Lonrho Mining SA (Pty) Ltd v Theta Mining (Pty) Ltd and Others (1481/2010) [2010] ZANCHC 57 (27 September 2010)

NORTHERN CAPE HIGH COURT, KIMBERLEY

Saakno: / Case number: 1481/2010

Datum verhoor: / Date heard: 03 / 09 / 2010

Datum gelewer/Date delivered: 27 / 09 / 2010

In the matter between:

LOHNRO MINING SA (PTY) LTD .......................First Applicant

AFRICAN EXPLORATION MINING &

FINANCE CORPORATION (PTY) LTD ............Second Applicant

and

THETA MINING (PTY) LTD ............................First Respondent

SYDNEY-ON-VAAL/VAALBOS

COMMUNAL

PROPERTY ASSOCIATION ........................Second Respondent

REGIONAL DIRECTOR: DEPARTMENT OF

MINERALS AND ENERGY, KIMBERLEY .........Third Respondent

MINISTER OF MINERALS AND ENERGY,

PRETORIA .................................................Fourth Respondent

DIRECTOR-GENERAL

DEPARTMENT OF

MINERALS AND ENERGY, PRETORIA ............Fifth Respondent

DEPUTY DIRECTOR-GENERAL DEPART-

MENT OF MINERALS AND ENERGY, PTA .......Sixth Respondent

JOHN RIET N.O. ......................................Seventh Respondent

JOSEPH VICTOR RIET N.O. ........................Eighth Respondent

CECIL DEON KATZ N.O. .............................Nineth Respondent

JOHN WILLIAMS N.O. ................................Tenth Respondent

JOSEPH JOE FLETCHER N.O. ..................Eleventh Respondent

SAMUEL PHELO KWEETSANG N.O. ...........Twelfth Respondent

SELOHELA JOSEPH PHOLO-

HOLO N.O. ..........................................Thirteenth Respondent

EDWARD DAVID CARVELL N.O. ..........Fourteenth Respondent

OCKERT JAMES LANGEVELDT N.O. ........Fifteenth Respondent

HENRY

WALTER GEORGE VAN

BRANDEN N.O. .....................................Sixteenth Respondent

SABINA SUSAN MOLETHLEGI N.O. ...Seventeenth Respondent

DENISE DESIREE SAMUELS N.O. ........Eighteenth Respondent

REX VAN SCHALKWYK .......................Nineteenth Respondent

Coram: Lacock

J

REASONS FOR JUDGMENT

LACOCK J:

The applicants, as a matter of urgency, filed an application on 25 August 2010, seeking the following relief:-

“2. That the arbitration proceedings that have been insttuted by the seventh to eighteenth respondents against the first applicant and the first respondent and which are pending before the nineteenth respondent be stayed pending the final determination of the action proceedings instituted in this Court by the first and second applicants against the first to nineteenth respondents.

3. That the costs of this application shall be costs in the action proceedings, save in the event of opposition by one or more of the respondents, in which event such opposing respondent be ordered to pay the costs of this application.”

The application is opposed by the seventh to eighteenth respondents, who are all trustees of the Vaalbos and Sydney-on-Vaal Restitution Community Trust (the Trust). Opposing and replying papers were filed, and the matter was argued before me on 3 September 2010. On this date I dismissed the application and reserved judgment on costs. I furthermore indicated that my reasons for dismissing the application and my judgment on costs would follow at a later stage. These are my reasons for the order made and my judgment on costs.

PURPOSE OF THE

APPLICATION

[2] The purpose of the application was to seek a stay of arbitration proceedings pending before the Nineteenth respondent, a retired High Court judge, which proceedings had been set down for hearing from 6 September 2010 to 8 September 2010, pending the finalisation of an action instituted by the applicants against inter alia the seventh to eighteenth respondents in their capacity as trustees of the Trust. Summons in this action was issued on 25 August 2010, i.e the same date on which this application was filed. The litigating parties to the arbitration proceedings are the said trustees of the Trust as claimants and the first applicant (Lonrho) and first respondent (Theta) as respondents. The second applicant is not a party to these proceedings.

LOCUS STANDI OF

THE SECOND APPLICANT

[3] Adv. Stais SC on behalf of the second applicant conceded that the provisions of the Arbitration Act, no. 42 of 1965 (the Act) do not afford the second applicant a legal basis to approach this Court for the relief claimed in the notice of motion. He submitted, however, that the second applicant has a direct and substantial interest in the arbitration proceedings. To appreciate this submission, it is necessary to deal with the applicants’ claim as set out in the particulars of claim to the aforesaid action, as well as the subject matter of the arbitration proceedings.

[4] The substance of the arbitration proceedings is the enforcement of a right of pre-emption by the Trust against Lonrho for the purchase of Lonrho’s shares in Theta. The Trust and Lonrho are the only shareholders of Theta: the Trust 51 % and Lonrho 49 %. The relationship between the Trust and Lonrho is regulated by a written shareholders agreement. The right of pre-emption on which the Trust relies for purposes of its claim is contained in this agreement; the details whereof are irrelevant for purposes of this application. The shareholders agreement furthermore contains the arbitration agreement in terms whereof the arbitration proceedings were launched. Theta is the holder of a prospecting right issued in terms of the Mineral and Petroleum Resources Development Act, no. 28 of 2002 (the MPRDA).

[5] In their particulars of claim the applicants (as plaintiffs) claim the following relief:-

“1. An order setting aside the shareholders’ agreement dated 27 July 2007.

2. An order declaring that the relationship between the first plaintiff, the second plaintiff, the first defendant, the second defendant and the Trust is governed solely by the provisions of the Companies Act 61 of 1973, as well as the first defendant’s memorandum and articles of association.

3. Alternatively to paragraphs 1 and 2 hereof, an order to the effect that clauses 11 and 12 of the shareholders’ agreement dated 27 July 2007 are pro non scripto.

4. Further alternatively to paragraphs 1, 2 and 3 hereof, an order declaring that the seventh to eighteenth defendants, in their representative capacity, are not entitled to enforce the provisions of clause 12 of the shareholders’ agreement dated 27 July 2007.

5. An order prohibiting the arbitration proceedings before the nineteenth defendant from proceeding.

An order:

setting aside the fifth defendant’s registration of the first defendant’s prospecting right dated 29 October 2008 under Protocol No: 1171/2008;

remitting the matter to the fifth defendant with the direction to effect such registration on the basis of the shareholding as set out in the sixth defendant’s power of attorney dated 3 March 2008, with the clarification that the shareholding between the second defendant and the Trust should be divided equally.

An order directing the first defendant to rectify its register of members and register of shares to the effect that as at 29 October 2008, the shareholding in the first defendant was the following:

the first plaintiff – 30 %;

the second plaintiff – 20 %;

the Trust – 25 %;

the second defendant – 25 %.

Costs of suit against the seventh to eighteenth defendants in their representative capacity, but no costs order against any of the other defendants, save in the event of opposition.”

Pivotal to all claims of the second applicant is the assertion that it is entitled to a 20 % shareholding in Theta. The first applicant joins forces with the second applicant in the action as well as in this application.

[6] In considering the issue of locus standi, I deem the following dicta in our case law as apposite:-

“The question of joinder should surely not depend on the nature of the subject-matter of the suit, as some of the head-notes I have referred to would seem to imply, but – whether the suit relates to a will, an aqueduct, a partnership or anything else – on the manner in which, and the extent to which, the Court’s order may affect the interests of third parties.”

(Amalgamated Engineering Union v Minister of Labour, 1949 (3) SA 637 (AD) at 657);

“Before it is possible to consider these various arguments, it is necessary to determine whether the applicants have locus standi to bring an application for the rescission, or setting aside, of para. 4 of the Court’s order and for the further consequential relief claimed.”

“Although a number of authorities were cited in support, and as illustrations of the operation of the common law rule, counsel were not able to draw my attention to any South African case dealing with the question of locus standi to bring an application for the setting aside of a judgment or order; nor have I, in the limited time at my disposal, been able to find any. It is, however, of perhaps more than passing interest to read the following comment in Supreme Court Practice (1970) upon the English Rule of Court relating to the setting aside or varying of judgments given in default of appearance (at p. 117):

‘The Rule is designed to enable judgments by default to be set aside by those who have, or can acquire, a locus standi; it does not give a locus standi to those who have none (Jacques v Harrison, (1883) 12 Q.B.D. 136). A third party who desires to apply to set aside a judgment must show that he has a direct interest in so doing and must either do so in the name of the defendant with his leave, or he must make both the plaintiff and the defendant parties to the application

and ask for leave to intervene.’

In my opinion, an applicant for an order setting aside or varying a judgment or order of Court must show, in order to establish locus standi, that he has an interest in the subject-matter of the judgment or order sufficiently direct and substantial to have entitled him to intervene in the original application upon which the judgment was given or order granted. Before this approach can be usefully applied, however, it is necessary to examine more closely the right of a party to intervene in legal proceedings.

Intervention is closely linked with the matter of joinder; in fact it is often treated as a particular facet of joinder.”

“It is settled law that the right of a defendant to demand the joinder of another party and the duty of the Court to order such joinder or to ensure that there is waiver of the right to be joined (and this right and this duty appear to be co-extensive) are limited to cases of joint owners, joint contractors and partners and where the other party has a direct and substantial interest in the issues involved and the order which the Court might make.”

“This view of what constitutes a direct and substantial interest has been referred to and adopted in a number of subsequent decisions, including two in this Division (see Brauer v Cape Liquor Licensing Board, 1953 (3) SA 752 (C) – a Full Bench decision which is binding upon me – and Abrahamse and Others v Cape Town City Council, 1953 (3) SA 855 (C)), and it is generally accepted that what is required is a legal interest in the subject-matter of the action which could be

prejudicially affected by the judgment of the Court.”

(United Watch & Diamond Co v Disa Hotels, 1972 (4) SA 409 (CPD) at 414 to 415)

“The joinder of parties depends not only upon the nature of the subject matter, but also upon the manner in which and the extent to which the court order may affect the interests of the parties. The parties to be joined must accordingly have a direct and substantial interest not only on the subject matter of the litigation but also in the outcome thereof. A court, in the absence of a direct and substantial interest, has a discretion to order a joinder on the basis of convenience.”

(Haroun v Garlick, [2007] 2 All SA 627 (C) at par. 14).

[7] The outcome of the arbitration proceedings will have no effect on any of its rights the second respondent may have against the Trust or Theta or the first applicant since it is not a party to the arbitration proceedings. No award made in these proceedings will either be binding on – or res judicata in respect of the second applicant. The continuation of the proceedings will not prevent the second applicant from pursuing its instituted action, nor be prejudicial to any of its rights or claims it may have against the defendants in the action. See Horowitz v Brock & Others 1988 (2) SA 160 (AD) at 178 H – J.

7.1 Messrs. Lüderitz and Stais submitted that the interest of the second applicant in the arbitration proceedings is founded upon the allegation that the second applicant is entitled to a 20 % shareholding in Theta. Had these shares been alotted and transferred to the second applicant – so the argument continued – the shareholders agreement could not be entered into legally in the absence and without the consent of the second applicant qua shareholder, whereby that agreement (and the pre-emptive rights) are rendered invalid and void.

[8] The sole causa on which the second applicant relies for its entitlement to a 20 % interest in the shareholding of Theta, is the following:-

8.1 At the time when the sixth respondent hereto, the Deputy Director-General: Department of Minerals and Energy, approved the granting of a prospecting right to Theta, he authorised the third respondent hereto, the Regional Director: Department of Minerals and Energy, Kimberley, to issue the said prospecting right to Theta. The written power of attorney, dated 3 March 2008, authorising the third respondent to issue the prospecting right to Theta, contain at the foot of this document a handwritten note reading:-

“Shareholding Theta

State – 20 %

CPAA Community Trust – 50 %

NARE ADAMAS – 30 %”

8.2 The second applicant alleges that the words “State” is to be understood as a reference to itself, and further alleges that the sixth respondent authorised the issuing of the prospecting right subject to the condition that the shareholding in Theta be altered to conform to the stipulated condition. It is common cause that the shareholding in Theta remained unaltered to date, and that no shares were either transferred, donated or sold to the second applicant. The second applicant relies on no other causa for its alleged entitlement to the shares in Theta, but the aforesaid “condition” to the issuing of the prospecting right to Theta. (Lonrho was previously known/registered as Nare Adamas).

[9] To my mind the second applicant’s said claim is legally and factually unfounded and discloses no cause of action. In the absence of any agreement or other just cause between the Trust and the first applicant as the only shareholders in Theta on the one hand and the second applicant on the other hand, I can find no justification for – as put by Adv. Eloff SC for the trustees – the expropriation of a portion of the shares of the shareholders in Theta. Even if one is to accept that the sixth respondent intended to authorise the third respondent to issue the prospecting right to Theta subject to an alteration of the shareholding in Theta, the stipulation of such a condition appears to me to be ultra vires the statutory powers of the sixth respondent derived from the provisions of the MPRDA, unless the application for the prospecting right by Theta was premised on such an intended alteration of its shareholding. No evidence of such an intention or undertaking were tendered or even suggested. The third respondent was therefore entitled to ignore the aforesaid invalid condition and to issue the prospecting right free of such condition to Theta.

[10] Should my interpretation of the law as stated above be wrong, it appears to me that the second applicant has a further insurmountable hurdle to cross. Had the third respondent issued the prospecting right in a manner contrary to what he was authorised to do, it follows that his actions (the issuing of the right) render the right so granted invalid and voidable. The applicants, however, are not attacking the validity of the prospecting right, but endeavours to circumvent an attack on the validity of the right by claiming a declaratory order that the second applicant is entitled to a 20 % shareholding in Theta, so as to conform to the conditions stipulated by the sixth respondent. In the absence of any arrangement or agreement between the shareholders of Theta and the second applicant, such a claim is, to my mind, still-born.

[11] For these reasons, and since the second applicant is not a party to the arbitration proceedings (cf. Freightmarine Shipping v S Wainstein and Others, 1984 (2) SA 425 (D & CLD), the second applicant has not persuaded me that it had a direct or substantial interest in the stay of the arbitration proceedings to clothe it with the necessary locus standi to bring this application.

URGENCY

[12] I now turn to the question of urgency.

It is common cause as between the first applicant and the trustees that,

The pleadings in the arbitration proceedings are closed;

All preliminary points taken in the arbitration proceedings were disposed of on 27 May 2010; and

The dates for the hearing of the arbitration had been agreed upon by all parties thereto during a second pre-arbitration meeting before the arbitrator on 11 August 2010.

Despite the aforesaid, the first applicant delayed the filing of this application until 25 August 2010. No explanation or reasons were advanced by or on behalf of the first applicant for the delay, and Adv. Lüderitz on behalf of the first applicant did not even attempt to explain why the application was not filed at an earlier stage of the arbitration proceedings. On the contrary, Mr. Lüderitz readily conceded that the first applicant did not meet the requirements for bringing the application on an urgent basis. He nevertheless requested me to entertain the application as such, since it could not be expected of the second applicant to have filed the application at an earlier date.

There is no merit in this submission of Mr. Lüderitz. The second applicant and its attorney were admittedly aware of the arbitration proceedings since at least 16 May 2010. The excuse advanced by the attorney of the second applicant viz that he was not informed by the attorney for the first applicant of the dates of the hearing of the arbitration and that he only became aware thereof on 20 August 2010, is patently unacceptable. Nothing prevented him from enquiring from any of the attorneys representing the parties to the arbitration proceedings whether and/or when the arbitration was set down for hearing. The set down of the arbitration for hearing was in any event not a prerequisite for the filing of the application. Nothing prevented the second applicant to bring this application timeously since 16 May 2010. See Twentieth Century Fox Film Corporation and Another v Anthony Black Films (Pty) Ltd, 1982 (3) SA 582 (W) at 586 A to C.

Any urgency there may have been in filing the application on 25 August 2010, is therefore self imposed. The applicants accordingly failed to make out a case for urgency, and on this ground too, the application was doomed to failure.

DISCRETIONARY

POWER

[13] However, and if I erred in my aforesaid findings, I had not been persuaded to exercise my discretion in favour of the applicants.

It is trite that a court will only refuse a party the right to have its case ventilated on arbitration where such an agreement exists, on very strong or compelling reasons. See Universiteit van Stellenbosch v JA Louw, 1983 (4) SA 321 (AA) at 333H to 334C; Kmatt Properties v Sandton Square Portion 8 (Pty) Ltd, 2007 (5) SA 475 (WLD) at 487 to 488. The onus to persuade a Court to refuse arbitration to a party to such an agreement, rests on the party who applies for such refusal or stay. (Universiteit van Stellenbosch (supra) at 333H).

Counsel were ad idem that I, in the exercise of my discretion, am entitled to take into account the strengths and/or weaknesses of the case the

applicants wish to pursue in this court. I have already dealt with this issue earlier in this judgment, and concluded that no proper cause of action had been disclosed in the particulars of claim. At best for the applicants one can say that their prospects of success in the action are poor to almost non-existent. To deny the trustees a hearing in the arbitration under these circumstances, will be more than unreasonable.

The main thrust of Mr. Lüderitz’s argument was that, to allow the arbitration to proceed, would result in a multiplicity of hearings regarding arbitral and non-arbitral issues. It was conceded by Mr Lüderitz that almost all causes of action relied upon by the applicants in their particulars of claim, had been raised in defence by the first applicant in the arbitration proceedings, and will be dealt with in the arbitration hearing.

The only so-called non-arbitral causes of action raised in the particulars of claim are

(a) a claim for the rectification of Theta’s prospecting right as registered in the Mineral and Petroleum Titles Registration Office under the Mining Titles Registration Act, No. 16 of 1967, to the effect that clause 16 thereof is set aside and

“remitting the matter to the fifth defendant, with the direction to effect such registraton on the basis of the shareholding as set out in the sixth defendant’s power of attorney dated 3 March 2008, as is contemplated in section 8(1)(c)(i) of the Promotion of Administrative Justice Act 3 of 2000.”;

(b) a right to a declaration in terms of Section 8(1)(d) of PAJA that, as at 29 October 2008,

“53.1 the shareholding in the first defendant was the following:

The first plaintiff – 30 %;

53.1.2 The second plaintiff – 20 %;

53.1.3 The Trust – 25 %;

53.1.4 The second defendant – 25 %.

an alternative claim in terms of PAJA directing the Trust

“from refraining to implement the shareholders’ agreement dated 27 July 2007 in any manner which would have the effect of affecting the sharheolding contemplated in the decision of the sixth defendant, as reflected in his power of attorney dated 3 March 2008, which includes the continuation of the arbitration before the nineteenth defendant.”

a claim for the rectification of Theta’s register of members in terms of Section 115 of the Companies Act of 1973

“in accordance with paragraph 53.1 hereof, since the second plaintiff’s and second defendant’s names have, without sufficient cause, been omitted from the register of the first defendant.”

As already stated, the prospects of success on these causes of action are so remote and negligible that it would cause unnecesary hardship to the trustees if the arbitration proceedings are to be stayed at this stage of the proceedings. In regard to Mr Lüderitz’s reliance on the Universiteit van Stellenbosch-case (supra), no more needs to be said but that the facts in that case are totally distinguisable from the alleged facts in this matter.

13.4 The continuation of the arbitration proceedings will result in a speedy determination of the disputes between the Trust and the first applicant. That will – at least as between these parties – foster legal certainty.

COSTS

[14] What remains for consideration is the question of costs. Mr Eloff submitted that the conduct of the applicants amounts to such an abuse of the process of this Court to justify a punitive costs order. Messrs. Stais and Lüderitz argued that such an order is not justified. I am inclined to agree with Mr Eloff.

As pointed out hereinbefore, the applicants waited until the eleventh hour to file their application. No cogent reasons were advanced or relied upon for this unacceptable conduct.

There is merit in Mr Eloff’s argument that the primary purpose of the application was to delay the finalisation of the arbitration proceedings on grounds that smack of mala fides. No purpose will be served to once again traverse those grounds.

[15] Wherefore the following order is made:

1. THE DISMISSAL OF THE APPLICATION IS CONFIRMED.

2. THE APPLICANTS ARE DIRECTED TO PAY THE OPPOSING PARTIES’ COSTS ON THE ATTORNEY AND CLIENT SCALE; SUCH COSTS TO INCLUDE THE COSTS OF TWO COUNSEL.

___

HJ Lacock

JUDGE

On behalf of 1st Applicant: Adv. Lüderitz o.i.o Van de Wall and Partners

On behalf of 2nd Applicant: Adv. Stais o.i.o Van de Wall and Partners

On behalf of 7th to 18th Respondents: Adv. Eloff o.i.o. Adrian B. Horwitz Attorneys