Category: Du Plessis Barry v Clearwater Estates

Du Plessis Barry v Clearwater Estates

The Supreme Court of Appeal

16 March 2017

Swain JA

Issue(s):

Whether ss 58(1) and 58(3)(c) of the Companies Act are alterable provisions.

Law:

ss 1, 58(8), and 58(3)(c) of the Companies Act 71 of 2008.[see note 1]

Ratio:

A deliberate change of expression in a statute will prima facie indicate a change of legislative intention/the apparent purpose of the provision.

Arguments:

For Du Plessis Barry:

  • On a proper interpretation of these sections, a clear distinction is drawn between the concept of the appointment of a proxy in terms of s 58(1), and the exercise of the proxy in terms of s 58(3)(c). The latter section deals, conceptually, with the administration of proxies.[at para 14]
  • This interpretation does not give rise to any conflict between ss 58(1) and 58(3)(c), as an individual could hold a valid appointment but be unable to exercise that appointment at a particular meeting.[at para 14]
  • The legislature intended that there could be a lawful variation through a company MOI of the provisions in the Act relating to the stipulation of a time period, within which proxies must be submitted for the purpose of exercising the rights contained therein, at a particular meeting of the company.[at para 14]
  • s 63(1)(b) of the Act enjoins the officer presiding over a general meeting to validate and verify proxies prior to allowing a proxy to exercise a vote on the instrument, a general meeting would be unable to proceed on the scheduled day because of the administrative burden imposed on the presiding officer.[at para 22]

For Clearwater Estates:

  • The wording of s 58(1)(a) is clear and unambiguous and permits no interpretation other than that a shareholder has the right to appoint any individual as a proxy ‘at any time.’[at para 15]
  • This subsection is an unalterable provision in the Act whose purpose was to protect the right of shareholders to participate in, speak and vote at a shareholders meeting and to do so through a proxy of their choice.[at para 15]
  • The appointment of a proxy may accordingly take place at any time, including during the meeting. The time clause in the first respondent’s MOI accordingly negates, restricts, limits or qualifies this fundamental right of a shareholder contrary to the provisions of s 15(2)(d) of the Act. The time clause contained in the first respondent’s MOI therefore contravenes and is inconsistent with s 58(1) of the Act and is void to that extent.[at para 15]

Conclusion:

  • The appointment contemplated by s 58(1) is not made in vacuo. Although it may take place at ‘any time’, it has a defined purpose in terms of the Act. That purpose in terms of s 58(1)(a), is to ‘participate in, and speak and vote at, a shareholders meeting on behalf of the shareholder’. The appointment of a proxy in respect of a particular meeting seeks to achieve this statutorily defined purpose. If that purpose is thwarted by a time bar imposed in terms of s 58(3)(c) for the delivery of the instrument appointing the proxy, then the validity of the appointment of the proxy itself is impugned. The appointment of a proxy who is unable to perform any of these statutorily defined functions at a particular meeting has no purpose and is no appointment at all.[at para 16]
  • The plain wording of ss 58(1)(a) and 58(3)(c) of the Act read together and in context with due regard to their purpose, is that a shareholder of a company may appoint at any time, anyone who is not a shareholder of the company as a proxy to participate in, and speak and vote at a shareholders meeting on behalf of the shareholder, provided that the proxy delivers a copy of the instrument appointing the proxy, to the company or to any other person on behalf of the company, before the proxy may exercise any of the rights of the shareholder at the meeting.[at para 18]
  • The use of the phrase ‘at any time’, is a deliberate change of expression. Considered together with the omission of a minimum period for the delivery of the instrument evidencing the proxy and its substitution with the requirement that it is to be delivered ‘before’ the exercise of any rights at the meeting, a change of legislative purpose with regard to the former minimum period of 48 hours is clearly indicated.[at para 21]
  • The provisions of s 58(1) are unalterable. The right of a shareholder to appoint a proxy ‘at any time’ is a provision that does not expressly contemplate its alteration in any way by a company’s MOI.[at para 13]
  • The provisions of s 58(3)(c) are alterable, because the section expressly contemplates that its effects may be altered. Consequently if the articles in question contravene or are inconsistent with the provisions of s 58(1), they are void in terms of s 15(1) of the Act.[at para 13]
  • If practical difficulties are real and not simply apparent, their resolution lies not in a strained interpretation of the Act, but by legislative intervention.[at para 22]

Notes:

s 1: An ‘alterable provision’ is a provision of [the] Act in which it is expressly contemplated that its effect on a particular company may be negated, restricted, limited, qualified, extended or otherwise altered in substance or effect by that company’s Memorandum of Incorporation. An ‘unalterable provision’ is a provision of this Act that does not expressly contemplate that its effect on any particular company may be negated, restricted, limited, qualified, extended or otherwise altered in substance or effect by a company’s Memorandum of Incorporation or rules.’