Uju Resources Proprietary Limited v Wescoal Mining Proprietary and Others (46767/18) [2019] ZAGPPHC 519 (11 October 2019)

IN THE HIGH COURT OF SOUTH AFRICA

GAUTENG DIVISION, PRETORIA

(1) REPORTABLE: YES/NO

(2) OF INTEREST TO OTHER JUDGES: YES/NO

(3) REVISED

CASE NO.: 46767/18

11/10/2019

In the matter between:

UJU RESOURCES PROPRIETARY LIMITED

Applicant

and

WESCOAL MINING PROPRIETRY

First Respondent

THIVHA TSHITHAVHANE

Second Respondent

IZAK VAN DER WALT

Third Respondent

VIKESH DHANOOKAL

Fourth Respondent

AZTOLINX PROPRIETARY

Fifth Respondent

JUDGMENT

VAN DER WESTHUIZEN, J

[1] The applicant launched an urgent application to seek the granting of interdictory relief against the first respondent under Part A of the notice of motion. It further seeks that the relief claimed under Part B of the notice of motion be postponed.

[2] The Deputy Judge President of the Division was subsequently approached for leave that the matter be enrolled in the Third Court for hearing on a semi-urgent basis in terms of an order granted in the urgent court. The matter came before me for consideration and adjudication.

[3] The first to fourth respondents opposed the application on various bases. The fifth respondent is a company of which the applicant and the first respondent are the shareholders. The applicant seeks to enforce any rights that the fifth respondent may have flowing from a Master Agreement entered into in respect of coal mined at Khanyisa Triangle.

[4] There are various disputes of fact between the parties raised in the papers filed. None of the parties sought an order that the disputes of fact be referred to the hearing of oral evidence. The matter stands to be adjudicated on the papers as filed.

[5] In their joint practice note the parties indicated the following issue to be decided, namely:

(a) Whether the applicant has a prima facie right to bring the application;

(b) Whether the Master Agreement has been validly terminated;

(c) Whether the applicant has satisfied the requirements for an interdict;

(d) Whether the matter is urgent.

[6] Some background may be useful in deciding the issues raised. The first respondent and the fifth respondent entered into a Master Agreement in terms whereof a joint venture was established. In terms of that agreement, the first respondent would extract coal from the Khanyisa Triangle and it would be responsible for all mining operations required to be performed to extract the coal from the Khanyisa Triangle. Further in terms of the said agreement the first respondent would sell the coal to the fifth respondent. The first respondent would be paid a "service fee" in respect of its mining obligations. The said agreement further stipulates that the fifth respondent would conclude the necessary agreements with third parties for the on-sale of the said coal.

[7] A dispute arose, and by agreement the first respondent was permitted to sell and deliver directly to third parties. This agreement apparently endured until 28 March 2018, where after the fifth respondent by resolution ended that agreement. However, the first respondent continued to sell and deliver the coal to third parties and not to the fifth respondent after 28 March 2018. The first respondent sold the coal inter alia to Sasol. The applicant alleges that the actions by the first respondent are contrary to the provisions of the Master Agreement and causes the applicant irreparable harm.

[8] In the preamble to the Master Agreement, the following is stated as the intended goal:

"It has always been and remains the express intention of the Parties that the commercial value in and to the Khanyisa Triangle Mining Right rightly vests in Aztolinx. It is with this intention in mind that Aztolinx is purchasing from the AAIC the abandonment by AAIC of the Khanyisa Triangle Mining Right on certain conditions. However, in the current regulatory environment of the South African mining industry, it is more time and cost efficient for Westcoat to obtain the necessary regulatory approval to hold the

Khanyisa Triangle Mining Right in its own name, thus enhancing the commercial benefit to be obtained by Aztolinx by virtue of the

exploitation of the Khanyisa Triangle Mining Right uneconomical. For this reason, the Parties have agreed to use, and benefit from the established mining operations of Westcoat to facilitate quick and cost effectively regulatory processes to enable them to exploit the Khanyisa Triangle Mining Right in the most efficient and economical manner. Against this background the Parties record as follows:

A Aztolinx is a special purpose vehicle established by Wescoal and Uju Resources in order to exploit the Khanyisa Triangle Mining Right for the ultimate benefit of such parties as Shareholders, which relationship is further regulated by way of, inter alia, the Shareholders Agreement.

B In order to realise the intention of the parties as described above, Aztolinx has, or is in the process of purchasing from AAIC the abandonment by AAIC of the Khanyisa Mining Right on condition, inter alia, that the DMR approves the exclusion of the Khanyisa Mining Right from the New Largo Mining Right and the inclusion or the Khanyisa Triangle Mining Right in Wescoa/ Mining Right.

C Wescoa/ is the owner and operator of various mining operations in South Africa including significant mining operations immediately adjacent to the Khanyisa Triangle in terms of Wescoa/ Mining Right, and as such has the capacity to secure the required mining rights from the DMR and use existing mining operations to exploit the Khanyisa Triangle Mining Right efficiently and with minimal capital costs. Wescoal shall be restricted from ceding, transferring or using as security the Khanyisa Triangle Mining Right without the consent of Aztolinx in accordance with the Shareholders Agreement. It is specifically recorded that the Khanyisa Triangle Mining Right will only have a realisable value for Aztolinx once the DMR has approved the exclusion of the Khanyisa Triangle Mining Right from the New Largo Mining right and the inclusion of the Khanyisa Triangle Mining Right in Wescoal Mining Right.

D Aztolinx and its Shareholders wish to, by way of this Master Agreement, establish a joint venture relating to the exploitation of the Khanyisa Triangle Mining Right for the commercial benefit of the Shareholders (proportionate to their shareholding in Aztolinx) and accordingly to provide for their rights and obligations as regards (sic) the Mining Operations and sale of the Coal.

E The Parties intend to give effect to the Joint Venture inter alia by way of the following:

a. Wescoal will extract the Coal and conclude, where necessary, third party contracts for run (sic) of the mine services, pre-crushing and screening transport of the Coal, material handling pre and post-crushing and screening of the Coal and the crushing and screening of the Coal;

b. Wescoal will be responsible for all Mining Operations required to the point where the Coal has been crushed and screened and will be paid the Service Fees for performing these responsibilities;

c. Wescoal will sell the crushed, screened and if applicable, processed Coal Reserves to Aztolinx at cost of its stockpile condition;

d. Aztolinx will conclude the required contracts in order to sell and deliver the Coal to purchasers;

e. Aztolinx will conclude third party contracts for the transport of the Coal pursuant to the aforesaid sale agreements".

[9] Clause 4 of the Master Agreement provides for the duration of the agreement and in particular clause 4.2 as follows:

"4.2 Despite anything to the contrary in this Agreement, in the event of any of the Parties ('the defaulting Party) committing a breach of any of the material terms of this Agreement and in failing to remedy such breach within a period of 14 (fourteen) Days after receipt of a written notice from another Party ('the aggrieved Party) calling on the defaulting Party to remedy such default, then the aggrieved Party will be entitled, at its sole discretion and without prejudice to any of its other rights in Jaw, either to claim specific performance of the terms of this Agreement or to terminate this Agreement forthwith and without further notice, claim and recover damages from the defaulting Party."

[10] The obligations of Aztolinx is set out in clause 6 of the Master Agreement and inter alia the following constitutes obligations of Aztolinx:

" Aztolinx must

6.1 conclude agreements for the sale of Coal;

6.2 conclude an agreement with Mwelase Mining for the transport of the Coal pursuant to the aforesaid sale agreements;

6.3 …”

[11] Furthermore, the Master Agreement encapsulates the obligations of the applicant and the first respondent as follows:

"THE OBLIGATIONS OF WESCOAL AND UJU RESOURCES

7. Uju Resources and Wescoal respectively must use their best endeavours to ensure that Aztolinx complies with its obligations in terms of this Agreement."

[12] A further obligation of the first respondent, stipulated in clause 8 of the Agreement, is that it is obliged to sell the coal to Aztolinx in accordance with clauses 9.1 to 9.6 of the Agreement.

[13] From a purposive reading of the Master Agreement, the parties who have various rights and obligations are the first and fifth respondents.

The applicant only has the obligation together with the first respondent to ensure that fifth respondent complies with its obligations in terms of the Master Agreement. It is clear that the predominant and primary obligation of the fifth respondent is that it must ensure conclusion of sale agreements, in respect of the coal that the fifth respondent purchases from the first respondent, with

third parties. The clear intention being that the applicant and the first respondent are to share in the profit of the sale of coal by the fifth respondent viz-a-viz the Shareholders Agreement. The latter agreement is independent and separate from the Master agreement.

[14] It follows that the applicant's only entitlement, or right, or obligation in terms of the Master Agreement is to ensure, together

with the first respondent, that the fifth respondent complies with its obligations stipulated in the Master Agreement. In particular

with reference to the fifth respondent's obligation to concluded contracts with third parties to purchase from the fifth respondent

the coal mined, delivered and sold by the first respondent to the fifth respondent.

[15] Thus, the applicant's assertion of contractual rights in relation to the Khanyisa Triangle and coal emanating therefrom is without merit. Likewise, the applicant's assertion that it has rights in term of the Master Agreement for benefitting from the exploitation of the Khanyisa Triangle, is without merit. The applicant seeks to enforce its shareholde'rs rights. There is no merit in any of the applicant's aforesaid contentions for what follows.

[16] In the context of the issue of joinder as a party to proceedings, the applicant's claimed rights amount to nothing more than a financial

interest which, in the present context, is only an indirect interest in the exploitation of the Khanyisa Triangle. The applicant has no proprietary interest in the Khanyisa Triangle itself or for that matter in the fifth respondent.[1] Further in that regard, it was held in United Watch & Diamond Co (Pty) Ltd et al v Disa Hotels Ltd et al[2] as follows:

"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."

[17] In my view the afore quoted passage is equally applicable to the present proceedings. The applicant will only have the required locus standi to bring this application if it has a direct and substantial interest in the subject-matter in the present instance.

[18] As recorded earlier, the applicant, as per the Master Agreement, only enjoys shareholder's rights and nothing more. Its only obligation is to see that the fifth respondent complies with its obligations stipulated in the Master Agreement.

[19] It is trite that a shareholder in a company only has the right to profit derived from that company's business when realised amongst its members.[3] A shareholder has no proprietary rights in and to the assets of a company.[4]

[20] It follows that the applicant has no locus standi to bring this application and has failed to prove a clear right for an interdict or for that matter a prima facie right even open to some doubt. The applicant simply has no right and the application stands to be dismissed on this basis.

[21] Furthermore, the applicant has failed to prove that it would suffer irreparable harm should the relief claimed not be granted. In my view it cannot suffer irreparable harm, or for that matter any harm, should the relief claimed not be granted. As held earlier, the applicant has no proprietary rights in any assets of the fifth respondent. Such assets would include the sale and delivery of coal mined by the first respondent at Khanyisa Triangle. Thus, it cannot suffer any harm, in particular irreparable harm, at this point in time.

[22] On the other hand, in terms of the provisions of the Master Agreement, the first respondent enjoys certain rights and obligations

thereunder. The first respondent is obliged to conduct the mining at Khanyisa Triangle, the crushing of the coal and the screening

thereof, after which it is obliged to sell the coal to the fifth respondent. Its reciprocal right is to receive payment for the

services rendered as service fees defined in the Master Agreement that include any royalties payable.

[23] The counter obligation of the fifth respondent is to accept delivery of the coal and to conclude sale agreements with third parties and make payment of the said service fees to the first respondent.

[24] It is common cause that the fifth respondent has failed to conclude any sale contracts with third parties in accordance with its obligations in terms of the Master Agreement, excluding the special arrangement to sell to Mwelase for an agreed period.

[25] It is not disputed that the first respondent will suffer prejudice and harm should the coal mined, crushed and screened not be sold on to third parties. The result thereof would be that the mining right would be in jeopardy and furthermore, the first respondent would suffer financially as it is to fund the mining at the Khanyisa Triangle. In order to mitigate its harm and subsequent damages, the first respondent sold the mined, crushed and screened coal directly to third parties and accounted to the fifth respondent.[5]

[26] The first respondent considered the fifth respondent's failure to conclude the obligatory sale agreements with third parties as a material breach on the part of the fifth respondent. The first respondent, in terms of the provisions of clause 4.2 of the Master

Agreement, quoted above, addressed the required notice to the fifth respondent to remedy the said breach within the stipulated 14-day period.

[27] Needless to say, the fifth respondent did not remedy its breach and the first respondent, as it is entitled to do, terminated the Master Agreement on 21 June 2018. Accordingly, the only agreement extant is the Shareholders Agreement which is not the subject of this matter, the only agreement relevant is the Master Agreement.

[28] The applicant concedes, as it should, in its version that the resource and the rights under the Master Agreement, befalls only the fifth respondent. It seeks to rely on its shareholding in the fifth respondent to act on behalf of the fifth respondent to protect the latter's rights under the Master Agreement. The fons et origine for that contention does not appear from the terms of the Master Agreement. The applicant simply does not have any such rights. It only has an obligation, together with the first respondent, in terms of the Master Agreement to see to it that the fifth respondent complies with its obligations in terms of the Master Agreement. It is not alleged by the applicant that the fifth respondent renounced its rights under the Master Agreement to the applicant. The bringing of this application is not in compliance with that obligation. In fact, it is contrary to the applicant's stipulated obligation recorded earlier.

[29] It follows that the applicant's contention that the Master Agreement was not validly terminated is of no merit. The fifth respondent has simply not complied with its obligations in terms of the Master Agreement. Furthermore, the fifth applicant has not itself addressed the issue of the termination of the Master Agreement and has not tendered any undertaking to comply with its obligations. In my view, the Master Agreement was validly terminated by the first respondent.

[30] In view of all of the foregoing, the balance of convenience cannot favour the applicant. On the contrary, the first respondent would

suffer irreparable harm and following on the foregoing, and the balance of convenience, in so far as it is relevant, favours the

first respondent exclusively.

[31] The issue of urgency remains. In view of the fact that the merits were argued simultaneously with the issue of urgency, it matters not what the ruling would be on the issue of urgency. However, it is to be recorded that it is clear from the chronology leading up to the launch of this application that any urgency that may have been present, was self­ created. The applicant, and for that matter the fifth respondent, were acutely aware during March 2018, when the first respondent terminated the supply to Mwelase, that the fifth respondent's rights under the Master Agreement may be compromised. Nothing was done in that regard. So too, when during May 2018 it was made clear that the first respondent would continue to sell coal to third parties in order to mitigate its damages, nothing was done. Furthermore, as the applicant has no rights under the Master Agreement, no urgency could in any event have been found.

[32] It is further important to note, that when the Master Agreement was terminated, nothing was done to revive that agreement, or to set aside the decision to terminate that agreement, nor is here any claim for relief in that regard contained in the notice of motion.

[33] The applicant has not made a case for the relief it seeks and the application stands to be dismissed for that reason too.

I grant the following order:

(a) The application is dismissed in respect of Part A of the Notice of Motion;

(b) The relief under Part B is postponed sine die;

(c) The applicant is to pay the costs, including the costs consequent upon the employ of two counsel.

CJ VAN DER WESTHUIZEN

JUDGE OF THE HIGH COURT

On behalf of Applicant:

EC Labuschagne SC

Instructed by:

Liversage Ross Inc.

On behalf of Respondent: A E Sham SC

BL Makola

Instructed by:

Mkabela Huntley Attorneys Inc.

[1] Morgan et v Salisbury Municipality 1937 AD 167

[2] 1972(4) SA409 (C) at415A-B

[3] Goldberg v P J Joubert Ltd 1960(1) SA 531 (T) at p 524E - 525F

[4] Ibid ; see also Itzkowitz v ABSA Bank Limited 2016 (4) SA 432 (SCA) at (9]-[13]

[5] Novic v Benjamin1972 (2) SA 842 (A) at 860A-B