Quintessence Opportunities Ltd and Another v BLRT Investments Ltd BLRT Investments Ltd v Grand Parade Investments Ltd and Others

JurisdictionSouth Africa
JudgeBlignault J
Judgment Date17 April 2007
Citation2007 (6) SA 523 (C)
Docket Number13965/2006 and 14235/2006
Hearing Date22 March 2007
CounselP B Hodes SC (with E Fagan) for the applicants S Olivier SC (with A Kantor) for the respondent S Olivier SC (with A Kantor) for the applicant P B Hodes SC (with E Fagan) for the respondents
CourtCape Provincial Division

Blignault J:

[1] There are two applications under consideration in this matter. They were heard together A and this judgment relates to both of them. Both applications concern a special resolution passed on 18 December 2006 at the annual general meeting of Grand Parade Investments Ltd (GPI), in terms of which GPI's articles of association were B abrogated and replaced by a new set of articles. This resolution is herein referred to as special resolution No 8.

[2] In the first application (case No 13965/2006) Quintessence Opportunities Ltd (Quintessence) as first applicant and Mr Hassen Adams, a director of Quintessence and GPI, as second applicant sought C and obtained on 18 December 2006, on an ex parte basis, an order interdicting BLRT Investments Ltd (BLRT Investments) from exercising the voting rights in respect of its shares in GPI at the annual general meeting of GPI. That relief was based on the terms of a voting pool agreement concluded between certain shareholders in GPI. D BLRT Investments now seeks to have that order reconsidered and set aside.

[3] In the second application (case No 14235/2006) BLRT Investments (as applicant) is seeking an order declaring that it is not bound by the voting pool agreement and an order declaring that special E resolution No 8 which was passed at the meeting, be set aside. The second application is opposed by GPI and Quintessence.

The salient facts

[4] GPI is a black empowerment company that owns a substantial F portion of the shareholding in Sunwest (Pty) Ltd (Sunwest), a company that is the owner of, inter alia, the Table Bay Hotel in Cape Town and the Grandwest Casino in Goodwood. Quintessence and BLRT Investments are shareholders in GPI. Third to seventh respondents in the second application (case No 14235/2006) are also shareholders in GPI and they are parties to the voting pool agreement. Although cited G in the second application they do not oppose it.

[5] The voting pool agreement was approved at a meeting of the voting pool members held on 23 November 2006. The meeting was attended on behalf of BLRT Investments by Mr Norman Daniels, the chairman of its board of directors. Purporting to act on behalf of BLRT H Investments, Daniels signed the voting pool agreement on 23 November 2006. The question whether Daniels was authorised to conclude the agreement on behalf of BLRT Investments, is the principal factual issue in the matter. I

[6] In terms of the provisions of the voting pool agreement the parties thereto pooled their shares in GPI for purposes of voting such shares at general meetings of GPI. The pooled shares, it was agreed, would be voted in accordance with a decision taken at a prior meeting of the pool members. J

Blignault J

[7] On 13 December 2006 the voting pool members met in order to consider how the pooled shares should be voted by the pool A representative at the annual general meeting of GPI to be held on 18 December 2006. A majority of the pool members represented at the meeting resolved to vote in favour of certain resolutions including special resolution No 8. There were no votes against the resolution to vote in that way, but Daniels, attending the meeting of 13 B December 2006 as the representative of BLRT Investments, abstained from voting. Adams was mandated to vote at the annual general meeting on behalf of the pool members. C

[8] BLRT Investments held its annual general meeting on 16 December 2006 and a new board of directors was constituted. The new board formed the view that BLRT Investments was not bound by the voting pool agreement as Daniels had not been authorised to conclude the agreement on behalf of BLRT Investments. The new board mandated Mr Shaun Rai, one of the directors, to attend the GPI annual general D meeting and to exercise the voting rights attaching to BLRT Investments' shares at that meeting. Rai informed Adams of this by way of a telefax letter on 18 December 2006.

[9] On 18 December 2006 Quintessence and Adams brought the urgent application for an order interdicting BLRT Investments from E exercising the voting rights in respect of its shares in GPI at the annual general meeting of GPI. Attempts were made to serve the application on BLRT Investments but they were not successful. The founding affidavit was deposed to by Mr Ralph Freese who is a director of Quintessence and GPI. He said that he had been informed by Daniels F at 17:40 on 17 December 2006 that BLRT Investments had held its annual general meeting on 16 December 2006 at which its board of directors had been reconstituted. Daniels also informed him that the new board had met the same day and resolved that Rai would exercise the voting rights in respect of BLRT Investments' shares at the annual G general meeting of GPI without regard to the voting pool agreement. Freese also deposed to a supplementary affidavit in which he referred to Rai's letter of 18 December 2006. He dealt with the allegation that Daniels had not been authorised to sign the voting pool agreement and sought to refute it. H

[10] The Court granted the interdict sought by Quintessence and Adams in the form of a final order shortly before the annual general meeting was due to commence.

[11] The annual general meeting of GPI took place at about 18:30 on 18 December 2006. Adams acted as chairman of the meeting. At the commencement of the meeting he announced that the Court order had I been obtained. Adams voted on behalf of the pool members, but excluding BLRT Investments, in favour of special resolution No 8 and it was passed with the requisite majority. J

Blignault J

The principal issues A

[12] BLRT Investments' case is a simple one. It contends that it is not bound by the voting pool agreement as Daniels did not have authority to conclude the agreement on its behalf. Had BLRT Investments been permitted to exercise its own voting rights at GPI's annual general meeting on 18 December 2006, it contends, special resolution No 8 would not have been passed at the meeting. B

[13] In opposing BLRT Investments' application, Quintessence and GPI raised four substantive defences:

(i)

They sought to counter BLRT Investments' contention that C Daniels was not authorised to conclude the voting pool agreement, by relying on the so-called rule in Turquand's case.

(ii)

They contended that the exercise of BLRT Investments' own voting rights at the annual general meeting held on 18 December 2006 would have made no difference to the outcome of the meeting.

(iii)

The third defence is that BLRT Investments is not in law entitled to an order setting aside the passing of special resolution No D 8.

(iv)

The fourth defence is that BLRT Investments is precluded by the provisions of art 54 of GPI's articles of association, from seeking an order setting aside the passing of special resolution No 8.

[14] I propose to consider these four defences in turn. E

Daniels' authority to conclude the voting pool agreement on behalf of BLRT Investments

[15] The circumstances surrounding the question whether Daniels was authorised to conclude the voting pool agreement on behalf of BLRT Investments, were canvassed in the affidavits filed on behalf of the parties in the second application. Rai, a director of BLRT Investments, F deposed to the founding affidavit on behalf of BLRT Investments. Daniels filed a confirmatory affidavit. Freese deposed to an answering affidavit on behalf of Quintessence and GPI. Rai in turn made a replying affidavit. G

[16] It appears from Rai's founding affidavit that a voting pool agreement had been under consideration for some time. On 21 October 2006 the directors of BLRT Investments signed a round robin resolution to enter into a pooling and shareholders agreement in respect of GPI on the terms and conditions set forth in a draft agreement. It is common cause that the terms of the voting pool H agreement that was later signed by Daniels, were substantially different from those of the draft agreement referred to in the round robin resolution. A majority of the shareholders of BLRT Investments, however, had concerns with the draft agreement. They met with Daniels on 4 November 2006 and they decided to reject the draft agreement. The concerns of these shareholders were conveyed to Adams by way of a I letter signed by Daniels on 7 November 2006. In the ultimate paragraph of this letter it was contemplated that a further debate would take place in regard to the concerns raised therein.

[17] A meeting of GPI's board of directors took place on 23 November 2006. It was chaired by Adams and attended by Daniels. The representatives J

Blignault J

of the parties to the voting pool agreement met immediately thereafter. Daniels' version of the events leading to his A signing of the agreement appears from paras 32 and 33 of Rai's affidavit:

'32.

Daniels was told by Adams that the voting pool agreement had been substantially changed as a result of inter alia, Daniels' input and that the voting pool agreement adequately accommodated the issues that had previously been raised. Daniels B indicated to Adams that he was extremely uncomfortable in dealing with the issues surrounding the voting pool agreement because of the concerns previously raised. Daniels also questioned whether or not he was authorised to conclude the voting pool agreement. Adams assured Daniels that the voting pool agreement dealt with the concerns previously raised and also told Daniels that he was authorised to sign C the voting pool agreement by reason of the round robin resolution which had been previously signed.

33.

Daniels signed the voting pool agreement the next day without reverting to the majority shareholders or his fellow directors. Daniels has admitted to me that he was not authorised to sign the voting pool agreement but did so because of Adam's assurance...

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3 practice notes
  • Analyses: The Turquand Rule, Irregular appointments and Bypassing the disciplinary process
    • South Africa
    • Juta South Africa Mercantile Law Journal No. , August 2019
    • 20 de agosto de 2019
    ...company on inquiry, there can be no furtherquestion of applying the Turquand rule (Quintessence Opportunities Ltdv BLRT Investments 2007 (6) SA 523 (C) 532F; FPW EngineeringSolutions (Pty) Ltd v Technicon Pretoria 2004 (1) All SA 204 (T) paras37–38).(2017) 29 SA MERC LJ528© Juta and Company......
  • Janse Van Rensburg v Mahu Exhaust CC and Another
    • South Africa
    • Invalid date
    ...Quintessence Opportunities Ltd and Another v BLRT Investments Ltd; H BLRT Investments Ltd v Grand Parade Investments Ltd and Others 2007 (6) SA 523 (C): referred to R v Forlee 1917 TPD 51: referred to R v Grove 1956 (1) SA 507 (SWA): referred to R v Grove 1956 (2) SA 254 (A): referred to Sa......
  • Tswelopele Non-Profit Organisation and Others v City of Tshwane Metropolitan Municipality and Others
    • South Africa
    • Invalid date
    ...materials that afford H habitable shelters. But because the occupiers are avowedly unlawful occupiers, who are vulnerable to a properly 2007 (6) SA p523 Cameron obtained eviction order under PIE, the structures to be erected must be capable of being A dismantled. Order 1. The appeal succeed......
2 cases
  • Janse Van Rensburg v Mahu Exhaust CC and Another
    • South Africa
    • Invalid date
    ...Quintessence Opportunities Ltd and Another v BLRT Investments Ltd; H BLRT Investments Ltd v Grand Parade Investments Ltd and Others 2007 (6) SA 523 (C): referred to R v Forlee 1917 TPD 51: referred to R v Grove 1956 (1) SA 507 (SWA): referred to R v Grove 1956 (2) SA 254 (A): referred to Sa......
  • Tswelopele Non-Profit Organisation and Others v City of Tshwane Metropolitan Municipality and Others
    • South Africa
    • Invalid date
    ...materials that afford H habitable shelters. But because the occupiers are avowedly unlawful occupiers, who are vulnerable to a properly 2007 (6) SA p523 Cameron obtained eviction order under PIE, the structures to be erected must be capable of being A dismantled. Order 1. The appeal succeed......
1 books & journal articles
  • Analyses: The Turquand Rule, Irregular appointments and Bypassing the disciplinary process
    • South Africa
    • Juta South Africa Mercantile Law Journal No. , August 2019
    • 20 de agosto de 2019
    ...company on inquiry, there can be no furtherquestion of applying the Turquand rule (Quintessence Opportunities Ltdv BLRT Investments 2007 (6) SA 523 (C) 532F; FPW EngineeringSolutions (Pty) Ltd v Technicon Pretoria 2004 (1) All SA 204 (T) paras37–38).(2017) 29 SA MERC LJ528© Juta and Company......

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