Larrett v Coega Development Corporation (Pty) Ltd and Others (EL1139/2013) [2018] ZAECELLC 12; 2019 (3) SA 510 (ECG) (11 December 2018)

Larrett v Coega Development Corporation (Pty) Ltd and Others (EL1139/2013) [2018] ZAECELLC 12; 2019 (3) SA 510 (ECG) (11 December 2018)

Section 165 of the Companies Act requires that derivative actions be properly authorised at inception, and the court cannot retrospectively ratify unauthorised proceedings. The applicant failed to comply with the statutory procedures prior to instituting the action, thereby undermining the gatekeeper function of the court. Furthermore, the applicant did not satisfy the requirements of good faith, material consequence, and best interests of the company, as she failed to address crucial issues raised by the respondent, including the validity of shareholder resolutions, the true recipient of the tender, and inconsistencies in her affidavits. The application for leave to continue proceedings...

Citation
[2018] ZAECELLC 12
Parties
Applicant: Glynis Beverly Larrett; Respondent: Coega Development Corporation (Pty) Ltd; Respondent: The Standard Bank of South Africa Limited; Respondent: Mr K B Ndzimela; Respondent: Independent Crushers Consortium (Pty) Ltd
Court
Eastern Cape High Court, East London Local Court
Jurisdiction
South Africa
Judgment Date
11 December 2018
Case Number
EL1139/2013
Procedural Posture
Civil Application / Application for Leave to Continue Proceedings in the Name and on Behalf of the Company Under S 165(5) of the Companies Act
Outcome
Application dismissed with costs, including costs of Senior Counsel.
Judges
Roberson
Legal Topics
Derivative Action, Companies Act 71 of 2008, Good Faith Requirement, Ratification of Unauthorised Proceedings, Prescription, Shareholder Disputes
Commercial and Corporate Civil Procedure Derivative Action Companies Act 71 of 2008 Good Faith Requirement Ratification of Unauthorised Proceedings Prescription Shareholder Disputes

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Parties

Glynis Beverly Larrett

Applicant

Coega Development Corporation (Pty) Ltd

Respondent

The Standard Bank of South Africa Limited

Respondent

Mr K B Ndzimela

Respondent

Independent Crushers Consortium (Pty) Ltd

Respondent

Procedural Posture

Civil Application / Application for Leave to Continue Proceedings in the Name and on Behalf of the Company Under S 165(5) of the Companies Act

Legal Issues

  1. 1 Whether section 165(5) of the Companies Act empowers the court to authorise continuation of proceedings that were unauthorised at inception.
  2. 2 Whether the applicant has satisfied the requirements of section 165(5)(b) regarding good faith, material consequence, and best interests of the company.
  3. 3 Whether the proceedings are precluded by prescription or res judicata.

Ratio Decidendi

Section 165 of the Companies Act requires that derivative actions be properly authorised at inception, and the court cannot retrospectively ratify unauthorised proceedings. The applicant failed to comply with the statutory procedures prior to instituting the action, thereby undermining the gatekeeper function of the court. Furthermore, the applicant did not satisfy the requirements of good faith, material consequence, and best interests of the company, as she failed to address crucial issues raised by the respondent, including the validity of shareholder resolutions, the true recipient of the tender, and inconsistencies in her affidavits. The application for leave to continue proceedings...

Court Disposition

Application dismissed with costs, including costs of Senior Counsel.

Orders

  • The application is dismissed with costs, including the costs of Senior Counsel.