North West Gambling Board and Others v SANTOSAT (Pty) Ltd and Others (1943/2021) [2023] ZANWHC 21 (2 March 2023)

IN

THE HIGH COURT OF SOUTH AFRICA

NORTH WEST DIVISION – MAHIKENG

Case Number: 1943/2021

Reportable: YES / NO

Circulate to Judges: YES / NO

Circulate to Magistrates: YES / NO

Circulate to Regional Magistrates: YES / NO

In the matter between:

NORTH

WEST GAMBLING BOARD

1ST APPLICANT

LAVELLE

WINSTON

2ND APPLICANT

HARRY

MASHAO

3RD APPLICANT

MORONGOA

MOSS

4TH APPLICANT

AND

SANTOSAT (PTY) LTD

1ST RESPONDENT

SANTOSCAN (PTY) LTD

2ND RESPONDENT

GOLDRUSH SLOTS NORTH WEST (PTY) LTD 3RD RESPONDENT

In re: the matter between:

SANTOSAT (PTY) LTD 1st PLAINTIFF

SANTOSCAN (PTY) LTD 2ND PLAINTIFF

GOLDRUSH SLOTS NORTH WEST (PTY) LTD 3RD PLAINTIFF

NORTH

WEST GAMBLING

BOARD

1ST DEFENDANT

LAVELLE

WINSTON

2ND DEFENDANT

HARRY

MASHAO

3RD DEFENDANT

MORONGOA

MOSS

4TH DEFENDANT

MEC FOR ECONOMIC DEVELOPMENT,

ENVIRONMENT,

CONSERVATION AND

TOURISM

OF THE NORTH WEST PROVINCE

5TH DEFENDANT

Delivered: This judgment was handed down electronically by circulation to the parties’ representatives via email. The date and time for hand down is deemed to be 10h00 on 02 MARCH 2023

ORDER

The following order is made

1. The action proceedings purportedly instituted on behalf of the Respondents/Plaintiffs is set aside.

JUDGMENT

MALOWA

AJ

INTRODUCTION

[1] This application was heard in a virtual hearing via Microsoft Teams. The Applicants are Defendants (are companies) in the main action proceedings and the Respondents are Plaintiffs. This is an opposed application by the Applicants, who are against the Respondents seeking an order to set aside the latter’s action proceedings which are said to be instituted on behalf of the Respondents and for the latter’s legal representatives or those who instructed them

to pay costs of the application on attorney and client scale.

[2] As a result the Applicants instituted an application in terms of Rule 30(1) for striking out the Respondents’ claim. The complaint was that the Respondents have not proved that the legal proceedings that they have instituted against the Applicants have been authorized by the Plaintiff’s companies. The latter did not respond to the Rule 30(1) Notice. The Respondents delivered an answering affidavit and the Applicants subsequently delivered a replying affidavit. Respondents had then opposed the relief sought by the Applicants on two bases; namely that the Rule 30 proceedings are not applicable in this dispute and that the Respondents had given authority for the institution of the action proceedings. Furthermore, the Respondent submitted that the Applicants cannot make their case in a replying affidavit.

ISSUE FOR

DETERMINATION

[4] The main dispute for determination is whether the Applicants’ are entitled to the relief sought under Rule 30(1) against the Respondents and whether the Respondents’ companies had authorized the institution of the action proceedings against the Applicants.

ARGUMENTS

[5] The Applicants are arguing that the action proceedings by the Respondents against them are said to be invalidly and not authorized by the majority of shareholders as stipulated in the memorandum of incorporation of the Respondents. It is stated that none of the companies do constitute majority shareholder for purpose of attaining the required votes to can institute thee legal proceedings where the value is over R2 000 000.00. The third respondent has more shares than other shareholders but its shareholding is less than 50% of all the shares. It cannot, on its own, form a majority shareholding. The resolution taken by K2019285410 (South Africa) (Pty) Ltd which is said to have acquired majority shareholding considering the three respondents’ shares combined does not assist the Respondents. Its shareholding was not approved by the First Applicant as it is required.

[6] The Applicants are challenging the authority of the Respondents to institute the action proceedings against the Applicants and not authority of the Respondents’ legal representatives to act and represent the Respondents.

[7] The Respondents are opposing the Applicants’ application based on the fact that the Respondents are alleging that they have a proper resolution to institute legal proceedings as they are having over 71% majority shares. It was submitted on behalf of the Respondents that Rule 30 proceedings are not applicable in an action proceedings but application proceedings.

[8] The Applicants submitted that the issue of authorization for legal proceedings to be instituted is due and has to be determined first. They further submitted that before the contents of pleadings can be considered and attacked under Rule 18(2) of the Uniform Rules, lack of authorization on the Respondents and or Respondents’ legal representatives makes the legal proceedings not to stand the test of validity.

[9] The Applicants argue that K2019285410 South Africa (Pty) Ltd has no power to authorize the legal proceedings by three companies because the said company has to receive prior the consent of the First Applicant to hold such interest in the Respondents’ companies prior to authorization of legal proceedings.

ANALYSIS

[10] Rule 30 of the Uniform Rules provides for irregular proceedings to cover for irregular step without limiting it expressly by implication to the type of dispute in the following manner:

30(1) “ A party to a cause in which on irregular step has been taken by any other party may apply to court to set it aside”. And this is what the Applicants had done. The argument that irregular step is not applicable in casu is not supported by authorities or stare decisis. Although the attack on the claim is said to be dealing with defects of claim from the roots, it does not mean the roots are limited to provisions of Rule 18. Although the Applicants argue that the irregular step has nothing to do with Rule 18(12), in terms of Rule 30 or if the pleadings both fail to comply with Rule 18 and are vague and embarrassing, the defendant has a choice of remedies, he may either bring an application in terms of Rule 30 or raise an exception in terms of Rule 23(1). See Sasol Industries (Pty) Ltd t/a Sasol v Electrical Repair Engineering (Pty) Ltd t/a LH Marthinusen 1992 (4) SA 466 (W) of 469 F-I.

[11] In terms of Section 27A of the North West Gambling Act No 2 of 2001, any person who directly or indirectly procures a controlling interest or a financial interest of 5% or more or any lesser percentage as may be prescribed, in the business to which a license or a registration in terms of section 60 relates shall, within the prescribed period, in a prescribed manner or determined by the board, apply for the consent of the Board (First Applicant) to can hold such interest. The condition for majority shareholdings in a prescribed manner was not met by the Respondents. A single shareholder will only pass muster if

it owns total 71% of the shares within either or all of the Respondents. It is undisputed that clause 36 of memorandum of incorporation of each of the Respondents prohibit those companies individually to procure “…engage in, agree to perform or undertake any Specially Protected Matter, unless the majority shareholders in writing, in one or more written instruments signed by them or on their behalf, first unconditionally consents to the company doing so”.

[12] The descriptions of Specially Protected Matters include, ‘the instituting of litigation or settlement of any claim where the amount in dispute exceeds R 2 000 000.00 (two million rand), but specifically excluding the institution of any legal proceedings against any shareholder or Director”. The meaning of majority shareholders too is clearly defined in paginated page 41 under heading of “Interpretation”

[13] It is not in dispute that total 71% of the shares is required and that resolution passed by artificial person (i.e. company) should be presented as proof of authority to do so in terms of the Constitution or memorandum of incorporation of that artificial person. The Respondents did not show the resolution that fits the conditions set out properly as resolution to be taken for them to institute action proceedings.

[14] Regarding the fact that the Applicants had made up their case in a replying affidavit, the argument is rejected as the Applicants were responding to the allegations and attachments put by the Respondents in their answering affidavit. The Respondents were at liberty to request to file further affidavits if circumstances warrant so and wherein they will show good cause why additional affidavit should be made. It cannot be said the Applicants had made a fresh argument that is not linked to the Respondents’ answering affidavit or the Applicants’ founding argument.

CONCLUSION

[15] Consequently in this case the Respondents have failed to prove that the institution of the action proceedings was authorized as required by the relevant legislation. Furthermore the Respondent had failed in its defence that the ‘irregular step’ process is not applicable in action proceedings and but application proceedings only. It is also not true that the Applicants had only made their case in their replying affidavit. The action proceedings instituted by the Respondents against the Applicants amounts to an ‘irregular step’ as envisaged in the Rules. The relief sought by the Applicants should be upheld and an order in terms of the notice of motion should be granted.

[16] Consequently, the Applicants’ application to have Rule 30(1) against the Respondents/Plaintiffs’ set aside should be upheld and the Respondents’/Plaintiffs’ defence be dismissed.

COSTS

[17] Consequently, it is trite that costs follow the results. However the scale of costs sought by the Applicants is the highest attainable and it is not given lightly. The costs on attorney and own client are normally payable by the client never mind the outcome of the matter in which he engaged the services of legal representative and not depending upon the award of costs by the Court. However in casu the Respondent and or their legal representatives had no authority to institute legal proceedings against the Applicant and it is a fundamental point that they should have known. To commence proceedings when you have no authority to do so is a fundamental flaw and there was no dispute or argument on the type of cost scale during the parties’ argument. Similarly in the matter of Bayne v Kanthack 1934 WLD 13, costs at a punitive scale were awarded against a guardian who brought an action on behalf of a minor without leave of the court. The Respondents/Plaintiffs’ attorneys or those who instructed them, to pay the costs of suit including this application on a scale as attorney and client which costs include costs occasioned by the employment of two counsel.

THE ORDER

[18] The following order is made

ACTING JUDGE OF THE HIGH COURT OF SOUTH AFRICA,

NORTH-WEST DIVISION, MAHIKENG

APPEARANCES

Date of hearing

: 11 November 2022

Judgment Reserved

: 11 November 2022

Date of Judgment :

02 March 2023

Counsel for the Appellant

: Adv Notshe SC

Counsel for the Defendant

: Adv.Roux SC