THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Reportable
Case no: 110/2019

In the matter between:
SEKEPE INVESTMENTS (PTY) LTD
FIRST APPELLANT

THE ALCHAMY (PTY) LTD

SECOND APPELLANT

MAROBALO INVESTMENTS (PTY) LTD     THIRD APPELLANT

And

GOVERNMENT EMPLOYEES
PENSION FUND

FIRST RESPONDENT

MAGAE MAKHAYA HOUSING
(RF) (PTY) LTD

SECOND RESPONDENT

Neutral citation: Sekepe
Investments
(Pty)
Ltd
and
Others
v
Government Employees Pension Fund and Another
(110/2019) [2020] ZASCA 183 (23 December 2020)
Coram:
CACHALIA, MOCUMIE and MAKGOKA JJA and
POYO-DLWATI and UNTERHALTER AJJA

Heard:
3 November 2020

Delivered: This judgment was handed down electronically by
circulation to the parties’ representatives via email, publication on the
Supreme Court of Appeal website and release to SAFLII. The date and
time for hand-down is deemed to be 09h45 on 23 December 2020.

Summary: Specific performance – standing – claims made to enforce
rights of shareholders – no derivative action required – conditions for the
advance of the loans satisfied – shareholders’ agreement to fund company
arises from shareholder resolution.

ORDER

On appeal from: Gauteng Division of High Court, Pretoria (Rabie J
sitting as court of first instance): judgment reported sub nom Sekepe
Investments Pty Ltd and Others v Government Employees Pension Fund
and Another [2018] ZAGPPHC 785.

The appeal is upheld with costs, including the costs of two counsel,
where so employed.
The order of the high court is set aside and replaced by the
following order:
‘The application succeeds with costs and prayers 1-17 of the notice
of motion are granted.’

JUDGMENT

Unterhalter AJA (Cachalia, Mocumie and Makgoka JJA and Poyo-
Dlwati AJA concurring)
[1] The appellants and the first respondent, the Government
Employees Pension Fund (GEPF),1 are the shareholders of the second
respondent, Magae Makhaya Housing (RF) (Pty) Ltd (MMH). MMH was
incorporated to develop low-cost housing projects. The shareholders of
MMH concluded a shareholders’ agreement. Clause 10 of the
shareholders’ agreement provides for the financing of MMH. It states that

1 The Government Employees Pension Fund is a pension fund established in terms of the Government
Services Pension Act 57 of 1973. It is represented by its investment arm, the Public Investment
Corporation SOC Ltd, a state-owned company created in terms of the Public Investments Corporation
Act 2004.

the funding of the company was to be from the profits of the company, by
way of loans on commercial terms, and, only insofar as may be agreed by
the shareholders, by way of shareholder loans to the company, provided
that the shareholders were given timeous notice of the request for
funding. The shareholder loans to MMH are stipulated to be in proportion
to the shareholders’ shareholdings. The first appellant, Sekepe
Investments (Pty) Ltd (Sekepe), holds 55%, the GEPF 25%, and the
remaining shareholders 10% each of the shares in the company.

[2] The GEPF concluded separate loan agreements with the appellants.
In terms of these agreements, the GEPF agreed, subject to conditions, to
lend considerable sums of money to the appellants to enable the
appellants to meet the calls made by MMH to its shareholders for
funding. The GEPF thus undertook to lend money to the appellants so
that they, together with the GEPF, would fund MMH. The loan
commitments made by the GEPF under the loan agreements amounted to
R500 million, inclusive of the amount it would itself be advancing to
MMH by way of shareholder loan.

[3] In September 2017, the board of MMH resolved that it required
shareholder funding for various projects. The GEPF was represented at
the board meeting by two directors. Pursuant to the resolution, MMH
issued utilisation notices to the GEPF calling upon it to advance sums to
the appellants, under the terms of their loan agreements with the GEPF,
so that the appellants, in turn, could make shareholder loans to MMH.

[4] The GEPF did not make the loans available to the appellants. In
October 2017, the appellants’ attorneys sent letters to the GEPF,
demanding that the GEPF make payment of the shareholder loans that it

was liable to pay to MMH, as a shareholder, being 25% of the
shareholder loan call. In addition, the appellants called upon the GEPF to
advance the loans to them pursuant to the utilisation notices, so that the
appellants, in turn, could meet their obligations to fund MMH.

[5] These demands went unheeded. The appellants launched an
application in the high court. The relief sought was specific performance.
First, the notice of motion sought the payment of shareholder loans to
MMH under the shareholders’ agreement. Second, the appellants sought
to enforce the payment of the loans allegedly due by the GEPF to the
appellants under the terms of the loan agreements and the utilisation
notices.

[6] In its answering affidavit, the GEPF, in essence, advanced the
following defences. First, it raised the issue of standing, contending that if
its failure to advance the sums sought (both in terms of the shareholders’
agreement as well as the separate loan agreements) was a wrong done to
MMH, then the application should have been brought by MMH. And, if
that was not possible because the GEPF would not consent to MMH
doing so, then the appellants, as shareholders, were required to bring
proceedings under s 165(2) of the Companies Act 71 of 2008 (the
Companies Act) to protect the legal interests of MMH.2 This, so went the
argument, the appellants had failed to do.

2 That is, by means of a derivative action. S 165(2) of the Companies Act provides that:
‘A person may serve a demand upon a company to commence or continue legal proceedings, or take
related steps, to protect the legal interests of the company if the person—
(a)
is a shareholder or a person entitled to be registered as a shareholder, of the company or of a
related company;
(b)
is a director or prescribed officer of the company or of a related company;
(c)
is a registered trade union that represents employees of the company, or another representative
of employees of the company; or
(d)
has been granted leave of the court to do so, which may be granted only if the court is satisfied
that it is necessary or expedient to do so to protect a legal right of that other person.’

[7] Second, the GEPF contended that the conditions of clause 7 of the
loan agreements had not been satisfied, nor had the GEPF been provided
with the documents required under the terms of clause 7, and hence the
GEPF had no obligation to advance the loans sought of it. Furthermore, it
was said that the appellants had failed to comply with clause 16 of the
loan agreements in that there had been no production of financial
statements, nor quarterly environmental, social and governance reports.

[8] Third, the GEPF contended that it was not in breach of its
obligations to make loans to MMH as a shareholder. Clause 10 of the
shareholders’ agreement required that shareholder loans be made
simultaneously. The GEPF contended that the appellants were in no
position to do so, which meant, as a result, that the GEPF had no
obligation to extend 25% of the funding sought by MMH as a shareholder
loan in terms of the shareholders’ agreement.

[9] The high court dismissed the application. Rabie J found that the
defences advanced by the GEPF were sound, save that he considered it
unnecessary to resolve the standing defence raised by the GEPF.3

[10] With the leave of the high court, the appellants appeal to this court.

Standing
[11] The GEPF contended that the appellants brought the application in
the interests of MMH and sought relief on behalf of MMH. The
appellants, as a consequence, lacked standing to do so. MMH was

3 See Sekepe Investments Pty Ltd and Others v Government Employees Pension Fund and Another
[2018] ZAGPPHC 785, especially para 41.

required to bring the application in its own legal interest for the relief
sought in the notice of motion. If MMH was not able to bring the
proceedings because the GEPF directors of MMH declined to give their
consent, so the submission went, then the appellants should have brought
a derivative action on behalf of MMH under the procedures set out in
s 165 of the Companies Act. This the appellants failed to do.

[12] There are passages in the founding affidavit that state that the
application is brought in the interests of MMH and that, under its
Memorandum of Incorporation, MMH cannot initiate litigation without
the unanimous resolution of its shareholders. In addition, the notice of
motion is formulated on the basis that the GEPF is directed to pay
amounts to MMH, these amounts being the advances on the loans due by
the GEPF to the appellants. The notice of motion also seeks to compel the
GEPF to pay amounts to MMH in accordance with the GEPF’s
obligations under the shareholders’ agreement. The GEPF relies upon
these passages in the founding affidavit, and the relief sought in the
notice of motion, to contend that the application is brought in the interests
of MMH; and that, absent compliance with s 165 of the Companies Act,
the appellants lack standing to bring the application.

[13] The agreements between the GEPF and the appellants are unusual.
The appellants appear to be nominal shareholders in MMH. The loans are
advanced by the GEPF to the appellants solely for the purpose of the
appellants, in turn, advancing the same amount as loans to MMH under
the shareholders’ agreement. Why the GEPF should wish to use the
appellants as a conduit through which to fund the MMH indirectly, in
addition to doing so directly (as a party to the shareholders’ agreement),
was not explained. But none of the parties contended that the

shareholding of the appellants, nor the shareholders’ agreement or the
loan agreements were sham transactions. We must therefore proceed on
the basis that these agreements are valid.

[14] Once this is so, the issue of standing is properly considered by
asking whether the appellants’ application was predicated upon the rights
of the appellants or the rights of MMH.

[15] The loan agreements were concluded between the GEPF and each
of the appellants. Under those agreements, the GEPF agreed to advance
amounts to the appellants as loans. The appellants, subject to the terms
and conditions of the loan agreements, enjoyed the right to the advances
promised to them by the GEPF. The appellants were obliged to apply the
amounts advanced to the capital calls of MMH. But those obligations do
not derogate from the appellants’ rights, in the first instance, to the
advances lent to them by the GEPF. It is true that the ultimate recipient of
the advances is MMH. Accordingly, the enforcement by the appellants of
their rights to the advances will, in turn, benefit MMH and be in its
interest. That flows from the fact that MMH triggered the capital call
upon its shareholders and the advances under the loan agreement were the
chosen means by which the capital was to be made available by the
appellants.

[16] None of this derogates from the fact that the appellants asserted
their rights to have the GEPF make the advances to them. Nor should it
be forgotten that the assertion of these rights and securing the advances
burdens the appellants under the loan agreements with the respective
obligations to pay interest and repay the advances as indebtedness owing
to the GEPF, albeit on terms that few commercial lenders would accept.

That is, that the appellants would pay interest and capital when and if
they received dividends from MMH. However, once the appellants seek
the specific performance of the obligations owed to them under the loan
agreements, they plainly have standing to do so. That the proceeds of the
advances will accrue to MMH does not alter the standing of the
appellants to enforce their rights.

[17] The relief sought by the appellants in the notice of motion, that
seeks to direct the GEPF to make payments to MMH in terms of the
shareholders’ agreement, stands on a somewhat different footing. The
parties to the shareholders’ agreement are the shareholders and MMH.
Clause 10 of the shareholders’ agreement regulates the funding of MMH.
The shareholders agree to fund MMH by way of shareholder loans in
proportion to their shareholding. True enough, MMH must request this
funding. But if the shareholders agree to this request, then the
shareholders become obliged to fund MMH by way of shareholder loans,
proportionate to their shareholding, and to do so simultaneously.

[18] These stipulations give rise to rights as between the shareholders.
Once the shareholders agree to fund MMH, the funding takes place
according to agreed proportions and by way of the simultaneous duty on
each of the shareholders to make the funding available. Each of the
shareholders owes a duty to make the funding available. That is a duty
owed by each shareholder to MMH and also to every other shareholder. It
follows that the appellants enjoy the right under the shareholders’
agreement to exact compliance with the duty to fund resting upon all
shareholders, and hence upon the GEPF. Here, too, the appellants as
shareholders are enforcing their rights to specific performance. MMH is
the recipient of the funding, but the duty to fund is not only owed by each

shareholder to MMH. It is also owed to every other shareholder, and, for
this reason, it is enforceable by the shareholders inter se. That being so,
the appellants enjoy standing to seek to compel compliance by the GEPF
with its funding obligations under the shareholders’ agreement.

[19] Accordingly, the standing defence fails.

The requirements to advance the loan amounts
[20] The GEPF contends that the appellants failed to meet the
requirements of the loan agreements and, absent compliance, there was
no duty resting upon the GEPF to advance the loans to the appellants.

[21] In its answering affidavit, the GEPF largely contented itself with a
repetition of the provisions of the loan agreements to advance its position
that there had been non-compliance by the appellants, rather than
deposing to the facts as to what documents were in the possession of the
GEPF and what was missing. A defence cannot be made out simply by
reproducing the terms and conditions of an agreement and asserting that
the conditions have not been fulfilled. This is most especially the case, as
I shall explain below, when the GEPF had received relevant documents
from the appellants and failed to reflect these in its answering affidavit.

[22] Ultimately, the GEPF’s complaint was this. Clause 6 of the loan
agreements made the advances subject to clause 7. Clause 7 stipulated for
various conditions, one of which is that the documents must be provided
as required by the further conditions of utilisation contained in clause 7.3.
Clause 7.3 states that the lender, that is the GEPF, will only be obliged to
advance the loans if, in its opinion, on the date of the utilisation notice
and the utilisation date, the repeating representations (a defined term) are

correct in all material respects. The repeating representations are defined
to mean the warranties and representations in clause 15. Among the
warranties and representations listed in clause 15 is the warranty that the
appellants had prepared their financial statements in accordance with
generally accepted accounting principles or in accordance with IFRS,4 as
consistently applied (‘the financial standards warranty’). This, the GEPF
contended, had not been done by the appellants, and hence no advances
were due to them.

[23] What occurred was this. In October 2017, the appellants’ attorneys
sent letters to the GEPF referencing the utilisation notices, stating that the
appellants had complied with the loan agreements, and demanding
payment of the advances under the loan agreements. No response was
forthcoming, and the appellants launched the application they had
threatened. The GEPF’s answering affidavit was deposed to by its then
Chief Executive Officer, Dr Daniel Matjila, on 16 February 2018.

[24] What the answering affidavit did not reference was the
correspondence that had passed between the GEPF’s attorneys and the
attorneys of the appellants. In the GEPF’s attorneys’ letter dated 26
January 2018, it was stated that the appellants were in breach of their
obligations in terms of clause 16 of the loan agreements in failing to
provide audited financial statements as at the end of the financial year. It
was further stated that the appellants had not provided the GEPF with
quarterly management accounts or quarterly environmental, social and
governance reports, as clause 16 required. Mention was also made of a
failure to comply with the information undertakings, a tautologous
reference to clause 16. Nothing was said about any failure to comply with

4 International Financial Reporting Standards.

clauses 7.3 and clause 15 as the basis upon which the advancement of the
loans was declined.

[25] The appellants’ attorneys replied on 9 February 2018. With some
indignation, they pointed out that compliance with clause 16 had never
been raised by the GEPF prior to the launch of the appellants’
application. However, the management accounts for the 11 months
ending 31 January 2018 were attached, as also the financial statements for
the 14 months ended 28 February 2017. The letter also observed that,
save for some small amounts, the loans from the GEPF to the appellants
flowing to MMH constituted the financials of the appellants. Further, it
was said that the GEPF had never prescribed for quarterly management
accounts. Nor would it make sense, given that the purpose of the
appellants was to channel money to MMH, not for the appellants to
provide environmental, social and governance reports. The broader point
made in the letter is that the GEPF was opportunistic in its endeavour to
find a basis not to advance the loans.

[26] No proper explanation has been furnished as to why the GEPF
failed to reference and deal with this correspondence in its answering
affidavit. The correspondence and its attachments form part of the
replying affidavit.

[27] What is plain, however, is that the financial standards warranty was
satisfied, as evidenced by the financial statements and management
accounts attached to the letter of the appellants’ attorneys. The only
documents that the GEPF identified that it had not received, pertinent to
clause 7.3 and the repeating representations, were the financial statements
and the management accounts. And these it now had.

[28] As to the alleged breach of clause 16, this clause does not set out
conditions that must be met before the GEPF is obliged to make the
loans. Those conditions, as indicated, are stipulated in clause 7.1 and 7.3,
read with clause 15. There the GEPF’s only factual complaint concerned
the financial standards warranty, which had been met. As to clause 16.2
and 16.3, the GEPF was provided with the audited financial statements. If
they were out of time, the GEPF may claim for breach, but it is hard to
see what of consequence could be claimed. The quarterly management
accounts and environmental, social and governance reports had to be
prescribed by the GEPF. There is nothing to show that it did so. Nor has
it responded to the invitation made by the appellant’s attorneys as to
whether there is reason to do so.

[29] It follows that the GEPF has failed to make out a defence that it
was not obliged to advance the loans to the appellants for the reason that
the antecedent conditions required to claim specific performance had not
been fulfilled.

Loan payments to MMF
[30] The GEPF relied upon the provisions of clause 10 of the
shareholders’ agreement to contend that it was not obliged to pay the
loans. Clause 10 requires that if MMH was to be funded by shareholder
loans, that must be agreed by the shareholders. The agreement must be
separate from the shareholders’ agreement. In addition, the agreement
must include the interest any loan will attract and when the loan is
repayable. The GEPF submitted that such an agreement did not take
place, and that in the absence thereof, there could be no obligation on it to
advance loans to the appellants. The only point of such advances was to

place the appellants in a position, in turn, to lend these monies, as
shareholders, to MMH. Finally, it was said that clause 10 required the
shareholders to make the loans to MMH simultaneously. Since the
appellants were in no position to make loans to MMH, the GEPF was
excused from doing so.

[31] These submissions are unavailing. A round-robin resolution was
passed by the shareholders of MMH,5 drafted on 4 November 2016.
Although something was made of the fact that the copy of the resolution
does not bear the signatures of the GEPF’s representatives, in its
answering affidavit the GEPF does not deny it agreed to the resolution.
The resolution stipulates the maximum amounts that may be advanced to
MMH by way of shareholder loans, and that the loans are to be interest
free. The shareholders therefore did, by separate agreement, decide to
fund MMH by way of shareholder loans and agreed the interest rate to be
zero. Clause 10 of the shareholders’ agreement states that the
shareholders’ loans shall ‘only be repayable when the shareholders
agree’. This means that, until the shareholders agree, the loans are not
repayable. Accordingly, the absence of agreement in the resolution as to
when the loans would be repayable did not invalidate the agreement that
the shareholders would make loans to MMH. It simply meant that the
loans were not repayable until the shareholders agreed to this.

[32] Finally, as to the requirement of simultaneous payment, the only
reason the appellants could not make good their loans as shareholders to
MMH was that the GEPF had declined to advance loans to the appellants.
Given that it is was always understood that the GEPF was to lend the
appellants the money, to enable the appellants to make their shareholder

5 See s 60(1)(b) of the Companies Act.

loans to MMH, the GEPF cannot rely upon its own failure to make the
required advances to contend that the appellants are not in a position to
make the shareholder loans simultaneously with the GEPF. In any event,
the orders sought by the appellants in the notice of motion will ensure
that the shareholder loans are made to MMH simultaneously.

Conclusion
[33] The GEPF’s defences to the grant of specific performance cannot
prevail. The appellants are entitled to the relief sought in the notice of
motion. Costs should follow the result, including the costs of two
counsel.

[34] The following order is made:
The appeal is upheld with costs, including those of two counsel.
The order of the high court is set aside and replaced by the
following order:
‘The application succeeds with costs and prayers 1-17 of the notice
of motion are granted.’

____________________
D N Unterhalter
Acting Judge of Appeal

APPEARANCES
For Appellants:

D van den Bogert (with him C Jacobs)

Instructed by:
M.R. Phala Attorneys., Benoni.
Honey Attorneys, Bloemfontein.

For First Respondent:
K Tsatsawane SC (with him E Mkhawane)

Instructed by:

Cliffe Dekker Hofmeyr Inc., Johannesburg

Friedland Hart Solomon Nicholson, Pretoria

Symington & De Kok, Bloemfontein.

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF
APPEAL

From:
The Registrar, Supreme Court of Appeal
Date:
23 December 2020
Status:
Immediate
The following summary is for the benefit of the media in the reporting of this case and does not form
part of the judgments of the Supreme Court of Appeal
Sekepe Investments (PTY) LTD and Others v Government Employees Pension Fund and
Another (110/2019) [2020] ZASCA 183 (23 December 2020)

Today the Supreme Court of Appeal (SCA) handed down judgment in an appeal against an
order of the Gauteng Division of the High Court, Pretoria (Rabie J), which involved a claim
for specific performance and turned mainly on the issue of legal standing to enforce the
provisions of a shareholders’ agreement. The appeal was upheld with costs.

The matter concerned the financing of the second respondent, Magae Makhaya Housing (RF)
(Pty) Ltd (MMH), a ringfenced company in the business of low-cost housing developments, of
which the appellants and the first respondent, the Government Employees Pension Fund
(GEPF), are shareholders. The shareholders’ agreement made provision for the business
activities of MMH to be funded by the profits of MMH, through loans on commercial terms,
and, insofar as may be agreed by the shareholders, by shareholder loans to the company in
proportion to each shareholder’s interest in MMH. The first appellant holds 55%, the GEPF
25%, and the second and third appellants each 10% of the shares in MMH.

Separate agreements were concluded between the GEPF and each of the appellants, in terms
of which the GEPF was to loan considerable sums of money to the appellants for the sole
purpose of enabling them to, in turn, advance these precise sums to MMH as shareholder loans

under the shareholders’ agreement. In terms of this arrangement the GEPF would therefore
provide all of the funding – directly, i.e. through its own shareholder loan, and indirectly,
through its loans to the appellants who then advanced that funding to MMH.

In September 2017, the board of MMH resolved that it required shareholder funding for various
projects. Pursuant to the resolution, MMH issued utilisation notices to the GEPF, calling upon
it to advance sums to the appellants under the terms of their respective loan agreements with
the GEPF, to enable the appellants to make shareholder loans to MMH. When these sums were
not forthcoming, the appellants’ attorneys demanded from the GEPF both the payment of its
proportional amount of the shareholder loan call, as is required under the shareholders’
agreement, as well as the individual loans to each of the appellants so that they could meet their
obligations to fund MMH.

These demands ultimately resulted in a claim for specific performance in the high court. The
notice of motion sought, firstly, the payment of the GEPF’s shareholder loan to MMH under
the shareholders’ agreement; and, second, the payment of the loans allegedly due by the GEPF
to the appellants under the terms of the loan agreements and the utilisation notices. The GEPF
hit back with three, essentially technical, defences: to wit, that the appellants were without legal
standing to claim in terms of a wrong done to MMH; that the appellants had not fulfilled the
conditions precedent under the loan agreements for any obligations of the GEPF to arise; and
that its (the GEPF’s) obligations vis-à-vis the company to make shareholder loans could only
arise if the appellants were in a position to make shareholder loans to MMH simultaneously,
which the appellants were not able to do.

The high court found it unnecessary to rule on the issue of standing, but found that the other
defences advanced by the GEPF were sound and consequently dismissed the appellants’
application.

On appeal to the SCA, it was held that the appellants had rights to the advances lent to them
by the GEPF.  The appellants therefore indeed had the necessary standing to seek the specific
performance of the obligations owed to them under the respective loan agreements.
Secondly, in terms of the right under the shareholders’ agreement to exact compliance with the
duty to fund, resting on every shareholder, the SCA held that because this duty rested on all

shareholders, and was owed not only to MMH but also to every other shareholder, the duty was
enforceable by shareholders inter se. The standing defence accordingly failed.

The GEPF also contended that no obligation to advance loans to the appellants arose in the
absence of compliance with the requirements included in the loan agreements. On this score,
the SCA found that a defence cannot be made out simply by reproducing the terms and
conditions of an agreement and asserting that the conditions have not been fulfilled.

Finally, in respect of the simultaneous payment of shareholder loans, the SCA held that the
GEPF was not entitled to rely on its own failure (that is, not to make the required advances to
the appellants) and thereafter contend that the appellants are not in a position to make the
shareholder loans simultaneously with the GEPF as the reason for not advancing the loans.

The GEPF’s defences to the specific performance remedy therefore failed to carry the day. In
the result, the appeal was upheld with costs, including those of two counsel.
________________________________________