THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA
CASE NO: 429/2004
Reportable
In the matter between
GUMEDE, ROBERT WELLINGTON MATANA First Appellant
GIJIMA AFRIKA SMART
TECHNOLOGIES (PTY) LTD Second Appellant
GIJIMA INFO TECHNOLOGIES
AFRICA (PTY) LTD Third Appellant
and
SUBEL SC, ARNOLD N.O First Respondent
STERENBORG, JOHANNES Second Respondent
ALLIMPEX INTERNATIONAL LTD Third Respondent
ALLIMPEX UK LTD Fourth Respondent
Coram: Mpati DP, Scott, Brand, Lewis JJA and Cachalia AJA
Heard: 9 September 2005
Delivered: 27 September 2005
Summary : A ruling by a Commissioner in an enquiry under s 417 of the Co mpanies
Act 61 of 1973 that a person be required to produce documents relating to the affairs
of the co mpany under investigat ion is not lia ble to the be set asid e where th e
commissioner had reason to believe that the documents are relevant. Relevance will
prevail over the right to privacy where the docu ment may throw light o n the affairs of
the company. The decision of the Johannesburg High Court refusing to set aside th e
ruling on review upheld.
JUDGMENT
LEWIS JA
2
[1] The first respondent is a senior counsel at the Johannesburg
Bar. He was appointed by the Mast er of the High Court (formerly
Transvaal Provincial Division) to act as a commissioner in an
enquiry into the affairs of a company in liquidation, Acquired Card
Technologies (Pty) Ltd (ACT), convened under s 417, read with s
418, of the Companies Act 61 of 1973. In the course of the
enquiry, at the instance of a cr editor (the second respondent,
Johannes Sterenborg), the first respondent (‘the commissioner’)
ordered the first appellant, Robert Gumede, a director of the
second and third appellants, to produce certain documents that do
not belong to ACT but to the second and third appellants. The
appellants applied to the High Court, Johannesburg, to set aside
the ruling of the commissioner in which he refused to uphold an
objection to the summons. The application was refused (by Du Toit
AJ). The appeal against that decisi on lies with the leave of the
learned acting judge. The co mmissioner does not oppose the
appeal. (References in this judgment to ‘the respondents’ do not
include the commissioner.)
[2] The principal issue for det ermination on appeal is whether
the right asserted by the appel lants to confidentiality in the
3
documents in question entitles them to refuse to produce the
documents to the commissioner. Th e appellants thus rely on the
right to privacy, entrench ed in the Constitution, 1 whereas the
respondents argue that the relevan ce of the documents to the
affairs of ACT is such that rights of privacy must yield to the
interests of the creditors of ACT. Some background must be
traversed before these issues are considered.
Factual background
[3] Sterenborg and his wife were t he sole shareholders in ACT
until August 2000. Sterenborg had bu ilt up the business of ACT,
which was the manufacturing of ‘smart cards’ for use in
telephones, both by Telkom and by cellular telephone companies.
The other respondents are companies incorporated in England but
under the control of Sterenborg.
[4] In August 2000 Sterenborg and his wife sold 26 per cent of
the shares in ACT to the second appellant, Gijima Afrika Smart
Technologies (Pty) Ltd (GAST), of which Gumede is the executive
director, for the price of R30 160 000. The balance of the shares in
ACT were sold to GAST for so me R2m a year later, and GAST
1 Section 14.
4
took complete control of t he business, previously run by
Sterenborg, on 6 August 2001. Ster enborg and his wife sued for
payment of the purchase price f or the balance of the shares in
ACT shortly after the second sale, in August 2001.
[5] GAST appointed Mr G T K haas as the day-to-day manager
of ACT. Khaas was employed by the third respond ent, Gijima Info
Technologies Afrika (Pty) Ltd (G ITA) and was made a director of
GAST in August 2001 after GAST had taken control of ACT. The
appellants refer to themselves lo osely as the ‘Gijima Group’.
Gumede alleged in his founding affidavit that the Gijima Group had
discovered, on taking control of ACT, that the records of ACT were
in disarray, that no audit of ACT had been done and that ACT had
made a substantial loss in trading. Khaas had allegedly been
aware of these problems. He had, however, been suspended from
his duties as an employee of the Gijima Group in October 2002
and was subsequently dismissed for misconduct in December of
that year. The misconduct allege d was that Khaas had ‘infiltrated
and diverted confidential e-mails and other communications
amongst executives, employees, customers and partners of the
Gijima Group’. Khaas, alleged Gu mede, had been in contact with
Sterenborg and had passed information about ACT to him. An
5
Anton Pillar order was granted against Khaas, at the instance of
the Gijima Group, in May 2003 and numerous documents and
computer data were seized from him. I shall return to the material
that was retrieved pursuant to the order.
[6] In October 2001, shortly a fter GAST had taken control of
ACT, Brait Merchant Bank Ltd, which was owed some R12m by
ACT, applied for the winding up of ACT. The application was
opposed by the Gijima Group. A provisional winding-up order was
granted on 13 November 2001, and the order was made final
some three months later on 27 February 2002, despite the
opposition.
[7] In November 2002 Sterenborg and the other appellants
applied to the Master for an order instituting an enquiry into the
affairs of ACT in terms of s 417 of the Companies Act. The
commissioner, in terms of the order granted, was required to report
to the Master on the likelihood of the recovery of money or
property of ACT, and was empow ered to issue such subpoenas
as ‘he may in his discretion regard necessary for the proper
investigation into the affairs of the company’. Each person so
subpoenaed could be ordered to produce ‘all of the books,
6
documents, records and papers in their possession or custody or
in their power or under their control relating to the company or their
dealings with the company, its bu siness, books, dealings, property
and affairs and as specified in each subpoena’ (my emphasis).
The wording of the order echoes that of s 417(3) which provides
for the production of documents ‘relating to the company’.
[8] Sterenborg requested the commissioner to summon
Gumede to produce a schedule of documents that had previously
been seized from Khaas in terms of the Anton Pillar order.
Requests to the Gijima Group’s attorneys for sight of the
documents had previously been refused. The summons was
issued by the commissioner. The appellants objected to producing
the documents. The legal adviser to the Gijima Group , Mr van der
Walt, submitted an affidavit to the commissioner in which he stated
that the documents requested were not ‘as a whole relevant to the
affairs of ACT’ (my emphasis ). Sterenborg conceded, however,
that he did not know what was in the documents , and a schedule
listing fewer documents, but sp ecifying categories, was then
handed in as exhibit ‘Z’.
7
[9] The documents requested in terms of ‘Z’ are
communications with Telkom relating to a tender; a prequalification
notice and award by Telkom of th e tender for the manufacture and
supply of phone cards; and all documents relating to the
implementation of the award to GITA and GAST from October
2001.
[10] Sterenborg and Gumede by agreement submitted affidavits
in support of their contentions, t he former as to t he relevance of
the documents to ACT and the latt er as to their confidentiality.
Among the objections to the product ion of the documents made by
Gumede was that these had been illegally obtained by Khaas. The
objection was not pursued before us.
The commissioner’s ruling
[11] After hearing argument for the Gijima Group and the
respondents, the commissioner dism issed the objection, giving
reasons for his decision that the documents be produced. He
stated that s 417(3) is to be read in the context of s 417(1) which
provides that the Master (or a commissioner who is given the
same powers) may summon any person whom he deems capable
of giving information about t he affairs of the company under
8
investigation. Section 417(3), when it refers to documents ‘relating
to the company’, must thus include documents relevant to the
affairs of the company. He conti nued: ‘In my view it would be
sufficient if I believe on reasonable grounds that the documents in
‘Z’ are relevant to the trade, dealings, affairs or property of ACT.’
Those documents, he said, impacted ‘upon the enquiry whether an
opportunity was available to ACT in the form of a Telkom award,
and, if so, whether that opportunity was improperly diverted’.
[12] The ruling is attacked by th e appellants on the basis that the
commissioner erred in finding that the relevance of the documents
prevailed over the claim of privacy: where a constitutional right is
infringed, they argue, a commissi oner must exercise his or her
powers in such a way as to avoid any infringement of the right. At
the stage when a commissioner considers an objection to the
production of documents, he must fi nd ‘sufficient cause’ for the
production of the documents. The argument derives from a reading
of s 418(5)(b)(iii) which provides that any person summoned to
produce documents and who fails to do so will be guilty of an
offence unless he shows ‘sufficient cause’ for his failure. The
appellants concede, however, that if the documents are relevant to
the affairs of the company liqui dated then the right of privacy may
9
be limited and confidentiality may not be a ground for refusing to
produce the documents.
Relevance
[13] Sterenborg, in the affidavi t filed with the commissioner,
averred that the documents requested were relevant because he
had been informed by Khaas some time in Ja nuary 2003 that
Telkom had shortlisted ACT for the manufacture and supply of
phone cards; after the provisional liquidation of ACT Gumede had
instructed Khaas to approach Telkom to substitute GAST for ACT
as the successful bidder; Khaas had altered a document to change
the name of the supplier from AC T to ACT/Gijima; and the Telkom
award to GAST had been made on th e basis of the assessment by
Telkom of ACT’s manufacturing plant.
[14] The evidence thus establ ishes, argue the respondents, that
there may have been a diversion of a corporate opportunity from
ACT that could have impacted on it s financial position. ACT, rather
than the Gijima Group, should ha ve been given the contract by
Telkom. The appellants contend, howe ver, that these allegations
are hearsay: Khaas was available to give evidence at the enquiry
but was not called, deposing instead to an affidavit that did not
10
confirm the allegations made by Sterenborg. (Khaas’ affidavit
deals mainly with negotiations wi th cellular telephone companies.)
Thus, it was argued, relevance was not established and the
documents requested, which related to the affairs of the Gijima
Group rather than those of ACT, were confidential. Added to this is
the contention that the Gijima Group opposed the liquidation of
ACT vigorously and at great cost, but that when it failed it was
entitled to purchase assets of ACT and bid for the Telkom tender.
[15] However, the respondents argue that the evidence of Khaas
was not necessary to establish that there was a reasonable
possibility that a corporate oppo rtunity had been diverted from
ACT. There was sufficient information, apart from what Khaas had
allegedly said, that led to the in ference that the Telkom contract
would, but for the intervention of the representatives of the Gijima
Group, have been awarded to ACT. This information was available
to the commissioner before he iss ued the summons. Much of it
appears, ironically, from the Gum ede affidavit that served before
the commissioner, and is annexed to his founding affidavit in the
application to set aside the summons.
11
[16] The information of signif icance includes the following.
Telkom had published a pre-qualific ation notice for the purpose of
identifying potential manufacturers of smart cards in South Africa.
ACT had responded to the notice by sending information to
Telkom enabling it to evaluate ACT. Telkom sent a letter to ACT
on 7 October 2001 advising that its representatives would visit
ACT’s manufacturing plant on 14 November. Khaas had
acknowledged the letter on behalf of ACT, and had made
arrangements for the visit. Telkom visited the ACT plant on 19
November. In March 2002, accordi ng to Gumede, GITA submitted
a tender for the supply of smart cards to Telkom. Telkom awarded
the tender to GAST in July 2002. There was nothing to suggest
that either of GAST or GITA had been evaluated by Telkom, and
indeed the Gijima group acquired the machinery required for the
manufacture of the cards from ACT. It could not have
manufactured the cards without the ACT machinery.
[17] All of these facts were not contested before the
commissioner. There was, in my view, every reason for him to infer
that ACT might have been aw arded the tender had the Gijima
Group not intervened. It follows that the commissioner was
entitled, probably obliged, to request any document that supported
12
the inference that there had been a diversion of a corporate
opportunity from the company unde r investigation. There was no
need for Sterenborg, as a creditor, to prove to the commissioner
his allegation of the diversion: he had only to show, as the
commissioner ruled, that there were reasonable grounds for
believing that the documents were relevant. In my view the
documents, although the property of the Gijima Group, were
clearly relevant to the questio n whether a c orporate opportunity
had been diverted from ACT, and th us related to the affairs and
dealings of ACT.
Confidentiality and relevance
[18] In Bernstein & others v Bester & others NNO 2 the
Constitutional Court confirmed that ss 417 and 418 of the
Companies Act do not per se infringe the right to privacy, or imperil
the confidentiality of documents that the person claiming privacy
seeks to protect. The sect ions can be read down, where
necessary, so as to ensure that constitutionally entrenched rights
are not unjustifiably infringed. In dealing with whether the forced
production of documents amounted to an unwarranted invasion of
2 1996 (2) SA 751 (CC).
13
privacy, Ackermann J, in the judgment of the majority of the court,
said:3
‘The present attack is in the vaguest terms, namely an assertion that the
privacy of witnesses is invaded when they are forced to disclose their books
and documents that they want to keep confidential an d to reveal information
that they want to keep to themselves. No real information is furnished as to
the nature or content of the documents or information in respect whereof the
claim to privacy is being made. In the present context a claim to privacy can
surely only be founded on the content of the information which the examinee
is being forced to disclose, not on his des ire not to disclose it. It is simply not
possible to pronounce on the issue of privacy unless the content of the
document or information in respect wher eof privacy is claimed is disclosed.
Under these circumstances it would be most inadvisable, if not in fact
impossible, to give a deta iled exposition on the constitutional right to privacy
at s 417 proceedings, quite apart from the fact t hat I am of the view that this
is, in the first instance, an exercise wh ich the Supreme Courts ought to work
out on a case to case basis. It is sufficient for the disposition of this part of the
case to repeat that there is no prov ision in s 417 or s 418 which, when
properly construed in the light of s 35( 2) and (3) of the Constitution, is
inconsistent with such right.’
[19] In my view, the bare assert ion made by the appellants that
the documents were confidential does not entitle them to withhold
3 Para 64, footnotes omitted. The judgment deals with the rights entrenched under the interim
Constitution but the principles remain applicable.
14
them. And the refusal to allow the commissioner sight of the
documents requested so that he could consider whether they were
indeed relevant did not assist their case as to the invasion of the
Gijima Group’s privacy. I do not acce pt the appellants’ contention
that, once a constitutional right is in issue, the person seeking to
infringe it must show sufficient cause why that should be done.
The proper approach is to determine whether there is reason to
believe that the documents requested will throw light on the affairs
of the company before the winding-up. If so, their relevance will in
general outweigh the right to privacy.
[20] The judgment in Bernstein is instructive on the justifiable
limitation of the right to privacy, albeit that it dealt with the limitation
provision under the interim Constitution.4
Ackermann J said:5
‘Even if it could be estab lished that, in certain circumstances, and despite a
proper construction of ss 417 and 418 of the Act and proper control of their
implementation by the Supreme Court, the production of private possessions
or private communications could be com pelled under s 417(3) or s 418(2) of
the Act, and in particular that they were relevant to the enquiry and the
achievement of its objects, in the sens e that I have outlined in this judgment,
4 Section 33(1).
5 Para 90, footnotes omitted.
15
such production would clearly be justif iable in terms of s 33 of the
Constitution. In South Africa, the right not to be subjected to seizure of private
possessions forms part of every person's right to personal privacy. The right
against seizure must therefore be interpreted in the light of the general right to
personal privacy. So much is also clear from the qualification of the right, ie
the right against seizure of private possessions. I have repeatedly
emphasised that privacy concerns are on ly remotely implicated through the
use of the enquiry. The public's interest in asce rtaining the truth surrounding
the collapse of the company, the liquidato r's interest in a speedy and effective
liquidation of the company and the cr editors' and contributors' financial
interests in the recovery of company assets must be weighed against this,
peripheral, infringement of the right not to be subjec ted to seizure of private
possessions. Seen in this light, I have no doubt that ss 417( 3) and 418(2)
constitute a legitimate limitation of the right to personal privacy in terms of s
33 of the Constitution.’ (My emphasis.)
[21] Bearing in mind the purpose of a s 417 enquiry 6 – the
acquisition of information, and the recovery of assets for the
benefit of creditors – the right to obtain relevant evidence as to the
plight of the insolvent company mu st as a rule prevail over the
6 See Bernstein above para 16 and Ferreira v Levin NO: Vryenhoek & others v Powell NO
1996 (1) SA 984 (CC) paras 122-124.
16
confidentiality of documents. In Re Rolls Razor Ltd (2) 7 Megarry J
said of the equivalent provisions in England:
‘The process . . . is needed because of the difficulty in which the liquidator in
an insolvent company is necessarily plac ed. He usually comes as a stranger
to the affairs of the company which ha s sunk to its financial doom. In that
process, it may well be that some of those concerned in the management of
the company, and others as well, have been guilty of some misconduct or
impropriety which is of relevance to the liquidation. Even those who are wholly
innocent of any wrongdoing may have motives for concealing what was done.
. . . Accordingly, the legislature has pr ovided this extraordinary process so as
to enable the requisite information to be obtained.’8
I agree with Du Toit AJ in the court below that ‘the interests in the
proper administration of the winding-up and the protection of
creditors . . . outweigh any claim to privacy in the circumstances of
this particular case’.
Prejudice to the Gijima Group
[22] The appellants argue also that the production of the
documents would prejudice the Gijima Group’s contract with
Telkom. This cannot be so. The tendering process was public:
Telkom is a parastatal body. The contract had already been
7 [1970] 1 Ch 576 at 591-592, cited in Bernstein para 17 and Ferreira para 124. See also M S
Blackman, R D Jooste and G K Everingham Commentary on the Companies Act vol 2 14-446
ff.
8 See also Meskin Henochsberg on the Companies Act Vol 1, 889.
17
awarded to a company that owne d ACT. The argument as to
prejudice to the Gijima Group thus has no merit.
Ulterior motive
[23] After the Commissioner ha d made his ruling, Sterenborg’s
attorneys disclosed that he and his wife were considering changing
the action previously instituted by them against the appellants so
as to claim the setting aside of the second sale of shares in ACT
rather than payment of the balance of the purchase price. They
asked the appellants’ attorneys to agree to a postponement so that
they could examine the docum ents required to be produced in
terms of the ruling in order to ma ke their election. The appellants
argue that the letter reveals the rea l, ulterior motive for requesting
the documents listed in ‘Z’: to assist Sterenborg and his wife in the
conduct of litigation against them. The court a quo, it is argued,
should have taken this ulterior motive into account when
considering the ruling made by th e commissioner: it had the power
to do so by virtue of the princ iples enunciated by Innes CJ in
Johannesburg Consolidated Invest ment Co v Johannesburg Town
Council.
9 Innes CJ distinguished between three classes of review:
one by summons, where the plaintiff seeks to set aside a decision
9 1903 TS 111.
18
vitiated by serious irregularity; the second by notice of motion,
where a public body is guilty of serious irregularity or illegality in
the performance of a duty; and the third where a statute confers a
power of review on the court. In the third kind of review, the court
may ‘enter upon and decide the matter de novo . . . [It] has the
functions of a Court of appeal wi th the additional privileges of
being able, after setting aside the de cision arrived at . . . to deal
with the matter upon fresh evidence . . . ’.10
[24] The argument that fresh evi dence as to motive is a ground of
review is in my view without merit. The Commissioner made the
ruling on the basis that there were reasonable grounds for
believing that there had been the diversion of a corporate
opportunity from ACT. That in itse lf is a basis for examining all
material relevant to the diversion. It is quite irrelevant that the
same material might also constitute evidence for a different action
against the purchaser, GAST. A ccordingly there is no need to
consider whether the ruling was reviewable pursuant to statutory
provisions as envisaged by Innes CJ in Johannesburg
Consolidated Investments.
10 At 117. See also the discussion of this third class of review in Nel & another NNO v The
Master (ABSA Bank Ltd & others intervening) 2005 (1) SA 276 (SCA) paras 22 and 23.
19
[25] The court a quo properly cons idered that it was engaging in
the review of the decision of the commissioner as a function of its
inherent jurisdiction to in tervene where there has been an
improper exercise of a discreti on (the second class of review
referred to in Johannesburg Consolidated Investments ). This has
been the approach of the courts to decisions made by a Master or
a commissioner under the Companies Act for decades,11 and there
is no reason to change the basis in this case.12
[26] In my view, therefore, the commissioner’s decision to issue
the summons for the production of the documents listed in ‘Z’ was
not irregular and the court a quo was correct in refusing to set it
aside, or to grant an order declaring that the appellants were not
obliged to produce the documents.
11 See for example Receiver of Revenue, Port Elizabeth v Jeeva 1996 (2) SA 573 (A) at
579H-J and Leech v Farber NO 2000 (2) SA 444 (W).
12 The appellants also contended that the Commissioner’s decision was reviewable as
administrative action in terms of ss 1(b) and 6 of the Promotion of Administrative Justice Act 3
of 2000. The argument was not pursued before us, however, and it is not necessary to decide
the matter.
20
[27] The appeal is dismissed with costs, including those
occasioned by the employment of two counsel.
_____________
C H Lewis
Judge of Appeal
Concur:
Mpati DP
Scott JA
Brand JA
Cachalia AJA