South African Women in Mining Investment Holdings (Pty) Ltd v Molobye and Others (3445/2019) [2021] ZAGPJHC 711 (21 June 2021)

IN THE HIGH COURT OF SOUTH AFRICA

GAUTENG LOCAL DIVISION, JOHANNESBURG

CASE NO: 3445/2019

NOT REPORTABLE

NOT OF INTEREST TO OTHER JUDGES

21/06/2021

In the matter between:

SOUTH AFRICAN WOMEN IN MINING INVESTMENT HOLDINGS

(PTY) LTD Applicant

and

NOMSA MOLOBYE First Respondent

BELINDA MOLEKO Second Respondent

DOROTHY SEFANYETSO Third Respondent

DELENE JACOBS Fourth Respondent

RUTH MAGWAGWA Fifth Respondent

BRENDA JANSEN Sixth Respondent

SAWIMA: GAUTENG Seventh Respondent

SAWIMA: NORTHERN CAPE Eighth Respondent

SAWIMIH – GAUTENG Ninth Respondent

BELL DEWAR INCORPORATED Tenth Respondent

SOUTH AFRICAN WOMEN IN MINING ASSOCIATION Eleventh Respondent

Delivered: This judgment was prepared and authored by the Judge whose name is reflected and is handed down electronically by circulation to the Parties/their legal representatives by email and by uploading it to the electronic file of this matter on CaseLines. The date for hand-down is deemed to be 21 June 2021

JUDGMENT

YACOOB J:

1. The applicant (“SAWIMIH”) is a Broad-Based Black Economic Empowerment company which holds investments in the mining and petroleum sector. It has, not unusually, been plagued by internal strife and factionalism for the better part of its existence. I am informed that the parties have been in court a number of times not just in this matter, and that these proceedings are only one chapter in this narrative.

2. The background to this matter is that a dividend payment of R45 367 486 was due to be paid to SAWIMIH and the eleventh respondent (“SAWIMA”) by Exxaro Resources. The dividend had been paid to Mainstreet 333 (Pty) Ltd, which was holding it in escrow, or trust. SAWIMIH and SAWIMA approached this court on an urgent basis, apparently to procure the payment of that dividend. It is not clear why that was necessary, but it appears that certain of the respondents were resisting that payment.

3. The first to sixth respondents in this matter were the sixth to eleventh respondents in that urgent application. The seventh, eighth and ninth respondents in this matter were the fourth, fifth and twelfth respondents in the earlier urgent application. The first to third respondents in that application are not involved in these proceedings.

4. SAWIMIH and SAWIMA, and the first to ninth respondents in this matter, entered into a settlement agreement which was made an order of court on 24 April 2018 by Victor J (“the April 2018 order”). In terms of that agreement, the disputed funds were to be held in the trust account of the tenth respondent in this matter (“Bell Dewar”). The parties entered into an “escrow agreement” which set out the details of how the funds were to be held and released.

5. Bell Dewar was to pay R8 million to SAWIMIH and R2 million to SAWIMA, and retain the remaining amount until SAWIMIH and SAWIMA had completed certain tasks, to which end the money paid to them was to be used. The relevant parties were then to provide written confirmation to Bell Dewar, upon which the funds would be released.

6. SAWIMIH contends that it has completed the tasks it was required to complete. The first to ninth respondents [fourth to twelfth respondents in the earlier application] have not signed the written confirmation (“the Release Notice”) which would enable the release of the funds, for reasons which will emerge in due course.

7. SAWIMIH then approached this court on an urgent basis, issuing papers on 31 January 2019, for an order that the first to ninth respondents sign the Release Notice. No order is sought against SAWIMA, and neither its share of the money nor its compliance with the identified tasks is in issue. It is simply cited as it is a party to the settlement agreement and the later Escrow Agreement.

8. According to SAWIMIH, the fifth to ninth respondents are not shareholders of SAWIMIH, nor do the seventh to ninth respondents actually exist, but are cited because they were parties to the earlier application. This allegation is denied by the respondents’ answering affidavit.

9. At the hearing of the urgent application on 19 March 2019, a settlement was entered into, which provided for the release of funds on the basis that certain things would happen. Those things did not occur and the application was revived, a contingency that was provided for in the order of 19 March 2019.

10. This application is opposed by the first to ninth respondents. I refer to them, collectively, as “the respondents” unless the context requires otherwise.

11. In April 2019 SAWIMIH filed a supplementary notice of motion and supplementary founding affidavit, which added to the relief sought a declaration that the first to ninth respondents had breached the various settlement agreements.

12. The respondents have filed two answering affidavits, one to the founding affidavit and one to the supplementary founding affidavit, and SAWIMIH has likewise filed two replying affidavits.

13. The respondents have filed rule 7 notices in respect of SAWIMIH and SAWIMA, while SAWIMIH has filed one in respect of the respondents.

Nothing was made of that before me, and I must assume that the parties are satisfied with their respective authority.

14. It is relevant that in May 2019, the first and second respondents in this matter, together with four other applicants and a fifth

applicant apparently comprising a seven page list of names, launched an application to remove the directors of SAWIMIH, cause SAWIMIH to hold an Annual General Meeting, and related relief. An application was apparently made to consolidate that application and this one.

15. On 23 May 2019 Sutherland J refused the consolidation of the two applications, and referred this application to oral evidence. The

respondents were directed to state unequivocally what was in dispute, with reference to the April 2018 order, and what evidence had to be presented to resolve it.

16. Although the respondents say in the answering affidavit that they wished the application to declare the directors unfit to hold office to be heard before this application, that relief was not pursued before me. No mention was made of the status of the other application, nor was there an attempt to stay this application until that one had been determined.

17. The final order referring this matter to oral evidence (“the referral order”) was issued by consent. It identified eight

issues which were referred to oral evidence. These issues were related to certain of the eight tasks SAWIMIH was directed to undertake in terms of the April 2018 order before it would become entitled to the release of the funds. Under each issue, the nature of the dispute related to that issue was recorded. Each issue was articulated as whether SAWIMIH has used a portion of the R8 million to complete the particular task identified.

18. Essentially, SAWIMIH contends that it has completed all the tasks, and the respondents that there was some underlying issue that gainsays a finding that the tasks were completed. The respondents contended in the answering affidavit that many of these issues could only be dealt with by way of oral evidence, hence the referral to oral evidence.

19. In addition, the respondents contend that the money should not be released as SAWIMIH has been badly administered and there is a

criminal case against the directors, and the money will not reach all the shareholders and beneficiaries.

20. At the outset, I note that the respondents agreed to the narrowing of the issues each time they entered into agreements with the applicant, and agreed to those agreements being made orders of court. The matter was therefore referred to oral evidence on very narrow grounds.

21. Although the respondents characterized their opposition to the release of the funds as being based on ongoing financial mismanagement by the directors of SAWIMIH, that question is not one of those specifically identified in the referral order, nor is it one dealt with explicitly by any of the tasks identified in the April 2018 order.

22. The April 2018 order required that the R8 million be used by SAWIMIH for the following tasks, which were to be completed within six months of the date of the order on 24 April 2018, that is, by 24 October 2018. SAWIMIH was to use the money to:

22.1. convene an Annual General Meeting;

22.2. pay auditors’ fees;

22.3. pay for forensic investigations;

22.4. pay for a verification report;

22.5. pay legal fees;

22.6. pay directors’ fees;

22.7. pay for roadshows, and

22.8. pay creditors.

23. Paragraph 6 of the April 2018 order required that vouchers for expenditure on the tasks were to be provided to [SAWIMIH’s] auditors, while Paragraph 7 required [SAWIMIH] to endeavor to complete the tasks within six months, or any extended period agreed to by the parties.

24. The items identified in the referral order as requiring determination are whether SAWIMIH:

24.1. used a portion of the R8 million to convene an AGM;

24.2. used a portion of the R8 million for payment of auditor’s fees;

24.3. used a portion of the R8 million for payment for a verification report;

24.4. used a portion of the R8 million for payment of directors’ fees;

24.5. used a portion of the R8 million for payment for roadshows;

24.6. used a portion of the R8 million for payment of creditors;

24.7. furnished its auditors with supporting vouchers for the expenditure incurred in respect of expenses listed in paragraph 4 of the settlement agreement [paragraph 22 above], and

24.8. whether SAWIMIH endeavoured to complete the tasks listed in paragraph 4 of the settlement agreement within six months of the date of the settlement agreement or any further period agreed to in writing.

25. It can be seen that whether the money was used to pay legal fees and to pay for forensic investigations is not an issue before me. It is also striking that the so-called “tasks” which SAWIMIH was to complete were articulated as things to which the R8 million should be applied, rather than things which had to be done in a certain way. Both SAWIMIH and the respondents agree that the intention was that the money was to be used to ensure that things were done, such as the holding of the AGM and the preparation of the verification report. I also note that this case is not about whether any portion of the R8 million was used for any other purpose.

26. At the hearing of the matter it was common cause that the only issues that needed to be dealt with out of the eight identified in the referral order are issues 1, 3, 5, 7 and 8. Issues 2, 4 and 6 were not argued before me and in fact were considered to have been complied with. It also therefore becomes clear that the only tasks from the April 2018 order which appear to be in issue at this point are the holding of the AGM, the compilation of a verification report, and the holding of the roadshows.

27. I pause to comment again that is the nature of the agreement on the issues which changes what the court has to look at. In the answering

affidavit, for example, it was contended that the auditors ‘ fees were not properly paid because there were problems with the financial statements and because there were duplications of financial statements. This is no longer an issue before me because that issue was narrowed and articulated to be whether the auditors’ fees were paid from the R8 million [Issue 2], which it is common cause they were.

28. I examine each of the remaining items below, together with the evidence adduced and the argument relevant to that issue.

Issue 1: the Annual General Meeting

29. It is common cause that a meeting was held on 13 December 2018, and that it was paid for out of the R8 million.

30. The respondents contend that the meeting was invalid. The reasons for the purported invalidity are:

30.1. The meeting was held outside the six-month period and was therefore ultra vires and invalid.

30.2. The people who attended the meeting were not the shareholders of SAWIMIH.

31. It is common cause that the date was outside the six month period which was allowed to SAWIMIH. SAWIMIH has however sought condonation for the delay.

32. Ms Mapanzela, who testified for SAWIMIH, testified that six months had not been sufficient time, as all the other tasks had to have been completed before the AGM was held.

33. The respondents simply dismiss SAWIMIH’s version, and contend that the tasks had to have been completed within six months, and that was that. According to them this means that the meeting was fatally invalid.

34. There is no suggestion as to what would then happen to the money. Nor is it clear on what basis SAWIMIH as a juristic person is then prevented from holding a valid AGM at all because it did not hold it within six months.

35. It is also relevant that the order required SAWIMIH to “endeavor” to complete the tasks within six months, or any extended period agreed to. This was not an absolute obligation. Failure to comply could not have resulted in automatic invalidity.

36. In my view the delay was not fatal and the respondents have not rebutted SAWIMIH’s case that the delay was necessary. In addition there is nothing to be gained by either party adopting a formalistic approach to the six month period, and the respondents has not suggested any prejudice to them caused either by the delay or by the grant of condonation.

37. I therefore find that the fact that the AGM was held after the six months had passed did not result in its invalidity.

38. The second reason for the purported invalidity of the AGM is that the respondents contend that the people who attended the AGM were not the shareholders of SAWIMIH.

39. The original shareholders of SAWIMIH in 2003 were the SAWIMA Members’ Trust (“the Trust”, which is not party to this application, which held 80% of the shares, and SAWIMA, the eleventh respondent, which held 20% of the shares. The shareholders’

agreement provided for a ten year lock in period which prevented the shareholders from selling their shares for ten years, and even after that sale of shares was subject to conditions.

40. The respondents contend that the shareholder’s agreement still subsists and that the Trust and SAWIMA are still the shareholders of the SAWIMIH.

41. It is common cause that a resolution was passed at SAWIMIH’s AGM in July 2007 to unbundle shareholding in SAWIMIH. The respondents

submit that the resolution was unlawful and is not enforceable against the Trust.

42. The respondents have not brought any application to set aside the resolution, nor have they sought to join the Trust. Nor is it clear what the basis is of the purported unlawfulness. Mr Motaung suggested in cross-examination of Ms Mapanzela that the unbundling was unlawful because the resolution was taken during the ten year lock in period and Ms Mapanzela responded that since the unbundling was only implemented in 2017 that was not the case. In any event it is not clear to me that the lock-in prevented unbundling. This would depend on whether the unbundling amounted to a sale of shares, and no evidence was adduced by the respondents to support that conclusion. Nor was there any genuine argument submitted on the issue.

43. In addition, the respondents’ witnesses Ms Makgopela and Ms Sekonya testified that they were shareholders who had bought shares

in SAWIMIH. This version is contradictory of the respondents’ answering affidavit (which functions as part of the pleadings) and argument.

44. That the shareholding is not as contended by the respondents is bolstered by the fact that one of the tasks to be completed using the R8 million was a “verification report”, which was to verify the shareholders of SAWIMIH.

45. Ms Makgopela testified that there were issues with how the investment money was handled, and various other transactions. She also testified that there were issues with accreditation at the AGM and certain people were not allowed to vote, nor were their proxies accepted.

46. There are remedies available to the respondents for such issues, which they have not pursued before me. The matter is not before me for the purposes of setting aside the AGM. In any event, taking into account the evidence and the way in which it differs from the “pleadings”, the respondents have in my view not proved the invalidity of the AGM on a balance of probabilities.

47. As far as Issue 1 is concerned, then, I am satisfied that SAWIMIH did in fact hold an AGM as required.

Issue 3: the Verification report

48. SAWIMIH contends that it engaged the services of Afro Pulse Group (Pty) Ltd to verify shareholders of SAWIMIH and compile a report, and that it paid Afro Pulse from the R8 million for the report.

49. The respondents do not contend that the report was not compiled. They contend that the report was compiled before the R8 million was paid to SAWIMIH, and that payments to Afro Pulse from the R8 million were for administrative services and not for the report.

50. It is also contended that there is a concern that the verification process conducted by Afro Pulse apparently diluted share holdings

without explanation. I pause to note that this position is again inconsistent with the notion that only the Trust and SAWIMA are

shareholders of SAWIMIH.

51. It must be noted that the respondents did not take any steps to challenge the validity of the verification report which it is now

contended there was an issue with. The April 2018 order did not require revisioning of an existing report, or investigation into

purported dilution. Nor was there any allegation or evidence before me that what the April 2018 order referred to was an inadequate

existing report which needed to be revised or done again.

52. In fact in response to the allegation in the founding affidavit that a verification report was presented at the AGM, the answering affidavit simply asserts that nothing SAWIMIH’s directors did was done lawfully.

53. Be that as it may, Ms Makgopela, the respondents’ witness, who does verification and evaluation for the Department of Housing,

conceded that the verification report was a valid outcome of a verification process. She testified about what she considered needed

to be done in a verification process, but conceded that she did not know what was actually done. Nor did the respondents take any steps to require those details to be placed before the court.

54. Mr Motaung submitted for the respondents that the report was incomplete and diluted people’s shareholdings, and that therefore Afro Pulse was not entitled to payment. No evidence was adduced to support this contention.

55. It is clear that the report was obtained, and that it was paid for. Ms Mapanzela testified that the report was continuously updated and new information received regularly. This was not contested. The fact that Afro Pulse was also paid administration fees is not relevant to the completion of the task.

56. I am satisfied that SAWIMIH used a portion of the R8 million to pay for the completion of the verification report.

Issue 5: the roadshows

57. It is common cause that the roadshows were held and that they were paid for. The respondents however contend that the task was not completed because the Gauteng roadshow was disrupted.

58. The evidence of witnesses for both sides was that the Gauteng roadshow was disrupted towards the end of the event, during the Question & Answer session.

59. Mr Motaung for the respondents submits that it became clear at the Gauteng roadshow that investors were not happy with the way in which SAWIMIH is being managed. But that does not lead to a conclusion that the roadshows were not held.

60. I am satisfied that the Gauteng roadshow was held and that that the task of holding roadshows was substantially complied with.

Issue 7 - were vouchers provided to SAWIMIH’s auditors?

61. The respondents contend that SAWIMIH failed to furnish to the respondents or to the court supporting vouchers or a report detailing SAWIMIH’s expenditure on the tasks outlined in the April 2018 order. They required that the existence of the vouchers needed to be demonstrated, as well as that the vouchers were submitted to the auditors and that the vouchers were available for inspection.

62. I note that the explanation of the issue does not reflect the articulation of the issue itself, nor the requirement in paragraph 7 of the April 2018 order that vouchers be submitted to the auditors.

63. In argument it was submitted that the report of the summary of payments made was not produced by the auditors and therefore the vouchers were not provided to the auditors.

64. The question before me is not whether the report of the summary of payments was produced by the auditors. It is whether the relevant

vouchers exist and could be produced.

65. SAWIMIH provided a number of vouchers, at the last minute, on Friday 5 June 2020, one court day before the matter was set down for hearing on Monday 8 June 2020.

66. The late production of the vouchers is regrettable. However the respondents did not seek any postponement on the basis of the lateness, nor did they contend with any seriousness that the vouchers were not genuine.

67. There is no evidence that the vouchers were not provided to the auditors. Nor is there any evidence before me of any basis to believe that the auditors did not do their work of preparing financial statements.

68. Ms Mapanzela testified as to the validity of a random sample of some of the vouchers and this was not seriously contested by the respondents.

69. I find that there is no basis on which to find that the vouchers were not provided to the auditors. The vouchers have also now been

provided to the respondents, although the April 2018 order did not require that.

Issue 8: Whether SAWIMIH endeavoured to complete the tasks within six months

70. The respondent contends that the tasks were not complied with within six months as required by paragraph 6 of the April 2018 order and that therefore they were ultra vires. I cannot see any basis for the conclusion that the tasks were ultra vires.

71. As I noted above, the April 2018 order did not make it an absolute requirement that the tasks be complete within six months. SAWIMIH had simply to endeavour to do so.

72. It is also relevant that there is no prejudice shown to have resulted from the delay. The order also does not provide for any penalty or consequence of the delay.

73. Further, there is no basis on which to conclude that SAWIMIH did not in any event have the power to hold an AGM, obtain a verification report, and so on. All those tasks would be within its power, and even obligation, as ordinary functions of the company.

74. The delay was also a small one. Ms Mapanzela testified that the delay was unavoidable and this was not contested by the respondents. She testified that there were difficulties obtaining old bank statements and information from the previous auditors, and that the verification report was delayed by new information constantly being received. She also testified that SAWIMIH kept the respondents informed and that they participated in meetings regarding the tasks with no objection related to the timetable. This was not contested.

75. I am satisfied that SAWIMIH completed the tasks as soon as was reasonably possible, and that it made sufficient endeavour to complete the tasks.

76. Taking into account the lack of prejudice, and that the tasks had to be completed anyway, I am satisfied that to the extent it is required, a case for condonation is made out.

Whether there is any other reason to continue to prevent the payment to SAWIMIH

77. As stated above, the respondents contend that the money should not be paid to SAWIMIH despite compliance with the tasks, because of a criminal case against the directors and because of alleged maladministration of the company.

78. These issues were not ventilated before me in evidence. Nor were they part of the April 2018 order as issues that needed to be dealt with before the payment could be made. The respondents agreed to an order that the money could be released once the tasks were completed and are bound by that. If there are other issues that arise, there are remedies available to the respondents. They have elected to use at least one of those remedies, as foreshadowed by the application to remove the directors.

79. In the circumstances, SAWIMIH has made out a case for the relief it seeks, on a balance of probabilities. I can see no reason to order the respondents to sign the release, rather than simply ordering Bell Dewar to release the funds.

80. However, I do not see any basis for the contempt orders sought in the supplementary founding affidavit. Nor were these seriously pursued before me.

Costs

81. SAWIMIH seeks a costs order only against the first to sixth respondents.

82. However, the first to ninth respondents opposed the application and I see no reason not to make a costs order against the first to ninth respondents, since if SAWIMIH is unable to recover from the seventh to ninth respondents because of its contention that they do not exist, they can still recover from the first to sixth respondents.

83. SAWIMIH did not seriously pursue the relief sought in its supplementary notice of motion and founding affidavit and I see no reason why it should not pay the costs occasioned by the opposition to that relief.

84. For these reasons, I make the following order:

(1) The tenth respondent is to release and pay to the applicant the remaining escrow amount it holds on behalf of the applicant in terms of the escrow agreement, within ten days of this order.

(2) The first to ninth respondents are to pay the costs of the main application, including costs of two counsel, jointly and severally,

the one paying the remainder to be absolved.

(3) The applicant is to pay the first to ninth respondents’ costs occasioned by opposition to the relief sought in the supplementary

notice of motion.

S.YACOOB

JUDGE OF THE HIGH COURT

Appearances

Counsel for the applicant: D

C Mpofu SC and Ms K Pillay

Instructed by: Mabuza

Attorneys

Counsel for the firsts to tenth Respondents: O Motaung

Instructed by: Faber

Goertz Ellis Austen Incorporated

Date of hearing: 08,

09 and 10 June 2020

Date of judgment: 21

June 2021