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IN THE HIGH COURT OF SOUTH AFRICA

KWAZULU-NATAL, DURBAN

CASE No : 13827/06

In the matter of:

BARKHAN, HOWARD LESLIE First Applicant

GLASSER, ERROL MAXWELL Second Applicant

vs

LA LUCIA SANDS SHAREBLOCK LIMITED First Respondent

LENTZ, JOHN PAUL GERARD Second Respondent

WOLFE, GEORGE Third Respondent

PARKER, JEANNE Fourth Respondent

COLLINS, PATRICK MICHAEL Fifth Respondent

MINISTER OF TRADE AND INDUSTRY Sixth Respondent

JUDGMENT

VAN ZÿL, J.,

1. The present application is brought against the background of a struggle for control of a large property development, operated in the form of a shareblock scheme by the first respondent. The remaining respondents in the present application, with the exception of the sixth respondent who was joined at a later stage, are cited in their capacities as the directors of the first respondent. The application is stated to be one to enforce the rights of applicants to gain access to first respondent's register of members by relying upon the provisions of section 113 of the Companies Act 61 of 1973 (“the CA”) and the applicants seek an order in the following terms:

"1. The first respondent is directed to provide photocopies of all the pages/folios constituting its register of members to the applicants' attorneys of record, as soon as possible, and by no later than 5 days from the date of the order of this Court.

2. Alternatively to paragraph 1 above the first respondent is directed to forthwith (from the date of the order of this Court) make its register of members available for inspection by applicants' attorneys of record.

3. That the respondents pay the costs, on an attorney-client scale, of this application, jointly and severally, the one paying the other to be absolved.

4. Granting the applicants further or alternative relief."

2. During 2002 action was instituted, by way of a combined summons, against the present first respondent as defendant therein under case number 19/2002 (“the action”). The first, second and fourth plaintiffs in the action were respectively the Flexi Holiday Club, the Trafalgar Holiday Club and the Star Vacation Club, each of whom described themselves in the summons as a “duly constituted club”, whilst the third plaintiff was Trafalgar Holiday Resorts (Pty) Ltd which, as the name suggests, was a company incorporated under the CA. The plaintiffs all alleged that they had each been owners of certain shares in and corresponding beneficiaries under Use and Occupation Agreements in the first respondent’s shareblock scheme, the first plaintiff having owned by far the majority of rights in issue. They alleged that the first respondent had unlawfully cancelled their occupation agreements and purported to have sold their shares. As against first respondent they sought restoration of their shares, alternatively payment of the values attributed thereto, further alternatively damages, together with costs.

3. The first respondent, in its plea in such action raised a number of defences. In limine it contended that the first, second and fourth plaintiffs lacked locus standi in judicio, firstly by reason of the provisions of section 31 of the CA, which reads as follows:

"31 Unregistered associations carrying on business for gain not to be corporate bodies

No association of persons formed after the thirty-first day of December, 1939, for the purpose of carrying on any business that has for its object the acquisition of gain by the association or by the individual members thereof, shall be a body corporate, unless it is registered as a company under this Act or is formed in pursuance of some other law or was before the thirty-first day of May, 1962, formed in pursuance of Letters Patent or Royal Charter." ;

and in the alternative, that they were precluded from holding shares in first respondent because they were not companies and did not have the requisite corporate personality as required by section 30 of the CA, which reads that:

"30 Prohibition of associations or partnerships exceeding twenty members, and exemption

(1) No company, association, syndicate or partnership consisting of more than twenty persons shall be permitted or formed in the Republic for the purpose of carrying on any business that has for its object the acquisition of gain by the company, association, syndicate or partnership, or by the individual members thereof, unless it is registered as a company under this Act, or is formed in pursuance of some other law or was before the thirty-first day of May, 1962, formed in pursuance of Letters Patent or Royal Charter.

(2) The provisions of subsection (1) shall not apply with reference to the formation by persons qualified to carry on any organized professions which are designated by the Minister by notice in the Gazette, of any association, syndicate or partnership for the purpose of carrying on such professions and/or any combinations of such professions."

4. With regard to the third plaintiff's position the first respondent denied that, at the relevant time, the third plaintiff had been a shareholder and claimed that during 1999 its shareholding had been transferred to the second plaintiff. Whilst admitting the sale and transfer of the shares previously held by the first, second and fourth plaintiffs, first respondent contended that its actions were lawful, inter alia because it alleged that the said plaintiffs' ownership of the shares also contravened regulations 5 and 15, as promulgated in Government Notice R327 contained in Government Gazette 9071 of 24 February 1984 in terms of section 12(1) of the Property Time-Sharing Control Act 75 of 1983.

5. In the result first respondent, by virtue of an interlocutory application for a separation of issues in terms of rule 33(4), moved for an order:

"1. That the locus standi in judicio of the First, Second and Fourth Respondents (the plaintiffs in the action) be determined separately and be disposed of ante omnia having regard to the provisions of sections 30 and 31 of the Companies Act 61 of 1973;

2. That with regard to the application of the provisions of sections 30 and 31 of the Companies Act, the following specific issues be determined: at the time of their formation as clubs or associations or at any material time thereafter:

2.1 - 2.9 [The sub-paragraphs then set out a number of specific issues to be determined]

3. That all further proceedings in the main action be stayed until the question of the locus standi in judicio of the First, Second and Fourth Respondents has been determined and disposed of by way of a trial hearing;"

together with other incidental relief. This application was opposed and the matter was eventually argued before Hugo, J. who granted an order in terms of prayers 1, 2 and 3 of the notice of motion (as set out above), but subject to the proviso that the relief contained in paragraph 3 would be read subject to the existing orders of this division. Costs were reserved.

6. It is against this background that the present application is brought and wherein the first applicant, in deposing to the applicants' founding affidavit, candidly states in paragraph 9 thereof that he and second applicant are partners in a property development venture with the object of acquiring, by way of purchase, the entire shareholding of the first respondent. To this end they instructed their attorneys of record to obtain a copy of the register of members of the first respondent ".. as we intended addressing letters to the members of the First Respondent offering to purchase their shareholding in the First Respondent."

7. Then followed a series of communications and correspondences between the applicants' representatives and the respondents. The basis upon which the request was framed was that the register of its members which the first respondent, as a company registered in terms of the provisions of the CA, is obliged to maintain in terms of section 105 thereof, could be accessed by or on behalf of applicants in terms of section 113 of the CA. Section 105(1) provides that;

"105 Register of members

(1) Every company shall keep in one of the official languages of the Republic a register of its members, and shall forthwith enter therein-

(a) the names and addresses of the members and, in the case of a company having a share capital, a statement of the shares issued to each member, distinguishing each share by its number, if any, and by its class or kind, and of the amount paid or agreed to be considered as paid on the shares of each member; and

(b) in respect of each member-

(i) the date on which his name was entered in the register as a member; and

(ii) the date on which he ceased to be a member."

8. The access provisions of section 113 provide that;

"113 Inspection of register of members

(1) The register of members of a company shall, except when closed under the provisions of this Act, during business hours (subject to such reasonable restrictions as the company in general meeting may impose, so that not less than two hours in each day be allowed for inspection) be open to inspection by any member or his duly authorized agent free of charge and by any other person upon payment for each inspection of an amount of R10 or such lesser amount as the company may determine.

[Sub-s. (1) amended by s. 15 of Act 35 of 2001.]

(2) Any person may apply to a company for a copy of or extract from the register of members and the company shall either furnish such copy or extract on payment by the applicant of an amount of R10 or such lesser amount as the company may determine for every page of the required copy or extract, or afford such person adequate facilities for making such copy or extract.

[Sub-s. (2) substituted by s. 6 of Act 59 of 1978 and amended by s.15 of Act 35 of 2001.]

(3) If access to the register of members for the purpose of making any such inspection or any such copy or extract or facilities for making any such copy or extract be refused or not granted or furnished within fourteen days after a written request to that effect has been delivered to the company, the company, and every director or officer of the company who knowingly is a party to the refusal or default, shall be guilty of an offence.

(4) In the case of any such refusal or default the Court may, on application, by order compel an immediate inspection of the register and index or direct that the copy or extract required shall be sent to the applicant requiring it and may direct that any costs of or incidental to the application shall be borne by the company or by any director or officer of the company responsible for the refusal or default.

(5) The provisions of this section shall mutatis mutandis apply also in respect of any register of transfers kept by a company."

9. The initial requests for access to the first respondent's register of members met with little success. Details thereof are of little relevance for present purposes, save to record that there are a number of factual disputes flowing from the communications as related by the deponents of each camp. What emerged, however, was the view expressed by third respondent, who acted as attorney for and who was also a director of first respondent, that the "real agenda" for the request for information, as attributed by respondents to applicants, was that the latter were acting for and on behalf of "Flexi Club et al", who were in fact the real principals behind the demand for the information sought. By reason thereof fifth respondent expressed himself as follows in paragraph 7 of annexure LB14, namely a letter dated 22 June 2006 and addressed by fifth respondent to applicants' attorneys;

"We once again reiterate that your "client's" right to the information requested has, of necessity, to be premised upon a legal right that he/it requires to protect, which, with respect, we submit he/it does not enjoy and is therefore not entitled to avail himself/itself of the aforesaid alleged statutory entitlement."

10. Eventually, on 10 July 2006 applicants' representative Ms Reid collected from the fifth respondent, who is first respondent's chairman, what was indicated to be a copy of first respondent's "share register". Applicants complain, however, that all this document (annexure LB.18) represented was a list of ''.. only the names of the alleged members of the First Respondent and does not contain the information which the First Respondent was obliged to enter into its register of members in terms of Section 105 of the Act. (i.e. the names and addresses of members and the number of shares issued to each member.)"

11. Subsequently third respondent wrote to applicants' attorneys by letter dated 29 August 2006 seeking to set out the reasons behind the attitude adopted by first respondent in response to applicants' attempts to access the information contained in its register of members. It appears there from that a resolution was passed at the first respondent's annual general meeting, held on 27 June 2006, in terms of which its general membership purported to "prohibit the dissemination of the members' addresses" in order to avoid "unsolicited (and unwelcome) correspondence (which) has been received when their addresses are made known" and claimed that their rights to privacy were infringed.

12. Then followed a telephonic discussion between first applicant and fifth respondent where the latter was advised of the applicants' intention to form a company which would offer to purchase the entire shareholding in first respondent. By reason thereof applicants' sought access to the information contained in first respondent's register of members so as to enable them to convey the intended offer to the members of first respondent at the appropriate time. First applicant followed this discussion with a letter addressed to the board of first respondent recording the intention to present an offer directly to its members and again requesting that ".. details of the company's share register consisting of shareholders' full names, postal addresses, telephone number and details of weeks held to be submitted to us."

13. In his reply thereto third respondent invited applicants to submit the intended offer or proposal to his offices for transmission to the board of first respondent and stated that "your request to present the offer directly to the shareholders is denied, and in the event that you wish to pursue same we invite your written proposals for submission to the Board of Directors, who in turn will contact and report to the shareholders as is their right and duty to do so.".

14. In addition the letter advised that "I furthermore place on record that as a shareholder of the company, you will require 100% acceptance by the shareholders of your proposed offer (of which we have not been furnished a copy) and to this end I place on record that I will not be consenting to any such offer." It is apparent from the application papers that the statement that 100% shareholder consent would be required was incorrect and that only 75% consent would be required in terms of the "Use Agreement". Applicants say that they did not respond to this letter because that would not have served any useful purpose.

15. In launching the present application applicants contend that they are entitled to the relief sought by virtue of the provisions of section 113(4) of the CA. Respondents, on the other hand, dispute such entitlement. They do so essentially upon two inter related grounds. In the first instance they contend that the request for access is not bona fide and should be held to be impermissible. Alternatively they contend that the provisions of sections 3(2) and 7(4) of the Share Blocks Control Act 59 of 1980 ("SBC") rendering the provisions of the CA also applicable to share block companies and in particular section 113 of the CA, offend the rights of privacy of the members of first respondent which also find protection in the provisions of the Promotion of Access to Information Act 2 of 2000 ("PAJA").

16. The provisions of section 113 of the CA create a right of access to the register of members of any company. The access is afforded in terms of sections 113(1) and (2) without qualification respectively to "any other person" and to "Any person". The right to inspect must be available for at least two hours during business hours of every business day (section 113(1), subject to the right of a public company, by notice published in the Government Gazette, as well as in a newspaper circulating in the district in which its registered office is situated, to close its register of members for a period or periods in aggregate not exceeding sixty days in any one year (section 14).

17. Non-compliance with the duty to make the register available for inspection is rendered punishable as an offence (section 113(3)) and performance of the duty to provide access may be compelled by an order of court, granted on application and whereby the court is authorised to facilitate access by ordering immediate inspection, or the delivery of a copy or extract to the applicant for information. In such an eventuality the court is further enabled to make an appropriate costs order against the company, or any director or officer thereof (section 113(4)).

18. The right of access thus created is, of course, limited to the specific information contemplated by the CA. In terms of section 105(1) the register of members is to contain the names and addresses of the members of the company and indicate when each became and ceased to be a member thereof. Where the company has a share capital, then the register must reflect the number and kind of shares issued to each of its members, as well as the amounts paid for such shares.

19. It is noteworthy that the information to be disclosed is carefully circumscribed. So, for instance, is there no requirement that the address of the member must necessarily be that of the member's residence, or workplace. Nor is it stated that the address is to be a physical, as opposed to a postal or contact address. The object appears merely to be to provide for a current address where communications, intended for the member may be addressed to such member. Nor is there any requirement that the register needs to contain a contact telephone or telefacsimile number, or even an e.mail address, for the member.

20. As part of the opposition to the application and as indicated above, respondents raised the constitutionality of the legislation. Accordingly and in compliance with the provisions of Rule 10A of the Uniform Rules of Court the respondents applied for and obtained the joinder of the Minister of Trade and Industry as the sixth respondent in these proceedings. Sixth respondent delivered an answering affidavit and instructed counsel to appear at the hearing of this application. Mr Bruinders SC, who appeared with Mr Boda, submitted in regard to the constitutional issues that the requirement of the accessibility of the register of members of a company to the public served important and useful purposes, in that third parties could obtain information on the identities, shareholding interests in the company and (in the case of a shareblock company), also of their rights to the use of company property. He submitted that such information was useful and potentially necessary for such persons contemplating contracting with the company or its members and where this may involve the purchase of a member's interest in the company, then to know with whom the purchaser would have to co-exist, once the purchase is made.

21. Mr Tee, who appeared for the first to fifth respondents, submitted that the request to access the register of first respondent's members was not bona fide. He argued that the applicants had an ulterior motive, in that they were in truth and in fact seeking to advance the interests of the Flexi Holiday Club associates involved in the pending litigation to which I have already referred to above. This, of course, was denied by the applicants and represents one of the factual conflicts in the matter. However, in the view I take of the issues this conflict is not of a material nature. Even if, for present purposes, I were to accept at face value the contentions of the first to fifth respondents to the effect that applicants have made common cause with the Flexi Holiday Club litigants, then in my view it would make no difference to the application of the provisions of section 113 of the CA to the request for access made by the applicants. The section creates a right for members of the public to access the register. It does not purport to prescribe their motives for so doing. In my view, if the request for access is legal and sanctioned by the CA, then an improper motive for doing what is otherwise legal cannot render the request for access illegal. The motive for the request is irrelevant to the duty created to comply with the request.

22. On behalf of first to fifth respondents it was submitted that the request for access to the register was calculated to enable applicants (whether as representative of the Flexi Holiday Club litigants or not) to obtain information, which would in turn enable them to act unlawfully, in execution of a scheme to facilitate a "hostile takeover" of first respondent, by making direct and unwanted approaches to the members of first respondent with offers to purchase their interests therein. It was argued that this was calculated to contravene provisions of the CA in that it would be an affected transaction as defined in section 440A of the CA.

23. Even if I were to accept that the information lawfully gathered, by exercising access to the register of members of first respondent, might be used at a later stage for unlawful purposes, then it still does not justify a refusal to give effect to the plain meaning of the statutory provisions creating a right of access to the register. If and when applicants proceed to act unlawfully, then appropriate steps may be taken to prevent them from so doing, as well as to impose suitable sanctions upon them for having acted improperly. In my view there is no merit in this argument.

24. The first to fifth respondents initially contended that the provisions of sections 3(2) of the Share Blocks Control Act 59 of 1980 ("the SBCA"), by rendering the provisions of the CA, insofar as they do not conflict with the provisions of the SBCA, also applicable to the SBCA, together with section 7(4) of the SBCA which provides that the inspection access created in section 113 of the CA will also apply to use agreements, constituted an unjustified invasion of the privacy to which the members of first respondent were entitled and was therefore unconstitutional. However, in view of the approach adopted by the sixth respondent in regard to this issue, first to fifth respondents did not persist.

25. In this regard sixth respondent pointed out that a respondent claiming the infringement of a basic right bears the onus at the interpretation stage. Therefore, so the argument ran, first respondent needed to discharge the onus of establishing that sections 3(2) and 7(4) of the SBCA unjustifiably limited the rights to privacy of first respondent's members by imposing the obligations contained in section 113 of the CA upon them. In developing the argument Mr Bruinders submitted that there are two grades of privacy enjoyed by a person - firstly the most intimate core of personal privacy in respect of which interference is not tolerated and which is narrowly construed. Secondly, that such core is left behind when one enters into relationships outside of that most intimate sphere. Here the individual's activities acquire a social dimension and the rights of privacy in this context becomes subject to limitation (Investigating Directorate : Serious Economic Offences v Hyundai Motor Distributors (Pty) Ltd : In re Hyundai Motor Distributors v Smit N O [2000] ZACC 12; 2001 (1) SA 545 (CC) at 556G - 557A).

26. Like other rights, the right to privacy in this context is not absolute and the information contained in a company register of members does not fall under those rights of privacy forming the inner core of such personal rights. Where a person enters the field of investing in shares or property, thereby becoming a member of first respondent, such investor becomes entitled to participate in the affairs of the first respondent, including the right to receive information relevant to first respondent and fellow members. This promotes transparency and accountability. However, such investor would also understand that his or her own information thereby becomes accessible to others so that prospective investors, or creditors, may be appraised of the affairs of the first respondent and its members in contemplating or entering into transactions with them. The information contained in the register is of such a nature as to be legitimately required by third parties who may wish to transact with first respondent or its members. Indeed, Mr Rome who appeared for the applicants drew attention to the following passage from the judgment of Ackermann J in Bernstein and Others v Bester and Others NNO [1996] ZACC 2; 1996 (2) SA 751 (CC) at page 796G to 797B (paragraph 85):

"[85] The establishment of a company as a vehicle for conducting business on the basis of limited liability is not a private matter. It draws on a legal framework endorsed by the community and operates through the mobilisation of funds belonging to members of that community. Any person engaging in these activities should expect that the benefits inherent in this creature of statute will have concomitant responsibilities. These include, amongst others, the statutory obligations of proper disclosure and accountability to shareholders. It is clear that any information pertaining to participation in such a public sphere cannot rightly be held to be inhering in the person, and it cannot consequently be said that in relation to such information a reasonable expectation of privacy exists. Nor would such an expectation be recognised by society as objectively reasonable. This applies also to the auditors and the debtors of the company. On the facts of this case the conclusion seems to be unavoidable that no threat to or infringement of any of the applicants' right to privacy as protected by s 13 of the Constitution has been established. "

27. One can think of other instances where personal information is generally available in public documents, such as, for instance, documents registered in the Office of the Registrar of Deeds, including ante nuptial contracts, mortgage and surety bonds, as well as property ownership. Accordingly it was submitted that the information to be disclosed from the first respondent’s register of members did not infringe upon the legitimate rights to privacy of the members of first respondent and even if it did, then that such infringement would be justifiable in terms of s 36(1) of the Constitution, 1996. I am satisfied that this is indeed so and that no constitutional infringement of the right to privacy resulted.

28. The next argument relied upon by the first to fifth applicants concerned the applicability of the provisions of the Promotion of Access to Information Act 2 of 2000 ("PAJA"). On behalf of the first to fifth applicants it was argued that applicants could not rely upon the provisions of section 113 of the CA but were compelled to apply to first respondent for information in terms of the provisions of PAJA. This, so the argument went, would then have enabled first respondent to consider the request and refuse such information as was not justified in terms of the provisions of PAJA.

29. In the preamble to PAJA it is recorded that the Act is intended to facilitate dissemination of information held, inter alia, by any person that is required for the exercise or protection of any rights, in compliance with the requirements of section 32 of the Constitution, 1996. The objects of PAJA are set out in section 9 thereof and include to give effect to the constitutional right of access to any information that is held by another person and that is required for the exercise or protection of any rights (section 9(a)(ii)), as well as the establishment of mechanisms or procedures to give effect to that right in a manner which enables persons to obtain access to records of private bodies as swiftly, inexpensively and effortlessly as is reasonably possible (section 9(d)). The interpretation of PAJA is dealt with in section 2(1) which provides that every court must prefer any reasonable interpretation of the provisions of PAJA that is consistent with the objects of the Act over any alternative interpretation that is inconsistent with those objects.

30. The clear intention of PAJA is to create mechanisms for the obtaining of information from both government and private individuals where otherwise previously no such mechanisms existed. PAJA is of general application and accordingly it needs to temper the demands for information by the creation of control mechanisms, such as the grounds for the refusal of access to certain records as contained in Chapter 4 thereof. It also provides for the provisions of PAJA to apply to the exclusion of other legislation which, firstly, prohibits or restricts disclosure of the records of a private body and, secondly, is materially inconsistent with an object or a specific provision of PAJA (section 5(a)).

31. Mr Rome, for the applicants submitted that there was no material conflict between the provisions of section 113 of the CA and the provisions of PAJA. I am in agreement with this submission. Section 113 of the CA creates a right to certain information and establishes a mechanism with which to enforce such right. As such it is not legislation which falls within the ambit of section 5 of PAJA. Where, for instance, applicants require from first respondent further information which is not required to be contained in the register of members of the first respondent and subject to disclosure in terms of section 113 of the CA, then they would conceivably have to resort to the provisions of PAJA. In my view PAJA is intended to create new mechanisms for obtaining information, not to displace existing mechanisms to enforce existing rights, such as section 113 of the CA. Such an interpretation would also be consistent with the interpretation requirements of section 2(1) of PAJA.

32. I accordingly conclude that there is no merit in the argument that applicants' reliance upon the provisions of section 113 of the CA was misplaced and that they should instead have sought to apply to first respondent for the required information in terms of PAJA. In my judgment first respondent should have provided the information required from it in accordance with the provisions of section 105(1) read with section 113 of the CA and the general membership of first respondent could not lawfully, even by resolution carried at the annual general meeting of first respondent, have prohibited its directorate from obeying the law in this regard.

33. Applicants seek a punitive order for costs on the attorney and client scale against the first to fifth respondents jointly and severally. Whilst I consider, as I have already indicated, that the first to fifth respondents were misguided in their interpretation of the legal position and the obligations imposed upon first respondent by the provisions of section 113 of the CA, I am not persuaded that this calls for a punitive order as to costs. It will also be recalled that the conduct of the second to fifth respondents were dictated by the resolution passed by the membership of the first respondent at the annual general meeting. In acting as they did the second to fifth respondents were therefore merely complying with the instructions of the first respondent and I see no reason to impose upon them an obligation to personally to pay costs jointly and severally with first respondent.

34. I have therefore come to the conclusion that the applicants are entitled to the relief in the form of an order, as follows;

a. The first respondent is directed to provide photocopies of all the pages/folios constituting its register of members to the applicants' attorneys of record by no later than FIVE(5) days from the date of the service of the order of this Court upon it.

b. Alternatively to paragraph (a) above, the first respondent is directed by no later than FIVE(5) days from the date of the service of the order of this Court upon it, to make its register of members available for inspection by applicants' attorneys of record.

c. That the first respondent pays the costs of this application, which will include the costs of senior counsel where employed, as well as the costs of two counsel in the case of the sixth respondent.

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VAN ZÿL, J.

JUDGMENT RESERVED ON: 17^TH OCTOBER 2007

JUDGMENT HANDED DOWN: 15^TH SEPTEMBER 2009

COUNSEL FOR APPLICANTS: ADV. GAVIN ROME

(Instructed by Routlege Modise c/o Strauss Daly Inc.)

COUNSEL FOR RESPONDENTS: ADV. NICHOLAS JOHN TREE

(Instructed by George Wolfe Attorney c/o Grundlingh Attorneys)

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