GOWORA J: The applicant filed an urgent application wherein it seeks an order
in the following terms:
TERMS OF INTERIM ORDER
1.
Pending
the determination of case number 6909/10, the respondents be and are hereby
ordered to give the applicant forthwith vacant possession of its business
premises at number 1 Manchester Road, Industrial Area, Chinhoyi and all its
property thereat.
2.
If
the respondents fail to comply with (1) above, the third respondent or the
police be and is hereby authorized to assist the applicant recover possession
thereof.
3.
The
respondents be and are hereby ordered to refrain from interfering with the
applicant's business operations in any way pending the determination of case
number HC 6909/10.
TERMS OF FINAL ORDER SOUGHT
1.
The
applicant shall have vacant possession of its business premises at number 1 Manchester Road,
Chinhoyi, as well as all its other assets thereat.
2.
The
respondents have no right to interfere in anyway with the applicant's business.
The founding affidavit attached to
the application was deposed to by one Patrick Tembo who is a director of the
applicant. The basic allegations are as follows:
The second respondent, Patrick
Tembo, Lameck Chinyemba, Stanford Makore and John Nyamujara are all share
holders in the applicant, with each of them holding a 20% shareholding of the
issued shares. It is common cause that sometime in about June 2010, the second
respondent, sold the entire shareholding in the applicant to the first
respondent. The sale was unauthorised. A report was made to the police and a
docket was opened for fraud charges.
The board of directors then resolved
to suspend the second respondent from the board pending the finalization of the
issue of the unauthorised sale. The deponent averred that “they” became aware
of the fraudulent sale sometime in August 2010. An application has since been
filed with the Registrar of this court to have the sale declared void under
case number HC 6909/10. The deponent avers further that despite being advised
of the attitude of the applicant towards the sale of the shares and its assets,
one of the first respondent had with the connivance of the second respondent
illegally occupied the applicant's premises at number 1 Manchester Road, Industrial Area,
Chinhoyi on 7 October 2010. The first respondent had claimed a right to occupy
the premises based on the alleged sale concluded with the second respondent.
The deponent further alleged that Mtetwa
and the second respondent had forcibly divested him of the keys to the depot on
the premise that the first respondent had now taken control of the applicant. A
report was made to the police who attempted to remonstrate with the respondents
to no avail.
On 8 October 2010 the deponent and
others regained temporary control of the depot in the morning and changed
locks. Around midday the respondents had allegedly forced themselves back onto
the premises by breaking locks to the gate. The first respondent has been in
occupation since then and has also assumed control of the fuel depot. After an
initial attempt at conciliation, the police have refused to get involved
claiming that the dispute is a civil matter.
The respondents have opposed the
relief being sought and have advanced points in limine.
Mr Mugomeza for the second respondent has put in issue the authority
of Patrick Tembo to institute these proceedings on behalf of the applicant.
In his affidavit, the second
respondent avers that the deponent seeks to derive authority to act on behalf
of the applicant premised on a resolution of the board dated 12 October 2010.
The second respondent states in his affidavit that he was the managing director
of the applicant but denies that there was a board meeting on the date in
question. He contended that if Patrick Tembo and Lameck Chinyemba, who signed
the resolution, met on the day in question, they did not constitute a quorum
and could therefore not pass a valid resolution. It is common cause that the
other two directors do not live in the country.
The applicant admits that the notice
of the meeting was not sent to the second respondent because he had been
suspended from the board. The applicant contends further that the other two
board members had given their proxies to Messrs Tembo and Chinyemba and that in
the circumstances these two had acted as alternate directors for the absent
board members. In effect the applicant contends that there was therefore a
properly constituted board meeting which passed a valid resolution authorising Patrick
Tembo to institute proceedings on behalf of the applicant.
A number of issues arise for
determination, the first being the suspension of the second respondent from
sitting on the board of directors. The minutes from the meeting held by the
board on 26 August 2010 have been produced by the applicant. Only three people
attended the meeting, P Tembo as chairman, the second respondent and L
Chinyemba who was also taking minutes. It is also recorded in the minutes that
P Tembo was alternate for J Nyamujara and S Makore.
The minutes attached to the urgent chamber application do not show that a valid
resolution was moved on that day for the suspension of the second respondent.
The portion of the minutes dealing with that aspect is to the following effect:
“At this juncture, the chairman was
forced to declare the meeting closed because there was no order, but before
doing so, he told Mr Chiseme that he breached the shareholders agreement and as
such will be suspended by the board, further to that, a letter will (sic) be written to BP informing them of
this new development.
The board resolved to do the
following:
- Suspend
Mr Chiseme as a director of the company with immediate effect.
- Report
Mr Chiseme to police for fraud.
- Write
to BP and Shell advising them about Mr Chiseme's suspension.
- Appoint
Mabulala and Motsi as our legal representatives in this case”.
The minutes are signed by the
chairman and the minute taker. The contention by the applicant is that Messrs
Nyamujara and Makore had appointed Mr Tembo to be an alternate director for
each or them and that therefore at any meeting of the board there would be a
quorum. The minutes do indeed show that Mr Tembo did attend the meetings not
only as himself but as an alternate for both Nyamujara and Makore. The question
is whether the articles and memorandum of association provide for an
appointment such as this?
The applicant did not find it
necessary to attach the articles to its papers in confirmation of the
appointment of Tembo as an alternate for Nyamujara and Makore. For as Gower-Modern
Company Law 4th ed states at 143:
“Sometimes the articles entitle a
director to appoint an alternate director to act for him at board meeting that
he is unable to attend. The extent of the alternate's promise and the answer to
such questions as to whether he is entitled to remuneration from the company or
from the director appointing him will depend on the terms of the relevant
article”.
This legal position is also
confirmed in Willie & Millin's Mercantile Law of South Africa 17 ed
which states at p 720:
“A director cannot delegate the
powers, i.e. appoint another person in his place unless authorised to do so by
the articles. This the articles usually do and such a director is called an
alternate director”.
I have accordingly no evidence before
me confirming the validity of the appointment of Tembo as an alternate for both
Nyamujara and Makore. The applicant's problems are further compounded by the
manner of suspension of the second respondent from the board of directors. It
seems to me that this may be an issue that may arise for substantive
determination before this court, but this matter cannot be resolved without an
examination of the manner of suspension of the second respondent from the board
of directors. I will however just adhere
on the legal requirements pertaining to the removal of a director.
On the suspension of a director, the
legal practitioners referred me to the authority of James North (Zimbabwe) (Pvt) Ltd
& Ors v Mathinson 1989 (1)
ZLR 322, in which reference was made to Van
Tonder v Pienaa & Ors 1982
(2) SA 336. At 341 D-F KANNEMEYER J stated:
“In my view the first respondent
approach is not correct. In terms of article 72 the directors are charged with
the management of the second respondent's affairs. There is no suggestion that
there has been a delegation by the directors of any of their powers to the first respondent.”
In Shaw and Sons (Salford) Ltd v Shaw
(1935) 2 KB 113 (A) at 134 GEER LJ is reported as saying:
“A company is an entity distinct
alike from its shareholders and directors some of its powers may, according to
its articles, be exercised by directors, certain other powers may be reserved
for the shareholders in general meeting. If powers of management are vested in the directors, they and they alone
can exercise those powers”.
In the absence of delegation, the
powers vested in the directors are exercised through resolutions passed by them
at meetings and notice of a meeting must be given to all directors present and
able to attend. See Mafola Investments (Pty) Ltd
v Uitzigt Properties (Pty) 1961 (4) SA 705. In casu, no resolution has been produced in
which the suspension of the second respondent as a director of the applicant
was voted on and passed. Going by the minutes of the meeting of 26 August 2010
there is no suggestion that the required number of directors agreed to the
suspension of the second defendant. The reference to the suspension was a
statement by the chairman that the second respondent had breached the
shareholders agreement and as such would be suspended by the board and that
further a letter would be written to BP informing them of this new development.
There is no indication that the matter was put to the vote and that even the
second respondent was given an opportunity to resist the suspension.
For the acts of a majority to bind a
minority, it is essential that the minority should at least have been given an
opportunity of stating their views, and to this again that the minority should
have been given time to consider the matter and furnished with or had access to
whatever information may be necessary. See Robinson
v Imroth & Ors 1917 WLD 159 at
179 per DE VILLIERS CJ.
It seems to me that there was no
proper resolution to suspend the second respondent and that therefore he should
have been given notice of the meeting of 12 October 2010 where the resolution
to institute these proceedings was made. He was not given notice and therefore
did not attend. Messrs Nyamujara and Makore also were not present. There is no
indication that they had been given notice to attend the meeting.
The general rule is that directors
of a company can only act validly at a board meeting, unless the articles
provide otherwise. See Silver Garbus
& Co (Pty) Ltd v Terchart, 1954 (2) SA 98, but it is clear that a board meeting may
be dispensed with if all directors agree to what is to be done. A meeting is therefore not a necessity
provided all the board members what the matters to be decided are and the
requisite number indicate their agreement to the decision. In African Organic Fertilizers and Associated
Industries Ltd v Premier Fertilizers
Ltd 148 (3) 233 it was accepted that notice of a director's meeting must be
sent to every director who is within reach. If any director who is able to
attend is not sent notice of a meeting, then such meeting is not valid. In this
instance, there was no notice to directors who were within reach and there was
no quorum.
It is also a generally accepted
principle that a resolution passed at an irregularly constituted meeting is
invalid and ineffective. See Bursten
v Yale 1958 (1) SA 768. The
resolution in casu was signed by two
directors when a quorum is constituted by three directors. I need not to deal with
the question of urgency as the applicant's representative has failed to
establish that he was properly authorised to institute these proceedings by the
board of directors of the applicant.
In the premises, the point in limine raised by the second
respondent is upheld and the application is dismissed with costs.
Mabulala & Motsi, applicant's legal practitioners
Mambosasa, first respondent's legal
practitioners
Mutezo
and Company, second respondent's
legal practitioners
