THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
Case No 35/04
REPORTABLE
In the matter between
CLUTCHCO (PTY) LTD APPELLANT
and
ANDREW CHRISTOPHER DAVIS RESPONDENT
Before: Mpati DP, Streicher, Nugent, van Heerden JJA and
Comrie AJA
Heard: 4 March 2005
Delivered: 24 March 2005
Summary: Information – access to – s 32 of Cons titution – Promotion of
Access to Information Act 2 of 2000, Part 3 – private company –
accounting records of first entry – whether shareho lder required
access thereto for exercise or protection of right.
_______________________________________________________
JUDGMENT
_______________________________________________________
COMRIE AJA
2
[1] Section 32 of the Constitution provides:
’32(1) Everyone has the right of access to –
(a) any information held by the state; and
(b) any information that is held by another person and that is
required for the exercise or protection of any rights.
(2) National legislation must be enacted to give effect to this right, and
may provide for reasonable measures to alleviate the administrative
and financial burden on the state.’
The national legislation contemplated by s 32(2) is the Promotion of
Access to Information Act 2 of 2000 (PAIA). Part 3 of that statute
regulates the rights of access to the records of private bodies. The
appellant, a private company, is such a body.
[2] The appellant is a small private company that houses a family
business. Seventy percent of the shares are held by the Davis Family
Trust which appears to be controlled by Frederick Davis-Armitage. He
is the sole director of the com pany. He has two sons: Gordon Davis,
and Andrew Davis, who is the present respondent. Gordon Davis was
appointed general manager and he attends to the administration of
the company and its business. In 1999 the responde nt joined the
company. He purchased 30% of the shareholding from his father (or
3
the trust) for R100 000; he was made a director; and he was
appointed workshop manager.
[3] Unfortunately, there was a family fall-out. In the result the
respondent was removed as a direc tor and removed from his post as
workshop manager. However, he retains his 30% shareholding.
There were some oral negotiations for the acquisition of those
shares, by the other shareholder , but agreement was not reached.
The respondent began to ask for information relating to the
appellant’s finances. He was furnished with audited financial
statements. He continued to press f or more information, in particular
for access to the company’s books of first accounting entry such as
cash books, ledgers, journals and invoice books. This was denied.
Eventually, in January 2003, the respondent submitted a formal
request in terms of s 53(1) of PAIA for access to the following
company records:
‘1.1 Volledige kasboeke vanaf Maart 1999 tot 21 Januarie 2003
1.2 Gedetaileerde algemene grootboek vanaf Maart 1999 tot
21 Januarie 2003
1.3 Gedetaileerde debiteure grootboek vanaf Maart 1999 tot 21 Januarie 2003
1.4 Gedetaileerde krediteure gr ootboek vanaf Maart 1999 tot
21 Januarie 2003
1.5 Volledige joernale ten opsigte v an aandeelhousers se leningsrekening’
4
[4] Part G of the request reads as follows:
‘G. Besonderhede van reg wat uitgeoefen of beskerm word
1. Dui aan watter reg ui tgeoefen of beskerm word: DIE REG OM DIE
WERKLIKE FINANSIËLE POSI SIE VAN DIE MAATSKAPPY
(CLUTCHCO) VAS TE STEL.
2. Verduidelik waarom die rekord wat versoek word, benodig word om
voormelde reg uit te oefen of te beskerm: DIT SAL MY IN STAAT STEL
OM DIE FINANSIËLE REKORDS TE REKONSTRUEER EN DAN DIE
WAARDE VAN MY 30% AANDELE TE BEPAAL.’
[5] On 29 January 2003 the company’s attorneys responded:
‘Regarding your client’s request for ce rtain records and information from my
client, it is my instructions that, in view of the fact that the other shareholder in
the Company is no longer interested in purchasing your client’s shares in the
Company, the question regarding the value thereof is no longer relevant, and the
information and records which are requested is therefore denied.’
[6] In late February 2003 the re spondent launched an application
in the Cape High Court for an order compelling the company to
furnish copies of the accounting re cords which I have listed in para 3
above. The application was oppos ed. The matter was heard by
Meer J who, subject to certain riders, granted the order as prayed
with costs. The judgment is repo rted at 2004 (1) SA 75 (C). The
5
learned Judge refused leave to appeal, but such leave was granted
on petition to this court. The appeal is unopposed.
[7] As appears from the reported judgment, both parties in their
affidavits adumbrated their res pective reasons for request and
refusal. The respondent claimed that as a shareholder he was
entitled to access to the records in question, especially as he
suspected (for reasons given) that not all the company’s transactions
were reflected in the financial statements. He cl aimed further that he
wished to reconstruct the financial records in order to determine the
company’s real income. This would enable him to determine the real
value of his 30% shareholding, which he proposed to sell.
[8] In his answering affidavit Mr Davis-Armitage stated that he
endeavoured to buy his son’s shares. In terms of clause 7.7.3 of the
articles of association the company’s auditors were asked to value
the shares. The auditors’ valuation was R100 065 for the company’s
entire shareholding. The deponent nonetheless offered to buy his son
out for R100 000 (being the initial investment) but the respondent was
not amenable thereto. Mr Davis-Armitage stated that the respondent
was out to destroy him personally . He admitted that in early 2002
there had been problems with the com pany’s credit facilities, but
stated that they were neither pe rmanent nor insurmountable. The
6
company was properly managed. He claimed that the respondent had
no entitlement in law to the financial records in question, and that as
regards the value of the shareholding , the respondent’s rights were
circumscribed by clause 7 of the articles. He added, in reference to
s 68 of PAIA, that:
‘the financial records sought by the App licant are highly relevant to the
Respondent’s financial viability, would enable the Applicant to have detailed
insight into the Respondent’s margins, customer lists, financial planning and
profit margins. Disclosure of this information would therefore be likely to cause
harm to the commercial and financial interests of the Respondent, more
particularly because the Applicant may use t hat information to set himself up in a
business in competition with the Respondent.’
[9] In reply the respondent pointed out that he had not given notice
in writing of his intention to sell his shares, as required by clause
7.7.1 of the articles. In such a notice he would be obliged to ‘state the
price he requires for his shares’. It would seem to follow – and
counsel for the appella nt appeared to accept – that the auditor’s
valuation is not binding upon him, and that he is presently not
restricted by articles 7.7.1 to 7.7.4 in the price which he may ask for
such shares. He stated that in order to determine the value of his
shareholding (and therefore, I assu me, his asking price), he needed
the information which he sought. He advanced criticisms of the
7
financial statements and of the auditors’ valuation and he added that,
in the light of what his father told him in 1999, his shareholding should
be worth considerably more than R300 000. Finally, he dealt with the
s 68 allegations in a manner which I need not set out because that
aspect is not advanced on appeal.
[10] In extending the fundamental right of access to information to
records held by private bodies, the Constitution and the statute have
taken a step unmatched in human ri ghts jurisprudence. We listened
to argument about the meaning of th e words ‘any rights’ in s 32(1)(b)
of the Constitution and in s 50(1)( a), read with s 9 (‘objects’), of the
statute, and on whether the und erlying right asserted by the
respondent fell within the ambit of that phrase. In the view which I
take of the matter, however, it is unnecessary to express any views
on those questions, and it would be wiser not to do so without the
benefit of opposing argument.
[11] The underlying right which the respondent asserts is his right,
as a shareholder, to value his sh areholding in order to fix an
appropriate selling price. I shall assume, without deciding, that that is
a right within the compass of Part 3 of the statute. Section 50(1)(a )
provides that a ‘requester’ must be given access to any ‘record’ of a
private body if –
8
‘(a) that record is required for the exercise or protection of any right.’
Such right of access is far from untrammelled, as appears from the
rest of Part 3. The expression ‘required for the exercise or protection
of any . . . rights’ is also to be found in item 23(2)( a) of Schedule 6 to
the Constitution, being the transitional arrangements in relation to the
right to information. It has been judicially considered. In Shabalala v
Attorney-General, Transvaal, and anot her; Gumede and others v
Attorney-General, Transvaal 1995 (1) SA 608 (T) Cl oete J said at
624C:
‘In addition, s 23 postulates that the information must be “required”. The word
“required” is capable of a number of meanings ranging from “desired” through
“necessary” to “indispensable” (see Khala v Minister of Safety and Security
(supra [1994 (3) SA 218 (W) and 1994 (2) SA CR 361 (W)] at 224G-225E (SA)
and 367d-368a (SACR)) where Myburgh J di scusses the meaning of the word
“required” and the context in which it should be interp reted in the Constitution).
To my mind, “required” in s 23 conveys an element of need: the information does
not have to be essential, but it certainl y has to be more than “useful” (the
meaning given by Marnewick AJ in Sefadi’s case supra [S v Sefadi 1995 (2) SA
SACR 667 (D)] at 671d) or “relevant” (the test postulated by Myburgh J in Khala’s
case supra at 238D-F (SA) and 381h-382a (SACR)) or simply “desired”.’
[12] In Nortje and another v Attorney-General, Cape 1995 (2) SA
460 (C), a full bench decision, at 474G, Marais J held that ‘required’
9
meant not ‘needs’, but ‘reasonab ly required’ in the particular
circumstances. That view appear s to have been shared by Cameron
J in Van Niekerk v Pretoria City Council 1997 (3) SA 839 (T) at 848G.
The same learned judge in Le Roux v Direkteur-Generaal van Handel
en Nywerheid 1997 (4) SA 174 (T) emphasised the need for an
applicant for information to ‘lay a proper foundation for why that
document is reasonably “required” for the exercise or protection of his
or her rights’ (the quotation is f rom the English headnote). In Cape
Metropolitan Council v Metro Inspection Services (Western Cape) CC
2001 (3) SA 1013 (SCA) the appellant purported to cancel a contract
on the ground that the first res pondent had committed a material
breach by submitting fraudulen t commission claims. It sought
disclosure of specified document s appertaining to the claims in
question. Streicher JA said at paras 28 and 29:
’[28] Information can only be required for the exercise or protection of a right if
it will be of assistance in the exercise or pr otection of the right. It follows that, in
order to make out a case for access to information in terms of s 32, an applicant
has to state what the right is that he wishes to exercise or protect, what the
information is which is required and how t hat information would assist him in
exercising or protecting that right.
[29] Although the first respondent did not expressly say so, it is clear that the
information required is the particulars of allegations that it claimed and received
10
commissions to which it was not entitled. All the documents referred to would
probably contain such information. The righ t which the first respondent wishes to
protect is its right to a good name and re putation. It denies that it submitted
fraudulent claims. In order to protect its good name and reputat ion it obviously
has to have particulars of the specific a llegations made against it. It follows that
the Court a quo correctly ordered that the first respondent be given access to the
aforesaid documents.’
[13] It seems to me that Streicher JA’s choice of the words
‘assistance’ and ‘assist’ in the above passage indicates that ‘required’
does not mean necessity, let alone dire necessity. I think that
reasonably required in the circum stances is about as precise a
formulation as can be achieved, provided that it is understood to
connote a substantial advantage or an element of need. It appears to
me, with respect, that this interpretation correctly reflects the intention
of the legislature in s 50(1)(a).
[14] I turn to the provisions of th e Companies Act 61 of 1973. First,
a spyglass look reveals that a member is entitled to rec eive copies of
the company’s annual financial statements (ss 286, 302, 309), and to
obtain copies of the minutes of the company’s general meetings
(ss 204, 206). A shareholder is not entit led to sight of the minutes of
directors’ and managers’ meetings maintained in terms of s 242 (Janit
v Motor Industry Fund Administrators (Pty) Ltd 1995 (4) SA 293 (A) at
11
303B-F). Nor, unless the articles of association otherwise provide, is
he or she entitled to inspect the accounting records of first entry
maintained by the company in terms of s 284. That right is reserved
to the directors (see s 284(3); Jacobs v Old Apostolic Church of
Africa 1992 (4) SA 172 (Tk) at 175B-C; Henochsberg on the
Companies Act (ed Meskin) Volume 1 at p 544). The appellant’s
articles of association (more partic ularly article 24) make no contrary
provision. Arguably – I express no views – there may be special
instances where a court could order some form of access in terms of
s 252 (member’s remedy in case of oppressive or unfairly prejudicial
conduct), but that section is not applicable here. The position is,
therefore, that the Companies Act does not afford the respondent the
right of inspection or right to information which he seeks. On the
assumption made above in para 11, seco nd sentence, it follows that
the respondent can invoke Part 3 of PAIA provided that the
circumstances warrant such a course.
[15] The Companies Act should, however, be viewed holistically. It
is replete with provisions designed to protect the interests of
shareholders. Of particular significance in this context are the
stringent duties placed on the directors in rel ation to the company’s
accounting records and financial statements. It is ultimately the
12
responsibility of the directors to take reasonable steps to secure
proper compliance with s 284, that is that a proper se t of books be
kept (s 284(4)). By s 286 it is the duty of the directors to cause the
financial statements to be made out. They must conform to generally
accepted accounting practice and ‘fairly present the state of affairs of
the company and its business as at the end of the financial year
concerned’ including the profit or loss for that year (s 286(3)). Failure
to comply is potentially an offence (ss 286(4); 287). See too regarding
falsifications, ss 249-251. Certain matters such as directors’ loans
and emoluments have to be disclo sed in the annual financial
statements (ss 295-7). The stat ements must be approved by the
directors and signed on their behal f (s 298). They must be
accompanied by the directors’ r eport (s 299) and the independent
auditor’s report (s 286(2)(d)).
[16] An entire chapter of the Companies Act (chap X) is devoted to
auditors. By s 281 the auditor has the right of access at all times to
the company’s accounting records , and the right to be heard at
general meetings. The auditor is ‘entitled to require from the directors
or officers of the company such information and explanations as he
thinks necessary for the performance of his duties’ (ibid). The auditor
reports to the members (s 282), and in respect of the annual financial
13
statements the report is either with or without qualification (s 301). An
auditor’s duties are extensive and onerous. See the commentary ad s
282 in Henochsberg , supra. With regard to t he audit of the annual
financial statements, these duties are set out in some detail in s 300.
Failure by an auditor properly to discharge these and other duties
may attract liability. See, most recently, Thoroughbred Breeders’
Association v Price Waterhouse 2001 (4) SA 551 (SCA) and cf ss
247, 248.
[17] The machinery established by legislation and the common law
for the protection of shareholders is in my opinion not lightly to be
disregarded. In enacting PAIA Parliament could not have intended
that the books of a company, great or small, should be thrown open
to members on a whiff of impropriet y or on the ground that relatively
minor errors or irregularities have occurred. A far more substantial
foundation would be required.
[18] In my view the respondent fail ed to lay such a foundation. His
complaints were not of a serious nature and no detailed criticism of
the auditors was advanced. In addition the respondent’s proposed
modus operandi was lacking in specificity. He claimed that access to
the books of first entry would enable him to ‘reconstruct’ them and
that the reconstructed version would enable him to place a proper
14
value on his shares. These broad a nd general assertions were not
supported by, for example, an affidavit by an experienced accountant
and auditor. I conclude that the respondent failed to show that the
access which he sought was required for the exercise or protection of
the rights which he asserted. The court a quo should accordingly
have dismissed the application with costs.
[19] As to the costs on appeal, I agree with Mr Manca that the
appeal raised, at least potentially, issues of novelty, difficulty and
fundamental import. In these circumstances I consider that the costs
of employing two counsel on appeal should be allowed.
[20] The appeal succeeds with cost s, including t he costs of two
counsel. The order granted by the court a quo is set aside, and
replaced by an order dismissing the application with costs.
_______________
R G COMRIE AJA
CONCUR:
MPATI DP
STREICHER JA
NUGENT JA
VAN HEERDEN JA