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[2019] ZASCA 69
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Singh and Others v Companies and Intellectual Property Commission and Others (822/2018) [2019] ZASCA 69; 2019 (5) SA 432 (SCA) (30 May 2019)
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THE SUPREME COURT OF APPEAL OF
SOUTH AFRICA
JUDGMENT
Reportable
Case
No: 822/2018
In
the matter between:
RAMESH
SINGH
FIRST
APPELLANT
LAHLENI
LAKES (PTY) LTD
SECOND
APPELLANT
FINISHING
TOUCH TRADING 304 (PTY) LTD
THIRD
APPELLANT
ONE
VISION INVESTMENTS 344 (PTY) LTD
FOURTH
APPELLANT
and
THE COMPANIES AND INTELLECTUAL
PROPERTY
COMMISSION
FIRST
RESPONDENT
MR
R VOLLER N.O.
SECOND
RESPONDENT
RALSTON
EMMANUEL SMITH
THIRD
RESPONDENT
Neutral
citation
:
Singh
& others v The Companies and Intellectual Property Commission &
others
(822/2018)
[2019] ZASCA 69
(30
May 2019)
Coram
:
Navsa ADP, Mbha, Schippers JJA, Mokgohloa and Davis AJJA
Heard:
15 May 2019
Delivered
:
30 May 2019
Summary
:
Powers of the Companies Commission to investigate a complaint –
whether complaint time barred – Effect of civil litigation
on
an investigation by the Companies Commission.
ORDER
On
appeal from:
Gauteng Local Division of
the High Court, Pretoria (Basson J sitting as court of first
instance):
1 The appeal is dismissed with costs
on an attorney and client scale.
2 The first and second respondents are
entitled to costs only in respect of the opposition to the
application to admit further evidence,
also on an attorney and client
scale.
JUDGMENT
DAVIS
AJA
(Navsa ADP, Mbha, Schippers JJA
and Mokgohloa AJA concurring):
Introduction
[1]
This case concerns the question whether the first
respondent, being the Companies Intellectual Property Commission (the
Commission)
established in terms of Section 185 of the Companies Act
of 2008 (the Act) has jurisdiction to investigate a complaint lodged
by
the third respondent, Mr Ralston Smith (Smith) to the effect that
his removal as a director of the second appellant Lahleni (Pty)
Ltd,
(Lahleni) had been effected fraudulently. Smith alleged that either
the first appellant, Mr Ramesh Singh (Singh), or persons
associated
with him fraudulently filed documents with the Commission which
reflected that Smith had resigned as a director.
[2]
On 23 February 2016, the Commission recommended
that the complaint be investigated. As part of the investigation
Singh was requested,
in his capacity as a director of Lahleni, to
appear before the Commission and to furnish certain information in
respect of Lahleni
as well as the third appellant Finishing Touch
(Pty) Ltd (Finish Touch).
[3]
Singh did not appear nor did he comply with the
Commission’s request for documentation. Summons was
subsequently served on
Singh, on 5 April 2015, via email. The
attorneys acting on behalf of Singh objected to the way which the
summons was served and
further contended that, in terms of
s 219(1)
(a)
of
the Act, the complaint had been lodged more than three years after
the alleged act, which was the cause of the complaint, had
been
committed. Hence, so it was contended, the complaint could no longer
be investigated as it had prescribed.
[4]
The Commission remedied the objection to service
of summons by ensuring that it was served by the Sheriff on 7 April
2016. The appellants
then launched an application to review and set
aside the decision of the Commission to accept and investigate the
complaint and
to authorise summons in terms of which Singh was
requested to appear and provide information to the Commission, in his
capacity
as director of Lahleni and Finishing Touch.
[5]
The court
a quo
dismissed the application with costs on an
attorney and client scale. It is against that order that the
appellants have approached
this court, with the leave of the court
a
quo
.
The factual matrix
[6]
The appellants and Smith, together with certain
other parties, entered into a series of commercial agreements between
September
and November 2012. The agreements were designed
to transfer shares in Lahleni and Finishing Touch to Singh or
entities
controlled by him. It appears that the agreements were
subject to various conditions precedent, including a clause which
provided
that all the existing shareholders and directors other than
Singh, had to resign within 30 days as from 3 October 2012.
[7]
A dispute arose as to whether the conditions
precedent to the agreements had been fulfilled and further, whether
Smith had resigned
as a director of both Lahleni and Finishing
Touch. On 21 May 2013 BTW Consulting (Pty) Ltd obtained a final
liquidation order
against Lahleni, which caused the latter together
with the fourth appellant (One Vision) to launch an application for
the rescission
of this liquidation order. Smith alleged that it
was during the course of that litigation that he first ascertained
that
Singh had claimed that he, Smith, had resigned as a director of
Lahleni and Finishing Touch. The claim of resignation as a director
was based on a document dated 2 October 2012, headed ‘Mandate
for Resignation of Director’ of Lahleni Lakes (Pty) Ltd.
The
document which is purportedly signed by Smith states that he had
consented to his resignation as a director. Smith
alleged
that his signature had been fraudulently affixed to the letter of
resignation, upon the discovery of which he lodged a
complaint with
the Commission.
[8]
On 16 October 2014, One Vision 344 (Pty) Ltd (One
Vision) launched an application in the North Gauteng High Court. The
main relief
sought was for specific performance of the Memorandum of
Understanding (MOU) concluded between the various parties in respect
of
the sale of equity in Lahleni. According to the first appellant,
one of the material issues in that litigation is whether the
provisions
of the MOU and the sale of equity had been fully executed
and implemented, including the critical question as to whether Smith
had resigned as a director of both Lahleni and Finishing Touch as
contemplated in the MOU and the sale of equity agreement. On 26
October 2015, by agreement between the parties, the application was
referred to trial.
[9]
On 18 February 2016, Smith filed two complaints
with the Commission in terms of s 168 of the Act, alleging that the
records of the
Commission incorrectly did not reflect that he was a
director of both Lahleni and Finishing Touch and that his purported
resignation
had been fraudulently procured. Smith provided the
Commission with a forensic report which concluded that the signatures
used to
effect his resignation as a director of Finishing Touch were
‘without any doubt not authentic writing but a forgery’.
He also deposed to an affidavit stating that the signatures used to
reflect his resignation as a director of Lahleni were also
forgeries.
[10]
Pursuant to these complaints, the Commission
initiated an investigation, as indicated above in paras 2 and 3,
summoned Singh in
his capacity as director to appear and to provide
information on 25 April 2016. Not only did Singh refuse to comply
with the summons
but, as stated above, he applied to court to review
and set aside the decisions of the Commission to accept the
complaints, authorize
summonses in which Singh was requested to
appear and provide information to the Commission and in the
alternative, an order setting
aside the decision to investigate and
issue summons and in the further alternative that all these acts of
the Commission were
ultra vires
.
The judgment of the court
a quo
[11]
In dismissing the application with costs, Basson
J, in the court a quo, found that the summons had been correctly
served on 7 April
2016 by the Sheriff. On the merits, the learned
judge dismissed the application, essentially for the following
reasons:
‘
The
investigative powers conferred upon CIPC are central to the statutory
duty to maintain the companies register. I am further
in agreement
with the submission that it would be absurd to suspend the
investigative powers of CIPC in exercising its statutory
duties
merely because an affected party has instituted proceedings into
other matters relating to the investigation regardless
of whether the
statutory regulator (such as CIPC) is a party to those proceedings.
Moreover, there is no reason, in my view,
why the investigation
conducted by the CIPC (which is a statutory obligation) cannot run
concurrently to action proceedings instituted
by a party to the
investigation process. Lastly, if regard is had to the relief sought
in the action proceedings, it is apparent
that no relief is claimed
with regard to the correction of the companies register maintained by
CIPC.’
The appeal
[12]
On appeal, the appellants’ counsel raised a
series of arguments which can be reduced to the following:
1.
The
complaint was time barred;
2.
There
is currently an action pending in the high court which deals with the
same matter, that is the action launched by One Vision;
and that
matter ought to have been referred to trial and consolidated with
this case.
3.1
Either
on the basis of the Promotion of Administration of Justice Act 3 of
2000 (PAJA); inter alia, on the basis that
the decision to
investigate the complaints was based on incomplete information or
3.2 The residual principal of
legality,
in that the Commission exceeded
its statutory authority by taking decisions, where s 219(1) of the
Act clearly precluded the
initiation of the complaint. Furthermore,
the appellants contended that the decision to pursue the complaint
was neither rational
nor reasonable.
[13]
For those reasons therefore, it was argued by the
appellants that the Commission lacks jurisdiction to investigate the
complaints.
Was the complaint time barred?
[14]
Section 219(1) of the Act provides as follows:
‘
A
complaint in terms of this Act may not be initiated by, or made to
the Commission or the Panel, more than three years after –
(a)
the act or
omission that is the cause of the complaint; or
(b)
in the case
of a course of conduct or continuing practice, the date that the
conduct or practice ceased.’
[15]
Counsel for the appellants contended that Smith
had lodged a complaint with the Commission more than three years
after the alleged
fraudulent submissions had been made removing him
as a director of Lahleni and Finishing Touch. The court
a
quo
found that the complaint was based
upon ‘a course of conduct or continuing practice’ within
the meaning of s 219(1)
(b)
of
the Act. The reason for this, so it was said, is to be found in the
obligation imposed upon the commission to ensure that the
records and
registers which it administers are maintained accurately. Section
187(4) of the Act provides that the Commission is
obliged not only to
establish but to maintain the companies register in the prescribed
manner and form. This implies that the continued
accuracy of the
register is part of its mandate. It is clear that, if a record
reflects a fraudulent entry and is not corrected,
the records
maintained by the Commission are not accurate. It must follow that if
the Commission discovers a fraudulent entry some
three years after
the fraud was perpetuated, on the basis of the argument of
appellant’s counsel, it would be powerless to
effect a change.
[16]
Counsel for the appellants focused his submission
on the finding of the court a quo, based as it was on s 219(1)
(b)
of the Act, that the records of the
company continued to reflect that Smith was not a director, was an
omission which constituted
a continuous practice. He submitted that
an incorrect insertion into a record of a company is a single act. In
the view of counsel
for the appellants, the words ‘continuing
practice’ were therefore inapplicable in this case.
[17]
In my view, it is possible to find an
answer to this submission in the dictum of Wallis AJ, in
Makate
v Vodacom Ltd
[2016] ZACC13;
2016 (4)
SA 121
(CC) para 192, wherein he states:
‘
In
the case of a continuing wrong there can be no question of
prescription, even though the wrong arises from a single act long
in
the past. The reason, which may appear somewhat artificial, but
which is well established, is said to be that
while
the original wrongful act may have occurred in a time past the wrong
itself continues for so long as it is not abated
.
’
(Emphasis
added). See also
Barnett
& others v Minister of Land Affairs & others
[2007]
ZASCA 95
;
2007 (6) SA 313
(SCA) para 20-21 and
Slomowitz
v Vereeniging Town Council
1966
(3) SA 317
(A) at 330H-331G which judgments accept the description of
a continuing wrong as one which still is in the course of being
committed
and is not to be located wholly in a single past action.
[18]
In the present case, however it appears to me to
be unnecessary to decide this issue on the basis of a ‘continuing
practice’
in that s 219(1)(a) of the Act is
applicable rather than s 219 (1)(
b
)
in which the phrase ‘course of conduct or continuing practice
is employed. Section 219(1)(
a
)
refers to ‘an act for an omission’ either of which is
applicable in this case. The Commission has an obligation to
maintain
an accurate register of companies. This obligation is not frozen in
time. If it were it would compel the Commission
to work
knowingly with inaccurate information, even in a case where the
record was tainted by fraudulent activity. If, as must
be the case,
the Commission is enjoined to maintain accurate records and
thus effect necessary corrections to ensure accuracy
, the failure by
a company to ensure that inaccuracies are corrected amounts either to
a misrepresentation of the correct position
or an omission to correct
the incorrect entry. In summary, when s 219(1)(a) of the Act
employs the words ‘the
act or omission’ the purpose
thereof is to impose an obligation not to misrepresent the accuracy
of the records or to omit
to ensure that they are corrected. Thus, if
the records of the company reflect incorrect information, there is an
obligation on
officers of the company to ensure that the inaccuracy
is cured. Thus the failure to ensure that the record is maintained
accurately
constitutes either an act or an omission which falls
within the scope of 219(1)(
a
).
Thus, if there is a complaint that the records of the company are
inaccurate, that constitutes a complaint that there has been
an act
or an omission which in terms of s 219(1)(
a
)
constitutes the cause of the complaint. The failure to cure the
inaccuracy or to draw it to the attention of the Commission
constitutes a discrete act which is not frozen in time, which was the
appellants’ argument in respect of prescription.
The effect of pending litigation
[19]
The appellant’s counsel contended that the
pending litigation before the high court will be required to
determine whether
Smith had resigned as a director of Lahleni and
Finishing Touch. In terms of an amended notice of appeal, it was
argued that the
precise dispute which confronts this court is
pertinently relevant to the litigation which has been launched. If
the Commission’s
investigation was allowed to continue, it
would lead to ‘a preview of the evidence to be presented at the
upcoming trial’
regarding the exact same issues, namely whether
Mr Smith had resigned of his own free will or whether the resignation
had been
fraudulently procured.
[20]
Counsel for the appellants contended that s 219(2)
of Act prevented the Commission from investigating a complaint where
the civil
action was pending before the high court. Section
219(2) of the Act provides as follows:
‘
A
complaint may not be prosecuted in terms of this Act against any
person that is, or has been, a respondent in proceedings under
another section of this Act relating substantially to the same
conduct
.’
[21]
The wording of this section makes it clear that a
complaint cannot be prosecuted if there are other proceedings
relating to substantially
the same conduct that gave rise to the
complaint where such other proceedings are based on a section of the
Act. In this case,
the proceedings before the high court are
contractual in nature and thus are not based on any provision of the
Act. Hence s 219(2)
of the Act is inapplicable to the present case.
The appellants’ counsel sought to argue further that the first
appellant
could be prejudiced if he was to be compelled to co-operate
with the Commission’s investigation, given that the same
question
about an alleged fraudulent signature was the subject of
civil litigation.
[22]
This submission flies in the face of formidable
authority. In
Davis v Tip No &
others
1996 (1) SA 1152
(W) at 1159A,
the question arose as to whether a disciplinary inquiry should be
postponed pending the conclusion of criminal proceedings
relating to
the same conduct, Nugent J said:
‘
In
the present case the applicant may well be required to choose between
incriminating himself or losing his employment. If he loses
his
employment that is a consequence of the choice which he has made but
not a penalty for doing so. It will be the natural consequence
of
being found guilty of misconduct, and not a punishment to induce him
to speak. Hard as the choice may be, it is a legitimate
one which the
applicant can be called upon to make and does not amount to
compulsion. In my view his right to silence does not
shield him from
making that choice.’
[23]
This approach commends itself to the present case,
where the issue concerns a choice between pursuing a civil action and
a refusal
to comply with a lawful demand issued by the Commission.
This conclusion finds further support in the judgment of Navsa J in
Seapoint Computer Bureau (Pty) Ltd v
Mcloughlin and De Wet No
1997 (2) SA
636
(W) at 648A-C, wherein the learned judge was required to
deal with an application staying a civil action, pending the
determination
of a criminal case, both of which stemmed from the same
conduct, In his judgment Navsa J said:
‘
I
agree with Nugent J that the discretion the cases speak of, is not
one in the traditional sense. To me, it means that a
Court has
authority to stay proceedings in suitable cases. In order to arrive
at a decision whether to do so or not, a Court weighs
all the facts
and circumstances to determine whether prejudice might attach to the
accused person if the civil proceedings were
to continue. Once
potential for prejudice is established, the Court will stay
proceedings or find a formula for preventing prejudice,
such as, in
appropriate cases, ruling that information obtained should not be
subsequently disclosed, or barring the use of compelling
or coercive
measures.
’
[24]
Applying these dicta to the present dispute, the
appellants have shown no prejudice of a kind of which these judgments
had in mind,
in the event that the Commission proceeds with its
investigation of the complaint nor was appellants’ counsel able
to suggest
any prejudice which would justify the relief sought by
appellants. Simply put, when a party is required to appear in
different
fora, each of which has jurisdiction in respect of the
subject matter the manner in which that party deals with the process
in
each forum is a matter of choice, which holds particular
consequences attendant on the choice so made. Ironically it is the
appellants
who launched the litigation that they now contend should
be put on hold, pending the outcome of litigation elsewhere or
consolidated.
The significance of the
Commission’s mandate.
[25]
The crisp issue which confronts this court is the
role of the Commission under s 7
(b)
(iii)
read with s 185(2) of the Act, in terms of which it is required to
act independently and impartially and to perform its functions
without fear, favour or prejudice, to encourage transparency and high
standards of corporate governance. It is empowered to investigate
complaints, particularly those which are sufficiently serious, such
as the allegation of the fraudulent removal of a director in
contravention of the provisions of the Act. Decisions taken in this
regard by the Commission must be designed to ensure that it
performs
one of its core functions, namely the enforcement of proper
compliance with the administrative provisions of the Act.
In the
event that an investigation concludes that there is no merit to the
complaint that would be the end of the matter. In terms
of s
170(1)(c) of the Act, the commission may “issue a notice
of non- referral to the complainant, with a statement
advising the
complainant of any rights they may have under this Act to seek remedy
in court” Alternatively, the investigation
may indicate that
the non-compliance requires a referral to the Companies Tribunal or
the National Prosecuting Authority or that
proceeding may commence in
the name of the complainant.
[26]
Whatever the situation may be with regard to a
private action launched in the high court concerning contractual
disputes, the present
dispute which deals with the accuracy of
company records falls within the jurisdiction of the Commission,
namely to investigate
a complaint. This function, as indicated, goes
to the heart of its mandate, namely to ensure the proper
administration of the Act
and compliance with the principles of good
corporate governance.
[27]
One would expect if there was an order of
preference or priority in relation to the competing fora, the
statutory regulator would
enjoy preference .The share register is,
after all, a document in which the world at large should have
confidence. Thus the Commission
must be empowered to fulfil its
obligations to ensure accurate records of companies under its
jurisdiction, the fulfilment of which
is manifestly in the public
interest. It stands to reason that the Commission’s powers to
investigate a complaint concerning
the accuracy of a company record
must enjoy primacy over private litigation involving companies.
Argument concerning a review based
upon rationality/reasonableness
[28]
Much of the
argument raised, albeit very tentatively, by the appellants’
counsel with regard to whether there is a ground
to review the
decision of the Commission, turned on a recourse to the PAJA. This
argument turns on whether the investigation of
a complaint lodged
with the Commission constitutes administrative action. The definition
of administrative action in s 1 of the
PAJA has been described as
simultaneously cumbersome, convoluted and narrow in its scope.
But.
[1]
it does not stretch
to cover a referral to a statutory body of an investigative nature,
this is clear from the
Competition
Commission of SA v Telkom SA Ltd
&
others
[2009]
ZASCA 155
;
[2010] 2 All SA 431
(SCA) para 11 which decision followed,
and relied on,
Simelane
NO v Seven-Eleven Corporation SA (Pty) Ltd
&
another
2003
(3) SA 64
(SCA) para 17.
[29]
The alternative argument raised, albeit with
equally little enthusiasm by appellants’ counsel was based upon
the residual
concept of legality, namely whether the Commission was
entitled in law to investigate the complaint. That is an issue that I
have
already determined, namely, that the Commission received a
complaint which it was empowered to investigate in terms of s 169 of
the Act and which had not prescribed in terms of s 219 of the Act.
For this reason the jurisdictional facts required for the Commission
to initiate a complaint are clearly present.
[30]
There was some suggestion that there was
insufficient evidence which had been contained in the complaint for
the Commission to act
rationally. The principle that all public power
must be exercised within the confines of applicable law has been
applied through
the concept of legality. Its application is context
driven; that is the application of legality depends on the facts of
the particular
case, particularly to ensure that a parallel universe
of administrative law is not developed.
See C Hoexter
Administrative Law in South Africa
2 ed (2012) at 130-32.
Suffice to say that there is an obligation placed
upon the Commission to act rationally when it exercise its statutory
powers.
[31]
In the present case it is difficult to follow the
basis of the argument that the Commission did not act rationally,
particularly
since Singh has steadfastly refused to testify before
the Commission or provide further documentation which may be relevant
to
its inquiry.
[32]
In summary, it would be inappropriate at this
stage of the Commission’s investigation to prevent it from
performing its statutory
role and prevent it from investigating what
is a serious complaint. If the Commission makes a finding on the
basis of inadequate
evidence, then the possibility of a review of a
substantive decision based on questions of rationality or
reasonableness may come
into play. But, on the papers before this
court, no case has been made out to review its decision, whether in
terms of the PAJA
or legality.
Application to allow further
evidence on appeal
[33]
The first appellant applied to have further
evidence received by this court. This evidence relates to the amended
pleadings and
the facts set out therein, which were filed before the
high court in the action to which reference has been made earlier in
this
judgment.
[34]
This application was not opposed with any vigour
by the respondents but counsel for the third respondent correctly
noted that the
contents of the evidence on which the application was
based were totally irrelevant to whether the Commission was empowered
to
investigate the complaint. For this reason the respondent
contended that the irrelevancy thereof was significant in respect of
the award of costs.
[35]
The appeal to this court was devoid of any merit.
It appeared to be no more than an exercise in deferment; that is
litigation designed
to postpone a legitimate inquiry. This kind of
litigation should be discouraged. For this reason a punitive costs
order is clearly
justified. However, as the Commission did not adopt
a clear stance in opposing the appellants’ litigation strategy,
it is
only entitled to its costs which were incurred in its
opposition to the admission of further evidence by the appellants.
[36]
In the result,
1
The
appeal is dismissed with costs on an attorney and client scale.
2 The first and second respondents are
entitled to costs only in respect of the opposition to the
application to admit further evidence,
also on an attorney and client
scale.
_________________
D Davis
Acting Judge of Appeal
Appearances:
For
the Appellants: DE Loggerenberg SC
Instructed
by: Hogan Lovells (SA) Inc, Johannesburg
Honey
Attorneys, Bloemfontein
For
the First and Second Respondent: ALS Msimang
Instructed
by: Rudman & Associates Inc, Pretoria
Horn
& Van Rensburg Attorneys, Bloemfontein
For
the Third Respondent: HF Oosthuizen SC
Instructed
by: Veneziano Attorneys, Pretoria
Symington
D Kok, Bloemfontein
[1]
See
Greys
Marine Hout Bay (Pty) Ltd & others v Minister of Public Works
[2005] ZASCA 43
;
2005 (6) SA 313
(SCA) para 21