Association (“the Homeowners Association”), which is a non-profit company
registered in terms of the Companies Act 71 of 2008 (“Companies Act”) . The
Homeowners Association is responsible for the governance of the Estate. The
Estate has more than 750 homeowners , and has various facilities, including a
clubhouse, schools from nursery to high school level, and sports fields and
facilities. The respondents are Mr Veli Khosa, Mr Lekula Sydwell Mofokeng, Mr
Dumisani Pascall Zuma, Mr Wandile Mazula and Mrs Tumi Smith (“the
respondent homeowners”), who are all owners of properties in the Estate and
members of the Homeowners Association.
[2] Mnandi Property Development (Pty) Ltd (“the Developer”) developed the Estate
and was conferred with rights in the Memorandum of Incorporation (“MOI”),
including special voting rights. The Developer is a company controlled by Mr
Shane Brown and his son, Mr Wesley Brown. Mr Wesley Brown is the current
chairman of the board of directors and deposed to the affidavits filed on behalf of
the Homeowners Association.
[3] The matter was originally set down on 19 April 2024 on the urgent roll to seek
interim relief in ‘Part A’ of the application pending the determination in the
ordinary course of ‘Part B’, but the matter was struck from the roll for lack of
urgency. The Homeowners Association then set it down again on the ordinary
opposed motions roll, seeking some portions of their original ‘Part A’ relief and
the whole of the ‘Part B’ relief.
[4] In the main application, the Homeowners Association seeks an order:
a. declaring the disputed meeting to have been a nullity and setting aside the
resolutions taken at it;
b. declaring that it is lawful and within the discretion of the directors of the
Homeowners Association to hold members or directors meetings virtually,
unless otherwise directed by a resolution of the Homeowners Association
duly taken in accordance with the requirements of the Memorandum of
Incorporation (“MOI”);
c. declaring the online platform known as eAGM to be compliant with the MOI
and lawful;
d. declaring the current levies determined by the directors and communicated
to members on 19 May 2023 to be lawfully imposed, binding on and payable
by members;
e. interdicting and restraining the respondents further interference with and/or
obstruction of the Homeowners Association and its directors in carrying out
their functions and duties accorded to them by the MOI.
[5] The respondents in turn brought a counter-application, in which they seek orders:
a. declaring that they lawfully objected to the Annual General Meeting (“AGM”)
held on 20 February 2024;
b. declaring that meeting unlawful and setting aside resolutions taken at it;
c. directing the Homeowners Association to reconvene the postponed AGM
in person, alternatively referring all disputes between the parties to CSOS
for determination;
d. declaring the Developer’s veto power to constitute oppressive conduct;
e. directing the Developer to co-operate and participate in a transitional
process of handing over control of the Estate to the homeowners, where
such a transitional process is to be conducted by Pam Golding as
independent entity with no interest in the matter.
[6] As is apparent from the relief sought in the main application and the counter-
application, the matter arises from circumstances in which relations have
strained, coming to a head around the AGM convened in early 2024. A brief
account of the material facts suffices.
[7] On 2 November 2023, the Homeowners Association gave notice of the AGM to
be convened virtually on 15 November 2023. As a quorum was not present, the
AGM was adjourned for a week to 22 November 2023. When it convened on that
date, there was a technical problem and communication with some members
was lost. The AGM was adjourned again to a later date.
[8] On 11 February 2024, the first respondent (“Mr Khosa”) addressed a letter to the
directors of the Homeowners Association requesting that the adjourned AGM be
held in person. Mr Khosa stated that 10% of the members had objected to holding
the meeting virtually and that the directors were required, in terms of Article
2.21.1.1 of the MOI, to reschedule the meeting, in person at an address within
the magisterial district in which the Estate is situated.
[9] On 20 February 2024, the Homeowners Association purported to reconvene the
AGM on a virtual platform (“the virtual purported AGM”). On the same date, the
respondent homeowners convened a meeting also purporting to be the
reconvened AGM (“the in-person purported AGM”) at which a number of
resolutions were taken, including to remove the auditors, appoint new directors
and reverse an earlier decision to set levies. It is the validity of the rival virtual
purported AGM and the in-person purported AGM that lies at the heart of this
matter.
[10] The parties have each referred several disputes to the Community Schemes
Ombud Service (CSOS). However, none of the pending disputes is material to
the issues in the present application.
[11] The main application and counter-application are, in several respects, mirror
images of one another. The parties disagree on the lawfulness of virtual
members’ meetings. While the Homeowners Association contends that the
reconvened virtual purported AGM held on 20 February 2024 was lawful and its
resolutions valid, the respondent homeowners contend that it was unlawful.
Similarly, the parties dispute the lawfulness of the in-person purported AGM
convened by the respondent homeowners . The respondent homeowners also
impugn the Developer’s veto power under the MOI. In light of the two
applications, the following issues arise for determination:
applications, the following issues arise for determination:
a. the admissibility of the respondent homeowners’ supplementary affidavit
and the Homeowners Association’s Rule 30 application in that regard;
b. the in limine objection of non-joinder raised by the respondent homeowners;
c. whether it is lawful to hold members’ meetings virtually and whether
members may object;
d. the lawfulness of the virtual purported AGM;
e. the lawfulness of the in-person purported AGM;
f. the validity of the levies;
g. the interdictory relief sought by the Homeowners Association against the
respondent homeowners; and
h. the Developer’s veto power and the complaint that it constitutes oppressive
conduct.
The respondent homeowners’ supplementary affidavit
[12] After the delivery of all the initial affidavits in the matter, the respondent
homeowners delivered a supplementary affidavit on 19 June 2024. The
Homeowners Association opposes its admission and has brought an application
in terms of Rule 30 to have the affidavit declared an irregular step.
[13] The initial application was made on an urgent basis involving truncated time
periods. The respondent homeowners delivered an initial answering affidavit,
which also constituted the founding affidavit in their counter-application, un der
the truncated time periods occasioned by the framing of the application as urgent.
Following the delivery of an answering affidavit in the counter-application, they
also delivered a replying affidavit. These latter two affidavits were delivered after
the matter was struck from the urgent roll. Subsequently, the respondent
homeowners delivered a supplementary affidavit dealing in more detail with Part
B of the application and the matters raised in their own counter-application.
[14] The court has a discretion in terms of Rule 6(5)(d) to permit the filing of further
affidavits. Given the genesis of this application as an urgent application, it is
appropriate to admit the supplementary affidavit in order to ensure that all
relevant facts are before the court. Notwithstanding some delay in its filing, the
explanation provided by the respondent homeowners is reasonable.
[15] I accordingly permit the filing of the supplementary affidavit, and the application
to have it declared an irregular step is dismissed. In the circumstances, taking
into account the delay in delivering the supplementary affidavit, I exercise my
discretion to make no order of costs in relation to the Rule 30 application.
Point in limine: non-joinder of other homeowners
[16] The respondent homeowners argued that the Homeowners Association ought to
have joined all the other homeowners, as the application affects them and
because many other residents have shown an interest in the application,
including by over a hundred of them signing a petition.
[17] The Homeowners Association confirmed that the application was provided to all
homeowners. It is not necessary in a matter involving a company to join all of its
shareholders. The interdictory relief sought in this matter is limited to the
respondent homeowners. Any other homeowners who wished to intervene had
a reasonable opportunity to do so, but they were not necessary parties. I find that
it was not necessary to join all of the over 750 homeowners.
The lawfulness of virtual members’ meetings
[18] The parties disagree on the question whether the Homeowners Association may
hold meetings of members, including the AGM, on a virtual platform. This issue
has implications for the lawfulness of both the virtual purported AGM and the in-
person purported AGM, and it is therefore convenient to address it at the outset.
[19] The respondent homeowners argued that the MOI does not provide for the power
to hold meetings on a virtual platform and that it is therefore impermissible to do
so. They note that clause 2.13.2, dealing with notice of a meeting, refers to “the
place”, which they argue means a physical location only. They further invoke
place”, which they argue means a physical location only. They further invoke
clause 2.21.1 of the MOI, which provides that “[m]embers’ meetings shall be held
within the magisterial district in which the HOA is situated unless it is determined
otherwise by the Directors and notice of the address at which the meeting is to
be held, which address falls outside the magisterial district in which the scheme
is situated, is clearly stipulated in the notice calling the meeting”. Again, so the
argument goes, the language of the MOI contemplates a physical location within
the same magisterial district and at a specified address.
[20] Section 63 of the Companies Act specifically contemplates that meetings of
shareholders may be conducted by means of electronic communication ,
providing as follows:
“(2) Unless prohibited by its Memorandum of Incorporation, a
company may provide for-
(a) a shareholders meeting to be conducted entirely by electronic
communication; or
(b) one or more shareholders, or proxies for shareholders, to
participate by electronic communication in all or part of a shareholders
meeting that is being held in person,
as long as the electronic communication employed ordinarily enables
all persons participating in that meeting to communicate concurrently
with each other without an intermediary, and to participate reasonably
effectively in the meeting.
(3) If a company provides for participation in a meeting by electronic
communication, as contemplated in subsection (2)-
(a) the notice of that meeting must inform shareholders of the
availability of that form of participation, and provide any necessary
information to enable shareholders or their proxies to access the
available medium or means of electronic communication; and
(b) access to the medium or means of electronic communication is
at the expense of the shareholder or proxy, except to the extent that
the company determines otherwise.”
[21] Accordingly, unless the MOI prohibits it, the Homeowners Association may
provide for a shareholders meeting to be conducted entirely by electronic
communication. The Companies Act provides that 'electronic
communication' has the meaning set out in section 1 of the Electronic
Communications and Transactions Act 25 of 2002 (“ECT Act”), which defines the
Communications and Transactions Act 25 of 2002 (“ECT Act”), which defines the
term to mean “a communication by means of data messages”. Section 1 of the
ECT Act in turn defines ‘data message’ to mean “data generated, sent, received
or stored by electronic means”, including “voice, where the voice is used in an
automated transaction”.
[22] I find that section 63(2) of the Companies Act permits the Homeowners
Association to hold members’ meetings on a virtual platform. While the language
of the MOI suggests a physical location, it does not prohibit virtual meetings.
Section 63(2) permits them unless expressly prohibited.
[23] The provision permitting shareholders meetings to be held by electronic
communication in section 63(2) of the Companies Act is subject to important
provisos, namely that the electronic communication employed “ordinarily enables
all persons participating in that meeting to communicate concurrently with each
other without an intermediary, and to participate reasonably effectively in the
meeting” (emphasis added).1 This principle is reinforced by the definition of the
term ‘present at a meeting’ in terms of section 1 of the Companies Act, which
means “to be present in person, or able to participate in the meeting by electronic
communication, or to be represented by a proxy who is present in person or able
to participate in the meeting by electronic communication” (emphasis added).
[24] There is a further important principle relating to objections to virtual meetings.
Clause 2.21.1.1 of the MOI provides that
“If 10 (ten) percent of members to whom the notice convening the
meeting is sent, in writing object to the address at which the meeting
is to be held at least 7 (seven) days before the meeting, the Directors
shall have no alternative but to re-schedule the meeting to take place
at an address within the magisterial district in which the scheme is
situated.”
[25] The Homeowners Association sought to argue that this provision of the MOI is
not applicable because it refers to objections to a physical location. However, if
the MOI is to be read with section 63(2) of the Companies Act to permit virtual
the MOI is to be read with section 63(2) of the Companies Act to permit virtual
meetings, that interpretive approach must be applied consistently to all the
relevant provisions of the MOI. It cannot be that the MOI must be read in a
1 See the commentary on section 63(2) in J Yeats et al Blackman II: Commentary on the Companies
Act 2008 (Juta, 2018), RS 1, 2020, at pp 1278-9.
technology-accommodating way in relation to the holding of members’ meetings,
but in a literal way in relation to objections.
[26] I turn now to apply these principles to the two disputed meetings convened,
respectively, by the Homeowners Association and the respondent homeowners.
The virtual purported AGM
[27] The virtual purported AGM was validly convened on a virtual platform initially in
terms of clause 2.13.1 and 2.13.2 of the MOI. It was lawful to give notice of an
AGM to be held virtually and would be lawful to hold the meeting in this way
provided that it ensured effective participation of all members.
[28] However, there was a lawful objection to the reconvened AGM being held
virtually. More than ten percent of members objected in writing to the meeting
being held virtually. In terms of clause 2.21.1.1 of the MOI then required the
directors to re-schedule the meeting at “an address within the magisterial district
in which the scheme is located”. Clause 2.21.1.1 of the MOI provides, as a
proviso to the power of directors by notice to set the location of a meeting, as
follows:
“If 10 (ten) percent of members to whom the notice convening the
meeting is sent in writing object to the address at which the meeting
is to be held (sic) least 7 (seven) days before the meeting, the
Directors shall have no alternative but to re-schedule the meeting to
take place at an address within the magisterial district in which the
scheme is situated.”
[29] Clause 2.21.1.2 then identifies the magisterial district as Brakpan in Gauteng .
[30] The purpose of this clause is clear. It is to enable members to object to a meeting
being held at a location that is remote or difficult to access. Upon objection, it
gives the directors “no alternative” but to reschedule at a location within the
magisterial district, making it clear that the directors cannot proceed at the
location to which objection has been raised. Applied to virtual meetings, the
location to which objection has been raised. Applied to virtual meetings, the
purpose would be similarly to object to a virtual meeting that may not be readily
accessible or in which members may not be able to participate effectively.
[31] Such an interpretation also accords with the statutory framework for meetings by
way of electronic communication set out in section 63(2) of the Companies Act.
Section 63(2) requires such a meeting to enable members to “participate
reasonably effectively”, a principle echoed in the definition of ‘present at a
meeting’, which entails being “able to participate in the meeting by electronic
communication”.
[32] The evidence established that there were repeated technical difficulties with the
virtual platform that the Homeowners Association sought to employ, including on
the occasion of the initial AGM. This was the cause of it having to be postponed
and rescheduled. The respondent homeowners put up evidence of further
internet outages and load-shedding. The Homeowners Association argued that
these challenges were being exaggerated, but on its own version admits that
there were technical problems, including those that originally led to the AGM
being postponed on 15 November 2023.
[33] The respondent homeowners were therefore entitled to object, both in terms of
the MOI and the Companies Act. In future, provided that the virtual platform
enables effective participation, it would be lawful under the MOI to convene
virtual meetings, although members would retain their right to object. I do not
need to decide in what future hypothetical circumstances such an objection may
or may not be valid. On the facts, effective participation was not possible virtually
due to the repeated technical challenges that were experienced.
[34] In response to the objection, the Homeowners Association denied that the
respondent homeowners were entitled to object and gave notice on 29 January
2024 that the AGM would re-convene on 20 February 2024 on the Zoom
electronic platform.
[35] In the circumstances, I find that the virtual purported AGM was lawfully scheduled
to be held virtually and the required notice given, but that the respondent
to be held virtually and the required notice given, but that the respondent
homeowners lawfully objected to the AGM being held on a virtual platform,
obliging the directors to convene the meeting at a location within the magisterial
district.
[36] The appropriate relief to flow from these findings needs to be considered in light
of the disputed in-person purported AGM, the AGM convened separately by the
respondent homeowners at the Estate clubhouse.
The in-person purported AGM
[37] The in-person purported AGM was also held on 20 February 2024, convened by
the respondent homeowners and not the directors of the Homeowners
Association. The Homeowners Association seeks an order declaring the in-
person purported AGM unlawful and declaring invalid any resolutions or
decisions taken there.
[38] Clause 2.12.2 of the MOI gives the directors the power to convene a general
meeting (unless there are insufficient directors capable of acting to form a
quorum, which exception does not apply on the facts). Clause 2.12.3 provides
that “general meetings shall be held at such time and place as the Directors shall
determine”.
[39] Clause 2.12.4 of the MOI provides for the right of members to convene a general
meeting:
“A General Meeting of Members shall also be convened on a
requisition by Members of the Association representing not less than
1 / 20
th of the total voting rights of all the Members of the Company
having at the date of the lodgement of the requisition a right to vote at
General Meetings of the Company or, in default, may be convened by
requisitions as provided by and subject to the provisions of the
Company’s Act.”
[40] Section 61(3) of the Companies Act provides, in similar terms, that the board of
directors of any other person specified in a company’s memorandum of
incorporation or rules must call a shareholders meeting if one or more written
demands for a meeting are delivered, where each demand describes the
purpose for which the meeting is proposed and, in aggregate, demands for
substantially the same purpose are made by the holders of at least 10% of the
voting rights.
[41] The respondent homeowners did secure a requisition of not less than 1/20th of
the of the total voting rights to convene the in-person purported AGM, in terms of
clause 2.12.4 of the MOI. However, they then purported to give notice of the
meeting and convene it themselves, rather than having the directors do so.
[42] The respondent homeowners argue that there was no self-help because the
meeting had originally been called by the directors in terms of clause 2.12.2 of
the MOI, after which the respondent homeowners had lawfully objected to the
meeting taking place virtually and then proceeded with the meeting originally
called by the directors for 20 February 2024. In other words, they argue that the
meeting that they convened was the same AGM of which the directors had given
notice, but taking place in a different venue pursuant to a lawful objection to the
virtual meeting.
[43] The Homeowners Association argues that, in terms of section 61(12) of the
Companies Act, the members’ rights are limited to approaching a court to order
the directors to call a meeting, and that they may not engage in self-help. The
Homeowners Association relied on the unreported judgment in Heatherview
Estate Extension 24 Homeowners Association NPC v Mahlatse Trading
Enterprise CC and 101 Others , where Ranchod J in the Gauteng Division,
Pretoria, held that where the directors fail or refuse to convene a me eting on
request of the members, the remedy for the members lies in approaching the
court in terms of section 61(12) for an order requiring the company to convene
the meeting, rather than convening the meeting themselves as members.2
[44] I agree that the respondent homeowners had the power, which they lawfully
exercised, by requisition to demand that a general meeting be re-convened.
However, their power does not extend to actually giving notice of the meeting
and convening it, as this is a power reserved to the directors and secretary of the
Homeowners Association.
Homeowners Association.
[45] Accordingly, the respondent homeowners acted lawfully and within their powers
in requisitioning the convening of the AGM, and the Homeowners Association
2 Heatherview Estate Extension 24 Homeowners Association NPC v Mahlatse Trading Enterprise CC
and 101 Others [2019] ZAGPPHC 180 paras 22-23.
through its directors acted unlawfully in failing to act on that requisition. Indeed,
this requisition may have been superf luous as the directors already bore an
obligation to reconvene the AGM. It was for the directors to convene the AGM.
The respondent homeowners ultimately exceeded their powers in proceeding
with the meeting and the resolutions and decisions taken at it are accordingly of
no force or effect.
[46] The respondent homeowners have, in fact, sought an order in their counter-
application to direct the Homeowners Association to reconvene the postponed
AGM in person. The court has the power to direct the Homeowners Association
to convene the AGM in terms of section 61(12) of the Companies Act.3 That is
the appropriate remedy in the circumstances and I am satisfied that the
respondent homeowners have made out a case for such an order. I consider that
it is appropriate to afford a period of 10 days to publish the notice of the
reconvened AGM and to afford a period of 21 calendar days of the meeting from
the date of publication of the notice. It is imperative that the AGM be concluded.
The levies
[47] I have found that the resolutions taken at the in-person purported AGM were
invalid. Accordingly, the purported resolution to set aside the earlier decision of
19 May 2023 setting the levies was invalid.
3 Section 61(2) provides:
“(12) If a company fails to convene a meeting for any reason other than as contemplated in
subsection (11)-
(a) at a time required in accordance with its Memorandum of Incorporation;
(b) when required by shareholders in terms of subsection (3); or
(c) within the time required by subsection (7),
a shareholder may apply to a court for an order requiring the company to convene a meeting
on a date, and subject to any terms, that the court considers appropriate in the
circumstances.”
[48] Given the dispute between the parties and the resultant uncertainty regarding
the levy obligations of homeowners, it is appropriate to issue an order resolving
this question.
[49] The Homeowners Association is entitled to an order in this regard.
The interdictory relief sought against the respondent homeowners
[50] The Homeowners Association also seeks a final interdict against the respondent
homeowners interdicting and restraining them “from interfering with and/or
obstructing in any manner whatsoever, the Applicant and/or its duly appointed
directors in the carrying out of their functions and duties accorded to them in the
MOI”.
[51] Mr Porteous for the Homeowners Association accepted that the homeowners are
entitled to meet privately and to discuss matters affecting the Homeowners
Association, but submitted that this right does not extend to actually convening
meetings of the company.
[52] In the analogous context of attempts to interdict members of a traditional
community from meeting outside the formal structures of the traditional
community, Skweyiya for the majority of the Constitutional Court in Pilane
recalled the constitutional significance of the right to assemble:
“This Court has on more than one occasion recognised the
significance of the rights to freedom of expression, association and
assembly in the functioning of a democratic society. It strikes me that
the exercise of the right to freedom of expression can be enhanced
by group association. Similarly, associative rights can be heightened
by the freer transmissibility of a group’s identity and purpose,
expressed through its name, emblems and labels. These rights are
interconnected and complementary. Political participation, actuated
by the lawful exercise of these rights, can and should assist in
ensuring accountability in all forms of leadership and in encouraging
good governance. The judgment of my Colleagues Mogoeng CJ and
Nkabinde J expresses concern that not to allow the first interdict to
Nkabinde J expresses concern that not to allow the first interdict to
stand would provide an avenue for the erosion of the rule of law. I do
not share these concerns. I see no reason to believe that the lawful
exercise of the applicants’ rights would result in chaos and disorder.
Rather, there is an inherent value in allowing dissenting voices to be
heard and, in doing so, permitting robust discussion which
strengthens our democracy and its institutions.”4
[53] Similar principles apply to homeowners in the context of a homeowners
association. Their constitutional rights to freedom of expression, 5 association6
and assembly,7 as well as their rights to property 8 and, where actually living on
the Estate, housing, 9 are threatened by an interdict against interfering with or
obstructing the homeowners association or its directors. An interdict has a
potentially chilling effect against active participation of members in the
Homeowners Association, and would only be appropriate when the unlawfulness
of their past and threatened conduct has been clearly established. This should
not be interpreted as free licence to homeowners to disregard the MOI or act
unlawfully, but constitutes an important counter-vailing consideration in the
context of the interdict sought.
[54] In the circumstances, I have found that both the Homeowners Association and
the respondent homeowners have acted inconsistently with the MOI and the
Companies Act. The Homeowners Association was entitled, in principle, to
convene a virtual AGM, but only if it met the requirement of effective participation.
It did not. The respondent homeowners were also entitled to object and demand
an in-person AGM. They were also within their rights to demand that the directors
convene a meeting to discuss the issues that they specified; but they were not
entitled to convene and hold that meeting themselves.
[55] In the circumstances, a case has not been made out for an interdict against the
respondent homeowners in the broad terms sought. In several respects, they
acted lawfully, though ultimately going too far in actually holding the in-person
purported AGM. What is necessary is clarification of the rights and obligations of
4 Pilane and Another v Pilane and Another [2013] ZACC 3; 2013 (4) BCLR 431 (CC) para 69.
5 Section 16 of the Constitution.
6 Section 18 of the Constitution.
5 Section 16 of the Constitution.
6 Section 18 of the Constitution.
7 Section 17 of the Constitution.
8 Section 25 of the Constitution.
9 Section 26 of the Constitution.
all parties, in the hope that all role-players can take a more constructive
approach.
The Developer’s veto power
[56] The respondent homeowners invoke section 163 of the Companies Act and ask
the court to declare “the developer’s veto power to constitute an oppressive
conduct”.
[57] Clause 2.17.1.2 of the MOI provides that:
“The Developer shall, during the development period have an equal
number of votes as there are the total number of Members votes in
the Company in addition to the votes conferred upon the Developer
in terms of this Article.”
[58] Clause 2.3.15 of the MOI provides that:
“Notwithstanding anything to the contrary in this Memorandum, the
Developer shall not pay any levy contribution in respect of any of the
freehold residential erven of which it is the registered owner until the
end of the development period.”
[59] The effect of clause 2.17.1.2 of the MOI is to confer on the Developer an
entrenched majority vote and to render the homeowners a perpetual minority.
This, of course, is the arrangement that the homeowners concluded and to which
they committed themselves under the MOI. As Sutherland J explained in
Bushwillow Park Home Owners v Fernandes & Another, the individual members
derive their rights and obligations from contract and the authority of the company
itself is defined by its instruments.
10 The Developer enjoys these weighted voting
rights, which amount in practice to a veto, until the completion of the development
phase, and also has the right to appoint three of five directors of the company.
10 Bushwillow Park Home Owners v Fer nandes & Another [2015] ZAGPJHC 250 para 6, cited with
approval in Mount Edgecombe Country Club Estate3 Management Association II (RF) NPC v Singh
and Others 2019 (4) SA 471 (SCA) paras 23-24.
[60] The respondent homeowners argue that the veto power contained in clause
2.17.1.2 constitutes oppressive conduct contrary to section 163 of the
Companies Act. Section 163(1) provides:
“163 Relief from oppressive or prejudicial conduct or from abuse
of separate juristic personality of company
(1) A shareholder or a director of a company may apply to a court for
relief if—
(a) any act or omission of the company, or a related person, has
had a result that is oppressive or unfairly prejudicial to, or that
unfairly disregards the interests of, the applicant;
(b) the business of the company, or a related person, is being or
has been carried on or conducted in a manner that is oppressive or
unfairly prejudicial to, or that unfairly disregards the interests of, the
applicant; or
(c) the powers of a director or prescribed officer of the company,
or a person related to the company, are being or have been
exercised in a manner that is oppressive or unfairly prejudicial to, or
that unfairly disregards the interests of, the applicant.”
[61] Section 163(2) then provides that a court considering an application under this
provision “may make any interim or final order it deems fit, including various
specified orders.
11
11 Section 163(2) refers to the following:
“(a) an order restraining the conduct complained of;
(b) an order appointing a liquidator, if the company appears to be insolvent;
(c) an order placing the company under supervision and commencing business
rescue proceedings in terms of Chapter 6, if the court is satisfied that the
circumstances set out in section 131(4)(a) apply;
(d) an order to regulate the company’s affairs by directing the company to amend
its Memorandum of Incorporation or to create or amend a unanimous shareholder
agreement;
(e) an order directing an issue or exchange of shares;
(f) an order—
[62] ‘Oppression’ in this context connotes lack of probity or good faith and fair dealing
in the affairs of a company to the prejudice of some portion of its members. 12 It
is not the motive for the conduct complained of that the court must consider but
rather the conduct itself and its effects on the other members of the company. 13
Where the directors of a company exercise their powers under its memorandum
of incorporation and do so in accordance with the standard of conduct required
by section 76, a shareholder prejudiced by their decision cannot complain that
they were unfairly prejudiced under section 163 save in exceptional
circumstances.
14 Section 76(3) requires directors to act in good faith and for a
proper purpose; in the best interests of the company; and with the requisite
degree of care, skill and diligence.
[63] As formulated in the respondent homeowners’ notice of counter-application, they
seek an order declaring the Developer’s veto power itself – rather than its
(i) appointing directors in place of or in addition to all or any of the directors then
in office; or
(ii) declaring any person delinquent or under probation, as contemplated in
section 162;
(g) an order directing the company or any other person to restore to a shareholder
any part of the consideration that the shareholder paid for shares, or pay the
equivalent value, with or without conditions;
(h) an order varying or setting aside a transaction or an agreement to which the
company is a party and compensating the company or any other party to the
transaction or agreement;
(i) an order requiring the company, within a time specified by the court, to produce
to the court or an interested person financial statements in a form required by this
Act, or an accounting in any other form the court may determine;
(j) an order to pay compensation to an aggrieved person, subject to any other law
entitling that person to compensation;
entitling that person to compensation;
(k) an order directing rectification of the registers or other records of a company; or
(l) an order for the trial of any issue as determined by the court.”
12 Grancy Property Ltd v Manala 2015 (3) SA 313 (SCA) para 23, referring to Scottish Co-operative
Wholesale Society Ltd v Meyer [1959] AC 324. See generally J Yeats et al Blackman II: Commentary
on the Companies Act 2008 (Juta, 2018), RS 1, 2020, at pp 7-18 to 7-20.
13 Grancy Property Ltd (id) at para 27.
14 Visser Sitrus (Pty) Ltd v Goede Hoop Sitrus (Pty) Ltd 2014 (5) SA 179 (WCC) paras 52, 59 and 65.
exercise in relation to one or more specific decisions – to be oppressive conduct.
In effect, they ask the court to declare that veto power inconsistent with section
163 for all purposes.
[64] In The Wilds Home Owners Association and Others v Van Eeden and Others ,15
the SCA considered a similar question whether a developer’s veto right may be
inconsistent with section 163 of the Companies Act. Cloete JA for a unanimous
court addressed the issue as follows:
“[14] By purchasing property in the development the members of the
HOA became bound by its articles of association. Those articles
contain a veto right in respect of resolutions taken at a general
meeting. That is the bargain to which the members assented. There
is no evidence that the veto right has thus far been used at all, much
less in a prejudicial, unjust or inequitable manner (as envisaged in
s 252 of the Act and s 163 of the Companies Act 71 of 2008) or in a
manner that unfairly disregards the interests of the members (as
envisaged in s 163 of the latter Act). If it is, the members would then
have to bring themselves within s 163. That is a fight for another day,
and hopefully that day will never eventuate. But if the developer’s veto
right is removed, it has no subsequent redress; and the veto right was
obviously inserted for its protection, bearing in mind the enormous
capital outlay and its continued exposure in the ongoing development.
It must be remembered that only phase 1 of the development has
been completed; phase 2 is already contem plated; and the
development can consist ultimately not merely of Pretorius Park
Extensions 13, 14, 15, 16, 17, 18, 19 and 20 Registration Division JR,
Gauteng, but (in terms of the definition of ‘Development Plan’ in the
articles) can include ‘any further Extensions that may be added, which
shall eventually fall into the Security Township to be known as “The
Wilds”.’ In short, this court simply does not know to what extent the
Wilds”.’ In short, this court simply does not know to what extent the
removal of the developer’s veto right might prejudice it; and it cannot
be said that it has been exercised in such a way that consideration
should be given to its removal under s 252 or s 163 ─ the problem
has been with the board of directors, and that problem can be
resolved. For both of these reasons I consider that (save in regard to
article 10.4) it should not be open to the extraordinary general meeting
to amend the articles of the HOA by special resolution so as to remove
the developer’s veto permanently.”
15 The Wilds Home Owners Association and Others v Van Eeden and Others [2012] ZASCA 113.
[65] In the present matter, there are factual indications that the Developer’s veto
power has been used in ways prejudicial to the interests, and certainly the
preferences, of members. In The Wilds Homeowners Association, the power had
not yet been so employed. Here, it appears to be used routinely by the
Developer, and was used to block amendments to the MOI that would remove
the veto power at the AGM held on 5 September 2021. The implications of
removing the veto power entirely would nevertheless be significant and would
require full ventilation and careful consideration, taking into account the
consequences of doing so for both the Developer and the members.
[66] The Homeowners Association raised a non-joinder objection in relation to this
issue. They argue that the Developer has a direct and substantial interest in
relation to the relief sought declaring the special voting rights to be oppressive
conduct.
[67] In Louw and Others v Nel, the Supreme Court of Appeal considered an appeal
in a matter where the applicant sought relief from oppressive conduct under
section 252 of the Companies Act 61 of 1973, the predecessor provision to
section 163 of the current Act.16 One aspect of the appeal concerned the attempt
to secure an order against other corporate entities that were not parties to the
proceedings on the basis, in substance, one going concern and consolidated as
such. In a unanimous judgment, the Supreme Court of Appeal held that this was
not competent.
17 The court also held that, while a court has wide discretion to
grant relief under the provision, it is essential that the applicant should formulate
the relief that is sought.
18
[68] The respondent homeowners in turn argue that the court should disregard the
separate legal personality of the Homeowners Association and the Developer
16 Louw and Others v Nel 2011 (2) SA 172 (SCA).
17 Id at para 33.
18 Id at para 32.
because the Developer controls the Homeowners Association and the same two
natural persons, Mr Wesley Brown and Mr Shane Brown, control both entities.
[69] In essence, the respondent homeowners invite the court to ‘lift the veil’ by taking
into account who the company’s shareholders and directors are. 19 The difficulty
is that the order sought would effectively terminate the Developer’s veto power,
in circumstances where the Developer has not been joined and its rights under
the MOI would be adversely affected. There is also no explanation for the failure
of the respondent homeowners to join the Developer, which might easily have
been done in the counter-application, especially since the respondents
supplemented their initial answering papers and the matter was proceeding on
the ordinary civil roll and not the urgent roll.
[70] The Developer is a separate legal entity, with its own directors, shareholders and
interests. The fact that through the veto power it exercises control over the
Homeowners Association does not detract from its separate legal personality and
the fact that the order sought would significantly impact the Developer’s rights
and obligations under the MOI, in its absence.
[71] It may be that the particular exercise of the veto power in certain specific
instances, having regard to the effect of such exercise of the power, constitutes
oppressive conduct. For instance, it may be oppressive conduct to impose virtual
meetings in circumstances where, on the facts, effective participation of
members is not possible. That, however, is not the relief sought by the
respondent homeowners and that particular issue has in any event been
resolved without the need to have regard to section 163. As with the decision in
The Wilds Homeowners Association, it is possible to resolve the specific current
dispute of the parties without removing the veto power of the Developer. It may
also be that the use of the veto power to entrench itself could amount to
oppressive conduct.
oppressive conduct.
19 There is a distinction between ‘piercing’ the corporate veil, which involves a court treating the liabilities
of a company as those of its shareholders or directors, and ‘lifting’ or ‘looking behind’ the veil, which
involves having regard to who the shareh olders and directors are. See Cassim et al Contemporary
Company Law (Juta, 2021) at 60.
[72] It is possible that the respondent homeowners could in future make out a case,
having properly joined the Developer, to declare the veto power as a whole or its
use in specific ways to be oppressive conduct and to seek appropriate relief,
such as the amendment of the MOI. I express no final view on that issue, given
the failure to join the Developer.
[73] In the circumstances, the relief sought in the counter-application to declare the
Developer’s veto power under the MOI oppressive conduct, for all purposes,
cannot be determined in the absence of the Developer as a party. This part of
the counter-application must be refused.
Conclusion and costs
[74] Ultimately, each of the parties has enjoyed some success in relation to the relief
sought. The Homeowners Association has succeeded in relation to the
declaratory relief permitting virtual members’ meetings, but subject to the
important proviso requiring effective participation under the Companies Act and
subject to the right of members to object to virtual meetings under the MOI. The
order will also confirm that the eAGM platform is one permissible option. The
Homeowners Association has also succeeded in establishing that the in-person
purported AGM held at the Estate Clubhouse on 20 February 2024 was ultimately
unlawful, although the directors were under an obligation to convene it in
response to the members’ requisition. As a result, they also succeeded in
establishing that the previously determined levies remain valid.
[75] The respondent homeowners, though unsuccessful in their position that virtual
meetings are entirely impermissible, established the important proviso and
qualification to the power to call virtual meetings. They also established that their
objection to the virtual purported AGM was lawful and effective, rendering the
meeting unlawful and resolutions taken at it invalid. They also succeed in
securing an order requiring the Homeowners Association to reconvene the AGM
securing an order requiring the Homeowners Association to reconvene the AGM
and to do so in person, in light of the valid objection and the fact that effective
participation was not secured previously.
[76] Despite plausible concerns regarding the Developer’s veto power and how it has
been deployed by the Developer, I have determined that the failure to join the
Developer precludes a determination that this power constitutes oppressive
conduct under the Companies Act.
[77] It is to be hoped that the reconvened AGM will provide an opportunity for the
parties to find each other, in the best interests of all homeowners, the Developer
and the Homeowners Association itself.
[78] In light of the substantial, and comparable, success achieved (and failure
experienced) by both sets of parties, I determine that it is just to make no order
as to costs.
Order
[79] The following order is granted:
1. The supplementary affidavit delivered by the Respondents on 19 June
2024 is admitted, and the Applicant’s application in terms of Rule 30 to
have that affidavit declared an irregular step is accordingly dismissed.
2. It is declared that it is lawful for the Applicant to hold meetings of
members by way of electronic communication on a virtual platform,
including using the online voting platform eAGM, provided that:
1.1 the electronic communication employed ordinarily enables all
persons participating in that meeting to communicate concurrently
with each other without an intermediary, and to participate
reasonably effectively in the meeting; and
1.2 subject to the right of members to object to the meeting taking
place virtually in terms of clause 2.21.1.1 of the Applicant’s
Memorandum of Incorporation.
3. It is declared that the members of the Applicant lawfully objected to the
Annual General Meeting (“AGM”) taking place on a virtual platform on
20 February 2024.
4. It is declared that the meeting purporting to be the AGM of the Applicant
held on a virtual platform on 20 February 2024 was unlawful in light of
the objection by members and because the electronic communication
employed would not enable all members to participate reasonably
effectively in the meeting.
5. All resolutions and decisions purportedly taken at the meeting referred
to in paragraph 4 of the order are set aside.
6. It is declared that the meeting purporting to be the AGM of the Applicant
held at the clubhouse of the Helderwyk Estate on 20 February 2024 was
not duly convened in terms of the Applicant’s Memorandum of
Incorporation and was thus unlawful.
7. All resolutions and decisions purportedly taken at the meeting referred
to in paragraph 6 of the order are set aside.
8. The current levies determined by the Applicant’s directors and
communicated to the members of the Applicant on 19 May 2023 are
declared to have been lawfully imposed and are binding upon the
members of the Applicant and payable by its members.
9. The Applicant is directed to reconvene, in person at a location in the
magisterial district of Brakpan, the AGM of the Applicant to address all
agenda items set out in the Applicant’s original notice of meeting dated
29 January 2024, notice of such AGM to be given within 10 days of the
date of this order and to give not less than 21 calendar days’ notice of
the date of the AGM.
10. There is no order as to costs.
___________________________
J BRICKHILL
ACTING JUDGE OF THE HIGH COURT
JOHANNESBURG
Type text here
This judgment is handed down electronically by circulation to the parties or their legal
representatives by email, by uploading it to the electronic file of this matter on Caselines, and
by publication of the judgment to the South African Legal Information Institute. The date for
hand-down is deemed to be 4 September 2025.
DATE OF HEARING: 2 June 2025
JUDGMENT SUBMITTED FOR DELIVERY: 4 September 2025
APPEARANCES:
For the Applicant: Adv GF Porteous and Adv N Tarmahomed,
instructed by Tonkin Clacey Inc.
For the Respondent: Adv P Mokoena SC, Adv S Msimanga and Adv N Kgaka,
instructed by Msikinya Attorneys & Associates.