Case CCT 108/17
[2018] ZACC 32
Hearing Date: 08 May 2018

Judgement Date: 25 September 2018

Post Judgment Media Summary  

The following explanatory note is provided to assist the media in reporting this case and is not binding on the Constitutional Court or any member of the Court.

On 25 September 2018 at 10h00 the Constitutional Court handed down judgment in an application for leave to appeal against a judgment of the Supreme Court of Appeal that dismissed an appeal from the High Court of South Africa, Northern Cape Division, Kimberley (High Court). The High Court had dismissed an application for rescission of an earlier court order made by the High Court against the applicants.

In 1997 a group of individuals in the Northern Cape acquired NC Housing Services and Development Co Limited (company), to use it as a vehicle to exploit commercial opportunities in the Northern Cape for the benefit of black people. The applicants, Mr Mosalasuping Morudi and 70 others, are some of the many people who are shareholders of this company. A dispute arose between the applicants and the second and third respondents, Mr Scholtz Babuseng and Mr Seodi Mongwaketsi, regarding the proportion of shares owned by the various shareholders.

Mr Babuseng and Mr Mongwaketsi launched an application in the High Court against the company, Mr Morudi and three other shareholders (the first four applicants before the Constitutional Court) in their capacities as directors of the company, seeking a determination of who was entitled to shareholding in the company and in what proportion. The High Court referred the matter to trial. A shareholders’ meeting was held on 19 April 2013 at which a resolution was taken to withdraw the company’s opposition to the court application launched by Mr Babuseng and Mr Mongwaketsi (April resolution).

When the application came to trial before the High Court for the determination of the company’s shareholding, the Court held that the shareholders (who were the first four applicants before the Constitutional Court) did not have standing to participate in the trial in their personal capacities as they had been cited in representative capacities as directors of the company. The High Court also held that, since the company had withdrawn its opposition to the trial, there was no other basis on which these applicants could have standing in the proceedings. The High Court refused to give them an audience, immediately granting an order in accordance with a draft order agreed to between Mr Babuseng and Mr Mongwaketsi, on the one hand, and the company, on the other.

All 71 applicants applied to the High Court for a rescission of the order, but their application was denied partly on the basis that they had been present in Court when the order was made and were therefore not entitled to have the order rescinded as it was not granted in their absence.

The applicants took the matter on appeal to the Supreme Court of Appeal. A majority judgment of the Supreme Court of Appeal upheld the order of the High Court. Additionally, the Supreme Court of Appeal held that although the applicants had been participating in the proceedings both as directors and as shareholders, the April resolution barred them from participating any further in the litigation because they failed to have the resolution set aside by the High Court.

In a unanimous judgment written by Madlanga J, the Constitutional Court held that when an individual shareholder is cited as “shareholder” in proceedings, she or he is a party to the litigation in her or his personal capacity.

The Court held that the trial was intended to determine who the shareholders in the company were. That meant every potential shareholder – the 71 applicants, Mr Babuseng and Mr Mongwaketsi included – had a direct and substantial interest in the outcome of the trial. That was so because that outcome would have had a direct impact on the rights of each potential shareholder. The High Court was therefore obligated to ensure that anyone directly affected by its order was joined to the proceedings. In refusing to grant an audience to the first four applicants before the Constitutional Court, the High Court denied them their right of access to courts which is guaranteed by section 34 of the Constitution. The order was therefore erroneously granted. Moreover, although the Uniform Rules of Court require that a party must have been absent when the order was granted, the Constitutional Court held that the first four applicants may have been physically present in the courtroom, but the High Court’s refusal to grant them an audience meant that they might as well have been absent.

On these grounds, the Constitutional Court granted the first four applicants rescission in terms of the Uniform Rules of Court and granted the further applicants leave to intervene in the trial resuscitated by the rescission.             

The Full judgment  here.