Matlala and Others v Mosalakae and Others (49867/2010) [2017] ZAGPPHC 1032 (13 November 2017)

IN THE HIGH COURT OF SOUTH AFRICA

GAUTENG DIVISION, PRETORIA

Case number: 49867/2010

13/11/2017

In the matter between:

NOMSA

MATLALA

FIRST PLAINTIFF

ESTER

MAPHANGWE

SECOND PLAINTIFF

MARIAM

MOTSHABI SEKATI

THIRD PLAINTIFF

SUZAN

NELUHENI

FOURTH

PLAINTIFF

TSHIMBILUNI INVESTMENT HOLDINGS (PTY)

LTD FIFTH

PLAINTIFF

PEMBELANI INVESTMENT HOLDINGS (PTY) LTD

SIXTH

PLAINTIFF

and

NEO

DOREEN MOSALAKAE

FIRST

DEFENDANT

HOLOFELO

MOSALA

SECOND DEFENDANT

EMMA

MAHWANA MAKATU

THIRD

DEFENDANT

IANE

ELIZABETH JOSUA

FOURTH DEFENDANT

SEDIMOZA (PTY) LTD

FIFTH DEFENDANT

NTOMBISI

SIXTH DEFENDANT

KOTULO-NALA CC

mghmghmghm

SEVENTH DEFENDANT

ISENZO

ESHILE CONTRACTORS CC

EIGHT DEFENDANT

BINDI J-ZEE TRADING ENTERPRISE CC

NINTH

DEFENDANT

GUNDO INVESTMENTS (PTY)

LTD

TENTH DEFENDANT

DIHLA INVESTMENT HOLDINGS (PTY) LTD

ELEVENTH DEFENDANT

THE

REGISTRAR OF COMPANIES AND CLOSE

CORPORATIONS

TWELFTH DEFENDANT

JUDGMENT

DE KLERK AJ:

Introduction:

[1] The Plaintiffs initially approached the Court on application proceedings. The matter was subsequently referred to trial. It was this part of the proceedings that I am now seized of. The Plaintiffs seek the rectification of the register of members of the Tenth Defendant, to which I shall henceforth refer to as Gundo, so to reflect equal shareholding of the following seven entities namely Tshimbiluni Investment Holdings (Pty) Ltd, Pembelani Investment Holdings (Pty) Ltd, Sedimoza (Pty) Ltd, Kotulo-Nala CC, lsenzo EshileContractors CC, Ntombisi CC and Bindi J-Zee Trading Enterprise CC. The register presently reflects only two members to wit the Fifth and Sixth Defendants, to which I shall henceforth refer to as Sedimoza and Ntombisi, which each hold 50% share. The said relief is sought in terms of the provisions of Section 115 of the Companies Act 61 of 1973.

[2] During the course of the trial, counsel for the Defendants informed me that the Defendants were only persisting with their alternative defence. In other words the identity of the members of Gundo had been conceded. This being the case it is common cause that Gundo's

register of members should be rectified by registering the aforesaid seven entities, as the members. It was furthermore conceded by counsel for the Defendants' that up until May 2002 the shareholding in Gundo was equal in respect of the seven entities. Same was based on the payments which these entities have made during 1997 towards membership fees. It is the Plaintiffs' case that this is still the position. The Defendants' case on the other hand is that Ntombisi and Sedimoza are entitled to a larger shareholding in Gundo. In this regard they rely on a rights offer in terms whereof they have taken up further shares during 2002. The remaining question for determination is therefore in what proportion these seven entities should be registered in the register of members of Gundo. This in fact entails the determination of the seven entities title to the said shares.

[3] Section 115 of the Companies Act 61 of 1973, provides as follows:

“115. Rectification of register of members (1) If- ...

(3) On any application under this section the Court may decide any

question relating to the title of any person who is a party to the application to have his name entered in or omitted from the register, whether the question arises between members or alleged members or between members or alleged members on the one hand and the company on the other hand, and generally may decide any question necessary or expedient to be decided for the rectification of the register."

[4] In the case of Verrin Trust & Finance Corporation (Pty) Ltd v Zeeland House (Pty) Ltd and Others 1973 (4) SA 1(C) at p9 the following was said with reference to the corresponding provision in the previous Companies Act:

"The true nature of an application under sec. 32 was considered by Stratford, J.A., in the case of Jeffery v Pollak and Freemantle, 1938 AD 1 at pp. 18-19. In his judgment the learned Judge of Appeal stated that essentially such an application is concerned with title to be on the register and not with the ownership of the shares in issue. Consequently -

'... there is no onus on the person previously on the register to prove his ownership and secondly the Court is not necessarily concerned with ownership at all, for, as is admitted, the right to be on the register may be independent of ownership'.

A court hearing such an application may, therefore, quite properly confine itself to the minor and direct dispute as to whether the register should be rectified or not and leave it to the parties thereafter to debate the question of ownership in a trial action. On the other hand, in terms of sub-sec. (3), the Court is empowered to investigate all questions in dispute between the parties and would, accordingly be entitled to determine the issue as to ownership if so advised." (My own emphasis.)

I am satisfied on a proper interpretation of Section 115 (3) that I c.an determine the issue as to the title to the said shares.

[5] I now turn to a summary of the history of the formation of Gundo. These facts are substantially common cause.

[6] During 1997 a certain George Negota, who was a reputable member of the Diepkloof community and an attorney by profession, invited groups of woman belonging for instance to societies, clubs, and stokvels to his home to inform them about various Black Economic Empowerment (BEE) opportunities, the main initiative being from a horseracing Company. The idea was to benefit as many women as possible which was certainly a noble one. Mr. Negota furthermore advised those present to form a BEE Company as a vehicle for such business ventures. He also offered to assist them in that regard. Those women in turn went out and spread the word amongst other women. Subsequently a further meeting was held on 14 June 1997. According to the minutes of the said meeting the First Defendant, Neo Mosalakae, to whom I shall henceforth refer to as Neo, addressed those present and stated that the purpose of the meeting was to form a formidable group of women which would be able to partake in various business ventures. It was recorded in the minutes

of the said meeting that 28 groups and approximately 225 individuals were in attendance. It was further required of each group to pay a membership fee of R2 000.00. They were also given a deadline within which to register the various groups as companies or close corporations.

[7] On 25 August 1997 a further meeting was held at which meeting eight Directors were haphazardly appointed. The reason for that was to facilitate the registration of the intended BEE Company. A shelf Company to wit New Shelf 271 (Pty) Ltd was obtained for that purpose. The understanding was however that the entities which were represented by these Directors would eventually be registered as the members of the Company. The first Directors were: Neo Doreen Mosalakae, Esther Maphangwe, Kholofelo Mosala, Nomsa Matlala, Mariam Motshabi Sekati, Suzan Neluheni Emma Makatu and Diane Josua.

[8] At a meeting held on 25 September 1997 it was resolved that the name of the shelf Company, its main object and business as well as the Articles of Association should be changed. Consequently the name was changed to Gundo Investments (Pty) Ltd. The main object and business of the company were changed to read as follows: "To promote economic empowerment of women through investment holdings."

[9] In the meantime the horseracing Company Phumelela Gaming and Leisure Limited, to which I shall henceforth refer to as Phumelela, which Company intended, upon listing on the Johannesburg Stock Exchange, to offer a certain percentage of its shares at a discount price to various BEE Companies, invited such Companies to make representation to it for possible selection as such. The idea was to form a Company called Dihla Investment Holdings (Pty) Ltd, to which I shall henceforth refer to as Dihla, which would hold shares directly in Phumelela. The various smaller BEE Companies in turn would became members of Dihla. Gundo made representation and was selected by Phumelela as one of the smaller BEE Companies to form part of Dihla. A representative of each member of Dihla would serve on the Board of Directors of Dihla. The First Plaintiff, to whom I shall henceforth refer to as Nomsa, was appointed as Gundo's representative.

[10] The process preceding the listing of Phumelela was however a long one and with the lapse of time interest on the part of some of the members of Gundo started to dwindle. However listing of Phumelela was always on the cards and eagerly awaited by other members.

The announced listing of Phumelela:

[11] On 15 May 2002 Dihla addressed a letter to all its members to inform them that Phumelela would be listed on 7 June 2002. It was further mentioned that the value of Dihla's shares in Phumelela was R4, 375 million. The letter went on to say that Phumelela required Dihla to pay a 10% deposit for its shares in Phumelela which in turn entailed that each member of Dihla had to, on its part, pay a 10% deposit for its shares in Dihla. It was further recorded that a certain Company called Nafhold had made a "share swap" offer to all the members of Dihla in terms whereof Nafhold would raise the required sum on certain terms and conditions. The balance of the amount due by Dihla had been financed by the Gambling Association. In terms of a "lock in" clause the members of Dihla were prevented from selling their shares until the said loan had been repaid.

The events following the announced listing of Phumelela:

[12] Arising from same a meeting of the Board of Directors of Gundo was held on the 5thh June 2002. The meeting was attended by Nomsa, Neo, the Second Defendant to whom I shall henceforth refer to as Kholofelo, and a certain Fanny. It was recorded in the minutes of the said meeting that four of the initial eight Directors had since resigned. The remaining Directors were Nomsa, Neo, Kholofelo and Emma Makatu. It was further resolved by the Board of Directors that the members would raise the required deposit themselves rather than to take up Nafhold's 'share swap' offer. This decision was conveyed to Dihla in a letter dated 7 June 2002.

[13] In reality however the raising of the funds seemed to be a tall order. There also seemed to have been a lack of communication between the members and/or Directors of Gundo. This is evident from inter alia the following events: It was recorded in the minutes of a meeting of the Board of Directors of Dihla held on 22 August 2002 that Nomsa had indicated to the Board that Gundo would like to reconsider its position with regard to the share swap offer from Nafhold and had in the meantime withdrawn the letter declining the said offer. About the same time Neo, on her part engaged the services of an attorney, one Don Qwelane to whom I shall henceforth refer to as Don. Don's mandate was to assist with the drafting of a rights offer.

The rights offer:

[14] Don consequently drafted a memorandum dated 23 September 2002 to call a meeting for the 5th of October 2002. Because of the importance thereof the relevant part

is quoted.

"Re: Gundo Investments (Pty) Ltd (“Gundo”) payment of outstanding money to Dihla Investments (Pty) Ltd

Dear All

1. I refer to the above matter.

2. Gundo members are aware that Gundo has to pay approximately R60 000(sixty

thousand rand) on or before the 15 November 2002 to Dihla Investments (Pty) a company holding shares in Phumelela. The amount constitutes 10% of the value of Phumelela shares at the date of listing of Phumelela.

3. A meeting will therefore take place on the 5 (Saturday) October 2002, 2pm, to resolve the above issue. The meeting will be held at AST Africa CC offices being, 1st Floor, Fulham House, Hampton park, 20 Georgian Crescent, Bryanston.

4. Please confirm your attendance prior to the 30 September 2002.

Should you need further information feel free to contact me at 084 3333 268."

[15] It was also part of Den's mandate to notify the members of Gundo accordingly.

[16] The only members of Gundo who attended the said meeting were Neo, Kholofelo and a certain Dr Syble Seoka. All three of them were members of Sedimoza and Dr Seoka was also a member of Ntombisi. The meeting was also attended by Don. At the meeting a rights offer contained in a resolution which had been drafted beforehand by Don, was moved and passed.

[17] On 9 October 2002 a further memorandum was drafted by Don and signed by Neo. Because of the importance thereof the relevant part is similarly quoted:

"Re: Gundo Investments (Pty) Ltd (“Gundo”) payment of subscription for shares in Phumelela to Dihla Investments (Pty) Ltd.

Dear All

1 I refer to the above matter.

2. A meeting was held on the 5 October 2002 at 1st Floor, Fulham House, Hampton Park, Bryanston. I wish to record that some members of Gundo did send their apologies whilst others chose not to attend the meeting.

3. It was resolved as follows at the meeting

3.1 that the amount of R60 000 required on or before 15 November 2002 being 10% of the value of Gundo's shares in Phumelela at the date of listing of Phumelela plus Dihla's administration costs be raised by issuing new shares in Gundo that will be offered to present Gundo shareholders;

3.2 that such offer be sent to each shareholder stating that the offer is for a specific period of 2 weeks from date of this letter;

3.3 that there should be no limit to the amount of shares a group/shareholder can subscribed to, but that a/location will be as follows:

3.3.1 if fully subscribed, each offeree will be allocated full quota of shares applied for;

3.3.2 if oversubscribed, the amount will be reduced proportionally such that each offeree is allocated a proportional amount of shares and

any extra amount will be refunded; and

3.3.3 if any shares remain unsubscribed for, these will be offered to any shareholder(s) able to take them up.

3.4 that all the other groups will still remain shareholders of Gundo based on their subscriptions of R2 500 paid by each group in 1997. It should however be noted that this will change the ultimate shareholding in Gundo."

[18] It was also part of Den's mandate to send the rights offer to the members of Gundo.

[19] On 22 October 2002 a certain Lindiwe Silimela, acting in her capacity as representative of Ntombisi, informed Don in an e-mail that Ntombisi would 'take up shares to the value of R30 000.00'. Lindiwe Silimela is Dr Seoka's sister. The other members of Ntombisi are their siblings.

Payment of the required deposit to Dihla:

[20] On 12 November 2002 Neo, acting in her capacity as representative of Sedimoza and Lindiwe Silimela acting on behalf of Ntombisi attended at the offices of Dihla to each present a cheque for an amount of R26 250.00 to Dihla. In a covering letter on Gundo's letter head and signed by Neo the following was inter alia stated:

"Re: Gundo payment of subscription for shares in Phumelela to Dihla

1. ….

2. This letter serves to confirm that Ntombisi CC and Sedimoza (Pty) Ltd being shareholders of Gundo Investments (Pty) Ltd have raised an amount of R52 500 being for payment of their shares in Phumelela.

Kindly acknowledge payment from Ntombisi CC and Sedimoza (Pty) Ltd."

[21] On 12 November 2002 Neo had also send a memorandum to the members of Gundo informing them that Sedimoza and Ntombisi had paid the required deposit of R52 500 directly to Dihla. It was further stated that "The shareholding in Gundo will as a result change in that Sedimoza and Ntombisi's shareholding will increase. All the other groups who have not been in a position to raise the R52 500 will still remain shareholders of Gundo based on their subscriptions of R2 500 paid by each group in 1997".

[22] Neo was however informed by the secretary of Dihla a certain Leonard Makhanda, to whom I shall henceforth refer to as Leonard, that the two cheques would not be presented for payment. Consequently Neo convened a meeting of the members of Gundo for the 15th of November 2002. At the said meeting Dr. Seoka moved the following resolutions which were however not adopted by the members. Because of the importance thereof the resolutions are quoted in full:

"Resolution 1

We resolve that

In view of the results of the share placing of Phumelela as per Gundo Board resolution of 5 June 2002 made to raise funds to pay the deposit for Phumelela shares and such resolution having been communicated to Dihla (Pty) Ltd in writing, the shareholding in Gundo be adjusted proportionate to the financial contribution to date of each shareholder such that Sedimoza (Pty) Ltd and Ntombisi CC hold 282.5 shares each and the remaining groups hold the initial 20 shares each, based on the initial R2000 contributed by each shareholder in 1997, recognizing that such funds have been used by the company in the ordinary course of its business.

Resolution 2

The minority shareholders who were not able to take up the share offer by 15 November 2002, be given the opportunity to raise their shareholding in Gundo if they so wish by further placement of shares in Gundo based on 10% of the value of Phumelela shares as at close of JSE on 15 November 2002 (R2.07 x1 050 000) which is R414.00 per Gundo share and such payment will be in cash payable by no later than 31 March 2003, failing which all rights to do so will be forfeited. A further re-adjustment of shareholding in Gundo will then be effected based on the results of this offer which is not available to Sedimoza (Pty) Ltd and Ntombisi CC."

[23] On 30 November 2002 a further meeting of the members of Gundo was held. According to the minutes of the said meeting it was recorded that Don was appointed by Sedimoza and that Sedimoza and Ntombisi had already consulted with their attorney. It was further recorded that according to Nomsa Nafhold had paid the required deposit on behalf of all the members of Dihla with the exception of a certain entity called Rixile.

[24] In a letter dated 18 December 2002 from Moss Cohen attorney who acted on behalf of Sedimoza and Ntombisi to Dihla it was inter alia stated that: 'the amount payable for 10% of the price of the shares were delivered to your offices timeously. Notwithstanding we are informed that you have not deposited the cheques for payment. ... would you please advise us .... that our client's cheques has now been deposited and their entitlement to shares is formally entrenched. (Sic.) In reply Dihla stated that: 'Nafhold

made an offer to all the Dihla shareholders on 8 November 2001 which was not accepted by Gundo. Subsequently at a meeting of Dihla on 21 October 2002 the representative from Gundo has agreed on behalf of Gundo to accept the offer... To date Nafhold has carried the finances of Dihla and have not taken ownership of any Gundo shares. When the legal agreements relating to the transfer of shares are drawn up Gundo will be

approached like all other shareholders in this regard. They still would have the option of declining the offer and continue as a shareholder of Dihla." (Sic.)

[25] On 22 February 2003 a further meeting of the members of Gundo was held. At this meeting the imminent split between the two litigating factions of Gundo became apparent. It was resolved, following a proposal by Faith that Sedimoza and Ntombisi should be reimbursed,that a dispute would be declared if the said proposal was not accepted.

[26] By the end of 2003 Nafhold was putting pressure on Dihla to repay the loan. Consequently on 3 October 2003 Leonard, who was still in possession of the cheques from Sedimoza and Ntombisi arranged a meeting with Moss Cohen. On 3 October 2003 Moss Cohen in a letter addressed to Dihla recorded the following: "Dihla will now accept the cheques previously tendered on behalf of Gundo by Sedimoza and Ntombisi for the deposit payable in respect of the shares in the above company allocated to it." In consequence thereof payment of an amount of R52 500 was made on 14 October 2003 by Sedimoza and Ntombisi directly into Dihla's bank account.

[27] On or about 1 November 2003 a meeting was held between the two litigating factions and Nafhold. The representative of Nafhold a certain Mr. Michael Leaf proposed that Sedimoza and Ntombisi should be reimbursed, which proposal was rejected by both factions. It was further proposed by Mr. Leaf that Gundo should pay as much as possible towards the Nafhold loan to Dihla. Subsequently further

payments were made by other members of Gundo in this regard.

The continuing dispute between the two factions of Gundo:

[28] At a meeting of the Board of Directors of Gundo held on 4 March 2004 Nomsa was removed as a Director of Gundo.

[29] On 22 May 2007 the legal representatives for both factions of Gundo met. In a subsequent letter dated 28 May 2007 from Moss Cohen to Edelstein Bosman who were at that time acting on behalf of the other faction, it was recorded that: "We refer to the second phase as the steps necessary to resolve exactly who are the shareholders of Gundo and what are their respective entitlements thereto. We believe that one item that should be common cause is that the persons who are registered as being shareholders

of Gundo are not entitled to be shareholders in their own right. The shareholders should be Black Economic Empowered entities whom they represent... The intention never was to enrich only the eight persons who are registered in the share register as shareholders."

Regularisation:

[30] During the latter part of 2007 Neo approached the auditors firm Johan Swartz & Associates to regularise Gundo. It was established that a certain Mr. Lederman was the only shareholder of Gundo. Neo was advised by the said auditors to approach Mr. Lederman to have his share transferred to Gundo. Upon her request Mr. Lederman then transferred his one share into her name. Neo furnished the auditors with proof of same as well as amongst others the rights offer, proof of payment by Sedimoza and Ntombisi of the amount of R52 500 to Dihla as well as the membership fee of R2000.00. A legal notice calling

upon all the members of Gundo to present proof of their shareholding to the said auditors was placed in the Sowetan of 22 November 2007. Only Sedimoza and Ntombisi responded to the said notice. The register of members of Gundo was then amended to reflect that Sedimoza and Ntombisi each hold a 50% share in Gundo. During 2008 Sedimoza and Ntombisi were accordingly provided with their respective share certificates in Gundo.

[31] At a meeting of the members of Gundo held on 7 August 2008 it was resolved that Fanny would see to the registration of the seven entities as the shareholders of Gundo. The meeting was called by the 'other faction' and attended by amongst others Neo as well as Dr Seoka.

[32] At a further meeting held on 19 August 2008 Dr Seoka informed the 'other faction' that they did not recognised that meeting as well as the previous meeting of 7 August 2008.

[33] On 20 November 2008, Edward Nathan Sonnenberg Attorneys, who at that time acted on behalf of Sedimoza and Ntombisi, stated in a letter addressed to the other faction's attorney inter alia as follows:

1. We write this letter at the instance of Gundo Investments (Pty) Ltd (“Gundo”) as well as Sedimoza (Pty) Ltd and Ntombisi CC (“our clients”)..

2. Sedimoza and Ntombisi each hold 50% of the issued share capital in Gundo.

3. On 13 November 2008 your offices forwarded minutes of a purported meeting of the shareholders of Gundo held on 7 August 2008. It is not clear whom you purport to represent given that our offices represent the three entities with an interest in the subject matter. Kindly advise us as a matter of urgency on behalf of whom you act...

4.3 Gundo was required to raise an amount of R52 500.00 to pay the deposit in order to secure the shares in Phumelela (through Dihla).

4.4 At the time the single issued share in Gundo was held by Mrs Neo Mosalakae.

It was agreed that the amount would be raised by issuing shares proportionately amongst those who were willing and able to contribute to the deposit.

4.5 Only Sedimoza and Ntombisi subscribed and the required deposit was raised from them and paid to Dihla on 12 November 2002. As a result Sedimoza and Ntombisi are the only shareholders in Gundo, each owning 50% of the issued share capital.

Sedimoza and Ntombisi are entered into Gundo's Members Register (a copy of which is attached for your perusal) as its only members. Should your clients dispute the status quo, they should seek redress in the appropriate forum and not take the law into their own hands."

[34] These proceedings were then instituted during August 2010.

[35] Pending the outcome of the dispute between the two litigating factions the dividends to which Gundo became entitled to are held in Trust. During 2010 the amount was already in excess of R6 million.

Factual disputes:

[36] The factual disputes between the parties involve among others firstly whether proper notice of the meeting of 5 October 2002 had been given, secondly whether the principle of unanimous assent is applicable, thirdly whether the rights offer had been sent to all the members of Gundo, fourthly whether the rights offer had been properly accepted by Sedimoza and fifthly whether payment had been made in terms thereof.

[37] It is desirable that I first decide the question as to whether a contract had been entered into between Gundo and Sedimoza as well as between Gundo and Ntombisi to take up further shares in Gundo following a rights offer. This is so because whatever right or title Sedimoza and Ntombisi may have to 'more shares' is derived by them from such a contract. Furthermore even if all the statutory

requirements have been complied with the question still remains whether a justa causa, in this case a contract to take up further shares had been entered into.

[38] Before I revert to the evaluation of the facts in this regard I first turn to examine the law.

[39] In Gaffoor and Another NNO v Vangates Investments (PTY) LTD and Others 2012 (4) SA 281 (SCA) it was said that: "A share is a collection of personal rights which is transferred by cession. In the words of Howie JA in Botha v Fick in respect of the

transfer of shares:

'1. Blote consensus is voldoende om sessie daar te stel.

.2 Sessie geskied deur middel van 'n oordragsooreenkoms wat sat saamval met, of voorafgegaan word deur, 'n justa causa. Die justa causa kan 'n verbintenisskeppende ooreenkoms

wees.'

In this case, the purported transfer of the shares did not comply with either of these requirements. There was no contractual or other basis Ousta causa) for the purported transfer. Neither was there any intention on the part of the executors of the deceased estate to relinquish or pass title to the disputed shares to the remaining shareholders or to anyone else."

[40] In Bauermeister v CC Bauermeister (PTY) LTD and Another 1981 (1) SA 274 (W) at 685E-G it was said that: "In the ordinary way the fact that an allotment of shares is not in accordance with the contract creates a strong equity in favour of a shareholder and will usually result in a Court exercising its discretion to rectify the register, even after liquidation. Thus Bristow J in the case of In re the Contributories of the Rosemount Goldmining Syndicate 1905 TH 169 said at 188 that:

'The question in fact depends solely on the contract which the parties have entered into.'

If this statement were literally true, there would, of course, be no discretion. But rectification is a matter within the discretion of the court ..."

[41] A rights offer is defined in Henochsberg on the Companies Act (issue 28) p 260 as follows: "Rights offer. - A rights offer or rights issue may take a variety of forms. Basically what such an offer or issue involves is the delivery by the company to each of its existing members (or debenture-holders) of what is known as a letter of right, i.e. in the language of the Act, a letter of allocation (see the definition of "letter of allocation in this section), conferring on him the right to subscribe within a specified period for shares (or debentures) in the new issue in proportion to his existing holding - usually, by way of inducement, at a price below the current market price of the shares (or debentures) comprising such holding... The shares (or debentures) are allotted (or issued) by the company to the holder of the letter who applies therefor and pays the price."

[42] In The Law of Contract in South Africa at p 112, by J.E du Plessis, it was said that: "But benevolent interpretation must not be taken too far. In Burroughs Machines Ltd v Chenille Corpn of SA (Pty) Ltd 1964 (1) SA 669 (W) 671 Colman J noted the warning of Lord Wright in Hlllas & Co Ltd v Arcos Ltd [1932] UKHL 2; (1932) 147 LT 503 (HL) 514 against making a contract for the parties and going outside the words they have used, and the warning of Viscount Maugham in Scammell & Nephew Ltd v Duston (1941) AC 251 255 against finding consensus ad idem by mere conjecture."

[43] In the case of Reymond v Abdulnabi and Others 1985 (3) SA 348 (W) at p349 it was said that: "It is well established, and indeed basic, that, for there to be a valid contract of sale, there must be agreement as to the purchase price (Burroughs Machines Ltd v Chenille Corporation of SA (Pty) Ltd 1964 (1) SA 669 (W) at 670), which must be fixed or determinable by the parties' agreement. (Aris Enterprises (Finance) (Pty) Ltd v Waterberg Koelkamers (Pty) Ltd 1977 (2) SA 425 (A) at 434.) In the latter instance, a method by which the price can be fixed or, as Colman J said in Burroughs Machines

(supra at 670)

"some external standard by the application whereof it will be possible to determine the price" has to be agreed on. Where it applies, it is important, as Mackeurtan Sale of Goods in South Africa 4th ed at 45 says, that:

"it should be possible to ascertain the price by the method agreed upon, otherwise there is no agreement between the parties as to price, and therefore no sale." (My own emphasis.)

[44] In Daniels and Another v Stander (3433/2010) (2011) SAWCHC 193; 2012 (2) SA 586 (WCC) (1 April 2011) it was said that: "Holmes JA in Oakland Nominees (Pty) Ltd v Gelria Mining & Investment Co (Pty) Ltd 1976 (1) SA441 (A) held at 452 A-G that: "Our law jealously protects the right of ownership and the correlative right of the owner in regard to his property, unless of course, the possessor has some enforceable right against the owner."

Evaluation of the facts:

[45] It is, as stated before, the Defendants' case the Ntombisi and Sedimoza are entitled to a larger shareholding in Gundo. In this regard they rely on a rights offer in terms whereof Ntombisi and Sedimoza have taken up further shares during 2002. The terms of the rights offer were set out in the memorandum dated 9 October 2002. As is evident from same the purpose thereof was to raise the funds to pay the required deposit for Gundo's shares in Dihla. The members of Gundo were given a period of two weeks to subscribe for shares in the new issue. No limit was placed to the 'amount of shares' a shareholder could subscribe for. The manner in which the allocation of shares would take place was prescribed. No mention was made of the number of shares on offer and the price per share.

[46] The only written offer of acceptance was received from Ntombisi by way of an e-mail dated 22 October 2002 in which it was stated that Ntombisi would 'take up shares to the value of R30 000.00'. In consequence thereof Ntombisi and Sedimoza each presented a cheque in an amount of R26 250.00 on behalf of Gundo to Dihla on 12 November 2002.

[47] In a subsequent letter dated 12 November 2002 by Neo to the members of Gundo, she only mentioned that the shareholding in Gundo would as a result of the aforesaid change in that 'Sedimoza and Ntombisi's shareholding will increase and that all the other groups will still remain shareholders of Gundo based on their subscriptions of R2 500.00 paid by each group in 1997'. No mention was made by Neo of the proportion in which Ntombisi and Sedimoza's respective shareholding in Gundo would change.

[48) On 16 November 2002 Dr Seoka tabled a further resolution in which the number of the shares held by Ntombisi and Sedimoza in Gundo were clearly set out.

[49] Annexure E1 to the Defendants' plea reflects that one share had been transferred to Neo on 25 August 1997 and after 99 further shares had been issued 100 shares were then transferred to Sedimoza on 25 August 1997. Fifty of these shares had been transferred to Ntombisi on 12 November 2002. The aforesaid is not in accordance with the rights offer relied on by the Defendants.

[50] When Dr Seoka was asked in cross-examination, with regard to the rights offer, how many shares were on offer and at what price per share, she was unable to answer the question. When asked about the resolutions proposed by her on 16 November 2002 Dr Seoka testified that same was necessary to determine the shareholding in Gundo. When it was put to her that a similar resolution had already been passed on 5 October 2002 she answered 'I guess for clarification'.

[51] Neo was similarly asked in cross-examination about the number of shares on offer and at what price per share to which she answered 'a thousand shares at R1.00 each, you do the maths and divide'. She was however unable to say to what extent the other members' shareholding in Gundo were, as a result thereof, diluted and to what extent Ntombisi and Sedimoza's shareholding were increased. She testified that it was ‘just the principle’ and that the calculation would be done later.

[52] It is trite that the merx and the price are essential elements of the contract. On the facts before me I find that there had been no agreement as to the number and the price of the shares. It follows that no valid contract to take up further shares in Gundo had been entered into between Gundo and Ntombisi as well as between Gundo and Sedimoza.

[53] Having come to this conclusion there is no need for me to further examine and decide the other disputed issues referred to hereinbefore.

In the result the following order is made

1. That the following seven entities are the owners in equal shareholding of the shares in Gundo Investments (Pty) Ltd namely Tshimbiluni Investment Holdings (Pty) Ltd, Pembelani Investment Holdings (Pty) Ltd, Sedimoza (Pty) Ltd, Kotulo­ Nala CC, lsenzo Eshile Contractors CC, Ntombisi CC and Bindi J-Zee Trading Enterprise CC;

2. That the register of members of Gundo Investments (Pty) Ltd be rectified to reflect same;

3. That these seven entities are entitled to share equally in the profit and or proceeds of Gundo Investments(Pty) Ltd;

4. That the amount of R52 500 paid by Sedimoza (Pty) Ltd and Ntombisi CC on behalf of Gundo Investments (Pty) Ltd be paid back to them by Gundo Investments (Pty) Ltd with interest on the said amount at the prescribed rate from

14 October 2003 until date of payment;

5. That the First, Second, Fifth, Sixth and Tenth Defendants are ordered to pay the costs hereof (the action and application) jointly and severally the one paying the other to be absolute.

M.C

DE KLERK

ACTING JUDGE OF THE HIGH COURT, GAUTENG DIVISION, PRETORIA

Appearances:

For the Plaintiffs:' Adv.

D Prinsloo

Tel: 083 381 0006

C/o Klagsbruin Edelstein Bosman De Vries Inc.

Tel: 012 452 8900

For the 1st, 2nd , 5th ,6th , and 10th Defendants: Adv. A.J D'Oliveira

Tel: 072 697 6796

C/o Swanepoel Attorneys

Tel: 011 333 1715