Lonrho Mining SA (Pty) Ltd v Gous Vertue & Ass Inc and Others (19/2009) [2010] ZANCHC 52 (22 October 2010)

IN THE HIGH COURT OF SOUTH AFRICA

(Northern Cape High Court, Kimberley)

Case Nr: 19/2009

Date heard: 15/10/2010

Date delivered: 22/10/2010

In the matter between:

LONRHO MINING SA (PTY) LTD …..................................APPLICANT/RESPONDENT

and

GOUS VERTUE & ASS INC …....................................1ST RESPONDENT/APPLICANT

BÊREND VAN DEVENTER …....................................2ND RESPONDENT/APPLICANT

JOHN RIET N.O. …...........................................................................3RD RESPONDENT

JOSEPH VICTOR RIET N.O. …........................................................4TH RESPONDENT

CECIL DEON KATZ N.O. ….............................................................5TH RESPONDENT

JOHN WILLIAMS N.O. ….................................................................6TH RESPONDENT

JOSEPH JOE FLETCHER N.O. …...................................................7TH RESPONDENT

SABINA SUSAN MOLATHLEGI N.O. …..........................................8TH RESPONDENT

SAMUEL PHELO KWEETSANG N.O. ….........................................9TH RESPONDENT

SELOHELA JOSEPH PHOLOHOLO N.O. ….................................10TH RESPONDENT

DENISE DESIREE SAMUELS N.O. …...........................................11TH RESPONDENT

EDWARD DAVID CARVELL N.O. …..............................................12TH RESPONDENT

OCKERT JAMES LANGEVELDT N.O. …......................................13TH RESPONDENT

HENRY WALTER GEORGE VAN BRANDEN N.O. …...................14TH RESPONDENT

(the 3rd to 14th respondents are cited in their capacities as trustees for theVAALBOS AND SYDNEY ON VAAL RESTITUTION COMMUNITY TRUST)

Coram: MAJIEDT AJP

REASONS FOR ORDER

MAJIEDT AJP:

This is an application for the rescission of a provisional winding-up order issued on 16 January 2009 under case number 19/2009. The application was brought on an urgent basis on Friday 15 October 2010 and I handed down an order on Monday 18 October 2010, while reserving the reasons for the order which I now hand down. The order reads as follows:

The 3rd to 14th respondents are ordered to show cause on Friday 26 November 2010 at 10h00 why an order should not be made in the following terms:

That the order provisionally winding up the applicant company on 16 January 2009 under case number 19/2009 be and is hereby rescinded and set aside.

That those respondents who oppose the application pay the costs thereof jointly and severally, the one paying the other/s to be absolved.

That the applicant serve the application papers and this order on all the trustees namely the 3rd to 14th respondents individually at their respective addresses in terms of the Uniform Rules of Court.”

A peculiar feature of the application, which was opposed by the third respondent only at this stage since he was the only respondent available at short notice to furnish instructions, is that the provisional winding-up order was discharged on 28 August 2009 by Kgomo JP, after the rule nisi had been extended on six previous occasions. The provisional winding-up order was discharged because the debt owing by the applicant had been paid to the first respondent, which was the applicant in the winding-up application. The reason why the rescission of a provisional winding-up order which has been discharged has been sought, emanates from provisions in a shareholders agreement to which I will refer presently.

In its original notice of motion the applicant sought the following orders:

“1.1 that the applicant’s failure to comply with the Honourable Court’s rules in respect of notice, service and process be condoned and that this application be heard as one of urgency in terms of Rule 6(12);

1.2 that the order provisionally winding-up the applicant company on 16 January 2009 under case number 19/2009 be and is hereby rescinded and set aside;

1.3 declaring that the effect of the rescission and setting aside of the order is that no such order was ever granted;

1.4 directing that such costs as are occasioned by the applicant in the opposition hereto be paid by such party/s; and

1.5 further and/or alternative relief.”

During the hearing an amended notice of motion was handed up by Mr. Wasserman SC for the applicant in which par 1.3 above was amended to read as follows:

“1.3 declaring that the order in paragraph 1.2 above be and is of retrospective effect and that the order provisionally winding-up the applicant on 16 January 2009 is a nullity and of no force or effect;”

At an advanced stage in his argument, Mr. Wasserman, however, indicated that the applicant no longer seeks an order in terms of the amended par 1.3 above and expressly abandoned same. The applicant simply asked for an order in terms of par 1.2 and for an order that the third respondent pay the costs of opposing the application.

The basis on which the setting aside of the provisional winding-up order is sought is that the said order was granted in error and that the Court was not legally competent to issue such an order, since it came to light recently that the provisions of sec 346(4A)(b) of the Companies Act, 61 of 1973 (“the Act”) were not complied with. The applicant’s case is that its attorneys, who had recently taken over the matter, made some investigations during the course of which this particular non-compliance was discovered. The third respondent, who was represented by Mr. Peter SC, opposed the matter only on a point in limine, namely the non-compliance with the provisions contained in sec 27 of the Supreme Court Act, 59 of 1959 and indicated that on the merits the respondents needed more time to do a proper investigation as to the abovementioned lack of compliance as alleged by the applicant. The provisions of sec 346(4A)(a) and (b) of the Act reads as follows:

(4A)(a) When an application is presented to the court in terms of this section, the applicant must furnish a copy of the application-

(i) to every registered trade union that, as far as the applicant can reasonably ascertain, represents any of the employees of the company; and

(ii) to the employees themselves-

(aa) by affixing a copy of the application to any notice board to which the applicant and the employees have access inside the premises of the company; or

(bb) if there is no access to the premises by the applicant and the employees, by affixing a copy of the application to the front gate of the premises, where applicable, failing which to the front door of the premises from which the company conducted any business at the time of the application;

(iii) to the South African Revenue Service; and

(iv) to the company, unless the application is made by the company, or the court, at its discretion, dispenses with the furnishing of a copy where the court is satisfied that it would be in the interests of the company or of the creditors to dispense with it.

(b) The applicant must, before or during the hearing, file an affidavit by the person who furnished a copy of the application which sets out the manner in which paragraph (a) was complied with.”

It was common cause during the hearing that the provisions of ss (a) and (b) of sec 346(4A) of the Act are peremptory and must be complied with. An affidavit of a Mr. Johannes Jakobus Gous, an attorney of this Court and a director of the first respondent which is an incorporated firm of attorneys was filed. In it he deposed to the fact that he had been the attorney of record representing the applicants in the application for winding-up. He stated that his firm does not object to the setting aside of the provisional winding-up order and that no affidavit as required by sec 346(4A)(b) of the Act was prepared by him and submitted to the Court at the hearing of 16 January 2009 (when the provisional winding-up order was issued) or at any time thereafter. Before I consider the merits of the rescission application, I turn to two preliminary matters, one raised by the applicant and the other by the third respondent.

The applicant objected to the third respondent’s locus standi to raise the point in limine which it does. Mr. Wasserman submitted that the third to fourteenth respondents were not parties to the winding-up application and that they were being cited as respondents in the present proceedings without a concession on the part of the applicant that they had any legal interest in the relief sought in this rescission application. Mr. Peter countered this argument by stating that the third respondent, as is the case with the second to fourteenth respondents as well, have a direct and substantial legal

interest in the matter which flows from the shareholders agreement between the applicant and these respondents in their capacity as trustees. This necessitates a discussion of the aforementioned shareholders agreement and the background thereto.

The applicant is a mining company. It is a joint shareholder with the Vaalbos Sidney on Vaal Restitution Community Trust (“the Trust”) in Theta Mining (Pty) Limited (“Theta”). The third to fourteenth respondents are trustees of the Trust. The relationship between the applicant and the Trust as shareholders of Theta is regulated by a shareholders agreement which forms the kernel of a dispute between these parties which are presently the subject of arbitration proceedings which are scheduled to resume on Thursday 21 October 2010 before advocate Van Schalkwyk SC in Johannesburg. The arbitration proceedings constitutes the urgency in this matter.

The relevant part of the shareholders agreement for present purposes is clause 12 and it reads as follows:

“12 DEEMED OFFERS

Notwithstanding any of the provisions for the time being of the company’s memorandum and/or articles of association, if-

12.1 a shareholder is sequestrated or liquidated (whether provisionally or finally) or suffers any similar disability, or

12.2 a shareholder dies or is placed under curatorship (whether provisionally or finally) or suffers any similar disability, or

12.3 the Trust ceases to be owned and controlled by natural persons who are historically disadvantaged persons,

Then the shareholder in question shall be deemed, on the day prior to that on which the event in question takes place, to have offered to sell all its shares in and its loan account against the company to the remaining shareholders upon the same terms and conditions, mutatis mutandis, as set out in 11.2 (in which event the remaining provisions of 11.2 to 11.6 inclusive shall also apply, mutatis mutandis) save that –

12.4 subject to the provisions of 12.8, the purchase price per share shall be determined by the auditors (acting as experts and not as arbitrators). Such determination shall be final and binding on all parties affected thereby in the absence of any manifest error in calculation;

12.5 subject to the provisions of 12.8, the purchase price of the loan account shall be its face value as at the date of the offer plus all interest (if any) accrued not yet paid thereon;

12.6 the purchase price shall be paid in cash against delivery of the share negotiable form and cession of the loan account;

12.7 the “first period” shall be the period of thirty days after receipt by the offerees of the auditors’ written valuation;

12.8 the purchase price per share and the corresponding loan account shall be discounted by 20% in circumstances where a deemed offer occurs pursuant to the provisions of 12.3.

The Trust relies on the provisions contained in clause 12.1 above for its case in the arbitration proceedings that the applicant is deemed to have offered to sell all its shares in and his loan account against Theta to the remaining shareholders.

It is trite that a party to litigation must have a direct and substantial interest in the subject-matter of that litigation.1 An indirect financial or commercial interest is not enough.2 In my view the abovementioned clause in the shareholders agreement affords the trustees, namely the third to fourteenth respondents, an interest beyond a mere financial or commercial interest in the matter. I am of the view that the deeming provision gives them a direct legal interest in litigation which has to decide whether a provisional liquidation order (which would have triggered the deeming provision) ought to be set aside or not. As a consequence the applicant’s objection to the third to fourteenth

respondents’ locus standi is devoid of merit and is overruled.

In reliance on a Full Bench decision of this Court, Shield Insurance Co. Ltd v Van Wyk3, Mr Peter submitted that the provisions of sec 27 of the Supreme Court Act must be complied with even in urgent applications i.e. where a respondent or respondents are outside the jurisdiction of a particular division. Sec 27 of the Supreme Court Act reads as follows:

“The time allowed for entering an appearance to the civil summons served outside the area of jurisdiction of the court in which it was issued shall be not less than –

(a) twenty-one days if the summons is to be served at a place more than one hundred miles from the court out of which it was issued; and

(b) fourteen days in any other case.”

“Civil summons” includes a rule nisi or notice of motion in terms of sec 1 of the said Act. Mr. Peter submitted that sec 27(a)

applies in the present matter since some of the trustees are resident in Gauteng and Western Cape provinces, more than one hundred miles from this Court. In the Shield Insurance case supra the Court held that it had no power to abridge the period laid down in the section, nor to condone non-compliance with the provisions

thereof, even in urgent applications. Mr. Peter submitted that this is still the law and that I am bound by this decision, which is a decision of a Full Bench of this division. In his countervailing argument Mr. Wasserman submitted that the Shield Insurance case has been distinguished on a number of occasions and should be likewise distinguished in the present matter. He referred me to inter alia Consani Engineering (Pty) Ltd v Anton Steynecker Maschinenfabrik GmbH4; Turquoise River Incorporated v McMenamin and Others5 and Scott v Hough6. In both the Turquoise River and Scott cases above, the Shield Insurance case was distinguished on the basis that in the latter final and definitive relief was sought. In this regard Rampai J said the following in Scott v Hough, supra7:

“Now what really sets Shield Insurance Co Ltd v Van Wyk (supra) apart from the rest was that in that decision the applicant sought and obtained final relief. The type of relief, in addition to the urgency factor, is a fundamental consideration which distinguishes the flexible external rules of service pertaining to exceptionally urgent applications from the rigid external rules of service pertaining to ordinary non-urgent applications. By external rules of service I mean the rules of dies induciae which apply to the respondents who reside outside the jurisdiction of the Court concerned.”

In my view in the present instance the matter was of sufficient urgency to have been brought on such short notice by the applicant. Shield Insurance Co Ltd v Van Wyk, supra, does not in my view establish an inflexible principle pertaining to urgent applications against respondents located outside the area of jurisdiction of this Court. In appropriate cases, as long as final and definitive relief is not granted, a Court may abridge the periods applicable in sec 27. As a consequence I am of the view that the applicant is not entitled to final relief, but may well be entitled to interim relief, provided it has made out a case on the merits on the rescission application. The point in limine raised by Mr. Peter on behalf of the third respondent is therefore dismissed.

I turn to the merits of the matter. Rule 42(1)(a) provides as follows:

“(1) The court may, in addition to any other powers it may have, mero moto or upon the application of any party affected, rescind or vary:

(a) An order or judgment erroneously sought or erroneously granted in the absence of any party affected thereby;”

It has been held in a number of cases that compliance with the provisions of sec 346(4A) of the Act is peremptory.8 In the Moodliar case, Davis J held that a court may, depending upon the facts and circumstances of each case, ascertain whether there has been

substantial compliance with the section. That enquiry does not arise in the present matter, since it is the applicant’s case that there has been no compliance at all with this particular section.

Relief will be granted in terms of Rule 42(1)(a) if there was an irregularity in the proceedings or if a court was not legally

competent to make an order that it did. See in this regard: ProMedia Drukkers & Uitgewers (Edms) Bpk v Kaimowitz and Others9; Colyn v Tiger Food Industries Ltd t/a Meadow Feed Mills (Cape)10.

As stated above, it was not in issue that the provisions of sec 346(4A)(a) and (b) of the Act are peremptory. There has been no compliance at all with these provisions. Attorney Gous says so without any equivocation in his affidavit. Mr. Peter criticised Gous’ affidavit for lack of detail, i.e. that he does not state clearly that he (and he alone) was tasked with attending to the service required in sec 346(4A)(a) and the filing of the affidavit in sec 346(4A)(b). This criticism has some merit, but I think all of this must be inferred from Gous’ affidavit. There is after all no suggestion that anyone else but Gous had been tasked with these responsibilities.

A further point of criticism was that Gous’ explanation does not eliminate the possibility that returns of service by the Sheriff could have been filed which would have dispensed with the need for an affidavit in terms of sec 346(4A)(b). This amounts to conjecture. In any event, Attorney Stockwell who deposed to the applicant’s founding affidavit in the present matter, states that

“...(in) the course of preparation for the arbitration I located a copy of the main application but was unable to locate the returns of service or affidavit evidencing compliance with section 346(4A)(a) of the Act.” (emphasis supplied)

In the premises there has been fatal non-compliance with these peremptory provisions and a provisional winding-up order could and should not have been issued. It consequently falls to be set aside. I deemed it prudent to issue a rule nisi, based on the consideration of the principles set out in para 12 above. A matter which may require further and proper consideration on the return day is the question whether, in the absence of declaratory relief in the nature of the now abandoned par 1.3 of the amended notice of motion11, rescission of a discharged interim order is possible in law12. I do not express a view on the matter, since I am satisfied that interim relief is warranted at this juncture and a consideration of that particular aspect is best left for the return day.

For these reasons I had issued the order set out in para 1 above.

________________________

SA MAJIEDT

ACTING JUDGE PRESIDENT

NORTHERN CAPE DIVISION

For the Applicant: Adv J Wasserman SC with Adv GW Girdwood

Instructed by: Van de Wall & Partners, Kimberley

For the 1st and 2nd Respondent: Adv J Peter SC

Instructed by: C Karamanolis & Associates, Kimberley

1Jacobs en ‘n Ander v Waks en Andere 1992(1) SA 521 (A) at 533J – 534C

2Ibid

31976(1) SA 770 (NC)

41991(1) SA 823 (T)

51992(3) SA 653 (D)

62007(3) SA 425 (O)

7At 433 D-E

8Moodliar NO and Others v Hendricks NO and Others [2] 2009 JOL 24459 (WCC); Hendricks NO and Others v Cape Kingdom (Pty) Ltd 2010(5) SA 274 (WCC) at [31]-[32]; and [35]

91996(4) SA 411 (C) at 417 G-I

102003(6) SA 1 (SCA) at para [5] and [6]

11See para 4 above

12The present instance must be distinguished from those governed by sec 354 and 358 of the Act which empowers a Court to stay or set aside proceedings in a winding-up.