Khan and Another v Communicare and Others (498/2010) [2011] ZAWCHC 392 (21 October 2011)

Khan and Another v Communicare and Others (498/2010) [2011] ZAWCHC 392 (21 October 2011)

The court found that the articles of association entitled all members, including retiring directors, to participate in the election of directors at the annual general meetings. The exclusion of the retiring directors was based on incorrect legal advice and resulted in an election process that was materially inconsistent with the companies' constitution. The court held that the rule in Foss v Harbottle did not preclude the applicants' standing, as their individual membership rights were adversely affected by the exclusion. The election could not be ratified or corrected by the company in general meeting, and the irregularity was not merely a matter of internal management. Accordingly, the...

Citation
[2011] ZAWCHC 392
Parties
Applicant: Blumerus Lodewyk Ezra Khan; Applicant: Barry Deane Tilney; Respondent: Communicare; Respondent: Communicare Construction; Respondent: Hermanus Johannes Fourie
Court
Western Cape High Court, Cape Town
Jurisdiction
South Africa
Judgment Date
21 October 2011
Case Number
498/2010
Procedural Posture
Review Application / Judgment
Outcome
Application granted. The election of directors at the 2009 annual general meetings is declared invalid and set aside.
Judges
A G Binns-Ward
Legal Topics
Company Articles Interpretation, Director Election Irregularity, Shareholder Voting Rights, Foss V Harbottle Rule, Personal Membership Rights
Commercial and Corporate Civil Procedure Company Articles Interpretation Director Election Irregularity Shareholder Voting Rights Foss V Harbottle Rule Personal Membership Rights

Case Brief

Summary, issues, holding and outcome

More case intelligence is available

Unlock the full research layer for this judgment.

Full judgment text Downloadable case file Legal principles 5 Authorities cited 18 Party arguments 2
Sign in to unlock

Parties

Blumerus Lodewyk Ezra Khan

Applicant

Barry Deane Tilney

Applicant

Communicare

Respondent

Communicare Construction

Respondent

Hermanus Johannes Fourie

Respondent

Procedural Posture

Review Application / Judgment

Legal Issues

  1. 1 Whether the exclusion of retiring directors from voting at the annual general meeting was contrary to the companies' articles of association.
  2. 2 Whether the election of directors at the annual general meetings was valid.
  3. 3 Whether the applicants have standing to challenge the election under the rule in Foss v Harbottle.

Ratio Decidendi

The court found that the articles of association entitled all members, including retiring directors, to participate in the election of directors at the annual general meetings. The exclusion of the retiring directors was based on incorrect legal advice and resulted in an election process that was materially inconsistent with the companies' constitution. The court held that the rule in Foss v Harbottle did not preclude the applicants' standing, as their individual membership rights were adversely affected by the exclusion. The election could not be ratified or corrected by the company in general meeting, and the irregularity was not merely a matter of internal management. Accordingly, the...

Court Disposition

Application granted. The election of directors at the 2009 annual general meetings is declared invalid and set aside.

Orders

  • The resolutions pertaining to the election of directors of the first and second respondents at the annual general meetings on 27 October 2009 are declared invalid and set aside.
  • The first and second respondents are declared liable, jointly and severally, to pay the applicants' costs of suit, including the costs of two counsel.