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[2019] ZASCA 125
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Mosalakae and Others v Matlala and Others (267/2018) [2019] ZASCA 125 (27 September 2019)
THE SUPREME COURT OF
APPEAL OF SOUTH AFRICA
JUDGMENT
In
the matter between:
Non-Reportable
Case
no: 267/2018
NEO DOREEN
MOSALAKAE
FIRST APPELLANT
KHOLOFELO
MOSALA
SECOND
APPELLANT
SEDIMOZA
(PTY)
LTD
THIRD APPELLANT
NTOMBISI
CC
FOURTH APPELLANT
GUNDO
INVESTMENTS (PTY)
LTD
FIFTH APPELLANT
and
NOMSA
MATLALA
FIRST RESPONDENT
ESTER
MAPHANGWE
SECOND RESPONDENT
MARIAM MOTSHABI
SEKATI
THIRD RESPONDENT
SUZAN
NELUHENI
FOURTH RESPONDENT
TSHIMBILUNI INVESTMENT
HOLDINGS (PTY) LTD
FIFTH RESPONDENT
PEMBALANI INVESTMENT
HOLDINGS (PTY) LTD
SIXTH RESPONDENT
KOTULO-NALA
CC
SEVENTH RESPONDENT
ISENZO ESHILE CONTRACTORS
CC
EIGHTH RESPONDENT
BINDI
J-ZEE TRADING ENTERPRISES CC
NINTH RESPONDENT
Neutral
citation:
Mosalakae & others v Matlala & Others
(267/2018)
[2019] ZASCA 125
(27 September 2019)
Coram:
Navsa, Plasket and Dlodlo JJA and Tsoka and Weiner AJJA
Heard:
22 August 2019
Delivered:
27 September 2019
Summary:
Section 115 of the Companies Act 1973 – respondents
applying to rectify the share register of a company to reflect the
fifth
to ninth respondents and the third and fourth appellants as
equal shareholders – third and fourth appellants relying on an
agreement in terms of which their shareholding was increased –
whether the terms of such agreement were proved.
ORDER
On
appeal from
: Gauteng Division of the High Court Pretoria, De
Klerk AJ, (sitting as a court of first instance):
The
appeal is dismissed with costs including the costs occasioned by the
employment of two counsel.
JUDGMENT
Weiner
AJA (Navsa, Plasket and Dlodlo JJA and Tsoka AJA concurring):
[1]
This appeal concerns the shareholding in the fifth appellant, Gundo
Investments (Pty) Ltd (Gundo). The fifth to ninth respondents
(hereinafter referred to as Tshimbiluni, Pembelani, Kotulo-Nala,
Isenzo Eshile and Bindi J-Zee or ‘the respondent entities’)
applied in terms of s 115 of the Companies Act 61 of 1973 (the Act)
for an order that they, together with the third and fourth
appellants
(hereinafter referred to as Sedimoza and Ntombisi or ‘the
appellant entities’), were equal shareholders
in Gundo. The
Gauteng Division of the High Court, Pretoria (De Klerk AJ), upheld
the application. This appeal is with the leave
of the court a quo.
[2]
In 1997, groups of black women belonging to societies and clubs were
offered the opportunity to become involved in certain Black
Economic
Empowerment (BEE) ventures. The women were advised to register each
group as a company or close corporation. These entities
would hold
shares in a BEE company which would act as the vehicle for such
business ventures. At a meeting held in June 1997, approximately
28
groups and 225 individuals were in attendance. Each group was
required to pay a membership fee of R2 000, which would entitle
them
to one share each.
[3]
On 25 August 1997, six directors were appointed in order to
facilitate the registration of the proposed BEE company. The first
directors were the first and second appellants (Ms Mosalakae and Ms
Mosala) and the first to fourth respondents (Ms Matlala, Ms
Maphangwe, Ms Sekati and Ms Neluheni). A shelf company, New Shelf
271(Pty) Ltd was acquired as the envisaged BEE company. On 8
December
1997, the name was changed to Gundo.
[4]
About 15 women’s groups initially bought into the initiative.
As Gundo failed to secure any investments over the next
five years,
all but the seven entities involved in this litigation, withdrew. It
is common cause that the initial R2 000 investment
was paid by these
seven entities. The intention was that each entity would hold an
equal shareholding in the BEE company.
[5]
One of the opportunities which arose was for Gundo to acquire an
indirect shareholding in Phumelela Gaming and Leisure Ltd
(Phumelela), through a company to be formed as the vehicle for its
participation in Phumelela. The company which was formed was
Dihla
Investments (Pty) Ltd (Dihla). Phumelela’s shares would be
listed on the Johannesburg Stock Exchange (JSE). Gundo was
selected
by Phumelela as one of the companies which would have a shareholding
in Dihla, which would consist of several BEE entities
(including
Gundo), that had been granted this opportunity. It was proposed that
7,5% of the issued share capital of Phumelela would
be offered to the
shareholders of Dihla on the basis that each of the shareholders
would participate in equal proportions in that
7,5% shareholding.
Dihla would hold the shareholding on behalf of such shareholders. A
representative of each member company would
serve on the board of
directors of Dihla. Ms Matlala was nominated as Gundo's
representative.
[6]
On 15 May 2002, Dihla informed its members that Phumelela would be
listed on the JSE on 7 June 2002 at a price of R0,50 per
share. In
order to invest in Phumelela through Dihla, each of the shareholders
in Dihla was required to pay a total amount of R525
000 for the
shares. An amount equal to 10% of the value of the shares allocated,
in the sum of R52 500, was to be paid as a deposit
by 25 October
2002. The balance of the amount owing was to be financed by the
dividends declared by Phumelela. Gundo was also informed
that a
company styled Nafcoc Investment Holding Co Ltd (Nafhold) had offered
a ‘share swap’ to all members of Dihla
in terms of which
Nafhold would raise the sum required to pay the deposit on certain
terms and conditions.
[7]
On 5 June 2002, at a meeting of the board of directors of Gundo, it
was recorded that certain of the directors had resigned.
The
remaining directors were Ms Matlala, Ms Mosalakae, Ms Mosala and Ms
Makutu. It was resolved that Gundo would not accept the
share swap,
but would raise the deposit itself. Ms Matlala was mandated by the
board to inform Dihla of such decision, which she
did in a letter
dated 7 June 2002. In subsequent correspondence, Ms Matlala informed
Dihla that the deposit was required six months
after the effective
date i.e by 15 November 2002. This seems to have been accepted.
[8]
The raising of the funds, however, became problematic. On 22 August
2002, Ms Matlala informed the board of Dihla that she wished
to
reconsider Gundo’s position in regard to the share swap offer
from Nafhold. She had accordingly withdrawn the letter dated
7 June
2002, in which the offer was declined.
[9]
The appellants were apparently unaware of this decision. On 23
September 2002 a memorandum (the September memorandum) from Ms
Mosalakae was transmitted by Mr Don Qwelane (Mr Qwelane) to the
members of Gundo, giving notice of a meeting scheduled for 5 October
2002. It is common cause that Ms Mosalakae appointed Mr Qwelane, an
attorney, without the knowledge or consent of the directors
representing the respondent entities, to assist, inter alia, with
administrative duties. The September memorandum reads as follows:
‘
Re:
Gundo Investments (Pty) Ltd (“Gundo”) payment of
outstanding money to Dihla Investments (Pty) Ltd
1
. . . .
2
Gundo members are aware that Gundo have to pay approximately R60 000
. . . on or before 15 November 2002 to Dihla Investments
The amount
constitutes 10% of the value of Phumelela shares as at the date of
listing of Phumelela.
3
A meeting will therefore take place on the 5 (Saturday) October 2002
to resolve the above issue. . . .
4
Please confirm your attendance prior to 30 September 2002.’
[10]
The only members of Gundo who attended the meeting were Ms Mosalakae,
Ms Mosala and Dr Seoka. All three of them were members
of Sedimoza.
Dr Seoka was also a member of Ntombisi. On 9 October 2002, a
memorandum (the October memorandum) was sent to members
by Mr
Qwelane. On Ms Mosalakae’s instructions, Mr Qwelane had
formulated what was envisaged as a ‘rights offer’,
which
was set out in the memorandum. It recorded that, at the meeting of 5
October 2002, it was resolved that:
‘
3.1
the amount of R60 000 was required on or before 15 November 2002
being 10% of the value of Gundo’s shares in Phumelela
at the
date of listing of Phumelela plus Dihla’s administration costs
be raised by issuing of new shares in Gundo, that will
be offered to
present shareholders;
3.2
that such offer be sent to each shareholder stating that the offer is
for a specific period of 2 weeks from date of this letter;
3.3
that there should be no limit to the amount of shares a
group/shareholder can subscribe to, but that allocation will be as
follows:
3.3.1
if fully subscribed, each offeree will be allocated full quota of
shares applied for;
3.3.2
if oversubscribed, the amount will be reduced proportionally such
that each offeree is allocated a proportional amount of
shares and
any extra amount will be refunded; and
3.3.3
if any shares remain unsubscribed, these will be offered to any
shareholder(s) able to take them up.
3.4
that all
the other groups will still remain shareholders of Gundo based on
their subscription of R2 500 paid by each group in 1997.
It should
however be noted that this will change the ultimate shareholding in
Gundo.’
[1]
[11]
The appellants relied upon the September memorandum to demonstrate
that notice of the meeting to be held on 5 October 2002
was given to
shareholders and that the respondents did not respond. There was much
argument put up by the respondents on the way
in which notices were
communicated and whether they were communicated to all shareholders.
There was also some dispute as to whether
a special resolution was
required to alter Gundo’s shareholding. In view, of the
decision to which I have come, I will, for
the purposes of this
judgment assume, as the court a quo did, that proper notices were
sent to all concerned and that all statutory
requirements were
complied with.
[12]
In evidence, Ms Mosalakae stated that, on the basis of ‘the
understanding’ reached at the 5 October 2002 meeting,
she and
Ms Silimela resolved to raise the R52 500 and pay it to Dihla before
the closing date. In her answering affidavit, however,
she referred
to a ‘resolution’ by her and Ms Silimela. However, Ms
Silimela was not a director of Gundo at the time.
There appear to
have been no shareholders’ meetings between 5 October 2002 and
12 November 2002, when the cheques were presented.
There are no
minutes of the meeting of 5 October 2002 and Ms Mosalakae was unable
to clarify in evidence exactly what was discussed.
[13]
On 22 October 2002, Ms Silimela on behalf of Ntombisi informed Mr
Qwelane that it would take up shares to the value of R30
000. No
indication was given as to how many shares it would take up for such
sum, as the share price was not indicated either in
the October
memorandum or in the alleged acceptance.
[14]
On 25 October 2002, Dihla, ostensibly through Nafhold, made payment
of the deposit to Phumelela. On 12 November 2002, Ms Mosalakae
and Ms
Silimela, representing Sedimoza and Ntombisi, apparently being
unaware of such payment, attended at the offices of Dihla,
to each
present a cheque for the amount of R26 250. They had prepared a
letter on Gundo’s letterhead, which stated that Ntombisi
and
Sedimoza, being shareholders of Gundo, had raised an amount of R52
500 as payment for their shares in Phumelela.
[15]
On the same day, Ms Mosalakae addressed a memorandum (the November
memorandum), to Ms Makutu, Ms Mokoena, Ms Matlala, Ms Maphangwe,
Ms
Silimela and Ms Mosala. They represented Bokang (which later withdrew
as a shareholder of Gundo), Women in the Liquor Trade
(which changed
its name to Isenzo Eshile), Tshimbiluni, Phembalani, Ntombisi and
Sedimoza respectively. The memorandum stated that
the R52 500 deposit
was paid to Dihla and that ‘[t]he shareholding within Gundo
will as a result change, in that Sedimoza
and Ntombisi’s
shareholding will increase. All the other groups who had not been in
a position to raise the R52 000, would
still remain shareholders of
Gundo, based on their subscriptions of R2 500 paid by each group in
1997.’
[16]
The secretary of Dihla, Mr Leonard Makhanda (Mr Makhanda), did not
accept the cheques as Sedimoza and Ntombisi were not shareholders
in
Dihla. He informed Ms Matlala of this and she agreed that the payment
should not be accepted as being paid on behalf of Gundo.
In any
event, payment had already been made by Nafhold on 25 October 2002.
The cheques were not deposited. According to Mr Makhanda,
he informed
Ms Mosalakae of this.
[17]
On 14 November 2002, at the instance of the appellants, notice of an
emergency shareholders meeting to be held on 16 November
2002, was
sent by Mr Qwelane to Gundo’s members. Various resolutions were
proposed at this meeting. Firstly, Dr Seoka proposed
that the
shareholding in Gundo be adjusted in proportion to the financial
contribution made by each shareholder, such that Ntombisi
and
Sedimoza hold 282,5 shares each and the remaining groups hold the
initial 20 shares each, based on the initial contribution.
Secondly,
it was proposed that the minority shareholders who did not take up
the initial share offer be given a further opportunity
to raise their
shareholding in Gundo, if they so wished, by further allotment of
shares in Gundo at R4.14 per Gundo share, based
upon the value of
Phumelela’s shares at the close of the JSE on 15 November 2002.
The payments had to be made by no later
than 31 March 2003. A further
readjustment of shareholding in Gundo would then be effected.
[18]
There appears to be no further explanation at the meeting as to what
the basis of this offer was. There was also no disclosure
as to
whether the price of the further shares, purportedly allocated to
Sedimoza and Ntombisi on 12 November 2002, was based upon
the value
of Phumelela’s shares on the JSE on that date. It is common
cause that the closing date for the share offer was
15 November 2002,
a day before the proposal was made. In addition, the time for the
payment of the deposit to Dihla had come and
gone. How this offer was
thus to be implemented is not explained. None of the resolutions were
passed. It was recorded that the
next meeting of shareholders would
be held on 30 November 2002.
[19]
At the 30 November 2002 meeting, it was recorded that the minutes of
the previous meeting should be amended to reflect that
Mr Qwelane
‘was not appointed as a lawyer but by Sedimoza to
facilitate/co-ordinate communication with Gundo shareholders.’
It was further recorded that Nafhold had paid the required deposit on
behalf of the members of Gundo. Dihla had not deposited the
cheques
tendered by Sedimoza and Ntombisi. The next meeting was to take place
on 22 February 2003.
[20]
By this time, it had become apparent that there were two opposing
factions within Gundo, the appellants on the one hand and
the
respondents on the other. Sedimoza and Ntombisi consulted attorneys
to deal with the impasse. On 18 December 2002, Moss Cohen
Attorneys
(Moss Cohen) addressed a letter on behalf of Sedimoza and Ntombisi to
Dihla enquiring why the cheques had not been deposited.
In reply,
Dihla stated that, on 21 October 2002 Ms Matlala had agreed, on
behalf of Gundo, to accept Nafhold’s offer to make
payment for
the shares.
[21]
On 22 February 2003, a further meeting of members of Gundo was held.
It was proposed that Sedimoza and Ntombisi should be reimbursed
by
all other members of Gundo and that a dispute would be declared if
the proposal was not accepted. This resolution also failed
to pass.
[22]
In about September 2003, Nafhold was putting pressure on Dihla to
repay the loan. On 3 October 2003, Mr Makhanda and Sedimoza
and
Ntombisi arranged a meeting and confirmed that Dihla would accept the
cheques previously tendered, which cheques were stale
and were to be
replaced. A direct deposit was made by Sedimoza and Ntombisi into
Dihla’s bank account on 15 October 2003.
In November 2006,
Dihla was liquidated. Over the next few years the animosity between
the parties escalated.
[23]
A round table meeting was held on 22 May 2007 between the two
factions and their attorneys. Moss Cohen represented the appellants
and Edelstein-Bosman represented the respondents. On 28 May 2007, it
was proposed by Moss Cohen in a letter to Edelstein-Bosman
that steps
had to be taken to determine exactly who the shareholders of Gundo
were and what their respective entitlements were.
It was reiterated
that the shareholders should be the BBE entities and not the
individuals representing them. It was accepted that
the appellant
entities together with the respondent entities were shareholders
based upon the initial R 2 000 investment. What
remained in dispute
was the respondent entities’ asserted status as equal
shareholders, as opposed to the claim by the appellant
entities of
their entitlement to an increased shareholding.
[24]
In an apparent attempt to resolve this dispute, Ms Mosalakae, despite
being fully aware that the seven entities had paid their
R2 000
contribution and were entitled to be regarded as shareholders,
decided to cause a notice to be published in
The Sowetan
on 22
November 2007, calling upon all shareholders of Gundo to furnish
proof of their shareholding in order to ‘regularise
Gundo’s
shareholding’. Her evidence that this was necessary because
‘all contact was lost’ can only be
described as
untruthful. Not only was she still in possession of the contact
details of all the respondents, which she had previously
relied upon
to communicate with them, but attorneys were involved on both sides.
Her evidence that she cannot recall if Moss Cohen
was still acting
for the appellants offers no excuse. A simple phone call to them
and/or to the respondents’ attorneys to
find a proper means of
communication was all that was needed. Why the notice in
The
Sowetan
was necessary is not adequately explained and lends
credence to the respondents’ contention that from 2002, the
appellants
had embarked upon a scheme to ‘hi-jack’ Gundo
and sought to legitimise their increased shareholding.
[25]
Only Sedimoza and Ntombisi responded to
The Sowetan
notice. Ms
Mosalakae approached an auditor’s firm to ‘regularise the
shareholding’ in Gundo. At that stage, the
original
shareholder, Mr Lederman, was still the only registered shareholder
of Gundo. The share register had never been updated.
It is common
cause that the entries in the share register were backdated by Ms
Mosalakae in December 2007. The share register presently
reflects
that Lederman transferred his one share into Ms Mosalakae’s
name on 25 August 1997. She, in turn, transferred this
share to
Sedimoza on the same day. On 12 November 2002, a further 99 shares
were issued to Sedimoza which transferred 50 shares
to Ntombisi. The
share register reflected that Sedimoza and Ntombisi each held 50% of
the shares. The directors who were then nominated
represented only
Sedimoza and Ntombisi.
[26]
Ms Mosalakae testified that this ‘regularisation’ was on
the advice of one Mariette, who was employed by the auditor,
Johann
Swart. She also stated that she was not aware that the CM42 was
backdated, but could not explain the date that appeared
with her
signature. What is clear is that Ms Mosalakae knew that the
respondent entities were entitled to shares based upon their
contribution of R2 000. This had never previously been in dispute.
Yet, she would have this court believe that she blindly accepted
Mariette’s advice that those contributions could be ignored.
Both legally and morally, this was wrong. This version is also
contrary to the evidence in Ms Mosalakae’s answering affidavit,
in which she failed to mention that Mariette gave her this
advice. If
this advice was given, and the R2 000 contributions were not to be
taken into account, one wonders how Ms Mosalakae
and/or Sedimoza
could be reflected as the shareholders in 1997.
[27]
The
respondents submitted that the appellants’ failure to call
Mariette to confirm this advice is not explained by the appellants.
Having regard to the different versions proffered by the appellants,
Mariette would have been a material witness in regard to the
‘regularisation process’. The respondents contended that
a negative inference should be drawn in this regard.
[2]
[28]
On 31 March 2008, the representatives of the respondent entities
removed the representatives of the appellant entities as directors
and replaced them with Ms Matlala, Ms Maphangwe, Ms Sekati and Ms
Neluheni.
[29]
On 7 August 2008, at a shareholder’s meeting, initiated by the
respondent entities, it was resolved unanimously, by both
the
appellant and respondent entities, that Gundo’s shareholding
should be corrected and that ownership should be registered
in the
names of the seven entities. However, at a later meeting on 19
November 2008, also initiated by the respondent entities,
Dr Seoka
stated that the appellants did not recognise the present meeting, nor
the meeting of 7 November 2008. Furthermore, they
did not recognise
any of the respondents as shareholders or directors. The
representatives of Sedimoza and Ntombisi then left the
meeting.
[30]
Sedimoza and Ntombisi had held a meeting on the previous day and had
appointed new directors of Gundo. On 20 November 2008,
in a letter
from Edward Nathan Sonnenberg Attorneys (ENS), acting for the
appellants, the respondents were informed that Sedimoza
and Ntombisi
each held 50% of the shareholding in Gundo.
[31]
In August 2010, the respondents launched an application in terms of s
115 of the Companies Act 61 of 1973 (the 1973 Act). The
application
was referred to trial on 21 November 2011. Before this court, it was
accepted that the court has wide powers in terms
of s 115 of the Act.
The section reads:
‘
Rectification
of register of members . . .
(3)
On any application under this section the Court may decide any
question relating to the title of any person who is a party to
the
application to have his name entered in or omitted from the register,
whether the question arises between members or alleged
members
between members or between alleged members on the one hand, and the
company on the other hand and generally may decide
any question
necessary or expedient to be decided for the rectification of the
register’.
[32]
In
Gafoor
& another NNO v Vangates Investments (Pty) Ltd & others
[3]
this court held:
‘
As
indicated above, the court’s jurisdiction under s 115 of the
Act has been described as unlimited and the exercise of its
discretion based on what equity requires. So too, in
Botha v Fick,
Howie JA stated that–
‘
Die
Hof het ’n wye diskresie by ’n aansoek ingevolge hierdie
artikel [s 115] om toe te sien dat billikheid en geregtigheid
geskied. En dit is “to make it reflect the state of affairs
which the appellant is entitled to claim that it ought to reflect”
(
Orr NO
and Others v Hill
1929
TPD
885
te
892) en, soos dit in die saak van
In
re The Contributories of the Rosemount Gold Mining Syndicate in
Liquidation
1905
TH 169
te
188 gestel is,
“
to
fix with the obligations of membership those persons and those
persons only upon whom such obligations should justly and equitably
rest”.
In
determining whether to grant or refuse an application for
rectification, the court makes a judgment in the light of all the
relevant considerations. As with s 344
(h)
of the Act, which
provides that ‘[a] company may be wound up by the Court if –
(h)
it appears to the Court that it is just and equitable that
the company should be wound up’, there is nothing about the
power
conferred by s 115 of the Act which results in the court of
first instance having any special advantage that would enable it to
exercise the power any more appropriately than a court of appeal. The
power is one that the court of appeal is in as good a position
as the
court of first instance to exercise. That being so, and bearing in
mind the equitable nature of the court’s discretion
in terms of
s 115, this discretion can rightfully be described as a discretion in
the broad sense. This court is therefore empowered
to re-examine all
the relevant material and, if satisfied that the discretion has not
been appropriately exercised, to substitute
its own opinion for that
of the court of first instance. It is not necessary to show that the
exercise of its discretion by the
court below was flawed in one of
the respects mentioned . . . above’
[33]
As appears from what is set out above, it was initially contended by
the appellants that only Sedimoza and Ntombisi were the
shareholders
of Gundo. During the course of the trial, it was conceded by the
appellants that Tshimbiluni, Pembelani, Kotulo-Nala,
Isenzo Eshile
and Bindi J-Zee were also shareholders (the concession). They
persisted with their claim that they were entitled
to a larger
shareholding by virtue of the ‘rights offer’.
[34]
Prior to the concession, the appellants relied on the CM42 referred
to above. It was contended that as only Sedimoza and Ntombisi
accepted the ‘rights offer’ and each paid an amount of
R26 250 to Dihla on behalf of Gundo, they were the only shareholders.
The appellants relied for this submission upon the resolution of 5
October 2002, which is recorded in the October memorandum. That
memorandum, however, also recorded that the respondent entities, none
of which had subscribed for additional shares, would remain
shareholders of Gundo based on the subscriptions of R2 000 paid in
1997. Sedimoza and Ntombisi countered this by submitting that
their
present claim for a larger shareholding is based upon the statement
in the memorandum that the shareholding would change
as a result of
parties taking up the additional shares.
[35]
The respondents submitted that the version pleaded by the appellants
cannot be reconciled with the CM42 form. It is clear that
at the time
the deposit was required to be paid to Dihla during November 2002, Ms
Mosalakae was not the sole shareholder as reflected
in the CM42. No
resolution was taken by Gundo that the payment would be made by
Sedimoza and Ntombisi alone. No basis is set out
for the issuing of
the additional 99 shares and/or the transfer of 50 shares to Ntombisi
on 12 November 2002. There are no resolutions
of Gundo authorising
these transactions. The CM42 does not reflect the issue of any
further shares allegedly acquired pursuant
to the resolution of 5
October 2002, nor does it reflect a transfer of the issued shares to
Sedimoza and Ntombisi, which increased
their pro rata shareholding.
The respondents contended that the shareholding of Sedimoza and
Ntombisi was never validly increased;
further that Ms Mosalakae,
without the knowledge and consent of the other members, attended to
the so-called ‘regularisation
process’ and unlawfully
changed the shareholding to reflect only Sedimoza and Ntombisi as 50%
shareholders each.
[36]
At the meeting held on 7 August 2008, when it was agreed that the
shareholding needed to be regularised, no mention was made
by any of
the appellants that the share register had already been amended in
December 2007 to reflect only Sedimoza and Ntombisi
as shareholders.
At that stage, all of the entities were recognised as shareholders by
all parties and it was unanimously agreed
that the Gundo shareholding
and ownership be rectified to reflect this. It was only at the
subsequent meeting held on 19 November
2008, that the appellants
changed their stance.
[37]
The respondents submitted that the various versions of the appellants
are factually and legally untenable. The initial version
of the
appellants is contained in Moss Cohen’s letter dated 28 May
2007, when it was acknowledged that the respondent entities
were
shareholders. In the answering affidavit, the first version appeared
to be that Sedimoza and Ntombisi were the only shareholders
by virtue
of the payment of the deposit on 12 November 2002. The second version
in such affidavit was that Sedimoza and Ntombisi
were the only
entities that could prove that they had acquired the shares.
According to the appellants, ‘it was a misconception’
that the seven entities had paid their joining fee. At the trial,
they persisted with their stance, that they were the only
shareholders.
Only after the trial had been running for some time,
was the concession made. Their claim then mutated to one for the
increase
of their shareholding and the dilution of the shareholding
of the other shareholders.
[38]
The onus was on the appellants to show that the shareholding of
Sedimoza and Ntombisi was subsequently validly increased in
the
manner alleged. The question in this case is whether the onus has
been discharged. It became common cause through the concession
that
all parties claiming to be shareholders of Gundo paid the R2 000
joining fee and were therefore entitled to have their shareholding
reflected in the share register. By 30 November 2002, at the latest,
the appellants knew that their payment to Dihla on 12 November
2002
had not been accepted. Thus, as at that date, they had no right to
consider Sedimoza and Ntombisi as the only shareholders.
Yet, in
December 2007, they backdated the change in shareholding to 12
November 2002. None of the appellant’s witnesses could
explain
this.
[39]
The court a quo correctly found that it was desirable that it first
decide the question as to whether a valid rights offer
was made and
accepted. Put differently, the question is whether a contract was
concluded between Gundo, Sedimoza and Ntombisi to
take up the further
shares in Gundo. It found that the appellants had failed to prove
this.
[40]
Sedimoza and Ntombisi’s claim to a larger shareholding is
solely dependent on the 12 November 2002 payments having been
accepted, which they were not. It was only on 15 October 2003 that
Sedimoza and Ntombisi paid Dihla the sum of R56 200. The respondents
contended, correctly, that at best, the two entities have a loan
account in Gundo but no entitlement to increase their shareholding
purely on the basis that they made this payment. It is of note that
when they made payment in October 2003, they did so without
the
knowledge and consent of the respondents, or the approval of Gundo,
in circumstances where they knew that they were not the
only
shareholders. Thus, any decision they took in relation to this
payment in October 2003 was not taken on behalf of Gundo and
is
accordingly invalid.
[41]
The judge a quo decided the matter on a very narrow basis. She found
that there was no valid contract entered into between
Sedimoza and
Ntombisi and Gundo. The appellants submitted that the court a quo
erred in three respects. Firstly, the court a quo
decided the matter
through the perspective of ‘purchase and sale’. They
argued that the contracts in the present matter
are for the
subscription or allocation of shares; thus the test is different.
Secondly, the court failed to consider the offer
and the acceptance
in its context. Thirdly, the court failed to adopt a sensible
commercial interpretation of the contract. The
agreement was not
vague and it had been partially executed.
[42]
It is clear
that a rights offer requires the same certainty as to its terms as
any other contract. In
Moosa
v Laloo & anther
,
[4]
the court held:
‘
an
allotment, by which shares are acquired from a company, is a
contract. Although a share is created and comes into existence upon
its original issue by the company, and not before issue (with the
consequence that he who subscribes for it does not purchase it
from
the company), the right to it springs from offer and acceptance. No
ceremonious ritual, nor any magic formula, is required
for the
process of allotting the share. It may be effected by way of offer on
the part of the company to the allottee, accepted
by him, or, as is
more usual, by way of an offer (an application for shares) by him,
accepted on behalf of the company; a contract
of allotment may be
effected in any manner in which a contract may be concluded, even by
implication from conduct.’
[43]
The
appellants submitted that the established approach in our law is that
an agreement seriously entered into between two parties,
especially
when such agreement has been partially executed, will not be struck
down.
[5]
It is trite that in a
contract of sale, the purchase price and merx must be agreed upon.
With a rights offer, as with any contract,
the parties must either
‘fix the amount of the price in their contract or agree upon
some external standard by the application
whereof it will be possible
to determine the price without further reference to them’.
[6]
None of this is present in this case. Neither Dr Seoka nor Ms
Mosalakae were able to give an answer as to how many shares were
on
offer and what the price per share was. Ms Mosalakae testified that
there were 1 000 shares at R1, 00 per share. She added ‘you
do
the maths and divide’. On her version, however, only 100 shares
were issued when Sedimoza and Ntombisi allegedly became
equal
shareholders.
[44]
Ms Mosalakae could also not give clarification as to what extent the
other shareholders’ shareholding would be diluted
and to what
extent Sedimoza and Ntombisi’s shareholding would be increased.
It is clear that the ’rights offer’
lacked the material
terms required in relation to the number of shares offered and the
price payable in respect of each share.
There is further no evidence
that such offer was authorised by Gundo.
[45]
In regard to whether the acceptance by Sedimoza and Ntombisi of the
‘rights offer’ was communicated to Gundo, the
appellants
rely on Ms Silimela’s email of 22 October 2002 as conveying
that Ntombisi accepted the offer from Gundo. The alleged
acceptance
was sent to Mr Qwelane and Ms Mosalakae, not to Gundo. They were not
authorised to act on behalf of Gundo in concluding
the agreement. In
regard to Sedimoza, Ms Mosalakae testified that Sedimoza would
subscribe for as many shares as were not subscribed
for by the other
shareholders. Thus, when only Ntombisi responded, Sedimoza took up
the balance of the shares. As Ms Mosalakae
was the ‘responsible
director’ who sent out the share offer, communication of
Sedimoza’s acceptance of the offer
to Gundo was communicated by
her on behalf of Sedimoza and to her on behalf of Gundo. She does not
state the basis upon which she
alone was authorised to act on behalf
of Gundo in this regard. This version cannot assist the appellants in
proving the conclusion
of an agreement.
[46]
The
submission that the agreement had been partially executed cannot be
accepted. There was no valid agreement and therefore, any
purported
execution thereof was invalid. Sedimoza and Ntombisi had no
entitlement to the sole shareholding in Gundo, as the payment
upon
which their purported allotment was based, had not been accepted.
Even on a benevolent interpretation, as contended for by
the
appellants, a court must guard against making a contract for the
parties and going outside the words they have used.
[7]
The benevolent interpretation must not be taken too far. A court
cannot find ‘consensus ad idem by mere conjecture’.
[8]
On the affidavits and the evidence, this court cannot find that he
appellants have discharged the onus upon them to prove that
an
agreement was concluded between Gundo and Sedimoza and Gundo and
Ntombisi.
[47]
The appellants submitted that whatever the result of the appeal, they
should not be mulcted in costs in relation to the full
record which
was placed before this court. They contended that the respondents did
not agree to a limited record being filed. I
find that the record was
extremely useful in determining the issues and can see no reason to
deprive the respondents of their costs
in relation thereto.
[48]
Accordingly, the following order is made:
The
appeal is dismissed with costs, including the costs occasioned by the
employment of two counsel.
____________________
S E Weiner
Acting
Judge of Appeal
APPEARANCES:
For
Appellant(s): AJD Oliviera
Instructed
by:
Swanepoel
Attorneys c/o Dawie Beyers Attorneys, Pretoria
Webbers
Attorneys, Bloemfontein
For
Respondent(s): A E Bham SC (with him D Prinsloo)
Instructed
by:
Klagsbruin
Edelstein Bosman, Pretoria
Symington
De Kock, Bloemfontein
[1]
It is common cause that the initial contribution was R2 000 not R2
500.
[2]
Pexmart CC v H. Mocke Construction (Pty) Ltd
[2018] ZASCA 175
;
[2019] 1 All SA 335
(SCA). Munster Estates (Pty) Ltd v Killarney
Hills (Pty) Ltd
1979 (1) SA 621
(A) at 624B-F.
[3]
Gafoor & another NNO v Vangates Investments (Pty) Ltd &
others
[2012] ZASCA 52
;
2012 (4) SA 281
(SCA) para 40-41.
[4]
Moosa v Laloo & another
1957 (4) SA 207
(D)at 219B-D.
[5]
De Beer v Keyser & others
2002 (1) SA 827
(SCA) para 12-14.
[6]
Burroughs Machines Ltd v Chenille Corporation of SA (Pty) Ltd
1964
(1) SA 669
(W) at 670C-E.
[7]
See Burroughs (fn 8) at 671A–B, citing with approval Hillas &
Co Ltd v Arcos Ltd
[1932] UKHL 2
;
147 LTR 503.
[8]
Viscount Maugham in Scammell & Nephew Ltd v Duston
(1941) AC
251-255.