Sammel and Others v President Brand Gold Mining Co Ltd

• Jurisdiction: South Africa
• Judge: Steyn CJ, Van Blerk JA, Botha JA, Holmes JA and Trollip JA
• Judgment Date: 29 May 1969
• Citation: 1969 (3) SA 629 (A)
• Court: Appellate Division

A Trollip, J.A.:

On 15th September, 1965 the President Brand Gold Mining Co. Ltd., herein referred to as 'President Brand', made a takeover bid for all the issued 12,491,870 R1 shares of the Free State Saaiplaas Gold B Mining Co. Ltd., called herein 'Saaiplaas', at 60c per share. By the close of the offer on 6th October, 1965 acceptances for about 93 per cent of the shares had been received, and President Brand then invoked sec. 103 ter of the Companies Act, 46 of 1926, as amended, in order to acquire the remaining shares. By 17th February, 1966, being the expiry date of the statutory notice under the section, the holders (numbering C 7,639) of 515,550 shares had not accepted the offer. In the meantime, on 11th February, 250 holders of about 184,000 shares combined to institute the present proceedings in the Court a quo, claiming an order against President Brand under sec. 103 ter (1) declaring that it was not entitled to acquire any of their shares. There are six other actions by 29 other shareholders, holding 16,048 shares, for similar relief, D still pending in the same Court. It has been agreed between the parties in those actions that they will abide the result of the present proceedings.

After a lengthy trial lasting 32 days, in which massive documentary and oral evidence was adduced, NICHOLAS, J., dismissed the action with a special order as to costs. Of the original plaintiffs, 168, holding E 161,690 shares, have now appealed to this Court against that judgment.

Miss van den Heever represented the appellants Sammel and the estate of the late Joseph Schepetin, and the other appellants were all represented by Mr. Suzman and his team of counsel, who presented the main argument F for all the appellants. Mr. Suzman did not appear for the plaintiffs at the trial, and, I suppose, it was therefore inevitable that, with a fresh mind being brought to bear on the case, new points and arguments, not pleaded or canvassed at the trial, would be raised on the appeal. Respondent's counsel strongly objected to any new, unpleaded issues being raised for the first time on appeal, and the appellants' right to G do so was debated at the Bar. In the end, I found it unnecessary to determine that dispute for, in each instance, I was able to assume in appellants' favour that the issue could be raised on appeal and to decide it on its merits against them. But, lest that course should be construed in this era of take-over bids as sanctioning or approving any laxity in pleading in cases like the present, I hasten to add expressly H that that is certainly not intended. On the contrary, I would say, albeit obiter, that the wide discretion which sec. 103 ter has conferred on the Court (to be noticed presently) has rather enhanced than detracted from the need for and importance of precision in pleadings in actions under the section. It is all the more necessary for the transferee company to know precisely and fully the grounds upon which the applicant dissentient shareholder will move the Court to 'order otherwise' under the section.

Trollip JA

Summary of facts.

The main facts relevant to this litigation can be summarised as follows:

A 1. Saaiplaas is a gold and uranium mining company situated in the goldfields of the Orange Free State. It was incorporated on 14th June, 1955. At the relevant time it was a member of the Gold Fields Group and fell under the technical and secretarial administration of the chief South African Company of that Group, Gold Fields of South Africa Ltd. (referred to as 'Gold Fields S.A.'). As NICHOLAS, J., said:

'The Saaiplaas mine started out with high expectations. Borehole B prospecting results, obtained before the incorporation of the company, had led to the belief that this would be a rich mine. These expectations were disappointed. When, by 30th June, 1961, the mine had been fully equipped for production, and development had reached an advanced stage, the gold values disclosed were poorer than prospecting results had promised.'

C The deterioration in the value and payability of its ore continued, and its problems were aggravated in 1963 by mining setbacks underground - a fire and the intersection of a hot water fissure. Consequently, by about the middle of 1964, it was facing a serious financial crisis.

2. One of its neighbours is the successful gold mine of President Brand, situated about six miles away. It is a member of the Anglo-American D Group, at the head of which is the Anglo-American Corporation of South Africa Ltd., herein termed 'A.A.C.', under the technical and secretarial administration whereof it fell. At all relevant times the chairman of President Brand was one Berning, who was a manager and alternate director of A.A.C. He also became a director of Saaiplaas as a nominee E of A.A.C. The Gold Fields and Anglo-American Groups were two independent, rival groups, the parent companies of which were not represented on each other's boards of directors.

3. In addition to having issued 25,438,800 fully paid shares of R1 each, Saaiplaas had borrowed extensively, nearly R10 million, on which it had F to pay interest amounting to about R700,000 per annum. Details of these loans are as follows. A consortium of its shareholders had lent it R5 million, which was repayable by 31st December, 1964. This consortium, described as 'the Loan Syndicate', comprised companies in the Goldfields, Anglo-American and Anglo-Transvaal Groups, a company known G as the Securities Agency Ltd., and the South African Mutual Pension Fund. The National Finance Corporation of South Africa Ltd., had lent Saaiplaas R2 million, which was repayable by 19th February, 1965. Repayment of this loan and interest was guaranteed by Consolidated Gold Fields Ltd., the English parent of the Group. In due course it in fact paid the amounts owing and stepped into the shoes of that Corporation as H creditor. Lastly, Saaiplaas had issued R2,392,915 in redeemable unsecured notes, which were redeemable on 30th June, 1965. Of those notes, members of the Loan Syndicate and associated companies held R860,945 (about 37.3 per cent). Consolidated Gold Fields also paid the interest due on these notes for the year ending 30th June, 1965 and became a creditor for that amount. The above constituted the major creditors of Saaiplaas and for convenience they will be referred to as 'the loan creditors'. The approximate position is summarised in the following table:

Trollip, J.A.

A Shareholder and/or creditor.	No. of shares held	Approx. %	Total creditor Position- Notes and/or loans
Gold Fields Group	8,590.119	34	R4,640,592
Anglo-American Group	3,284,909	13	1,625,428
Anglo-Transvaal Group	962,556	4	537,500
S.A. Mutual	819,556	3	537,500
Securities Agency & Associated Companies	428,767	2	1,132,728
Total Loan Syndicate & Associated Companies	14,085,829	59	R8,473,748
[*] Other Companies	2,231,344	8
[*1] Other Shareholders	9,121,627	36
Other Noteholders			1,474,242
Totals	25,438,800	100	R9,947,990

5. Saaiplaas, at the relevant time, had a board of 12 directors, of whom one Ewing had been the chairman since its D incorporation. He was well qualified and widely experienced in mining, and, at the time of his retirement on 31st December, 1965, he held the position of an executive director of Gold Fields SA Except that he was a director of certain of the companies in the Anglo-American Group as the nominee of Gold Fields S.A., he had no connection with or E interest in that Group. As already mentioned Berning was a director of Saaiplaas.

6. The extent of the financial crisis that faced Saaiplaas in 1964 can be gauged, inter alia, from the following:

(a)

Consolidated Gold Fields agreed to and eventually did repay the R2 million loan with interest to National Finance Corporation and the interest on the notes for the year ending 30th June, F 1965 in order to enable Saaiplaas to continue its normal operations for the time being.

(b)

Saaiplaas had to ask the Loan Syndicate to suspend the interest payable on their loans from 1st July, 1964 and to agree to extend the date of repayment of the capital to 30th June 1965. G In the memorandum in support of its request, Saaiplaas admitted that it could not pay either the interest or capital of these loans. The Loan Syndicate agreed to the request.

(c)

At the meeting of the directors of Saaiplaas on 9th June, 1964 Ewing reported that operations at the mine were no longer profitable, the yield of gold per ton having dropped to 4.7 H dwts., whereas 4.9 dwts. were required to obtain sufficient revenue to cover working costs and capital expenditure; that there would be an estimated deficit of R310,000 for the year ending 30th June, 1965;

Trollip JA

that the company's cash resources were virtually exhausted (as at 31st May, 1964 there was in fact a net cash deficit of R248,466); and that it was consequently necessary to make new financial arrangements to allow A development and production to continue on the current scale.

(d)

On 12th June, 1964 Saaiplaas applied to the State for aid in the sum of R310,000 under the latter's scheme for assisting marginal mines in order to cover working costs and capital expenditure for the period 1st May, 1964, to 30th June, 1965. This was B granted under an agreement between the State and the company concluded in September 1964 (exh. 4A).

(e)

In his annual report to shareholders for the year ended 30th June, 1964 Ewing mentioned the

'major deterioration in both the results of the operations and in the financial...