AFM Theological College (Association Incorporated under Section 21) and Others v National Leadership Forum of the Apostolic Faith Mission of South Africa, Represented by the National Office Bearers and Others (A255/2012) [2013] ZAGPPHC 509 (19 December 2013)

IN THE HIGH COURT OF SOUTH AFRICA

NORTH GAUTENG, PRETORIA

Case no A255/2012

Date: 19 December 2013

Not reportable

Not of interest to other judges

In the matter between:

AFM THEOLOGICAL COLLEGE............................................................................First Appellant

(Association Incorporated under Section 21)

AFM THEOLOGICAL COLLEGE

t/a AUCKLANDPARK THEOLOGICAL

SEMINARY........................................................................................................... Second Appellant

SMITH, GERHARDUS JACOBUS.........................................................................Third Appellant

HATTINGH, WILLEM JOHANNES.......................................................................Forth Appellant

MOLLER, FRANCOIS PETRUS.............................................................................Fifth Applicant

ERASMUS, LODEWIKUS JOHANNES.................................................................Sixth Applicant

and

THE NATIONAL LEADERSHIP FORUM.............................................................First Respondent

OF THE APOSTOLIC FAITH MISSION OF

SOUTH AFRICA, REPRESENTED BY THE NATIONAL

OFFICE BEARERS

ATTERBURY, VICENT EDWARD..................................................................... Second Respondent

BALOYI, MZAMANE CONVY.............................................................................Third Respondent

KNOESSEN, HENRICO....................................................................................... Fourth Respondent

AUGUST, ELIZABETH DOROTHY....................................................................Fifth Respondent

HERBERT, TREVOR WILLIAM RICHARD.........................................................Sixth Respondent

MEYER, ESTELLE FRANSISKA.....................................................................Seventh Respondent

MOLOI, MESHACK QETELO............................................................................ Eighth Respondent

PEREIRA, CLARENCE ALFRED.....................................................................Ninth Respondent

TSHABALALA, MURIMISI SAMUEL............................................................ Tenth Respondent

NAIDOO, JONATHAN..................................................................................Eleventh Respondent

PLATT, ALAN FREDERICK CHARLES.......................................................Twelfth Respondent

VAN DEN BERG, JAN CHRISTOFFEL....................................................Thirteenth Respondent

DE WITT, PETER JOHN HEFZEL............................................................ Fourteenth Respondent

THE REGISTRAR OF COMPANIES............................................................Fifteenth Respondent

JUDGMENT

BAM, AJ

1. This appeal concerns a dispute between members of the Apostolic Faith Mission of South Africa, the “Church". The appellants appeal against the whole of the judgment of Ebersohn AJ, delivered on 8 August 2011, dismissing an application lodged by the appellants.

2. It is for convenience sake expedient to set out the relationship and nexus between the parties in church context.

The National Leadership Forum (“NLF') of the Church is the first respondent. The NLF, consisting of approximately 61 elected members, is responsible for managing the affairs of the Church and is represented by its National Office Bearers (“A/OS”). (The nomenclature speaks for itself). The Apostolic Faith Mission Theological College t/a Auckland Park Theological Seminary (“ATS”), second appellant, is a tertiary theological education institution approved in 1974 by the NLF in terms of the Constitution of the Church. ATS has its own Institutional Statues. The Apostolic Faith Mission Theological College (a section 21 company) (“the Company”), first appellant, was registered as a Private Higher Education Institution in 2003.

3. On 29 April 2008 Pastor P J F de Witt, the fourteenth respondent, in his capacity as Executive Officer of the Church, pursuant to a resolution of the NLF, signed, and filed with the Registrar of Companies, an official form CM 29, in terms of the provisions of the Company’s Act, in which it was reflected that the original directors of the Company have resigned and that new directors have been appointed. The third and fourth appellants as well as the fifth and six applicants and Pastor de Witt counted amongst the former directors

4. Aggrieved by this notification of their resignation and the appointment of a new directorate the first and second appellants, apparently represented by the third and fourth appellants; the third and fourth appellants in their personal capacity; and the fifth and sixth applicants, approached the Court on an urgent basis for interim relief restraining the respondents from acting in any way in the name of the Company. The interim relief was granted on 3 September 2008. Subsequently the appellants and the other two applicants applied to the Court for the following final relief:

“1 Declaring that:

1.1 The CM29 signed by Peter John Hefzel De Witt (fourteenth respondent) on 29 April 2008 and lodged with the fifteenth respondent in relation to the first applicant is a nullity and not binding on the applicants and the fifteenth respondent;

1.2 The first to thirteenth respondents are not authorised in law to represent or to transact any business on behalf of the first applicant;

1.3 Any resolutions passed, ostensibly on behalf of the members of directors of the first applicant, and any business transacted in the name of the first applicant, by the first to thirteenth respondents, is of no legal force or effect in law.

2. Authorising and directing the fifteenth respondent:

2.1 to register, against receipt of a CM29 duly signed by the third applicant reflecting the third to sixth applicants, as well as Samuel Joseph Henekeman, Clarence Alfred Pereira and Vijayen Padayachee as directors of the first applicant as from the incorporation of the first respondent on 6 March 2003.

2.2 To amend the records in relation to the directors of the first applicant in accordance with the information contained in such CM29, and by removing any reference in the said records to the second to the fourteenth respondents as directors or officers of the first applicant. ”

5. On 6 August 2011 the Court a quo, Ebersohn AJ presiding, discharged the interim order and dismissed the application for the final relief with costs. An application for leave to appeal was dismissed but subsequently granted by the Supreme Court of Appeal. The 2nd, 3rd, 4th, 5th, 6th, 8th, 9th and 13th respondents, respectively, filed a Notice to Abide. The appeal is opposed by the 1st, 10th, 11th, 12th and 14th respondents.

6. Mr Kairinos, appearing for the appellants, submitted on pages 7 and 8 of his heads of argument, that the grounds of appeal dealt with “four fundamental errors” made by the Court a quo. They are as follows.

1. “The Court a quo materially misinterpreted Article 5.1 of the first appellant’s articles of association, finding that article 5.1 gave the church through the first respondent shared control over the first appellant including the power to unilaterally remove directors. This misinterpretation of Article 5.1 ignores and contradicts Article 8.1;

2. The Court a quo incorrectly supported this misinterpretation by reference to sections 30(3A) and (5A) of the Income Tax Act;

3. The Court a quo incorrectly found that the removed directors had consented to their removal, whether by unanimous assent or at all.

4. The Court a quo incorrectly found that the replacement directors were validly appointed. ”

7. The cardinal question raised by the appellants in this matter is whether the Church, represented by its National Office Bearers, NOB, was entitled to file the CM29 reflecting that the directors of the Company have resigned. It follows that to consider this question it must primarily be established what relationship, if any, existed between the Church and the Company and its directors. Secondly it needs to be determined what exactly the motivation was for the signing «and filing of the CM29 and whether it was in fact valid.

8. It was the appellants’ contention that in view of the fact that the Company is a juristic person registered in terms of Section 21 of the Companies Act of 1973, the procedure in regards to resignation of directors of the Company is regulated by the provisions of that Act and had to be complied with. The signing of the CM29 form by Mr de Witt on instructions by the NLF on behalf of the Church was, according to the appellants, not in accordance with the provisions of the Act and was therefore not valid. The appellants further contended that the Church, represented by the National Office Bearers, “NOB”, did not have any authority in that regard, due to the fact that there was no vinculum iuris between the Company and the Church. It was the appellants’ case that the third and fourth appellants did not resign as directors.

9. The respondents’ case, presented by Mr Ferreira SC and Ms Muller, on the other hand, is that the Church and ATS, at all relevant times had joint control of the Company. There was an intrinsic bond between the Company and ATS. In this regard the respondents contended, with reference to the appellants’ replying affidavit, (Vol 6 p426, par 33.2) that the third and fourth appellants, in both their capacities as members of ATS, on behalf of ATS, and as initial directors of the Company, subscribed to the Company’s Articles of Association. It was submitted that the link between the Company and NLF, first respondent, is to be found in the provisions of the Constitution of the Church and the fact that ATS transferred its ownership of the Company to NLF, It was contended by the respondents that the third and fourth appellants in fact resigned.

10.lt was common cause that the Company and ATS are linked. In that regard it was stated in the appellant’s founding affidavit (Vol 2 p 39, lines 18-19) that the Company was incorporated and registered at the instance of the ATS. This is consistent with clause 1.10 of Institutional Statutes of the ATS. (Annexure A4 p5A).

11. In regards to the issue of the registration of the Company and its relationship to the Church, section 9.2 of the Constitution of the Church provides as follows:

9.2.1

“The National Leadership Forum shall form a Section 21 Company in accordance with the provisions of the Companies Act for the purposes of registering the theological training institution as a Private Institution of Higher Education as provided for in the Higher Education Act."

9.2.2

"The National Leadership Forum as constituted in terms of Section 4.3 shall be the members of the Section 21 Company.”

9.2.3

“The Board of Directors of the Section 21 company shall be members of the Education and Training Directorate as appointed by the National Leadership Forum during each election year. ”

12. Regarding the finances and control of the Company articles 4 and 5.1 of the Articles of Association of the Company read as follows:

“4. The Company will be financed by:

Funds from the Apostolic Faith Mission of South Africa and fees payable by students and/or any other organizations or any other legal way. ”

“5. Board of Directors

5.1. The Company is controlled by a board of directors consisting of the first members being the subscribers to the articles of association and will also be controlled by the Apostolic Faith Mission of South Africa ...”

13. The prologue of the aforementioned Institutional Statutes of the ATS indicates that the historic built up to the registration of the Company started with the establishment of the Apostolic Bible College by the Church. The aim was to establish an education facility for theological students of the Church in order to facilitate “pastoral training of its leaders”. Subsequently the name of the education facility was changed to The Apostolic Faith Mission Theological College, a legal persona. Eventually it became the ATS.

14. Section 51(1 )(b) of the Higher Education Act, No 101 of 1997, requires that higher education facilities have to be registered or recognised as a juristic person in terms of the Companies Act of 1973 before it may provide higher education. The ATS, although a legal persona, was not an entity who could legally register as a training facility in terms of the said Act. Accordingly, to facilitate ATS to register as such, the Company was registered for that purpose on 3 March 2003. In this regard it is confirmed in the appellants’ founding affidavit that the Company was registered “for the purposes of registration in terms of the prescripts of the Higher Education Act.” The Company was therefore the conduit, or “vehicle”, used for registration in terms of that act in order to enable the ATS to legally continue with the training of the theological students of the Church.

It follows that the first appellant was at all relevant times nothing else but an extension of the education facility of the Church managed by ATS.

15. In August 2007 an agreement was entered into between the Office Bearers of the Church, NOB, and the Management Board of ATS. The terms of that agreement include the following:

“That the NLF requests the management of Auckland Park Theological Seminary to consider their withdrawal as the directorship of the Section 21 Company in favour of a replacement directorship ...”

The following issues were also addressed.

“1.1 Change of Board of Directors: Section 21 Company.

That to give effect to the NLF resolution, the present Board of Directors submit to the process as envisaged in point number 4 of article 5 of the Articles of Association; and

That the NLF elects the New Board of Directors in terms of the approved E&T Directorate and its controlling activity as envisaged in point 1 of Article 5 of the Articles of Association.”

The agreement also enjoined the NLF to elect new directors.

16. On 14 August 2007, the date the said agreement was signed, seven of the directors of the Company were present, including the third and fourth appellants and the fifth and sixth applicants.

17. Pertaining to the aforesaid agreement it is further of importance that the Management Board of ATS recorded at a subsequent meeting of the directors held on 9 November 2007 that:

“Having signed an agreement with the Office Bearers (of the Church) whereby the Article 21 Company of ATS registered at the Department of Education, was made available to the new College ...” (My insertion.)

18. In considering the meaning of the agreement of August 2007, it is difficult to comprehend on what basis it was submitted on behalf of the appellants that the Company was not bound by that agreement. The contention that the Company was not party to the contract totally disregards the facts that the third and fourth appellants were directors of the Company at the time and that the agreement directly involved the Company.

19.lt is common cause that the Company and ATS are intrinsically linked. The Institutional Statutes of ATS provides that it is the agent of the Company. It further provides that the ATS is “an independent legal persona distinct from the AFM (the Church) and or its members ...”

This was in fact the situation, although it must be kept in mind what the real purpose for registering the Company was, to wit the legalising of the education facility conducted by ATS. This bond between the Company and ATS does however not have the implication that the Church is now excluded.

20. There is no basis for a finding that the intertwined relationship between the ATS and the Company affected control of the Company vested in the Church. At all relevant times, in my view, due to the real reason or purpose for the existence of the educational facility and the registration of the Company in that regard, there cannot be any doubt, that the Company, and its directorate, were subject to control by the Church. The fact that ATS might have been more directly involved with the Company does not mean that the Church’s control of its own education institution was at any stage ousted, or disappeared, or limited in any way.

21. The relationship between the Church and the Company, in my opinion, differs materially from the situation where one has to deal with the relationship between legal personae in terms of the Company Laws. In this case the relationship between the Church, the Company and the ATS, seems to be unique and sui generis. In any event it appears from the provisions of Section 9.2 of the constitution of the Church, that it was throughout contemplated and intended by the Church to at least have joint control of its education facility. It follows that the Company and the ATS, established in terms of Constitution of the Church, are bound by the terms thereof.

22. The contention by the appellants that, although the directors of the Company represented ATS, they “certainly did not represent the Church”, cannot unreservedly be correct. Some of the directors, including Pastor de Witt, were officials of the Church and did surely also represent the Church. This situation, in my view, constitutes incontestable proof of the Church’s involvement in the business of the education facilities.

23. In view of the relationship between the Church and the Company, alluded to above, it is in my opinion correctly contended by the Respondents that any one of the National Office Bearers, in his capacity as representative of the Church, was a director of the Company with all the inherent rights and authority attached to that post about matters concerning the Company and the Church.

24. The argument on behalf of the appellants that the process in regards to the yearly election of Board Members, provided for in Article 5.4 of the Articles of Association of the Company, was not previously employed, and that for this reason the procedure followed in this matter became unlawful, has no substance. There is no basis for any argument that the mere fact that the procedure in that regard was in the past not followed every year, as provided by the Article, resulted in the said procedure falling into abeyance or that it became unlawful. Article 5.4, in my view, in any event constitutes further proof of the inherent right of the Church

to have control over the Company.

25. It appears from the papers that the third and fourth appellants, and the remaining erstwhile applicants, did not voice protest against their resignation in accordance with the CM29 before the meeting of the (former) directorate of the Company on 20 June 2008. It appears that at that meeting, for the first time, the directors present recorded their objection against the filing of the CM29 signed by the fourteenth respondent, Pastor de Witt, (Annexure A1) on 20 April 2008. The reasons for their objection at the meeting of 20 June were formulated as follows:

“RESOLVED

THAT the status quo ante in relation to the Board of Directors of the Company be restored, given the fact that the Company is the formal recognition of the ATS with the Department of Education and the Receiver of Revenue. ”

26. From the wording of this objection it is clear that the third and fourth appellants, and the other (former) directors that were present at the meeting, regarded the Company as the sole property of ATS, and, accordingly, that only the Management Board of the ATS, and its directors, had the authority to make any decision in regards to the Company.

27. In view of the interest of the Church in the Company, alluded to above, this attitude of the appellants was clearly unfounded. It seems that what was recorded was nothing more but a unilateral view of the erstwhile directors of the Company who were also members of ATS. The Court a quo, in this regard expressed the view, correctly in my opinion, that the recorded grievance of the erstwhile directors was an “afterthought.”

28. The Court a quo clearly appreciated what the issues at hand were by stating the following in par 9 of the judgment:

“In the process (of deciding the case) the court must examine and consider whether the “resignation” of the erstwhile directors and the appointment of the new directors must be viewed not only as against those issues alluded to by applicants but also against the factual matrix that existed at the time of the conclusion of the “August 2007 agreement’ and the role of the Church in the historic background which led to the appointment of the new directors. The court must further examine and consider furthermore whether the applicant’s simplistic approach to the resignation and appointment of directors with reference only to the Companies Act and the contents of the articles, is borne out by the positive law. ”

29. In a comprehensive judgement the Court a quo considered, inter alia, the nature of the relationship between the Company, ATS and the Church. The Court, correctly in my view, emphasized the importance of Article 5.1 of the Articles of Association of the Company and found that the said article cannot be construed in any other way but that the Company would be controlled by the Church. The criticism levelled on behalf of the appellants at this finding is without substance. The Court a quo’s interpretation of Article 5.1 in par [14] of the judgment is in my opinion sound and properly motivated. I deem it unnecessary to repeat the judgment in that regard.

30. The Court a quo further found that the Company was “part and parcel of the ‘Group’ registration of the Church” and that the Church and all its institutions are registered as a Public Benefit Organisation. Regarding the latter issue the Court ruled that the reference in article 5.1 of the Company’s articles “fully accords with the provisions of the Income Tax Act. ” These findings of the Court a quo are clearly consistent with the facts alluded to above.

31. The finding of the Court a quo, that the erstwhile directors of the Company who did not sign the August 2007 agreement, assented to the agreement, was evenly properly motivated. There was no proof that all the members did not assent to the resolution passed

at that meeting. It can accordingly be assumed that the third and fourth appellants, belatedly, decided to take the point that no proof existed that all the former directors have indeed signed the agreement. In this regard the Court a quo stated that it was reasonable to assume that up to 23 April 2008 the third and fourth appellants, and the fifth and sixth applicants, as well as the other former directors of the Company who may not have been present at the time, seemingly acquiesced in their resignation as the Board of Directors of the Company and that they accepted the appointment of the new directors. In my view the reasoning by the Court a quo was sound and consistent with the facts and the relevant authorities. See in this regard Randcoal Services Ltd v Randgold and Eploration Co Ltd [1998] ZASCA 45; 1998 4 SA 825 at 840 G - I.

32. The argument on behalf of the respondents that clause 1.1 of the August agreement, referred to in paragraph 15 above, provided that the NLF had the right to appoint the directors of the Company are, in my opinion well founded. It seems clear that at all relevant times the Church was, and is, responsible for the conduct of its members and it therefore follows that the Church should have had control over the conduct, and management, of the business of education conducted by ATS, and for that matter, the Company. The Church and the education facility in the name of ATS and the Company are un-separable. This situation actually seems to be sui generis in that it differs from the standard situation where nobody else but the directors of a specific company will have control over the resignation of the directors.

33. The Court a quo found that the resignation of the former directors was lawful in that it followed the August 2007 agreement entered into by all relevant parties. I am in agreement with this finding. See Gohlke & Schneider v Westies Minerale Bpk 1970(2) SA 685 (AD) at 690 E.

34. Accordingly the Court a quo found that the agreement entered into by the NLF and the Company in August 2007 was valid and enforceable and that it proved that the former directors of the Company have indeed resigned their directorships. The fact that the said agreement was followed up by the meeting on 9 November 2007, alluded to above, reflecting no adverse comment against the resignation issue, is in my opinion devastating to the appellant’s case, confirming the Court a quo’s finding in that regard.

35. It follows that the respondents’ contention that NLF, as members of the directorate of the Company, were lawfully entitled to state that the erstwhile directors of the Company have resigned and to appoint new directors, cannot be faulted.

36. The instructions of the NLF to Pastor de Witt regarding the signing and filing of the CM29, consequent upon the resolution of August 2007, were therefore, in the circumstances, valid and binding on all the directors of the Company. It is of interest to note that the CM29 also included the resignation of Pastor de Witt as former director.

37. Accordingly I could find no reason to say that the Court a quo erred in finding that the third and fourth appellants had agreed to resign and that the new directors were lawfully appointed. The appeal should therefore be dismissed

38. I now turn to the issue of costs. In view of the ruling by the Court a quo, sanctioned by this Court, which includes that the first and second appellants are controlled by the Church and that the third and fourth appellants should be ordered to pay the costs of the application, it seems fair to find that the Company and ATS were drawn into the litigation by its former directors, mainly the third and fourth appellants. It would therefore be unfair and unreasonable to order the Company and ATS to pay the costs of the appeal. The responsible parties in that regard are the third and fourth appellants. They were two of the applicants in the application and they persisted with the appeal before this Court.

39. I therefore propose that the following order be made:

1. The appeal is dismissed.

2. The Third and Fourth appellants are ordered to pay the costs, jointly and severally, the one paying, the other to be absolved. The costs to include costs of two counsel.

A J BAM ACTING JUDGE OF THE HIGH COURT

1 November 2013

I agree.

CE HEATON NICHOLS JUDGE OF THE HIGH COURT

I agree, and it is so ordered.

E J FRANCIS JUDGE OF THE HIGH COURT

For the appellants: Adv G Kairinos

For the respondents: Adv. Ferreira SC assisted by Ms Muller