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IN THE HIGH COURT OF SOUTH AFRICA

(Northern Cape High Court, Kimberley)

Case No:        1577/2012

Heard:             23/05/2014

Delivered:        08/08/2014

In  the  matter between:

NC HOUSING SERVICES & DEVELOPMENT COMPANY          APPLICANT

AND

MTHUTHUZELI JOSEPH MATSHOBA                                                   1^st RESPONDENT

KEITUMETSE JEANETTE MOTHIBI                                                     2^nd RESPONDENT

SCHOLTZ JACOB BABUSENG                                                            3^rd  RESPONDENT

SEODI JULIUS MONGWAKETSI                                                           4^th RESPONDENT

MOSALA SUPING PHILLIP MORUDI                                                    5^th RESPONDENT

DONALD JAMES JACOBS                                                                    6^th RESPONDENT

FRANKLIN ARNOLD GEORGE ADAMS                                               7 ^th RESPONDENT

VIVEIROS ALLEN GOLIATH                                                                   8^th RESPONDENT

Coram: Mamosebo AJ

JUDGMENT

MAMOSEBO AJ

[1] In an application dated 26 August 2013, which was issued by the Registrar on 26 August 2013, the applicant, NC Housing Services & Development Company, brought an application on urgency in which it sought the following relief:

1.1    That the meeting that was held on 19 April 2013 at the Kimberley Library purporting to be a shareholders meeting be declared unlawful;

1.2    That   all   resolutions   adopted   at   the   meeting   in  question purporting  to  be the  resolutions  of the  Company  be declared unlawful and be set aside;

1.3    That the first and second respondents (Joseph Matshoba and Jeanete Mothibi, respectively), be ordered to pay the costs on an attorney and client scale. Matshoba and Mothibi are not directors of  the applicant company.

[2] The third respondent, Scholtz Babuseng, is the Chairman of the Company. The fourth to eighth respondents are directors of the Company. They are, respectively, Seodi Mongwaketse, Mosalasuping Morudi, Donald Jacobs, Franklin Adams and Viveiros Goliath.

[3] Morudi (the fifth respondent) is also the deponent on   behalf of the applicant Company. He claims to derive his authority from the "Resolution of the Board of Directors: NC Housing  Services & Dev     Co"  dated  16  August  2013  at  which    the following directors were present: "(l) MrM Morudi; (2) Mr D Jacobs; (3) Mr F Adams". At which It was resolved that:

"1       The meeting held on the 19^th of April 2013 purporting to

be a meeting of the shareholders of the company be declared illegitimate and unlawful together with the resolutions[thereof].

2.        That the firm TOWELL & GROENEWALDT ATTORNEYS is appointed to represent the company in this matter.

3.          That   Mosalasuping Phillip Morudi is  authorized  to depose to all affidavits in Opposition of this application. "

[4] A brief history of the applicant Company NC Housing Services & Development Company is a registered Public Company. It was acquired by a group of the present shareholders as a Shelf Company during 1997. It was then converted into a Public Company for purposes of the registration of more than 50 people as shareholders. The underlying acquisition was to create a special purpose vehicle for a broad-based entity for a large group of predominantly poor and historically disadvantaged Black people to  acquire and control strategic stakes in mineral and other enterprises.

[5] On 04 January 2002 the Board of Directors passed a resolution to sell shares to an investor to enable the company to purchase an interest in Meriting Investments (Pty) Ltd. On 08 May 2004 the shareholders passed a resolution to the effect that anyone wishing to increase their stake in the company could deposit money in the Company Bank Account at Standard Bank, Kimberley. The understanding was that the shareholder would then be issued a commensurate number of shares with the deposit made.

[6] NC Housing Services subsequently acquired an interest in  NWC Manganese (Pty) Ltd. The latter had a majority shareholding in Northern Cape Manganese Company (Pty) Ltd.

The   last  mentioned   company   in  tum  held  an   interest in a valuable prospecting right for    Manganese in   the  Northern Cape under Department of Mineral Resources Reference Number 52/2005 (PR).

[7] Notwithstanding the aforegoing NC Housing Services & Development was deregistered by the Registrar of Companies on 21 September 2007 for failure to submit Annual Statements and/or returns. However, the company was restored to the Register of  Companies by Order of Court on 13 April 2012.

[8] The  application  now  before  me  (Case  No  1577/2012)  has  been referred  to as the Interlocutory  Application.   There is  a pending Main Application  registered  under the same case number on 11

September 2012 in which the parties are as follows:

"Scholtz Jacob Babuseng                          1^st Applicant

Seodi Julius Mongwaketse                        2^nd  Applicant

And

NC Housing Services & Development        1^stRespondent

Company

Mosalasuping Phillip Morudi                         2^nd Respondent

APJacobs                                                      3^rd  Respondent

Franklin Arnold George Adams                     4^th  Respondent

Viveiros Alen Goliath                                    5^th    Respondent"

[9] In the Main Application, the two applicants seek the following relief:

"1.      An order declaring  that the list of persons,  attached as Annexure "M" to the founding affidavit, to be the list of shareholders of the first respondent.

2.       An order declaring that the number of persons allotted to each shareholder listed in annexure "M" shall be in

3.        The Board of Directors of first respondent is authorized and compelled to amend the first respondent's Memorandum of Incorporation to provide for the necessary increase of the number of authorized shares, pro rata to a maximum of 2832 shares   and   the issuing thereof as contemplated in section 36 of   the   Companies  Act, 71 of 2008.

4.      The Board of Directors of the first respondent shall give effect to the Resolutions passed on 22 February 2012 that are attached as annexure "P" to the founding affidavit.

5.      The costs of this application be paid by the first respondent, alternatively by such a respondent opposing this application, jointly and severally with the first respondent;

[10] Pertaining to the Main Application Williams J made the following  Interim Order by agreement between the parties on 16 October   2012,  which  Order  is  quoted  in  full  because   a substantial portion of its  terms  feature  prominently  in  the

Interlocutory Application I am  seized with:

"1.      The question whether annexure "M" to the founding affidavit correctly reflects the shareholding in the first respondent  and if not what changes  should  be effected

thereto is referred to trial on a date to be determined.

2.      The Parties' affidavits shall stand as pleadings.

3.      Each party shall be entitled to call a deponent as well as any other person of whom it gives notice no less than 10 days before the hearing as a witness.

4.      The parties shall be entitled to discovery in terms of the

Rules.

5.      Pending   judgment   in   the   abovementioned trial; the following interim order is made:

5.1            The board of directors as referred to below, is authorized to issue one (1)  ordinary  par   valueshare to  each   person  whose   name   appears  on

annexure "M";

5.2            The board is directed to issue share certificates according to paragraph 5.1 above;

5.3           The board  is  directed to convene  a  shareholders

meeting on or before 16 November 2012 for purposes of voting on whether or not  to approve the sale of shares in NWC Manganese (Pty) Ltd referred   to   in   annexure   "N"   to   the founding

affidavit and  to take a  resolution  as  envisaged in sections 112 and 115 of the Companies Act 71 of 2008 ("the Act);

5.4           The board of directors shall consist of the first applicant [Babuseng] as the Chairperson, and the second to the fourth respondents[Morudi, Jacobs and Adams], and no resolution to the contrary  shall  be passed.

6.      Declaring that upon restoration of the first respondent on 13 April 2012, the  board of directors as referred  to    in paragraph 5.4 was restored to office and may   carry out all functions and obligations in terms of the Act.

7.      The proceeds of the sale of shares shall be deposited in equal shares into the trust accounts of the respective attorneys of the parties, viz Towell & Groenewaldt and Van Zyl & Groenewaldt, to be retained until final judgment in this matter subject to paragraph 8 below.

8.      The costs of the application to date shall be paid by the first respondent [NC Housing Services & Development Company], such costs to include costs of two counsel in the case of the applicants and the travelling and subsistence costs of the respondents' counsel. "

[11] At the meeting that was held on 19 April 2013 at the Kimberley Library, which is sought to be declared unlawful and the resolutions   adopted there be set aside (see para  1 above),   the following    resolutions were taken:

"RESOLUTION OF THE SHAREHOLDERS OF THE NC HOUSING SERVICES & DEVELOPMENT COMPANY, REGISTRATION NUMBER 1997/005908/06     ("THE COMPANY") TAKEN AT KIMBERLEY ON 19 APRIL 2013

"Now therefore it is resolved that:

5.     The mandate of the said Attorneys Towell & Groenewaldt to represent the Company be terminated with immediate effect;

6.     The Company immediately withdraw its opposition to the

application and henceforward support the application;

7.    Mthuthuzeli Joseph Matshoba, the lawful Proxy and Agent 2 0 of Caroline Nonzima Matshoba,   a   shareholder in  the Company,  be and  is  hereby  authorized  in his  capacity as

such to, sign and depose to any necessary documentation or affidavits and to take all necessary steps on behalf of the shareholders and Company to give effect to this Resolution and that any steps he may already have taken in  this regard be and are hereby  ratified;

8.     The powers granted in Paragraph 7 above include but shall not be restricted to

8.1 The appointment of attorneys and advocates to represent the shareholders and company and to appear in the High Court;

8.2The appointment of Forensic Accountants or other suitably qualified experts to assist the said attorneys and

advocates in the conduct of these proceedings;

8.3The payment of all fees of the attorneys, advocates and other experts used in these proceedings;

8.4The making of all other payments which may be necessary and desirable for the proper conduct of the  case;

8.5To proceed to the final end and determination thereof; 8.6To move  the Court  to vary the Interim  Order  granted on

16 October 2012 to provide that:

8.6.1   One  third  of  the   proceeds   of   the   sale   of   the Company's  Shares in NWC Manganes  (Pty) Ltd be paid into    the shareholders' Attorneys Trust Account and that this amount be deducted  from  the

amount payable in terms of the said Order into the Trust Account of Messrs  Towel & Groenewalt;

8.6.2  The said Morudi, Jacobs, Adams and Goliath may be suspended as Directors should investigations referred   to   in   paragraph   9   result   in criminal charges being brought against them pending the outcome of those proceedings;

8.6.3  Should paragraph 8.6.2 become operative, the shareholders be given the right to elect acting Directors pending election of the new Directors in the normal course.

9.     The Company investigate the possibility of commencing criminal proceedings against  the   said   Morudi,  Jacobs, Adams and Goliath in relation to irregularities that have been alleged to have occurred in the issue of shares    and to mandate the said Matshoba to take such steps as might be necessary to proceed in this regard. Certified a true copy and signed at Kimberley on 19 April 2013 by the following shareholders who were present at the meeting."

[12] Adv W Coetzee, for first and second respondents (Matshoba and Mothibi), has taken two points in limine. The second point, the non­ joinder issue, holds no water and will be dealt with in passing at the end. The first objection goes along the following lines:

12.1  The purported authority to lodge the present (the Interlocutory Application) is derived from a meeting dated 16 August 2013 at which meeting the fifth, sixth and seventh respondents (Morudi, Jacobs and Adams, respectively) were present. See para 3 above.

12.2   In this regard it is important to note that in terms of the Order of Court of 16 October 2012, of the Main Application, the third, fifth, sixth, seventh and eighth respondents (Babuseng, Morudi, Jacobs, Adams, and Goliath) were appointed directors. The Court Order in question is quoted in para 10 above. The relevant paragraph (Clause) of the Court Order is 5.4 and reads as follows:

"5.4  The  board  of  directors  shall  consist  of  the  first applicant [Babuseng] as the Chairperson and the second to fourth respondents [ Morudi, Jacobs and Adams], and no resolution to the contrary  shall  be  passed."  (Own emphasis)

Mr Coetzee made an error as far as Goliath is concerned. Order/Clause 5.4 does not mention him but he was a director before the Court Order.

12.3   The third respondent (Babuseng), having been appointed as Chairperson of the Board by the Court, did not receive notice of the meeting of 16 August 2013 hence, it is submitted, that no enforceable resolutions could be taken, Mr Coetzee submitted.

[13] The third and fourth respondents  (Babuseng: the  Chairman and Mongwaketse: a Director, respectively), applied to Court on 11 September 2012 for an order declaring that the list of persons in Annexure "M" appended to the Resolution  taken on 19 April 2013 marked Annexure "B" be the only persons entitled to shares in proportion to the contributions they have made. This situation would obtain until the Board of Directors amend the Company's Memorandum of Incorporation to increase the number of authorized shares to 2832 for proportional distribution to the listed persons.

[14] The following is noteworthy and significant:

14.1   The application referred to in para 13 (above) was opposed by the Company on the authority of a Resolution marked Annexure "MPM   l" dated  12 September  2012.  The meeting was attended by Morudi  (the   deponent),   Jacobs,   Adams   and Goliath. Conspicuous by his omission or absence is the Chairman (Babuseng).

14.2   Annexure "PMM2" dated 16 August 2013, which initiates the application now before me, demonstrates that Babuseng was once again overlooked because his name is not reflected thereon. (See: para 3 above).

[15] What is unmistakable is that there were clearly two camps amongst the Board of Directors.

15.1   One camp is composed of  Babuseng  (the  Chairperson)  who  potentially   owns  15.67%  of  the  shares  in  the   Company  and Mongwaketse,   who  is  a  major,  if  not  the  major  shareholder. They are supported by the first and second respondents (Matshoba and Mothibi) who have been authorized from time to  time  to guide the directors  in the affairs  of the   Company

They appear to be very knowledgeable.

15.2   The other camp consists of Morudi, Jacobs,  Adams  and Goliath. They are all directors and respondents in this application. What is striking about their conduct is that they not only overlooked  Babuseng  in  the  meetings  referred  to   paras

14.1 and 14.2 (above) but a lot of correspondence was exchanged between them (the Morudi-faction represented by Towell and Groenewaldt Attorneys) and the Babuseng-faction after  19 April 2013 and  meeting  that the Morudi-faction  called

on 16 August 2013. However, nothing was   said by the Morudi-faction to Babuseng about the intended meeting of 16 August 2013 nor, as already mentioned, was he officially notified like all the attendees.

[16] There is no explanation in the Morudi-faction's founding papers or Replying Affidavit for sidelining the Chairman as aforesaid. Mr Kgotlagomang, acting for the Morudi-faction which group masqueraded as the NC Housing Services & Development Company (the applicant) did not address this issue in his Heads of Argument.  This matter should have   received   their  combined  attention   because Mr Babuseng drew attention to  it as follows in his opposing affidavit:

16.1   "8. The Board did not meet prior to 15 March 2013 to authorize Towell & Groenewaldt Attorneys to act on behalf of the Board  or the applicant and to send the letter dated 15 March 2013, annexed to the founding affidavit as annexure "PMM4 ". I am the  Chairman  of  the  Board  and  did  not  receive  any  notice toattend a Board meeting  where resolutions  would be taken.

9. The Directors, not including me as Chairperson, purported to mandate the attorney to send the letter. They had no authority to do so and acted ultra vires.

10.On 12 July 2013, Mr Kgotlagomang sent a letter to the first respondent [Matshoba] informing him that the board does not recognize the resolutions taken at the shareholder's meeting. I refer the Court to annexure

"PMM9"appended to the  founding affidavit. I was  yet again not informed of a Board meeting where this was discussed and  decisions taken.

11.A period of approximately three months lapsed between 19 April 2013 (the date of the shareholders meeting) and  12 July 2013 when the letter referred to in paragraph 10 supra was sent. There is no explanation for this delay.

12.On 22 April 2013 Michelle Kock sent an e-mail  stating that  a Board meeting will be held on 23 April 2013 at which a resolution will be sought to bring an application to have the shareholders meeting declared illegitimate. I refer the Honourable  Court  to  annexure  "PMM7"   to  the  founding affidavit. On the same date at approximately 17:00, I received a text message from Morudi informing me that a Board meeting will be held at 16:00 on 23 April.2013 at the offices of Towell and Groenewald. It stated that Mr OC Koikanyang, an attorney who previously acted for NWC Manganese, called the meeting. 13.I replied to Morudi informing him that Mr Koikanyang was not a Director and could not call a Board meeting. If the Board met, it was not properly constituted and any resolutions passed are of no force and effect. force and effect.

14.Annexure "PMM2" purports to prove that a meeting of the Board took place on 16 August 2013. I never received notice of that meeting and Morudi was not duly authorized to bring this application on behalf of the Company. The Resolutions are of no force and effect.

15. It  is respectfully  submitted  that  for  these reasons no Morudi  and the other  Directors  had  no  authority  to  bring  this  application  on behalf  of the Company  and  therefore lacks locus standi.

16. I refer the Court to the time that lapsed between the date of knowledge of the shareholders meeting (15 March 2013), the letter on 12 July 2013, the e-mail on 22 July 2013 and the purported Board meeting on 16 August 2013." (Own emphasis)

[17] It is therefore safe to infer that the Morudi-faction masquerading  as the  applicant  has. no explanation to proffer. They must stand or fall by their founding papers. In

Swissborough   Diamond  Mines  (Pty)  Ltd and  Others  v Government of the Republic of South Africa and Others  1 999 (2) SA 279 (T) at 323 F -  324C Joffe J stated:

"It is trite law that in motion proceedings  the affidavits  serve  not only to place evidence before  the Court  but also to  define the issues between the parties. In  so doing  the issues  between the parties are identified. This is not only for the benefit of the Court but also, and primarily, for the parties. The parties must know the case that must be met and in respect  of which  they  must  adduce  evidence  in  the  affidavits.   In  Hart  v  Pinetown Drive-Inn  Cinema  (Pty)  Ltd  1972 (])  SA 464 (D) it was  stated at 469C--E that

'where proceedings are brought by way of application, the petition is not the equivalent of the declaration in proceedings by way of action. What might be sufficient in a declaration to foil an exception, would not necessarily, in a petition, be sufficient to resist an objection that a case has not been adequately made out. The petition takes the place not only of the declaration but also of the essential evidence which would  be led at a trial and if there   are absent from the petition such facts as would be necessary for determination of   the   issue   in  the  petitioner's favour,   an objection  that it does  not  support  the relief claimed  is  sound.'

An applicant must accordingly raise the issues upon which it would seek to rely in the founding affidavit. It must do so by defining the relevant issues and by setting out  the  evidence  upon which it relies to discharge the onus of proof resting on it  in respect thereof As was held  in  Prokureursorde  van  Transvaal  v  Kleynhans  A  1995  (1)  SA  839  (T)  at  849B    in regard to a constitutional issue:

'Dit is myns insiens vir die behoorlike ordening van die praktyk absoluut noodsaaklik dat konstitusionele punte nie deur advokate as laaste debatspunt uit die mou geskud word maar pertinentin die stukke as geskilpunt geopper word sodat dit volledig uitgepluis kan word deur die partye ten einde die Hof  in staat te stel om dit behoorlik te bereg.'

The dictum is not only of application to constitutional issues - it applies to all issues. Nor is the dictum only of application in the context of a founding affidavit- it applies equally to answering affidavits and replying affidavits. "

See MEC for Health, Gauteng v 3P Consulting (Pty) Ltd 2012 (2) SA 542 (SCA) at 550F - 55 lD.

[18] Adv Zietsman SC was corect in his contention that it is not the case of the applicant Company that the irregularity in excluding the Chairman of the Board (Babuseng) was caused by any subsequent lawful ratification. He submitted that the three Directors (Morudi, Jacobs and Adams) who attended the meeting  cannot  be said to have acted  lawfully.  It  is a  sound principle that an act executed ultra vires cannot  be ratified.

18.1    In African Organic Fertilizers & Associated Industries Ltd v Premier Fertilisers Ltd 1948 (3) SA 233 (N) at 241 Broome J stated:

"I therefore   accept  the  principles  that   notice  of  a directors' meeting must be given to every director who  is within reach, and that the question whether a director is within reach depends upon the circumstances, including the nature of the business to be transacted If the business to be transacted were contentious, the degree of inaccessibility would have to be very great. "

18.2         In Damane v Central Energy Fund 2013 JDR 0915(GSJ) the Full Bench (Sutherland J, with Van Ooster J and Bedhesi AJ concurring) held at paras 32- 33:

"32.   The  principle  in  contention  is  that  unauthorised decisions may be ratified with retrospective effect. There is a distinction of importance between:

32.1.        the ratification of an authorised  decision  that could have been validly taken if prior authority had been conferred,  and,

32.2.      the impossibility of an attempt to 'ratify' a decision which could not have been taken, even if the decision maker had been notionally authorised.

The difference is between the concept of an 'unauthorised decision' and the concept of an 'incompetent decision'.

33. The decision in Wessels & Smith v Vanugo Construction (Pty) Ltd 1964 (I) SA 635 (0) is an illustration of the latter type of decision, ie an incompetent decision: an invalidly constituted board (improperly convened  and without a quorum) cannot take a valid decision and nothing exists in law to ratify. The critical point is that the decision maker was incompetent to make the decision (at 638D). Similarly, the basis for the decision in Mathipa v Vista University and others 2000 (1) SA 396 (T) was that the initial decision by the rector to appoint a campus director was characterised by the court as ultra vires the statutory regime of the university and that a ratification of an ultra vires act by an organ of the university, ie the council, that did   have such  power  to  make  an  appointment,   was  not  in  law possible (see at 401A-E)."

18.3            In Nyoka v Cricket South Africa [2011] JOL 27198  (GSJ) delivered 15 April 2011 at page 35 para 71 Mojapelo DJP held:

"[71] The respondent failed to give proper notice of  the meeting to the applicant who was entitled to same. The failure is an irregularity which invalidates the proceedings. Resolutions taken at a meeting where persons who were entitled to receive notice or required to receive  notice   thereof did  not  receive such,  are ordinarily invalid (see Mtshali  v Mtambo  1962  (3)  SA 469 (G) at 472 (D-E; Wessels & Smith v Vanugo Construction (Pty) Ltd 1964 (]) SA 635 (0) at 636 G - 637H; African Organic & Associated Industries Ltd v Premier Fertilisers Ltd 1948 (3) SA 233 (N) at 239-241; Visser v  Minister  of Labour  1954 (3) SA  975  (W)  at

Based on the stated irregularity the result should be that the application must fail.

WHETHER THE FIRST AND SECOND RESPONDENT WERE AUTHORISED  TO CALL THE MEETING  OF 19 APRIL 2013.

[19] Mr Morudi, on behalf of the Company, states as follows in para 49 of the founding papers:

"49 I am advised that the business and the affairs of  the  company must be managed by the directors of the company through the Board of Directors. The Board of Directors has the authority to exercise all the powers and perform all the functions to the extent that same is authorized by the Act and the Memorandum of Incorporation. Nobody but the Board may manage the affairs of the applicant other than the people that constitute the Board. The resolution suspending the Board flies in the face of the provisions of the Act and therefore is unlawful. The first and second respondents are not in a position to manage the affairs of the applicant in this matter. "

[20] The first respondent's (Mr Matshoba's) response is as follows:

"41.2 I aver  that 1 have been advised that the  directors  hold office at the  will  of  the  shareholders  and  not  the other  way  round  and  that where directors fail to act in the bona fide interests of the Company, a General Meeting of Shareholders  has an inherent and statutory power to remove or override them and that a resolution  to   suspend

directors is therefore not necessarily unlawful particularly when framed in  the form that the written  resolution signed by  the shareholders on  the19th April 2012  was  framed,  namely  that the above Honourable Court be moved to amend its Order on the 16^th October 2012 to provide that the said directors may be suspended in the event that investigations result in criminal charges being brought against them pending the outcome of the criminal proceedings.

41.3 l further deny that I am attempting to manage the Company. I am

only trying to extricate the Company from ruinous and unjustifiable litigation for which I have a Shareholder's Resolution and which litigation has not been pursued in the bona fide interests  of the Company but by certain directors in the pursuit of their own interests which are directly in conflict with the interests of the majority shareholders. "

[21] Where a company has an ineffective Board of Directors the shareholders in a General Meeting have the residual right to invoke the company's powers. Adv W Coetzee, for first and second respondents (Matshoba and Mothibi), has argued that on this principle

Matshoba has been validly  authorized to appoint the current  attorneys of record for the Company and withdrew the Company's Opposition  to the Main Application for the relief sought therein to be obtained on. an unopposed basis.

[22] The  withdrawal   of  the  opposition   and  the  appointment   of   first respondent (Matshoba) referred to by Mr Coetzee are contained in a legal document filed of record by Mr Matshoba's attorneys, Adrian B Horwitz & Associates who, by the way, also represent Babuseng and Mongwaketse. To give the proper context the full document is quoted: "In  the  High  Court  of  South  Africa,  Northern  Cape  High Court,

Kimberley, Case No 1577/2012

Kimberley: The 16^th Day of October 2012

Before the Honourable Ms Justice Williams

In the Matter of

Scholtz Jacob Babuseng                                            1^st  Applicant

Seodi Julius Mongwaketse                                         2^nd Applicant

And

NC Housing Services & Development                        1^st  Respondent

MP Morudi                                                                   2^nd Respondent

DJ Jacobs                                                                   3^rd  Respondent

FAG Adams                                                             4^th  Respondent

VA Goliath                                                              5^th  Respondent

NOTICE   BY   FIRST   RESPONDENT   OF   SUBSTITUTION OF ATTORNEYS OF RECORD AND WITHDRAWAL OF OPPOSITION TO APPLICATION

Please take notice that pursuant to a Resolution passed at a duly constituted General Meeting of Shareholders at Kimberley on 19 April 2013, first respondent in the above matter, NC Housing Services & Development Company Limited, Registration Number 1997/005908/06  hereby:

i.         Substitutes  Attorneys  Adrian  B  Horwitz  & Associates,  Ground Floor,  Barnet  House,  45  Du  Toitspan  Road,  Kimberley  as its Attorneys of Record in these proceedings in place of Attorneys Towell & Groenewaldt, 28 Roper Street, Kimberley.

ii. Withdraws its opposition to the Application and will henceforward support the application and file an affidavit to give effect to such support.

A copy of the Resolution and Letter of appointment of first respondent's [the Company's] new attorneys hereunto annexed marked "A" and "B" respectively.

Please take notice further that first respondent will henceforth accept service  of  all  Notices,  Affidavits   and  other  Documents in  these proceedings at the offices of its substituted Attorneys. Dated at Kimberley on this the 81  day of August 2013."

The Resolution in question has been set out in full in para 11 of this judgment.

[23] Mr Willem Coetzee has cited  the  following authority for his submission  made in para 23 above:

23.1        Gohlke & Schneider v Westies Minerale 1970(2) SA 685 (A) at 693 where Trollip JA expounded:

"The articles, therefore, only  empower  a  general  meeting  to  appoint directors to fill vacancies caused by retirement   or   removal   of directors, a   situation  which  did  not arise  in the present  case.  I agree however with Mr. Coetzee that the members must have inherent or implied general power to appoint directors to fill other vacancies caused, for example, by   resignation, death, incapacity, or disqualification. Usually, as a matter of practice, they would exercise that power by ordinary resolution at a general meeting. But the articles neither require that nor prohibit the power from being exercised by their unanimous assent achieved otherwise than at such  a meeting. After all, the holding of a general meeting is only  the formal machinery for securing the assent of members or the  required majority  of them, and, if the assent  of all the members  is  otherwise

obtained, why should that not be just as effective? Thus in the case of Salomon v Salomon and Co. Ltd., 1897 A.C. 22, one of the questions that arose was whether the agreement whereby the company purchased the vendor's business was valid, since there had been no independent board of directors to render the company bound. No general meeting of members of the company had been held to approve the agreement, but according to the evidence they all knew of its terms and accepted them. "

23.2        Alexander Ward and Co Ltd v Samyang Navigation Co Ltd

[1975] 2 AIIER 424 (HL) per Lord Hailsham at 428-429 that:

"With respect, however  this argument  is a non sequitur which  would only become cogent if one adopted a false and question­ begging  meaning to the word  "competent."  In my opinion, at the relevant time the *679 company was fully competent either to lay arrestments or to raise proceedings in the Scottish courts. The company could have done so either by appointing directors, or, as I think, by authorising proceedings in general meeting, which in the absence of an effective board, has a residual authority to use the company's powers."

[24] As I understood him correctly Mr Zietsman, for Babuseng and Mongwaketse, supported the line of argument presented by Mr Coetzee but he added an aspect that I will address in passing. That Mr kgotlagomang has conceded. First, that the meeting took place without a Chairperson which resulted in the lack of locus standi by the applicants. He cited s73 (4) (b) of the Companies Act 71 of 2008 which is couched in peremptory terms. The second concession pointed out by Mr Zietsman is that the Board of Directors was

dysfunctional. This, he submitted, resulted in the shareholders having a clear right to intervene in the affairs of the Company.

[25] Mr Kgotlagomang, for the Company and the Morudi-faction, made the following submissions on these aspects. That even though  it  is submitted that the Board was dysfunctional, the respondents have failed  to  comply   with   sections  61  (Shareholder's  meetings), 62 (Notice of the meetings) and 65 (Shareholder resolutions) of the Companies Act. Mr Kgotlagomang argued that it is the Board that must refer issues to the shareholders and the Board must convene a shareholders' meeting.

[26] Mr Kgotlagomang's argument cuts both ways. If it holds true  against the Babuseng-faction for the meeting of 19 April 2013 then it is self-   defeating in respect of the applicant in respect of its meeting held on 16 August 2013. Be that as it may, I am satisfied that, on the facts of this case, Mr Coetzee's authorities and argument is in point and must succeed on two fronts, as already discussed.

GOING FORWARD:  MATTERS  OF CONCERN

[27] The Babuseng and Morudi factions must reconcile. The Company is fighting against itself and will self-destruct. They must agree on someone neutral, qualified, experienced and competent m commercial/company matters to mediate/arbitrate. The Shareholders and Directors  must  bear  in mind  why the Company  was formed or

acquired;  to  improve  their socio-economic situation  as  previously

disadvantaged people. There seem to be signs of a smash-and-grab, get-  rich-quick mentality emerging.

[28] Mr  Zietsman  has  dedicated  about  12  paragraphs   of  his    Heads  of      

Argument to alleged incidents of impropriety on the part of attorney Kgotlagomang. Kgotlagomang has elected not to respond to the allegations merely stating that it is hearsay. It would be undesirable to express myself on this issue on the papers before me. What I am prepared to say, however, is that an  untenable  situation  for him  and his firm has been precipitated. This includes, leaving aside what Mr Zietsman has contended, on an overview of  the  entire  case,  a  potential conflictual situation for the attorney and his firm. Stepping aside may be the best option.

THE COSTS ISSUE

[29] It is unfair for the Company to be mulcted in costs and at the shareholders' expense for  the  indiscretions  of  the  directors (Morudi, Jacobs, Adams and Goliath) who seem to have acted in their selfish interests. The exorbitant proposed payout to Directors and some Shareholders and Regional Representatives without proper authorization are not signs that instill  confidence.

[30] Notwithstanding the fact that the name of the Company has been used and abused it appears that the Company may have to bear the costs. However, the errant directors are warned to desist. They will in future bear   the costs in person, possibly punitively.

[31] In the result, the following order is made:

ORDER

1.   The application by NC HOUSING SERVICES & DEVELOPMENT COMPANY (the Applicant) is dismissed with costs on a party and party scale. The costs shall include cost for two counsel for the third and fourth respondents.

________________________

MC MAMOSEBO

ACTING  JUDGE:  NORTHERN  CAPE  HIGH COURT

On behalf of the Applicant:                                Mr Kgotlagomang

Instructed by:                                                      Towell & Groenewaldt Attorneys

On behalf of the 1st& 2^nd Respondents:           Adv W Coetzee

Instructed by:                                                         Adrian B Horwitz & Associates

On behalf of 3^rd  & 4^th  Respondent:                   Adv P Zietsman SC

Assisted by:                                                         Adv PR Cronje

Instructed by:                                                       Elliot Maris Wilmans & Hay Attorneys

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