-submitted. This was not done. Instead, the REDISA plan
stated that the management company ‘will
be appointed for a
period of five years’, as if that had not yet happened by the
time the REDISA Plan was re-submitted. This
is one of the reasons why
I agree with the court a quo’s conclusion that the appellants’
unsubstantiated version was
far-fetched and untenable, thus liable to
be dismissed by virtue of the application of the well-established
Plascon Evans
rule.
[186]
The appellants disputed the Minister’s assertion that the
Department was not provided with the management agreement
up to the
time of iSolveit’s intervention. However, in the joint minute
signed on behalf of the Department and REDISA, it
was recorded that
the management contract had, at that state, not been supplied to the
Minister. Whether or not the Department
or the Minister became aware
of the management agreement before the iSolveit report came to hand
is, at the end of the day, of
no consequence because that management
agreement merely identified KT as the management company. It did not
disclose that the three
REDISA executive directors were the
shareholders of KT, let alone disclosing the extent of the
shareholding.
[187]
As can be seen in one of REDISA’s e-mails to iSolveit on 22
July 2016 (not attached to the founding papers but an annexure
to the
letter of 30 November 2016), REDISA purported to attach the requested
management contract together with certain other requested
items. One
can see from the name of the attached file that it was in fact a
management contract between Redisa and KT relating
to multiple waste
streams. Despite REDISA having previously maintained that there was
only one management contract between itself
and KT, it appended a
management agreement that remarkably served to confirm the contrary,
revealing the two companies’ existing
or intended involvement
in other waste streams, in contravention of the provisions of the MOI
and the REDISA Plan.
[188]
In the REDISA Plan, REDISA mentioned that it was a non-profit company
created for purposes of implementing the REDISA Plan.
Section 1
of
the
Companies Act defines
a non-profit company as a company
‘incorporated for a public benefit or other object as required
by item 1 (1) of Schedule
1’ and the income and property of
which are not distributable to its incorporators, members, directors,
officers or persons
related to them except to the extent permitted by
item 1 (3) of Schedule 1’. I consider it significant that the
Minister,
in her letter setting out approval conditions, pointed out
that the REDISA plan ‘responds well to the requirements of an
IITWMP as stated in [regulation] 9(1) of the Waste Tyre Regulations.’
It is worth noting that the same provision, inter alia
requires that
the identity of the party submitting the IITWMP for the Minister’s
consideration, be disclosed. In this instance,
the party submitting
the IITWMP was a non-profit company which, by its definition, is a
company incorporated for a public benefit.
[189]
Among the other requirements set out in Regulation 9(1) of the Waste
Tyre Regulations is that the IITWMP Plan submitted for
approval
should specify how the levy collected would be distributed. The
REDISA Plan stipulates that 20%
of the revenue collected
would
cover all the costs of administering the plan. It is common cause
that the management fee payable to the external management
company
was also included in that 20%. I therefore hold the view that the
clause of the management contract providing for REDISA’s

collection of 18% on the
invoiced amount
was therefore a
deviation from the REDISA Plan. Regulation 17(1)
(b)
of the
Waste Tyre Regulations stipulates that non-compliance with the
published plan constitutes a criminal offence. In terms of
Regulation
17(2),the applicable penalty upon conviction, is a fine not exceeding
R100 000.00 or imprisonment for a period not exceeding
10 years
imprisonment or both, plus a fine not exceeding three times the
commercial value of anything in respect of which the offence
was
committed. That the legislature has deemed it necessary to visit the
contravention of the provisions of a published plan with
a criminal
sanction, is an indication of how seriously non-compliance is viewed.
[190]
Regulation 9(1)
(p)
requires a plan to indicate the extent of
auditing and reporting on the integrated industry waste tyre
management plan envisaged.
In compliance with that requirement, the
REDISA Plan in clause 24 gave the assurance that it would be audited
in terms of all existing
legal and International Financial Reporting
Standards (IFRS) requirements and will include compliance with the
approved plan and
the applicable conditions of approval. Included in
that audit would also be the extent of the independence of the REDISA
board.
[191]
Whatever the criticism there
could be against the iSolveit and A@L reports, the fact of the matter
is that the revelations pertaining
to the various non- compliances
with the REDISA Plan, the MOI and several provisions of the
Companies
Act are
discernible from a mere perusal of these instruments.
Furthermore, the cursory nature of the A@L report does not detract
from the
fact that the allegations made therein pertained to aspects
peculiarly within the knowledge of the shareholders and directors of

KT. There is therefore no reason why the undisputed parts of both
reports cannot be accepted as substantiation of the Minister’s

assertions. I am fortified in this view by the remarks made by the
court in
Registrar of
Insurance v Johannesburg Insurance Co Ltd
[78]
.
In that matter, the
applicant in an application for the winding up of the respondent
sought to hand up a report drawn by an accountant
appointed to
investigate the affairs of the respondent. The respondent had
contended that the report in question constituted hearsay
evidence
and therefore objected to its admission. Hiemstra J reasoned as
follows:
‘
I
am not prepared to allow rules of procedure to tyrannise the Court
where an important matter has to be thrashed out fully and
all the
facts have to be put before the court. In this particular case,
because the case is complex and it cannot be fairly expected
from the
petitioner to have all the facts at his disposal before he launches
his petition, which was in fact launched in the public
interest, I
will overlook the fact that an important part of the petitioner’s
case was put in after his original petition.
It
has also been argued that much of this report is hearsay; it is
stated to be unsworn hearsay in terms of the argument I have
just
dealt with and in some respects as double hearsay. It is true that
the report contains statements by the accountants that
they were
informed of certain facts. Any investigation into books drawn by
others who do not testify to the entries is, very strictly
speaking,
hearsay. But books are admissible against a party. If all the people
who know about every small fact which makes up this
complex case
should have to make affidavits, the matter would have become quite
impracticable. In a case like that, a case will
relax its rules for
the sake of facilitating litigation and in the interest of justice.’
I echo the same sentiments.
[192]
Similar sentiments were expressed in a slightly different context in
Kleynhans v Van der Westhuizen NO
1970 (1) SA 565
(O), where
the court stated:
‘
Once
a discretion has been exercised in favour of an applicant, a Court of
appeal will only interfere if it comes to the conclusion
that the
Court a quo has not exercised its discretion judicially. . . The
application for a provisional order of sequestration
was placed
before the Court as a matter of urgency in the interests not only of
applicant but of the public generally. The ramifications
of
respondent’s affairs were extensive and complex and it was
impossible for applicant to have all the facts fully at his
disposal
before he launched his petition.’ I align myself with these
remarks and consider them to be of application in this
matter.
[193]
It is also noteworthy that that
Erdmann’s employment contract required him to promptly disclose
his direct and indirect personal
interests in a form which he had to
update from time to time. Erdmann has not produced a written form or
resolution evidencing
his disclosure of interests to REDISA. Although
the financial statements state that the conflicted directors recused
themselves
from the discussion of the appointment of KT as the
management company and the non-executive directors
[79]
concluded the contract, this allegation has not been substantiated by
the relevant resolution. Furthermore, REDISA’s external

auditor, KPMG, in the same financial statements, expressly stated
that this information was not verified. Given that the Minister
had,
in her replying affidavit, specifically raised the failure of the
appellants’ failure to attach the relevant documents,
one would
have expected that these documents would have been attached to the
rebutting affidavit that was subsequently filed. Surprisingly,
this
did not happen. The ineluctable inference is that there was no such
disclosure of a conflict of interest. As stated already,
this
flagrant disregard of the MOI and the
Companies Act is
not something
that the Minister is empowered, expressly or impliedly, to agree to.
[194]
At paragraph 71 of the majority
judgment, it is stated that ‘the letter of 30 November 2016
dealt at length with the reasons
for KT’s appointment and the
way in which potential conflicts of interest were managed in
accordance with good corporate
governance, as KPMG had confirmed.’
However, KPMG, which was REDISA’s external auditor,
unequivocally stated that it
had not verified whether the potential
conflicts of interest were indeed disclosed in accordance with
corporate governance.
[80]
Although the MOI states that the minutes of all meetings serve as the
evidence of the taking of resolutions, no minutes reflecting
such
resolutions were attached to the appellants’ papers.
Undoubtedly, this was information peculiarly within the appellants’

knowledge and would have been easy to furnish. This was not done,
save for a one-page document which what was referred to as ‘specimen’

resolution. This ‘specimen’ was completely unrelated to
the appointment of KT as the management company. What is in
fact
evident from that ‘specimen’ is that contrary to the
provisions of
s 75(5)(g)
of the
Companies Act, the
three conflicted
executive directors signed that specific resolution. Furthermore, one
of the executive directors who presumably
ticked one of the blocks
did not sign the resolution.
[195]
Clearly, the requirements of
s 75(5)
of the
Companies Act and
clause
11.6 of MOI pertaining to the management of conflict of interest were
not complied with. Therein lies these three executive
directors’
insurmountable hurdle. Another disconcerting factor evident from the
‘specimen’ is that despite the
clear provisions of the
REDISA Plan, compiled by REDISA, which expressly stipulated that the
board was to consist of ten members,
two of whom were to be executive
directors, one legal expert, one financial expert, five captains of
industry and one person from
the informal business sector, that
requirement was not complied with.
[196]
For whatever it was worth, the appellants repeatedly harped on the
fact that they had disclosed their shareholding to the
‘relevant
government institutions and industry bodies beforehand’. As
stated before, one would have expected this to
have been disclosed in
the REDISA Plan, which was not the case. As correctly found by the
court a quo, the irresistible inference
drawn from the undisputed
facts is that they did not do so. The alleged awareness of those
organisations would in any event not
have served to regularise
non-compliance with the
Companies Act and
MOI. Therefore, the
Minister’s awareness thereof would not have legitimised non-
compliance with the REDISA plan requiring
independence of the board.
[197]
Awareness of the ‘relationship’ in any event does not
equate to an awareness of the nature and extent of the shareholding,

which are important in assessing the extent of the personal interest
and, in turn, have a bearing on the extent of the conflict
of
interest. The 92% shareholding of Erdmann, Davidson, and Kirk, via
Nine Years Investments and Avranet meant that these three
executive
directors, in essence, controlled KT. This served to emasculate the
requirements of the REDISA Plan and MOI pertaining
to of an
independent board.
[198]
Further and in any event, the fact that the financial statements
disclosed that some of the REDISA directors were indirect

shareholders does not detract from the fact that the extent of that
shareholding, which in effect meant that the three implicated

executive directors controlled KT, was never disclosed in any of the
correspondence issued by or at the instance of REDISA. The
fact that
this was not even disclosed in REDISA’s answering affidavit
speaks volumes with regards to REDISA’s tendency
to withhold
material information. The extent of the shareholding came to light
only as a result of the A@L report.
[199]
Crucially, neither REDISA nor KT has averred that this state of
affairs was ever ratified by the REDISA Board. In any event,
both the
MOI and the
Companies Act lay
down certain procedures for
ratification. It could only have been done with the consent of the
Minister or with leave of the court.
It was not the appellants’
case that this was ever done.
[200]
What is also clear from the provisions of clause 11.6.1 - 11.6.5 of
the MOI is that the three implicated REDISA directors
were not
eligible to serve as directors in REDISA and that their ineligibility
and their personal interests in KT and NYI, were
not condoned. Clause
11.7 provides that the ineligibility to serve as directors can be
condoned if (1) the breach of the relevant
criteria is disclosed to
the board of directors
prior to its arising
and (2) the
remaining directors unanimously agree to such condonation and (3) in
exercising its power of condonation, the board
is not acting in
breach of any law or the Minister’s directive. The last
requirement would not have been satisfied, for the
REDISA Plan
constituted subordinate legislation and emphasised the independence
of the board. This was further emphasised in the
Minister’s
letter dated 29 November 2012, in which the conditions of approval in
respect of the REDISA Plan were set out.
[201]
Section 75(7)
of the
Companies Act stipulates
the circumstances under
which a decision of the board can become valid despite the existence
of a personal interest on the part
of the directors. That can only
happen if the decision was taken subsequent to the disclosure of the
conflict of interest or if
it has been declared to be valid by a
court of law. It is self-evident that the appellants satisfied none
of those requirements.
The signature of the management agreement and
its first amendment by conflicted parties was never ratified, whether
in terms of
the provisions of the
Companies Act or
in terms of the
MOI. Here, too, the alleged knowledge and acquiescence of the
Department would not come to the assistance of the
appellants.
Needless to say, the various non-compliances with the
Companies Act
by
the REDISA board members equate to a breach of the directors’
fiduciary duties.
[202]
In my view, the failure to disclose in the REDISA Plan that KT had
already been appointed as the external management company,
coupled
with the non- disclosure of the nature and extent of the shareholding
constitute material non- disclosure. This resulted
in an untenable
and pervasive conflict of interest that went to the heart of the
relationship between REDISA and KT on the one
hand, and between the
two companies and the Minister, on the other. This conflict of
interest was matched in equal measure only
by the lack of
accountability and transparency which offended the objects of the
Companies Act. There
is absolutely nothing in the papers that shows
that the three implicated executive directors addressed this conflict
of interest
in any way. Crucially, the fact that KT was appointed
before the REDISA Plan was gazetted also means that REDISA’s
promises
of accommodating BBBEE and black economic empowerment, as
set out in the REDISA Plan, were hollow given the fact that KT was
self-evidently
a fiefdom of a few individuals. KT was correctly
identified as a front. The Minister’s disgruntlement with this
state of
affairs is absolutely justified.
[203]
There is a reason why the numerous non-compliances with the REDISA
Plan and MOI would have taken some time to uncover. Anyone
reading
the MOI would have been satisfied that it was aligned to the REDISA
Plan and that there were enough safeguards for accountability
and
transparency. This is especially so because of (i) a clause in the
MOI binding the company to compliance with the unalterable
provisions
of the
Companies Act, which
include provisions surrounding the
directors’ fiduciary duties, (ii) to the assurance in the MOI
that at least 3 directors
would be ‘persons not connected’
as contemplated in the Income Tax Act and (iii) reiterated the
grounds of disqualification
of the directors. Anyone seeing the
REDISA Plan and reading the MOI would have been lulled into a false
sense of security, not
being aware that a management agreement was
already in breach of those clauses and thus seriously eroded the
protection these documents
seemed to confer.
The
unauthorised change in the computation of the management fee
[204]
At paragraph 17, the majority judgment states that ‘the
management contract between KT and REDISA permitted KT to a

management fee of 18% of the total levy from tyre manufacturers,
which was less than the 20% stipulated under the REDISA Plan.
The
Minister could not but have been aware of this from the beginning.’
Furthermore, at paragraph 70 of the majority judgment
it is stated
that ‘by simple calculation one can see that the management fee
in each month was exactly 18% of the revenue.’
For his part, Mr
Crozier alleges that ‘REDISA pays KT an administration fee
equivalent to 18% of the levy for providing administration
services
(which is less than the prescribed 20% approved by the applicant).’
This statement is misleading, as it creates
an incorrect impression
that REDISA was in fact charging less than what it was entitled to.
The Minister’s case is that KT
received far more than it was
lawfully entitled to. What is set out in the next few paragraphs
shows that the Minister’s
assertions are correct. The court a
quo’s conclusions in this regard are indeed correct.
[205]
What has to be borne in mind is that the 20% referred to in the
REDISA plan was intended to include the administration overheads
set
out in clause 25 of the REDISA Plan. These included the costs related
to IT, HR, marketing, training and contracts, among others.
This is
admitted by Mr Crozier. However, some of these overheads seem to have
been left out of the computation of the management
fee, with the
result that the sum of the head office costs paid to KT plus the
management fee paid to KT exceed 20% of the levies
collected. The
composition of the 20% fee was, in breach of the REDISA Plan and the
MOI, unilaterally changed by the KT- REDISA
management contract in so
far as it stipulated that KT would be entitled to ‘18% of the
total monthly amount invoiced by
REDISA to subscribers.’ No
reference is made to administration costs being included in that
management fee.
[206]
The impact of changing the calculation or composition of the 20%
management fee as stipulated in clause 25 of the REDISA Plan
is
self-evident from a document that was prepared by an auditing firm,
PWC, at the instance of REDISA. This is the PWC Report of
April 2016
(PWC report). Clause 44 of the PWC report states that the
administration costs consist of head office costs based on
the annual
budget plus the management fee to which KT is entitled. However, a
simple calculation shows that the amendment to the
management
agreement resulted in KT getting more than it would otherwise have
been entitled to receive in terms of the REDISA Plan.
[207]
The REDISA Plan had made provision for the administration (head
office costs) plus the management fee to account for only
20% of the
tyre levy that was collected. At paragraph 14 the majority judgment
correctly interprets the 20% fee referred to in
the REDISA Plan to
refer to ‘20% of the levies collected’, as clause 16 of
the REDISA Plan inter alia states that REDISA
will undertake its
management, administration and disbursements, among others, from
‘levies paid into the fund’. It
is evident from the
amounts paid to KT, captured in the PWC and A@L reports, that the sum
of the management fee plus some head
office costs exceed 20% of the
collected revenue. The management agreement changed this clause in
two ways: the management fee
became calculable on invoiced amounts
instead of revenue collected, and separated the management fee from
the rest of the head
office overheads. At first blush, it seems as if
nothing turns on this aspect. However, this amounted to a unilateral
change to
the REDISA Plan, which amounted to a contravention of the
Waste Tyre Regulations. As I will demonstrate shortly, the direct
result
of changing the computation of the administration expenses in
the manner I have just alluded to was that KT unjustifiably became

entitled to more than it would otherwise have been entitled to. It
became entitled to 18% of the
invoiced amount
and not the
revenue or levies that were actually collected. This was a unilateral
deviation from clause 16 of the REDISA Plan.
[208]
The Minister correctly contended that the effect of REDISA deviating
from the REDISA Plan by virtue of the management agreement
was that
KT became entitled to charge 18% on the amount appearing on the
invoice, regardless of whether it had actually been collected
or not.
The fact that the 18% charge came about as a result of the provisions
of the management agreement is set out as follows
in the notes to the
financial statements for the year ended February 2015: ‘Management
fees from subscribers are recognised
when the following criteria are
met: once an invoice is issued to a subscriber or if the amount for a
subscriber can reliably be
estimated at the end of each liability
period’. And the following is stated in the PWC report: ‘The
management agreement
(Annexure 19) between KT and REDISA states that
the management fees are determined based on invoiced value and not
revenue collected,
as set out in para 50 [of the PWC report] above.’
[209]
Furthermore, Ms Conceivious, who was the Chief Financial Officer of
REDISA, confirmed that the management fees are not adjusted
for
revenue receivables written off. An example of how the ratio between
KT’s management fee and the head office fees became
skewed is
evident from clause 45 of the PWC report, which captures ‘the
split between Head Office and KT management costs’
for January
to February 2016. Significantly, the PWC report states the following
at para 48 – 49: ‘Based on the reasonability
assessment
above the total head office costs included in the estimate is
overestimated by R3 757 798. Supporting information surrounding
the
head office costs has been listed as an outstanding in E below’
(sic).
What
is also clear from the figures reflected in clauses 45 and 51 of the
PWC report is that in the period indicated, KT received
a fee of R16
163 216.00 as its management fee for that period, which is indeed 18
per cent of the revenue collected (R89 795 642.00).
[210]
If the management fee were to be calculated in accordance with the
REDISA Plan, the total administration costs inclusive of
KT’s
management fee would have been 20% of the revenue collected, which is
an amount of R17 959 128.40. Out of that amount,
the head office
costs amounting to R8 145 565.00 would have to be deducted, which
would mean that KT would be entitled to R9 813
563.40 (R17 959 128.40
– R8 145 565.00 (head office costs) = R9 813 563.40). On KT’s
own version, it was paid 18% of
the revenue collected, which is an
amount of R16 163 216. This means that the amount of R6 349 653.00
constituted an overpayment
in respect of January to February 2016. KT
was not entitled to this surplus payment. I therefore cannot agree
with the majority
judgment’s conclusion that ‘the
management fee stipulated in the contract was in line with the Plan’.
[211]
It is undisputed that the 18% calculation was used at all material
times and was still the basis of the calculation of KT’s

management fee up to the time of the bringing of the Minister’s
application in 2017. It stands to reason that by the time
the
Minister initiated the proceedings in 2017, it had translated into a
substantial amount, as REDISA had, over a period of about
four years,
collected revenue in the amount of R2.256 billion, of which R432
million was transferred to KT as management fees and
R97.088 million
as set up costs. In terms of the REDISA Plan, 20% of the revenue
collected should have covered management fees
as well as head office
costs, but a simple mathematical calculation shows that 19.1% of the
revenue collected was dedicated exclusively
to KT’s management
fees. At paragraph 19 of the majority judgment, it is correctly
stated that ‘the management agreement
contemplated that KT
would incur start-up costs in respect of the Plan, which would be
passed on to Redisa’. However, that
very term of the management
agreement also constituted a unilateral deviation from the REDISA
Plan as clause 16 thereof expressly
stipulated that the set-up costs
would be paid from the over-recovery of operating costs accumulated
in the initial years. Given
all these facts, the only reasonable
inference that is justified by the undisputed averments made by the
Minister, which are borne
out by the documentary evidence, is that
the insertion of the clause changing the computation of the
management fee was with the
sole purpose of ensuring that KT would
get more than what it was entitled to receive in terms of the REDISA
Plan.
[212]
It is evident from the afore-mentioned facts that all surplus
payments which were made in breach of the REDISA Plan were not
in
respect of a legal obligation of REDISA, were not bona fide and
therefore constituted a contravention of item 1(1) and 1(3)
of
Schedule 1 of the
Companies Act as
well as clause 4.2 of the MOI. The
afore-mentioned contraventions, which resulted in the assets of a
non-profit company being distributed
contrary to its objects,
committed by its own promoters who, as executive directors were in
charge of its operations, constituted
a misappropriation of those
funds. KT, as the management company of REDISA Plan, was
au fait
with the REDISA Plan. It was aware of the impropriety that could
result from the inappropriate implementation of that Plan, given
the
warning sounded by REDISA in the introductory parts of the REDISA
Plan. Notwithstanding that, it was a party to the management

agreement that deviated from the REDISA Plan in various ways,
including the computation of the management fee and the transactions

pertaining to set-up costs were concerned. It is the one that
presented the tax invoices to REDISA and received the afore-said

amounts. It was therefore complicit in the misappropriation of those
funds. This conclusion is clearly justified by the facts of
this
case. I have already highlighted various indisputable contraventions,
and the golden thread of a reluctance to readily share
information
pertaining to serious allegations of impropriety. These lead me to
conclude that the litigation initiated by the Minister
in the court a
quo was fully justified.
[213]
At paragraph 94(iv) the majority judgment states that it is unlikely
that REDISA deliberately withheld the management contract.
In my
view, it is more likely that they indeed deliberately withheld it,
for the three executive directors knew that the date of
signature of
that management agreement would expose their misrepresentation of the
true state of affairs, i.e. that an external
management company which
had a pre-existing relationship with REDISA had already been
appointed by the time the REDISA Plan was
re-submitted to the
Minister for approval but was not disclosed therein. Furthermore,
they knew that it would cause consternation
on the part of the
Minister and the Department if they were to notice the unilateral
changes made to the REDISA Plan and how corporate
governance was
eroded by effectively handing over the executive management of REDISA
to KT, thus allowing it to circumvent the
strictures of the
Companies
Act and
to channel income to it. This became easy to do because in
terms of the management agreement, KT was given the mandate to do
book-keeping
functions for REDISA. Curiously, Tania Conceivious, who
was a director of KT, was also the Chief Financial Officer of REDISA.
[214]
Various important provisions of the REDISA Plan, which constitute
s
an instrument of subordinate legislation, were breached
notwithstanding that the Waste Tyre Regulations clearly stipulated
that
non-compliance therewith constitutes an offence. As if that was
not enough, KT also benefitted from the fact that its majority
shareholder, NYI, was REDISA’s landlord. This is another form
of ongoing conflict of interest. The acquisition of software
whose
intellectual property belonged to KT and for which NYI received
royalties is yet another reflection of the untenable conflict
of
interests underlying the relationship between KT and REDISA. Despite
the clear provisions of the
Companies Act, the
REDISA Plan, the MOI,
the King Code to which REDISA had committed itself in terms of the
MOI, this untenable situation was allowed
to persist despite the red
flags raised in the iSolveit report. This constitutes a breach of the
directors’ fiduciary duties
and is a serious indictment on the
REDISA board of directors.
[215]
Furthermore, KT had an existing 5-year lease agreement with NYI, a
private company in which Erdmann and his son were directors
and in
which Erdmann held an 80% shareholding. On 28 June 2012 a ‘sub-lease
agreement was entered into, in terms of which
NYI sublet the same
property to REDISA and the latter would pay up to 50% of the rent for
the space, plus ‘additional charges
set out in an Annexure,
plus an additional amount as ‘operating costs’. There is
no proof that the conflict of interest
arising from the conclusion of
this contract was disclosed by Erdmann to the REDISA board as
contemplated in his employment contract.
The same applies to the two
further agreements. First, an agreement in terms of which a company
managed by Erdmann’s wife
and his son (Westfalen) rendered
certain services to REDISA. Second, an agreement in terms of which
NYI became entitled to the
intellectual property rights pertaining to
the Oracle computer system. Here, I must hasten to add that Erdmann’s
employment
contract expressly prohibited him from entitlement to
intellectual property rights ‘made, created or discovered by
[him]
in the course and scope of his employment with [REDISA] in
connection with or in any way affecting or relating to the business
of [REDISA], or capable of being used or adapted for use by REDISA or
in connection with its business’ and stated that such

intellectual property would belong to and be the absolute property of
REDISA.
[216]
As already stated, the relationship between REDISA and KT was
characterised by substantial non-disclosure. For example, certain

disclaimers were made the April 2016 PWC report. In respect of a
certain amount of rental, the report states: ‘Ms Conceivious

informed us that the amount is for the rental of the office building
of REDISA and is paid based on a verbal agreement. No further

procedures have been performed.’ In respect of consulting costs
amounting to R200 000.00, paid in February and March 2016,
the report
states: ‘This amount could not be linked to any supporting
documentation. The cost consists of consulting fees
paid to Isivumo
Consulting and this is performed based on a verbal agreement. No
supporting documentation was supplied to us.’
[217]
Having considered all the undisputed facts, as well as the applicable
legal provisions, the management agreement, the REDISA
Plan and the
MOI, it is clear that the REDISA executive directors were in effect
permanently conflicted because of their relationship
with KT. It
cannot be seriously reasoned that they could transcend KT’s
interests by focussing exclusively on what was in
REDISA’s best
interests. The futility of that exercise is borne out by the various
non-compliances with the MOI and the terms
of the management
agreement, which served to circumvent the REDISA Plan. To suggest
that the untenable conflict of interests could
be addressed by them
recusing themselves every time a business related decision was taken
is simply incongruous with the provisions
of
Companies Act already
alluded to, earlier, in this judgment.
[218]
Whereas
s 24
of the
Companies Act requires
a company to keep record
of all its minutes and resolutions, amongst others, for seven years,
the appellants did not furnish the
court with any resolutions to
substantiate its contentions of disclosure of the conflict of
interest and recusal from participation
in certain decisions. What is
also disconcerting from what Erdmann referred to as a ‘specimen’
document evidencing
their recusal in respect of areas where the
executive directors were conflicted, is that the very executive
directors who were
recusing themselves signed the ‘specimen
resolution’ without disclosing the interest that required them
to recuse themselves.
What is quite remarkable about the ‘specimen
resolution’ is that whereas the REDISA Plan envisaged that the
board of
directors would consist of ten members, it was signed by
only four directors (including the three who were recusing
themselves)
and one director did not sign. This would suggest that
REDISA was operating at fifty percent of the board capacity referred
to
in the REDISA Plan. This was also less than the number prescribed
in the MOI. On Erdmann’s version, the REDISA Plan was
implemented
in June 2013. By then, the MOI was already in place.
Despite this, various provisions thereof were not complied with.
[219]
With regard
s
to the directors’ remuneration,
REDISA claims that these were benchmarked by PWC. What they do not
disclose is that PWC recommended
that the remuneration of board
members should not exceed the median. A perusal of the recommended
figures shows that most directors
were paid in excess of the median.
Some of them were paid exorbitant sign-on fees in excess of R1
million even though these were
not recommended in the PWC report.
With regard
s
to the CEO’s remuneration, PWC
proposed a total guaranteed package inclusive of all benefits.
Despite this, Erdmann’s
salary was in excess of the recommended
amount. The CEO’s contract expressly provided how his
remuneration was to be determined.
However, that was not done. His
salary worked out to R4 164 840.00 per annum. In addition, there were
exorbitant perks. For example,
an amount of R548 696.08 was paid for
rental of the home he occupied. In addition thereto, an amount of
R943 522.46 was paid for
private security allocated to his home and
the homes of Kirk and Davidson, which were guarded day and night. The
CEO’s exorbitant
salary obviously had a bearing on the
remuneration of the other executive directors as the gap could not be
too big. They too,
ended up with exorbitant packages including the
provision of security at their homes around the clock. Although
Erdmann asserted
that this was approved by the board, he provided no
substantiation on this aspect. Having considered all these factors, I
cannot
agree with the majority judgment’s opinion that the
remuneration was not excessive.
An
intergovernmental dispute
[220]
At paragraph 145, the majority judgment opines that the dispute
between REDISA and the Minister falls within the definition
of an
intergovernmental dispute and arose long before the Minister’s
resort to liquidation proceedings against REDISA. It
is propounded
that the Minister therefore had a constitutional duty to avoid
judicial proceedings by attempting to settle the dispute.
I disagree
that the Minister breached her constitutional duty. It is clear from
s 41 of the Constitution that accountability and
transparency are
foundational to the proper functioning of government. As correctly
stated in the majority judgment, REDISA was
an organ of state
handling public funds within the legislative framework emanating from
s 24 of the Bill of Rights. Erdmann correctly
acknowledged that
REDISA ‘is performing a constitutional function and undertakes
public law obligations. Given the provisions
of the Waste Act, the
Tyre Regulations, the REDISA Plan and the MOI, it is undeniable that
the Minister was an important stakeholder
in the implementation of
the REDISA Plan. The iSolveit report contained serious allegations of
misappropriation of public funds.
Despite the Department and the
Minister’s numerous complaints about the lack of independence
of the REDISA board and the
conflict of interest, REDISA took no
steps whatsoever to remedy the situation. It simply stated that the
conflict of interest had
been disclosed and dug its heels in. This is
hardly an attitude that could be expected of an organ of state
responsible handling
public funds. In my view, REDISA was
recalcitrant.
[221]
The duty to foster good relations applied with equal force to both
REDISA and the Minister. As the correspondence between
the Department
and REDISA pertaining to the alleged transgressions had yielded no
fruit, it would serve no purpose for the Minister
to first embark on
negotiations regarding the alleged contraventions of the law before
launching the application at the court a
quo. Moreover, two
applications were already pending in the High Court, which had been
initiated by REDISA against the Minister
without observing the
provisions of s 41 of the Constitution. Viewed in this light, the
contention that the Minister ought to have
observed the provisions of
s 41 of the Constitution before resorting to this litigation clearly
lacks any merit.
[222]
Furthermore, by REDISA’s own admission, the Department’s
protection of the environment and public health is a
key government
objective. Issues of non- compliance of an organ of state with
various prescripts in violation of the Constitution
and government
objectives are serious by their nature. This is more so the case when
such non-compliance involves misappropriation
of substantial public
funds. What was required was a court intervention. This is especially
so in this case because all parties
had already litigated against one
another in three other matters. Expecting them to first negotiate on
even more serious issues
before approaching the court a quo was
simply not practical, under the circumstances.
Section
157(1)
(
d
)
standing, the use of
ex parte
proceedings
in winding up and the ‘just and equitable’ remedy
[223]
The granting of an order for the winding up of a solvent company on
just and equitable grounds under circumstances similar
to the present
is not a novel remedy and was permissible in terms of the Companies
Act of 1973. It is interesting to note that
in terms of the 1973 Act,
acting contrary to the Memorandum of Incorporation was considered a
ground to justify the winding up
of a company under the just and
equitable ground. Furthermore, s 258 of the 1973 Act envisaged the
investigation of the company’s
affairs at the instance of the
Minister of Trade and Industries and s 262 permitted the winding up
of such a company on just and
equitable grounds. Clearly, fraud and
illegality were accepted as valid grounds for winding up a solvent
company despite the limitations
set out in s 346 of the 1973 Act with
regards to the persons eligible to apply for a winding up envisaged
in that provision.
[224]
The just and equitable ground
has been replicated in the 2008 Act. A company operated to achieve a
fraudulent purpose may be wound
up on the just and equitable
ground.
[81]
Indeed, the various classes of cases recognised by the Courts as ones
in which an application of the just and equitable ground
may fall
should not be regarded as a closed category, and the principles
enunciated therein imply no fetter on the court’s

discretion.
[82]
Ultimately, every case must be considered on its own merits. When
considering the meaning to be given to section 157 of the Companies

Act, courts must be mindful of the fact that they are enjoined to
promote the spirit, purpose and objects of that Act.
[83]
Like any other statute, the Companies Act should also be interpreted
through the prism of the Constitution.
[84]
[225]
It is also trite that if any
provision of a statute is capable of more than one meaning, the
meaning that best promotes the spirit
and purpose of this Act must be
preferred. This constitutes a purposive interpretation. One of the
purposes of the Companies Act
is to provide for the accountability of
non-profit companies in a manner designed to promote, support and
enhance the capacity
of such companies to perform their
functions.
[85]
Despite the fact that in clause 26.1.5 REDISA bound itself to its
management of REDISA being audited to ensure compliance with
accepted
accounting standards, REDISA was not accountable and was clearly not
amenable to being reigned in. Its litany of non-compliance
could not
be allowed to be business as usual, especially considering that it
had, in terms of clause 24 of the REDISA Plan, committed
itself to
the auditing of its compliance with the REDISA Plan, the Waste Act
and the Waste Tyre Regulations.
[226]
Furthermore, KT adopted an attitude of refusing to be accountable to
the Minister on the basis of it being a private company.
It seemed to
be oblivious to the fact that by agreeing to be the management
company of REDISA, it bound itself to the provisions
of the REDISA
Plan relating to accountability. In terms of clause 26.1.5, it too,
as the management company, was equally bound
to ensure that REDISA’s
management complied with acceptable accounting standards. It also had
to develop an audit plan in
respect of the invoicing of and payment
of waste management levies. The following warning which was sounded
by the Constitutional
Court is equally applicable to KT, more so
because of the accountability it bound itself to, in terms of the
REDISA Plan:
‘
[85]
The establishment of a company as a vehicle for conducting business
on the basis of limited liability is not a private matter.
It draws
on a legal framework endorsed by the community and operates through
the mobilisation of funds belonging to members of
that community. Any
person engaging in these activities should expect that the benefits
inherent in this creature of statute will
have concomitant
responsibilities. These include, amongst others, the statutory
obligations of proper disclosure and accountability
to shareholders.
It is clear that any information pertaining to participation in such
a public sphere cannot rightly be held to
be inhering in the person,
and it cannot consequently be said that in relation to such
information a reasonable expectation of
privacy exists. Nor would
such an expectation be recognised by society as objectively
reasonable. This applies also to the auditors
and the debtors of the
company. . .’.
[86]
[227]
Apart from s 157(3), which categorises the persons that may bring a
lawsuit grounded on derivative action, there is no other
limitation
stipulated in this section. Subject to obtaining the court’s
leave, there are no limitations to bringing an application
for
winding up in the public interest. The appellants’ proposition
that an interpretation of s 157 that grants the public
interest
standing would give a public interest litigator more rights than
other litigants has no merit because that provision does
not grant
such a litigant an untrammelled right. After all, the public interest
litigant must apply for leave of the court in order
to enforce the
remedy.
[228]
It cannot be denied that the amount that was presented as reserves to
the Minister was thereafter greatly reduced in subsequent

communication. It is also undisputed that REDISA stated that even a
cash injection of R210 million would not change the situation
but
would merely postpone the ‘wind-down’ by three months.
This was obviously alarming and justified the bringing of
an urgent
application. To my mind, nothing precluded the Minister from
approaching the court on the basis of the new disconcerting
facts
that had come to light since the institution of the Gauteng
litigation. Collection of levies by REDISA amounted to a collection

of public funds on behalf of government. This was a matter of public
importance. Paragraph 42 of the majority judgment states that
a
transitional business plan was delivered to the Department on 31 May
2017, but was not attached to the Minister’s founding
papers.
On REDISA’s own version, this business plan was delivered a day
after the Minister had already deposed to the founding
affidavit. The
fact that it was not attached to the Minister’s affidavit is
therefore unsurprising, in my view.
[229]
I am satisfied that all the
circumstances of this case, including the discrepancies in reflected
reserves as well as the fact that
REDISA had, in its notice dated 31
May 2017 threatened to stop the collection of tyre waste with effect
from 1 June 2017, warranted
the launching of ex parte proceedings.
That state of affairs would obviously have had an adverse effect on
the environment. The
acceptance of hearsay evidence was also
justified. In her founding affidavit, the Minister applied for
hearsay evidence to be admitted
and averred, among other things, that
most of the evidence originated from the appellants and was largely
recorded in minutes and
correspondence that had not been refuted at
the time. Indeed, some of the minutes attached were counter-signed by
the appellants.
Apart from this paper-trail, the alleged breaches of
the REDISA Plan, the Companies Act and the MOI were discernible from
a mere
perusal of these documents in conjunction with the management
agreement. The requirements for the acceptance of hearsay evidence

were indeed satisfied. The circumstances of this case were
undoubtedly exceptional.
[87]
[230]
The Minister was also justified in launching the application on an
urgent basis. She gave a variety of reasons, most of which
I am in
agreement with. As stated already, the stoppage of collection of tyre
waste from tyre producers was imminent. Furthermore,
the Minister was
concerned that given the provisions of item 1(4) of Schedule 1
regarding the distribution of the net value of
a non-profit company
upon its dissolution, REDISA could easily transfer the assets to any
one of the non-profit companies it had
registered after the gazetting
of the REDISA Plan, with Erdmann and Davidson being the directors in
those companies. As already
alluded to, REDISA had, despite being
adamant that there was only one management agreement between itself
and KT, unwittingly attached
the wrong management agreement to its
letter, which disclosed the existence of yet another management
agreement, this time pertaining
to other waste streams. With the
announcement of an imminent ‘wind down’, the stage was
set for the REDISA funds to
be unilaterally transferred to another
non-profit company registered by Erdmann, where Erdmann and his
fellow directors could have
exclusive say over how the funds were to
be spent. Further and in any event, the Minister had asked for a rule
nisi to be issued,
so REDISA was always going to be given an
opportunity of providing its full story.
[231]
Subsequent to the granting of the provisional liquidation order,
REDISA anticipated the return date of the rule nisi and asked
the
court a quo to reconsider the order granted
ex parte
. It filed
an answering affidavit and was allowed to file a rebutting affidavit
in response of the new allegations that were made
in the Minister’s
replying affidavit. The issues were fully ventilated. The court a quo
demonstrated in its judgment that
in its determination of the
application, it was fully aware of the details of the afore-mentioned
litigation. In fairness to the
court a quo, it is clear from the
tenor of its judgment that it addressed itself to the issue of
disclosure of information, for
it found that the information that was
allegedly withheld by the Minister was peculiarly within REDISA’s
knowledge. It went
on to state that the appellants were the ones that
were not entirely forthcoming with material information. In as far as
the Minister’s
affidavits were concerned, there was truly no
material non- disclosure to talk about. The court a quo’s
remark that nothing
turns on non- disclosure must be seen in that
light.
[232]
To my mind, the only parties
that are guilty of material non-disclosure are REDISA and KT, as
their relationship with the Minister
and the Department was largely
characterised by a reluctance to disclose critical information. This
is evident from their failure
to provide supporting documentation to
the Minister, PWC, KPMG and iSolveit. Notwithstanding the seriousness
of various allegations
suggesting a deliberate failure to be
accountable and transparent, they chose to be very laconic in their
responses. They indeed
tried to create a fog in the hope of hiding or
distorting the reality.
[88]
Their failure to meet some of the Minister’s allegations left
same unchallenged. There is therefore no reason why undisputed
facts
should not be accepted. The appellants must therefore live with the
consequences of the choice they made.
[233]
It must be borne in mind that the Minister was the member of Cabinet
responsible for the implementation of the REDISA Plan.
The Waste Act
gives her the authority to monitor compliance with the Plan. Her
unique role related to the implementation of and
compliance with the
REDISA Plan is recognised in the MOI. In terms of clause 29 of the
REDISA Plan, REDISA was obliged to work
‘very closely’
with the Department to ensure ‘ongoing improvement’ of
the waste tyre industry. In terms
of clause 28.1.6, KT, as REDISA’s
management company, was obliged to report to the Department on all
aspects of the REDISA
Plan. The Minister was, undeniably, an
important stakeholder for both REDISA and KT. Furthermore, the MOI
bound REDISA to the principles
of corporate governance, which in turn
places a high premium on stakeholder relations. Her numerous
enquiries failed to yield the
desired results. The role that the
Minister played in the implementation of the REDISA Plan has already
been alluded to and need
not be repeated. In clause 2.1 of the REDISA
Plan, REDISA acknowledged the fact that the Department’s task
of protecting
the environment and public health is a key government
objective. It cannot be denied that that objective, which is evident
from
the Waste Act as well as the Constitution, resorts under the
Minister. For all these reasons, I cannot see any reason why the
Minister
would not have standing to initiate liquidation proceedings
in the public interest. This is especially so because, as correctly

stated by Jafta J in the article mentioned in the majority judgment,
the provisions of s 157 were intended to extend standing,
not to
limit it. I am therefore satisfied that the leave granted by the
court which granted the provisional order was justified.
As stated
before, the matter was urgent and insisting that leave be requested
in separate proceedings would truly amount to putting
substance over
form.
[234]
The use of ex parte applications in respect of applications for
winding up is not prohibited. The facts of this case in any
event
justified this. An important consideration here is that from the
outset, the applicants prayed for a rule nisi to be issued.
The
winding up order that was granted was provisional, as a return date
was fixed. As matters turned out, the respondents anticipated
the
rule nisi and filed affidavits presenting their side of the story. To
expect the court a quo to have shut its eyes to the serious
issues
raised and to discharge the rule nisi purely on the grounds that the
application was brought on an
ex parte
basis would have been
an unnecessarily technical approach.
[235]
At the end of the day, every case must be decided on its own facts.
Serious allegations of impropriety and abuse of public
funds, a lack
of accountability and failure to observe corporate governance were
made against an organ of state. The court a quo
observed the
audi
alteram partem
rule by allowing all the parties to file further
affidavits. These, in my view, are important considerations that
ought to be included
in the basket of criteria to be taken into
account by an appellate court that is evaluating the appropriateness,
or otherwise,
of an order granted pursuant to an
ex parte
application.
[236]
The Minister comprehensively
explained why she considered the winding up of both REDISA and KT to
be a matter of great importance
and public interest. I agree that she
has made out a proper case for the granting of such an order. It must
be borne in mind that
a court’s power to grant a winding-up
order is a discretionary power, irrespective of the ground upon which
it is sought.
[89]
The discretion must be exercised on judicial grounds.
[90]
[237]
As stated before, the granting
of a winding-up order in circumstances analogous to the present is
not a novelty. As correctly pointed
out by the court a quo, a
liquidation order was granted in
Pienaar
v Thusano Foundation
[91]
under circumstances that bear many similarities with the present
case. It is also not novel in foreign jurisdictions. For example,
a
winding up order was granted in the public interest in
Secretary
of State for Business Innovation and Skills v PAG Management Services
Limited
[2015] EWHC 2404
(Ch), reported at
[2015] BCC 720
, where the Secretary of State had,
inter alia, alleged that the respondent company had misused the
insolvency legislation. In granting
that remedy, which was
permissible in terms of the Insolvency Act, the court found that the
scheme used by the respondent company
had misused insolvency
legislation. By parity of reason, a winding up order is appropriate
in circumstances where a company’s
corporate personality was
abused in order to facilitate misappropriation of funds, as in the
present case.
[238]
In this matter, it must be borne in mind that REDISA was a non-profit
company and was, as such, a company created for the
public benefit as
contemplated in item 1(1) of Schedule 1 to the Companies Act. Its MOI
described its main object as the conservation,
rehabilitation and
protection of the natural environment specifically by creating and
procuring the implementation of the REDISA
Plan ‘subject to the
Approval Conditions’ lawfully stipulated by the Minister. In
the Approval Conditions, the Minister
expressly reserved to herself
the right to amend the REDISA Plan and to request the inclusion of
additional information and measures
that may give effect to the
objects of the Waste Act. She also expressly reserved her right to
approve other IITWMPs in the future.
Clearly, the Minister was an
important stakeholder in the implementation of the REDISA Plan.
[239]
It is undisputed that REDISA was considered to be an organ of state
and that it dealt with public funds in so far as it was
tasked with
collection of tyre waste levies. As stated earlier, The REDISA Plan
was also an instrument of subordinate legislation.
The REDISA Plan
was presented to the Minister by REDISA. The REDISA Plan states that
REDISA was registered for purposes of implementing
the REDISA Plan.
The appellants averred that KT had developed a ‘tailor-made
bespoke system’ whose only ‘customer
is REDISA’.
All
the executive directors of REDISA (Erdmann, Kirk and Davidson)
together with one of the KT directors, Crozier, together owned
a 100%
shareholding in REDISA via two companies. One of these companies
(NYI), under the directorship of Erdmann and his son, received
R24
556 000.00 from REDISA.
[240]
To state that the Minister had no reason to approach the court a quo
urgently because the management contract was provided
to iSolveit in
September 2016 fails to take into account that even though it was
evident from that contract that KT was the appointed
external
management company, the extent of the shareholding of the REDISA
directors is not set out in that contract. There is much
to be said
about this extent of the shareholding of these three executive
directors, Erdman, Kirk and Davidson not having been
disclosed in the
appellants’ answering affidavits. There is a reason why the
extent of the shareholding was kept a closely
guarded secret. It
would have lifted the lid on an untenable conflict of interest and
that would have put paid to KT’s livelihood.
[241]
At paragraph 102 of the majority judgment, it is stated as follows:
‘
I
am afraid that this case – that the scheme was developed by the
creators of the Redisa Plan to misappropriate public funds
–
was neither pleaded in the founding affidavit nor in reply. It does
not get out of the starting blocks.’
For
the reasons set out below, I disagree with that conclusion. The
following averments made in the Minister’s affidavit support

the Minister’s conclusion that a scheme to misappropriate funds
was indeed developed:
[85.7]
An “untenable conflict of interest” is created by the
fact that the executive directors of [REDISA] are shareholders
of
[KT]: this creates an opportunity where a separate profit company can
be used as a vehicle to redirect the public funds, collected
by
[REDISA] for the sole purpose of giving effect to the REDISA Plan,
into the pockets of the shareholders of that separate profit
company.
[90.21]
that the roles and relationship between [REDISA] and [KT] in terms of
assets, office space, expenditure and “arm’s
length
trading”, independence and governance are grossly compromised;
[90.14]
Payments were made to “Westfalen Management”, a private
company of which Mr Erdmann’s wife and son are
the directors. A
copy of the CIPC search for Westfalen Management(Pty) Ltd) is
attached as Annexure “BM 72”.’
[242]
The majority judgment at paragraph 108(iii) further states:
‘
The
issue of Redisa’s intellectual property was also addressed. Mr
Erdmann testified that KT paid for its Oracle computer
system (being
Oracle software and computer hardware), and that NYI, which is KT’s
majority shareholder, had laid claim to
the underlying intellectual
property which it had developed. There was nothing untoward about
this at all.’
I
disagree. On the contrary, that arrangement is in fact, a further
example of an undisclosed conflict of interest. Erdmann’s

employment contract prohibited him from entitlement to intellectual
property rights made, created or discovered by him in connection
with
the business of REDISA. NYI was a company in which Erdmann held an
80% shareholding. He controlled it. Furthermore, Erdmann
and his son,
Alexander Erdmann, were both directors of NYI. NYI was a majority
shareholder of KT. The same Erdmann was the executive
director of
REDISA. It is undisputed that REDISA paid royalties to Erdmann for
this software. Since Erdmann stated that NYI, as
the landlord of
REDISA, was not charging REDISA for rent, it has to be assumed that
the R24.556 million that it received was in
respect of this
intellectual property.
[243]
On KT’s own version, its only client was REDISA. The MOI
acknowledged that REDISA was a special purpose vehicle for
waste tyre
management as set out in the REDISA Plan. REDISA was a non-profit
company incorporated for a public benefit. Yet KT
purchased the
Oracle software so that it could use it for the benefit of REDISA at
a cost, instead of REDISA buying it, if it needed
it. Both KT and NYI
benefitted from this arrangement. The conflict of interest is
palpable. Nowhere in the papers is there even
an attempt to state
that this conflict of interest was disclosed and that Erdmann recused
himself when the decision to enter into
that tripartite arrangement
was taken. It would have been important to do so, especially because
clause 7.2.1 of the management
agreement requires that KT obtain
REDISA board approval before incurring, on behalf of REDISA, capital
expenditure in excess of
R500 000.00.
[244]
It is to be borne in mind that in terms of the REDISA Plan, the NCCS
was the computer system that would be used for levy-collection
and
auditing purposes. On Erdmann’s version, it was a bespoke
computer data collection system. The NCCS was acquired using
REDISA
funds. Whereas it is clear from the REDISA Plan that the ownership of
the NCCS was to vest in REDISA and that the management
company would
‘implement and develop’ it, the management agreement
deviated from the REDISA Plan by inserting a clause
stipulating it
would also ‘develop’ the NCCS. It went on to provide that
the intellectual property rights relating
to the NCCS ‘shall
vest in KT’. For some unexplained reason, NYI ‘laid
claim’ to the intellectual property
rights in contravention of
Erdmann’s own employment contract. This non- compliance stands
irrespective of whether his claim
was in respect of the NCCS or the
Oracle computer system. Even if it can be accepted, in the
appellants’ favour, that the
intellectual property rights in
respect of the NCCS vested in KT, clause 13.2 of the management
agreement in any event granted
REDISA a ‘royalty-free licence’
to use the information technology and financial systems created by KT
for the duration
of the agreement.
[245]
Furthermore, considering that the management by KT on behalf of
REDISA ‘for a period not lasting longer than twenty
four months
from the commencement date of the management agreement [May 2011], it
is rather curious that KT saw it fit to purchase
the Oracle computer
system and make it available to REDISA at a cost, instead of buying
it with REDISA funds. Even more difficult
to understand is why the
intellectual property rights of that Oracle computer system would be
owned by KT’s shareholder,
NYI and not by KT.
[246]
No resolution or minutes have been produced to show that the conflict
of interest relating to the acquisition of the Oracle
computer system
was disclosed and that the three implicated REDISA directors recused
themselves when that decision was taken. In
my view, this tripartite
arrangement, entered into without any disclosure of conflict of
interest, falls foul of good corporate
governance and the Companies
Act. This ineluctably bolsters the Minister’s assertion that
there was a scheme between KT and
REDISA executive directors intended
at facilitating the siphoning of REDISA funds.
[247]
At paragraph 95 the majority judgment states as follows:
‘
The
Minister’s new case, not made out on the papers, but presented
orally in the court a quo and again on appeal, is that
REDISA’s
directors had abused KT’s corporate personality and contravened
Item 1(3) of Schedule 1 of the 2008 Act, and
the equivalent
provisions in REDISA’s MOI.’
To
describe the Minister’s assertions as a ‘new case’
is a misnomer, in my view, for the Minister’s assertions
in
that regard are expressly made in the Minister’s affidavits.
All the submissions made on the Minister’s behalf are

foreshadowed in the affidavits and are borne out by the REDISA Plan
and the MOI. It must be borne in mind that the REDISA Plan
is an
instrument of subordinate legislation and the MOI is the instrument
that governed the REDISA Plan. The Minister’s case
was that the
REDISA Plan, the MOI and the legal prescripts were not compliance.
She made averments which, in broad terms, set out
the nature of the
non-compliances. It was therefore not necessary for the Minister to
have detailed every clause of the REDISA
Plan and the MOI in her
affidavits. What is critical is the exposition of the facts on which
a legal conclusion or argument is
based. The following remarks by
this court in
Swart v
Heine
[92]
are apposite:
‘
In
my view it is not necessary for a litigant who is relying on a
statutory provision to specify it. It is sufficient if it is clear

from the facts alleged by the litigant that the section is relevant
and operative. This point was made clear in Fundtrust (Pty)
Ltd (in
liquidation) v van Deventer
1997 (1) SA 710
(A) 725H-726A, where this
court stated the following: ‘It is not necessary in a pleading,
even where the pleader relies on
a particular statute or section of a
statute, for him to refer in terms to it provided that he formulates
his case clearly (see
Ketteringham v City of Cape Town
1934 AD
80
at 90) or, put differently, it is sufficient if the facts are
pleaded from which the conclusion can be drawn that the provisions
of
the statute apply (see
Price v Price
1946 CPD 59
,
Wasmuth v
Jacobs
1987 (3) SA 629
(SWA) at 634I).’
See
also
Bato Star Fishing (Pty) Ltd v Minister of Environmental
Affairs & others
[2004] ZACC 15
;
2004 (4) SA 490
(CC) para 27.
[248]
In
My
Vote Counts v Speaker of the National Assembly & others
,
[93]
the Constitutional Court stated as follows:
‘
It
is, in any event, imperative that a litigant should make out its case
in its founding affidavit, and certainly not belatedly
in argument.
The exception, of course, is that a point that has not been raised in
the affidavits may only be argued or determined
by a court if it is
legal in nature, foreshadowed in the pleaded case and does not cause
prejudice to the other party.’ (Footnotes
omitted).
[249]
Fortified by those authorities, I am of the view that the following
averments made in the Minister’s founding affidavit
support her
contention that there was an abuse of corporate personality:
‘
[85.5]
The Respondent [REDISA] alleged that the REDISA Plan was “set
up on the basis that its governance structure would be
independent of
the tyre industry to ensure that there would be no external influence
on decision making, and to promote transparency
and job creation”
and that “this independence has been retained throughout as
confirmed by audit”. The governance
structure of [REDISA] may
have been set up to protect it from external or outside influence
from the tyre industry, but a performance
audit is aimed at internal
problems and systemic rot. As for transparency and job creation,
these are objectives that were clearly
not met whilst the alleged
independence of the governance structure of [REDISA] appears - on the
basis of available information,
in respect of which [REDISA] had a
full opportunity to provide further information to the contrary - to
have been abused within
a self-enriching web of various companies,
entities and persons.
[85.6]
With regards to the still outstanding information on the “management
company” [KT], Mr Erdmann (in contravention
of the reporting
obligations under the REDISA Plan, while representatives and / or
directors of not only [KT] but also of Kusaga
Taka International
(Pty) Ltd are representing [REDISA] at its meetings with the
Department) is still hiding behind the alleged
confidentiality of the
financial information of a private profit company in his answer: “All
information which REDISA was
able to provide to iSolveit regarding KT
has been provided as requested.” Mr Erdmann also stated that
“REDISA is not
in a position to furnish this information about
KT. KT is a separate juristic entity from REDISA. The documents are
in its exclusive
possession.” There is with respect no rational
reason whatsoever for either of the Kusaga Taka companies to withhold
any
information from [REDISA] Respondent as [KT] is merely the
“management company” of [REDISA] and thus an agent
subject
to its control. Furthermore, the precise role of and
relationship with Kusaga Taka International (Pty) Ltd within the
governance
structures erected by Mr Erdmann for the administration
and implementation of the REDISA Plan have not been disclosed or
clarified
to date. The convenient reliance on separate juristic
persons is with respect simply an excuse to withhold important and
significant
information from the Department.
[85.7]
An “untenable conflict of interest” is created by the
fact that the executive directors of [REDISA] are shareholders
of
[KT]: this creates an opportunity where a separate profit company can
be used as a vehicle to redirect the public funds, collected
by
[REDISA] for the sole purpose of giving effect to the REDISA Plan,
into the pockets of the shareholders of that separate profit
company.
Although it is stated that the implicated directors of [REDISA]
recuse themselves from board meetings when decisions regarding
the
management company are discussed and taken, neither [REDISA] nor
Erdmann has provided the Department with any minutes or other

compelling evidence to show that this was indeed the case - again the
Department is faced with the say-so of [REDISA] or Mr Erdmann
and
without any means to objectively verify this.
[85.8]
Mr Erdmann further alleged that there is full transparency on what
[KT] does for the staggering fee it receives, that this
information
has always been made available to the Department and that this
information was disclosed to iSolveit Consulting. This
is with
respect not true. The functions entrusted or contracted out to [KT]
as set out by Mr Erdmann (such as training, communication,

administration, accounts, IT and HR requirements) seem duplicated in
the expenses of [REDISA].
[85.9]
Mr Erdmann alleged that [REDISA] and [KT] do not share office space
but the relevant Lease Agreement, letting the office
space to
[REDISA] only, indicated that [REDISA] sublets “part of the
building that occupies its entire 4th floor” (sic),
which then
includes the North Wing of the 4th floor occupied by [KT]. [REDISA]
is thus paying for the entire 4th floor. I also
refer to the
Honourable Court to all of other private companies in which Mr
Erdmann is a director, which also gave their physical
address as the
same floor leased by [REDISA]. The tyre industry is thus paying for
the other companies in which Mr Erdmann has
a stake. I return later
to these lease agreements.
.
. .
[90]
The findings in the iSolveit report confirmed:
…
[90.5]
that there are major conflicts of interest between [REDISA] and [KT]
that undermine the integrity and therefore long-term
sustainability
of [REDISA]. An example of such conflict of interest is that no
minutes of meetings of the Board of Directors of
[REDISA] were
provided as evidence of when the directors of REDISA would recuse
themselves from decision-making, which negated
the allegation of
independence of the Board of Directors of REDISA.
[90.6]
that there was a deviation from the governance obligations as
contained in the REDISA Plan, in that the “management
company”
[KT] did not report to the Department on all aspects of the REDISA
Plan and there does not appear to be an “arm’s
length”
transacting between [REDISA] and [KT]. . . .
[90.21]
that the roles and relationship between [REDISA] and [KT] in terms of
assets, office space, expenditure and “arm’s
length
trading”, independence and governance are grossly compromised;
[90.22]
that [REDISA] has installed an Oracle computer system in the amount
of R57 million to manage its operations but the review
team of
iSolveit consulting was informed that [KT] owned both the hardware
and the software comprising the information technology
to which the
Department wanted access but which access was constantly delayed by
allegations of an upgrade.
.
. .
[90.50]
that the directors of [REDISA] hold multiple positions in various
entities established by [REDISA] and/or Mr Erdmann and
the directors
and/or stakeholders in [REDISA] in clear conflict with the [MOI] in
which is enshrined the governance principles
of REDISA
[90.51]
that critical deviations from the REDISA Plan in respect of
governance, operations and financial decision-making were found.
The
Honourable Court should with respect note that the nature of the
information and documents, requested from [REDISA], is such
that it
should in any properly-managed company, and especially in a
non-profit company such as [REDISA] assisted at great expense
by a
management company [KT] and with the benefit of a huge investment in
a computer system, be readily available.’
[250]
Clearly, there are enough facts that support the legal conclusions
contended for by the Minister. The court a quo’s
finding on the
abuse of corporate identity is fully justified, given the authorities
it relied upon. That finding is in any event
supported by the
provisions of s 20(9) of the Companies Act. Notably, clause 3 of the
REDISA Plan, defines ‘Plan’ as
the IITWMP ‘written
and operated by REDISA’. However, the appellants’ own
description of their relationship,
in the management plan, is quite
telling. Even though it clearly states that there is no partnership
or joint venture between REDISA
and KT, it records that ‘KT has
been rendering services to Redisa for a period of no less than two
years prior to the signature
date [November 2011]’ and that
‘these services performed on risk have formed a central role in
the decision to appoint
KT to provide the services in terms of the
agreement.’ Clearly, KT was not an ordinary management company
having an arm’s
length relationship with REDISA. The court a
quo’s conclusion that REDISA was fronting for KT was therefore
justified. The
three executive directors of REDISA, together with
Crozier, who was also a director of KT, had 100% control over KT via
their shareholding.
Given that on REDISA and KT’S own versions,
REDISA was KT’s only client, it is fair to say that in essence,
REDISA
concluded an agreement with itself. The court a quo correctly
stated that the facts of this case lead to an ineluctable conclusion

that REDISA was the lifeblood of KT. It is worth noting that despite
the lack of independence of the executive directors of REDISA
being
repeatedly raised as a concern, the implicated executive directors
remained on the board despite being ineligible to serve
as directors.
Furthermore, on the appellants’ own version, there were three
executive directors on the board of REDISA despite
the REDISA Plan
catering for only two executive directors. The reasons for all of
this are not hard to find. The aim was to have
sufficient influence
on the board so as to facilitate that that KT be paid more money than
it ought to receive as bona fide management
fees. Payments were also
made to other companies in which one or more of the implicated REDISA
directors held directorships.
[251]
The management contract allowed the three implicated REDISA executive
directors to unlawfully receive profits earned from
the fees
generated by REDISA in addition to exorbitant salaries they received
and other perks. The ineluctable inference drawn
from the undisputed
facts is that the payments were facilitated by the presence of the
three implicated REDISA directors on the
REDISA board and that those
payments were not bona fide. Another inescapable inference is that
the management contract was not
a bona fide contract. This lack of
bona fides is evident from the fact that the management function of
REDISA was given to KT,
a company in which Nine Years Investment
(NYI) and Avranet jointly held a 100% shareholding (KT held a 75%
shareholding, while
Avranet held a 25% shareholding). As stated
before, the shareholders of NYI were Erdmann (80%), Kirk (10%) and
Crozier (10%) and
the only shareholder of Avranet was Davidson.
[252]
Despite the management contract
dated November 2011 stipulating that KT would exclusively perform the
management function for REDISA
in respect of the REDISA Plan, KT
subsequently entered into a ‘Management and facilities
provision agreement’
[94]
with NYI, in terms of which NYI also performed management functions
and received about R868 055.00 per month. It is indisputable
that
both agreements violated the provisions of MOI insofar as some of the
REDISA funds were being paid indirectly to its executive
directors,
in contravention of the provisions of item 1(3) of Schedule 1 to the
Companies Act, with Erdmann receiving the lion’s
share in the
staggering amount of R97 million within a period of four years.
Significantly, neither Erdmann nor any of the other
executive
directors averred that the payments they personally received through
KT, other than their remuneration as directors,
fell within the
exceptions set out in item 1(3) of Schedule 1 to the Companies Act.
The Minister’s contention that some of
the money collected by
REDISA ended up in the pockets of the three executive directors is
therefore correct. Clearly, there was
an abuse of corporate identity
on many levels in order to unduly benefit Erdmann, Davidson and Kirk.
[253]
An equally irresistible inference is that there was a scheme in terms
of which REDISA and KT acted hand in glove with each
other in running
rough-shod over an instrument of subordinate legislation. The
multiple directorships are also quite telling. The
lame excuse that
some of the companies were formed in order to empower some of the
tyre processors did not account for the myriad
of companies
registered. In any event, clause 2 of the REDISA Plan provides that
no board member may represent any waste stream
managed by REDISA.
Despite that, Erdmann and Davidson saw it fit to be directors in
companies within the waste stream managed by
REDISA. They opted for
that despite the fact that clause 6.3 of the REDISA Plan limited the
assistance that REDISA could give,
relating to the establishment of
the businesses of recycling processors, to ‘training, financial
support and mentoring’.
[254]
Further and in any event,
clause 11.6.5 of the MOI clearly stipulates that any person who
subsequently becomes ineligible on the
basis of the grounds stated in
clause 11.6.1-11.6.5 shall forthwith resign as a director of REDISA.
For its part, s 69(4) of the
Companies Act provides that a person who
becomes ineligible or disqualified to serve as a director while
already serving as a director
ceases to be entitled to continue to
act as a director immediately. This means that once Erdmann, Davidson
or Kirk had accepted
directorships in the companies involved in any
stream of waste tyre management, including being co-directors with
the tyre processors,
they became ineligible to continue serving on
the REDISA board. Notably, only the Product Testing Institute
non-profit organisation
was disclosed in the financial statements. In
my view, the explanations given in respect of the registration of the
balance of
the companies, which were described as ‘in business’
in the CIPC documents, falls within the category of a palpably

implausible version as described in the
Fakie
judgment.
[95]
The ineluctable inference is that they were part of the broader
scheme to siphon funds from REDISA. Simply put, both KT and REDISA

abused the corporate identity of REDISA as a non-profit company,
sustained by public funds, in order to unfairly benefit KT. In
the
process, the three implicated directors of REDISA jointly
misappropriated REDISA funds.
[255]
For the avoidance of doubt, I make it clear that I accept that Item
1(3) of Schedule 1 does not preclude or prohibit payments
made in
terms of a contract. However, that contract must be bona fide and not
a mechanism by which specific provisions of Schedule
1(3) can be
circumvented. Ironically, it is REDISA itself which made the
following prophetic statement in clause 2 of the REDISA
Plan: ‘’A
properly drafted MOI imposes codes of conduct and governance and
guards against narrow sectoral influences
or private enterprises
taking over and hijacking the aims of the organisation.’
Regrettably, the ‘code of conduct and
governance’ were
largely ignored.
[256]
The court a quo ordered that both REDISA and KT be liquidated despite
KT being a solvent private company. Like the court a
quo, I arrive at
the same conclusion, albeit for slightly different reasons. Given
that REDISA, a non-profit company, and KT as
its management company,
were recidivist in their contravention of the REDISA Plan, MOI and
Companies Act, the most appropriate
remedy that would simultaneously
stop the bleeding and salvage what was left of the public funds was
an order of liquidation in
respect of both REDISA and KT. As pointed
out before, Erdmann, Kirk and Davidson, who were the indirect
shareholders of KT through
NYI and Avranet, were the executive
directors of REDISA, while Crozier, who had shareholding in NYI, was
one of the directors of
KT. It is clear that all the individuals who
had indirect shareholding in KT were the same people who, in their
capacity as directors,
managed REDISA and KT, respectively. That
being the case, there is no innocent shareholder who stands to be
prejudiced. It is therefore
befitting that what befell REDISA be
extended to KT despite the latter being a solvent private company.
This will send a clear
message that courts take a dim view of those
who knowingly allow themselves to be used as conduits in unlawful
schemes that drain
public funds. That is the only remedy that will
swiftly enable the Minister to simultaneously stop malfeasance dead
in its tracks
and to recover public funds from those who had
unlawfully benefitted in the scheme. Moreover, since REDISA was KT’s
only
client, there is no ‘range’ of persons or groups
that will be adversely affected by this remedy.
[257]
While the demonstrable recalcitrance of the implicated REDISA
directors justifies the majority judgment’s suggestion
that
they could be declared delinquent directors if the facts so proved,
granting only that order would, in my view, be a slap
on the wrist,
as the transgressors would retain the benefits they had obtained in
contravention of item 1(3) of Schedule 5 of the
Companies Act. That
would not serve the interests of justice. Indeed, given the
appellants’ conduct, the Minister could also
have considered
invoking the provisions of the Waste Act as a basis for laying
criminal charges as contemplated in that Act. What
is undeniable is
that there was a need for swift action. All the criteria mentioned in
the
Ferreira v Levin
judgment, pertaining to the determination
of whether a person was acting in the public interest, alluded to in
paragraph 134 of
the majority judgment, have been met. The Minister,
in her capacity as the Executive responsible for ensuring compliance
with the
REDISA Plan, was entitled to take all the steps she took in
the public interest, instead of reporting the various non-compliances

to the Commission or Panel, as per the appellants’ proposition.
Courts are the guardians of the Constitution and should not
be seen
to be ivory towers that are oblivious to the realities of how the
slow pace of litigation may have a negative impact on
the recovery of
public funds.
[258]
In my view, it would truly
amount to putting substance over form if the appeal was to succeed
purely because this court opines that
the court a quo should have
resorted to the ‘less drastic’ remedy of an interdict,
institution of a claim, an order
declaring the implicated executive
directors as delinquent, or any other remedy proposed by the
appellants, notwithstanding that
the court a quo in fact had a
discretion in that regard. That court carefully considered a number
of authorities, including a judgment
that had granted a winding-up
order under analogous circumstances.
[96]
The exercise of its discretion is evident from the tenor of its
evaluation of evidence and arguments, viewed against the backdrop
of
apposite authorities. Under such circumstances, it cannot be
seriously contended that the court a quo did not exercise its
discretion at all, or that it did not exercise it judicially. In my
view, the court a quo’s discretion was judicially exercised.

There is therefore no basis for this court to tamper with it.
[97]
[259]
For all the reasons set out above, I would dismiss the appeal with
costs.
___________________
M
B Molemela Judge of Appeal
Appearances:
(Case
no: 1260/17 and 188/18)
For
Appellant: G Budlender SC (With him L Kelly)
Instructed
by: Cliffe Dekker Hofmeyr Inc, Cape Town
Claude
Reid Attorneys, Bloemfontein
For
Respondent: G Woodland SC (with him J Rust)
Instructed
by: The State Attorney, Cape Town
The
State Attorney, Bloemfontein
(Case
no: 1279/17 and 187/18)
For
Appellant: J G Dickerson SC (with him K Reynolds)
Instructed
by: Bradley Conradie Halton Cheadle, Cape Town
Claude
Reid Attorneys, Bloemfontein
For
Respondent: J Muller SC (with him B Swart SC and J Myburgh)
Instructed
by: The State Attorney, Cape Town
The
State Attorney, Bloemfontein
[1]
Henney J; the case is reported sub nom Minister of Environmental
Affairs v Recycling and Economic Development Initiative of South

Africa NPC
2018 (3) SA 604
(WCC).
[2]
The Minister was Ms Edna Molewa, who passed away on 22 September
2018.
[3]
The ‘Redisa Plan’ was promulgated by the Minister in
November in November 2012 under the National Environment Management:

Waste Act 59 of 2008. It was described as an instrument of
‘subordinate legislation’ by this court in Retail Motor

Industry Organisation & another v Minister of Water and
Environmental Affairs
[2013] ZASCA 70
;
2014 (3) SA 251
(SCA) para
30.
[4]
Environment Conservation Act (73/1989): Waste Tyre Regulations,
2008, GN R149, GG 31901, 13 February 2009.
[5]
Below paras 73-74.
[6]
National Director of Public Prosecutions v Basson;
2002 (1) SA 419
(SCA) para 21.
[7]
See eg Thomas A Edison Ltd v Bullock
[1912] HCA 72
;
(1912) 15 CLR
679
at 681-2 per Isaacs J; Bank Mellat v Nikpour
[1985] FSR 87
(CA)
at 89 per Lord Denning MR, at 92 per Donaldson LJ and at 93 per
Slade LJ; Siporex Trade SA v Comdel Commodities Ltd [1986]
2 Lloyd’s
Rep 428 at 437 per Bingham J; Arab Business Consortium International
Finance and Investment Co v Banque Franco-
Tunisienne [1996] 1
Lloyd’s Rep 485 (QB) at 489; Aristocrat Technologies Australia
Pty Ltd v Allam
[2016] HCA 3
para 15.
[8]
Above fn 6 at 491.
[9]
Schlesinger v Schlesinger
1979 (4) SA 342
(W) at 350B.
[10]
Brink’s-Mat Ltd v Elcombe & others
[1988] 3 All ER 188
(CA) at 193 and cases there cited.
[11]
Phillips & others v National Director of Public Prosecutions
2003 (6) SA 447
(SCA) para 29.
[12]
Above para 36.
[13]
Above paras 28, 38 and 39.
[14]
Above para 43.
[15]
Above para 42.
[16]
Knox D'Arcy Ltd & others v Jamieson & others
[1996] ZASCA 58
;
1996 (4) SA 348
(SCA) at 379I-380B.
[17]
Re First Express Ltd
[1991] BCC 782
at 785D-G.
[18]
Although this court has not yet had occasion to deal with this
issue, there is authority in the respective divisions of high
courts
for this approach: see eg Van Zyl v Siyaya Engine Rebuilders CC &
another
[2016] ZAWCHC 137
paras 5-10 (a two-judge decision); Molete
& another v Molete & others [2016] ZAGPPHC 258 paras 23-26
(a full court decision);
Van As No & others v Jacobs NO &
others [2017] ZAGPPHC 1162 paras 45-49. The very point raised by the
Minister’s
submission was confronted and rejected in the Hong
Kong decision Seapower Resources International Ltd & others v
Lau Pak
Shing & others
[1993] HKCFI 242
, an approach endorsed by
the Hong Kong Court of Appeal in Luck Continent Ltd v Leonora Yung &
others
[2010] HKCA 312
paras 16-19 (and see also Yifing Developments
Ltd v Liu Chi Keung Ricky & others
[2014] HKCFI 1375
;
[2014] 4
HKLRD 483
para 15).
[19]
Above fn 1 Minister of Environmental Affairs v Recycling and
Economic Development Initiative of South Africa NPC para 192.
[20]
Ibid para 199.
[21]
Above paras 5 and 53.
[22]
Above para 12.
[23]
Above para 20.
[24]
Above para 18.
[25]
Above para 70.
[26]
Above para 25.
[27]
Above para 21.
[28]
Above paras 41, 74 and 75.
[29]
Above para 78.
[30]
Mr Erdmann and Ms Kirk own 90 per cent of Nine Years Investments
(Pty) Ltd which in turn owned 75 per cent of KT. The other 25
per
cent of KT was owned by Ms Davidson indirectly through a company
called Avranet (Pty) Ltd. Mr Crozier, who was not a director
of
Redisa, had an indirect shareholding in KT of 7.5 per cent by virtue
of owning 10 per cent of Nine Years Investments (Pty)
Ltd.
[31]
Above para 18.
[32]
Compare National Director of Public Prosecutions v Zuma
[2009] ZASCA
1
;
2009 (2) SA 277
(SCA) paras 26 and 27.
[33]
Above paras 21 and 22.
[34]
In Robson v Wax Works
2001 (3) SA 1117
(C) at 1130H-J it was held
that it would generally be inappropriate for a court to wind up a
company against the interests of
its shareholders.
[35]
Cf Taylor v Welkom Theatres (Pty) Ltd & others
1954 (3) SA 339
(O) at 350A-351A; Pienaar v Thusano Foundation & another
1992
(2) SA 552
(BG) 582G-H; Apco Africa (Pty) Ltd & another v Apco
Worldwide Inc
[2008] ZASCA 64
;
2008 (5) SA 615
(SCA) para 18.
[36]
Muller v Lilly Valley (Pty) Ltd 2012 1 All SA 187 (GSJ).
[37]
Judgment fn1 paras 216 and 218.
[38]
Section 258(2)(a) of the Companies Act 61 of 1973 (the 1973 Act).
[39]
Section 262(1) of the 1973 Act.
[40]
P M Meskin Henochsberg on the Companies Act 61 of 1973 vol 1 Service
Issue 8 at 495.
[41]
Section 262(2)(a) of the 1973 Act.
[42]
Section 81(1)(f) of the 2008 Act. It is unclear whether the
Commission has this power in respect of insolvent companies, as the

1973 Act deals with their winding-up.
[43]
The Takeover Regulation Panel established under s 196 of the 2008
Act
[44]
Union Government v Rosenberg (Pty) Ltd
1946 AD 120
at 126-127;
Minister of Water Affairs and Forestry & others v Swissborough
Diamond Mines (Pty) Ltd & others
1999 (2) SA 345
(T) at 353B-C.
[45]
See Ex Parte Minister of Justice: In re R v Bolon
1941 AD 345
at
359; S v Theron
[1984] ZASCA 1
;
1984 (2) SA 868
(A) at 877B-878C.
[46]
See above para 122. There are various statutes in which government
agencies are expressly given power to bring liquidation proceedings,

for example 68(1) of the Banks Act 94 of 1990,
s 75(2)
of the
Mutual
Banks Act 124 of 1993
,
s 30
of the
Cooperative Banks Act 40 of 2007
,
s 38B
of the
Financial Advisory and Intermediary Services Act 37 of
2002
, s 42 of the Long-Term Insurance Act 52 of 1998, s 41 of the
Short-Term Insurance Act 53 of 1998 and
s 100
of the
Financial
Markets Act 19 of 2012
.
[47]
See also
s 168(3)
, which permits the Minister to direct the
Commission, as contemplated in
s 190(2)(b)
, or the Panel to
investigate – (a) an alleged contravention of the Act; or (b)
other specified circumstances.
[48]
157 Extended standing to
apply for remedies
(1)
When, in terms of this Act, an application can be made to, or a
matter can be brought before, a court, the Companies Tribunal,
the
Panel or the Commission, the right to make the application or bring
the matter may be exercised by a person-
(a)
directly contemplated in the particular provision of this Act;
(b)
acting on behalf of a person contemplated in paragraph (a), who
cannot act in their own name;
(c)
acting as a member of, or in the interest of, a group or class of
affected persons, or an association acting in the interest
of its
members; or
(d)
acting in the public interest, with leave of the court.
(2)
The Commission or the Panel, acting in either case on its own motion
and in its absolute discretion, may-
(a)
commence any proceedings in a court in the name of a person who,
when filing a complaint with the Commission or Panel, as
the case
may be, in respect of the matter giving rise to those proceedings,
also made a written request that the Commission or
Panel do so; or
(b)
apply for leave to intervene in any court proceedings arising in
terms of this Act, in order to represent any interest that
would not
otherwise be adequately represented in those proceedings.
(3)
For greater certainty, nothing in this section creates a right of
any person to commence any legal proceedings contemplated
in section
165 (1), other than-
(a)
on behalf of a person entitled to make a demand in terms of section
165 (2); and
(b)
in the manner set out in section 165.’
[49]
‘
156 Alternative
procedures for addressing complaints or securing rights
A
person referred to in section 157 (1) may seek to address an alleged
contravention of this Act, or to enforce any provision
of, or right
in terms of this Act, a company's Memorandum of Incorporation or
rules, or a transaction or agreement contemplated
in this Act, the
company's Memorandum of Incorporation or rules, by-
(a)
attempting to resolve any dispute with or within a company through
alternative dispute resolution in accordance with Part
C of this
Chapter;
(b)
applying to the Companies Tribunal for adjudication in respect of
any matter for which such an application is permitted in
terms of
this Act;
(c)
applying for appropriate relief to the division of the High Court
that has jurisdiction over the matter; or
(d)
filing a complaint in accordance with Part D of this Chapter within
the time permitted by section 219 with-
(i)
the Panel, if the complaint concerns a matter within its
jurisdiction; or
(ii)
the Commission in respect of any matter arising in terms of this
Act, other than a matter contemplated in subparagraph (i).’
[50]
Ferreira v Levin NO & others; Vryenhoek & others v Powell NO
& others
1996 (1) SA 984
(CC) para 234. ‘. . . This Court
will be circumspect in affording applicants standing by way of s
7(4)(b)(v) and will require
an applicant to show that he or she is
genuinely acting in the public interest. Factors relevant to
determining whether a person
is genuinely acting in the public
interest will include considerations such as: whether there is
another reasonable and effective
manner in which the challenge can
be brought; the nature of the relief sought, and the extent to which
it is of general and prospective
application; and the range of
persons or groups who may be directly or indirectly affected by any
order made by the Court and
the opportunity that those persons or
groups have had to present evidence and argument to the Court . . .
.’
[51]
C Jafta (2015) ‘Critical Analysis of the extended legal
standing provisions under
section 157(1)
of the
Companies Act 71 of
2008
to apply for Legal Remedies’ Journal of Corporate and
Commercial Law and Practice (2015) vol 1 at 41-42.
[52]
‘
168 Initiating a
complaint
(1)
Any person may file a complaint in writing-
(a)
with the Panel in respect of a matter contemplated in Part B or C of
Chapter 5, or in the Takeover Regulations; or
(b)
with the Commission in respect of any provision of this Act not
referred to in paragraph (a), alleging that a person has acted
in a
manner inconsistent with this Act, or that the complainant's rights
under this Act, or under a company's Memorandum of Incorporation
or
rules, have been infringed.’
[53]
‘168 Initiating a complaint
(3)
The Minister may direct the Commission, as contemplated in section
190 (2) (b), or the Panel to investigate-
(a)
an alleged contravention of this Act; or
(b)
other specified circumstances.’
[54]
‘
190 Minister may
direct policy and require investigation
(1)
. . .
(2)
The Minister-
(a)
. . .
(b)
may at any time direct the Commission to investigate-
(i)
an alleged contravention of this Act; or
(ii)
any matter or circumstances with respect to the administration of
one or more companies in terms of this Act, whether or
not those
circumstances appear at the time of the direction to amount to a
possible contravention of this Act.’
[55]
‘
162 Application to
declare director delinquent or under probation
(3)
The Commission or the Panel may apply to a court for an order
declaring a person delinquent or under probation if-
(a)
the person is a director of a company or, within the 24 months
immediately preceding the application, was a director of a
company;
and
(b)
any of the circumstances contemplated in-
(i)
subsection (5) apply, in the case of an application for a
declaration of delinquency; or
(ii)
subsections (7) and (8) apply, in the case of an application for
probation.
(4)
Any organ of state responsible for the administration of any
legislation may apply to a court for an order declaring a person

delinquent if-
(a)
the person is a director of a company or, within the 24 months
immediately preceding the application, was a director of a
company;
and
any
of the circumstances contemplated in subsection (5) (d) to (f) apply
with respect to any legislation administered by that
organ of
state.’
[56]
‘
22 Reckless trading
prohibited
(1)
A company must not carry on its business recklessly, with gross
negligence, with intent to defraud any person or for any fraudulent

purpose.
(2)
If the Commission has reasonable grounds to believe that a company
is engaging in conduct prohibited by subsection (1), or
is unable to
pay its debts as they become due and payable in the normal course of
business, the Commission may issue a notice
to the company to show
cause why the company should be permitted to continue carrying on
its business, or to trade, as the case
may be.
(3)
If a company to whom a notice has been issued in terms of subsection
(2) fails within 20 business days to satisfy the Commission
that it
is not engaging in conduct prohibited by subsection (1), or that it
is able to pay its debts as they become due and payable
in the
normal course of business, the Commission may issue a compliance
notice to the company requiring it to cease carrying
on its business
or trading, as the case may be.’
[57]
‘
174 Referral of
complaints to court
(1)
If the Commission or Panel, as the case may be, issues a notice of
non-referral in response to a complaint, the complainant
concerned
may apply to a court for leave to refer the matter directly to the
court, but no such complaint may be referred directly
to a court in
respect of a person who has been excused as a respondent, as
contemplated in section 170 (1) (a).
(2)
A court-
(a)
may grant leave contemplated in subsection (1) only if it appears
that the applicant has no other remedy available in terms
of this
Act; and
(b)
if it grants leave, and after conducting a hearing, determines that
the respondent has contravened the Act, may-
(i)
require the Commission or Executive Director, as the case may be, to
issue a compliance notice sufficient to address that
contravention;
or
(ii)
make any other order contemplated in this Act that is just and
reasonable in the circumstances.’
[58]
‘
20 Validity of
company actions
(9)
If, on application by an interested person or in any proceedings in
which a company is involved, a court finds that the incorporation
of
the company, any use of the company, or any act by or on behalf of
the company, constitutes an unconscionable abuse of the
juristic
personality of the company as a separate entity, the court may-
(a)
declare that the company is to be deemed not to be a juristic person
in respect of any right, obligation or liability of the
company or
of a shareholder of the company or, in the case of a non-profit
company, a member of the company, or of another person
specified in
the declaration; and
(b)
make any further order the court considers appropriate to give
effect to a declaration contemplated in paragraph (a).’
[59]
‘41 Principles of co-operative government and
intergovernmental relations
(1)
All spheres of government and all organs of state within each sphere
must-
(a)
. . .
(h)
co-operate with one another in mutual trust and good faith by-
(i)
fostering friendly relations;
(ii)
assisting and supporting one another;
(iii)
informing one another of, and consulting one another on, matters of
common interest;
(iv)
co-ordinating their actions and legislation with one another;
(v)
adhering to agreed procedures; and
(vi)
avoiding legal proceedings against one another.
(2)
. . .
(3)
An organ of state involved in an intergovernmental dispute must make
every reasonable effort to settle the dispute by means
of mechanisms
and procedures provided for that purpose, and must exhaust all other
remedies before it approaches a court to resolve
the dispute.’
[60]
The dispute falls within the definition of an intergovernmental
dispute is
s 1
of the
Intergovernmental Relations Framework Act 13
of 2005
. An intergovernmental dispute means: ‘a dispute
between different governments or between organs of state from
different
governments concerning a matter-
(a)
arising from-
(i)
a statutory power or function assigned to any of the parties; or
(ii)
an agreement between the parties regarding the implementation of a
statutory power or function; and
(b)
which is justiciable in a court of law,
and
includes any dispute between the parties regarding a related
matter.’
[61]
See footnote 1 of the majority judgment.
[62]
Brink’s-Mat Ltd v Elcombe & others fn 10 above.
[63]
Wightman t/a J W Construction v Headfour (Pty) Ltd & another
[2008] ZASCA 6
;
2008 (3) SA 371
(SCA).
[64]
Fakie NO v CCII Systems (Pty) Ltd (653/04); [2006] ZASCA 52; 2006
(4) SA 326 (SCA).
[65]
Wightman v Headfour (supra) at para 22.
[66]
Natal Joint Municipal Pension Fund v Endumeni Municipality [2012]
ZASCA 13; 2012 (4) SA 593 (SCA).
[67]
Retail Motor Industry Organisation & another v Minister of Water
& Environmental Affairs & another
2014 (3) SA 251
(SCA);
[2013] 3 All SA 435
(SCA);
[2013] ZASCA 70.
[68]
Ibid para 1.
[69]
Ibid para 11.
[70]
In terms of item 1(2) of Schedule 1 of the
Companies Act, a
non-profit company must apply all its assets and income, however
derived, to advance its stated objects as set out in the Memorandum

of Incorporation (MOI). In terms of item 1(3) of Schedule 1, a
non-profit must not, directly or indirectly, pay any portion of
its
income or transfer any of its assets, regardless how the income or
asset was derived, to any person who was its incorporator
or who is
a member or director of the company except reasonable remuneration
or as a payment of or reimbursement for expenses
incurred to advance
the stated objects of the company or as a payment in terms of a bona
fide agreement between the company and
a third part or in respect of
any legal obligation binding on the company.
[71]
This history is set out in the judgment of this court referred to in
footnote 3 of the majority judgment.
[72]
See Natal Joint Municipal Pension Fund v Endumeni Municipality
(supra) at para 18.
[73]
Clause 66, Principle 2.18 in Chapter 2 of the King III Code of
Corporate Governance.
[74]
Section 69(7) provides:
‘
A
person is ineligible to be a director of a company if the person-
(a)
is a juristic person;
(b)
is an unemancipated minor, or is under a similar legal disability;
or
(c)
does not satisfy any qualification set out in the company’s
Memorandum of Incorporation.’
[75]
‘Personal financial interest’ is defined as follows:
‘
[P]ersonal
financial interest’, when used with respect to any person-
(a)
means a direct material interest of that person, of a financial,
monetary or economic nature, or to which a monetary value
may be
attributed; but
(b)
does not include any interest held by a person in a unit trust or
collective investment scheme in terms of the Collective
Investment
Schemes Act, 2002 (Act No. 45 of 2002), unless that person has
direct control over the investment decisions of that
fund or
investment’.
[76]
Clause 25, Principle 2.14 of the King III Code of Corporate
Governance.
[77]
Section 2(1) provides:
‘
(1)
For all purposes of this Act-
(a)
an individual is related to another individual if they-
(i)
are married, or live together in a relationship similar to a
marriage; or
(ii)
are separated by no more than two degrees of natural or adopted
consanguinity or affinity;
(b)
an individual is related to a juristic person if the individual
directly or indirectly controls the juristic person, as determined

in accordance with subsection (2); and
(c)
a juristic person is related to another juristic person if-
(i)
either of them directly or indirectly controls the other, or the
business of the other, as determined in accordance with subsection

(2);
(ii)
either is a subsidiary of the other; or
(iii)
a person directly or indirectly controls each of them, or the
business of each of them, as determined in accordance with

subsection (2).’
[78]
Registrar of Insurance v Johannesburg Insurance Co Ltd
1962 (4) SA
546
(W) at 547.
[79]
Notably, none of the non-executive directors mentioned in the
financial statements had been appointed at the time when the

management agreement was entered into.
[80]
KPMG remarked as follows on the comments made in the Directors’
Report: ‘As part of our audit of the financial statements
for
the year ended 28 February 2014, we have read the Directors’
report for the purpose of identifying whether there are
material
inconsistencies between this report and the financial statements.
This report is the responsibility of the respective
preparers. Based
on reading this report, we have not identified material
inconsistencies between this report and the audited
financial
statements. However, we have not audited this report and accordingly
do not express an opinion on this report.’
(Own emphasis).
[81]
In re T E Brinsmead & Sons
[1897] 1 Ch 406
(CA); In re The
International Securities Corporation Ltd
(1908) 24 TLR 837
(Ch);
Kyle v Maritz and Pieterse Inc
[2002] 3 All SA 223
(T) at 232.
[82]
Henochsberg on the
Companies Act 71 of 2008
, Vol 1 Service Issue 16
at 332(6B).
[83]
Section 158
of the
Companies Act provides
:
‘
When
determining a matter brought before it in terms of this Act, or
making an order contemplated in this Act-
(a)
a court must develop the common law as necessary to improve the
realisation and enjoyment of rights established by this Act;
and
(b)
the Commission, the Panel, the Companies Tribunal or a court-
(i)
must promote the spirit, purpose and objects of this Act; and
(ii)
if any provision of this Act, or other document in terms of this
Act, read in its context, can be reasonably construed to
have more
than one meaning, must prefer the meaning that best promotes the
spirit and purpose of this Act, and will best improve
the
realisation and enjoyment of rights.’
[84]
Section 7(a)
of the
Companies Act provides
: ‘The purposes of
this Act are to-
(a)
promote compliance with the Bill of Rights as provided for in the
Constitution, in the application of company law’.
[85]
Section 7(h)
of the
Companies Act provides
: ‘The purposes of
this Act are to-
.
. .
provide
for the formation, operation and accountability of non-profit
companies in a manner designed to promote, support and enhance
the
capacity of such companies to perform their functions . . .’
[86]
Bernstein & others v Bester & others NNO
[1996] ZACC 2
;
1996 (2) SA 751
(CC) at para 85.
[87]
National Director of Public Prosecutions v Basson fn 6 para 21; Knox
D'Arcy Ltd & others v Jamieson & others fn 16 at
379I-380B.
[88]
See Wightman v Headfour supra at para 16.
[89]
F & C Building Construction Co (Pty) Ltd v Macsheil Investments
(Pty) Ltd
1959 (3) SA 841
(D) at 844. Re J D Swain Ltd
[1965] 2 All
ER 761
(CA) at 762.
[90]
Irvin & Johnson Ltd v Oelofse Fisheries Ltd
1954 (1) SA 231
(E)
at 244.
[91]
Pienaar v Thusano Foundation & another 1992 (2) SA 552 (BG).
[92]
Swart v Heine [2016] ZASCA 16.
[93]
My Vote Counts v Speaker of the National Assembly & others
2016
(1) SA 132
(CC);
[2015] ZACC 31
para 277.
[94]
Referred to in the A@L report and undisputed by the appellants.
[95]
Fakie v CCII Systems (supra) at para 55.
[96]
Pienaar v Thusano Foundation & another 1992 (2) SA 552 (BG).
[97]
Trencon Construction (Pty) Ltd v Industrial Development Corporation
of South Africa Limited & another
2015 (5) SA 245
(CC);
2015
(10) BCLR 1199
(CC);
[2015] ZACC 22.