THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Not reportable
Case No: 960/2016
In the matter between:
THE CHEMICAL INDUSTRIES NATIONAL
PROVIDENT FUND

APPELLANT
and

TRISTAR INVESTMENTS (PTY) LTD

RESPONDENT

Neutral citation: The Chemical Industries National Provident Fund v Tristar
Investments (960/2016) [2017] ZASCA 184 (6 December 2017)
Coram:
Cachalia, Bosielo, Tshiqi and Mathopo JJA and Makgoka AJA
Heard:
20 November 2017
Delivered: 6 December 2017
Summary: Validity of an investment consulting agreement – whether the
signatories who signed the agreement on behalf of the appellant had authority –
whether the agreement was ultra vires the rules of the appellant.

Calculation of income for the unexpired period of an unlawfully terminated
agreement- such task inherently speculative – court obliged to make an award if
there is credible evidence.
________________________________________________________________
ORDER
________________________________________________________________

On appeal from: Gauteng Local Division of the High Court, Johannesburg
(Tsoka J sitting as court of first instance):

The appeal is dismissed with costs, including the costs of two counsel where so
employed.
________________________________________________________________
JUDGMENT
________________________________________________________________
Makgoka AJA (Cachalia, Bosielo, Tshiqi and Mathopo JJA concurring):
[1] This appeal concerns the validity of an investment consulting agreement
(the agreement) concluded between the appellant, Chemical Industries National
Provident Fund (the Fund) and the respondent, Tristar Investments (Pty) Ltd
(Tristar). The Fund is a large pension fund whose members are employees in the
chemical industry in South Africa. It is managed by a Board of Trustees.
[2] Tristar is an investment consulting company, whose business is to advise
trustees on the management of their assets. The Fund is governed by a set of
rules, in terms of which its management is carried out by 24 trustees, half of
whom are appointed by the employers of the members and the other half by
employee members.

[3] Until the end of 2007 the Fund was administered by an entity known as
NBC (Pty) Ltd (NBC). The Fund’s investment consulting services were
provided by an NBC-affiliated company. On 19 December 2007 the Fund and
Tristar concluded the impugned agreement in terms of which Tristar would
provide investment consulting services to the Fund for three years with effect
from 1 January 2008.
[4] Pursuant to the agreement, Tristar performed services on behalf of the
Fund for over three months, for which it was paid a sum of R2 722 207.44. On
17 April 2008, the Fund resolved to withdraw Tristar’s appointment, contending
that the agreement was invalid because the signatories on behalf of the Fund did
not have the authority to conclude it. It also contended that the agreement was
ultra vires the rules of the Fund. Tristar viewed the Fund’s stance as a
repudiation of the agreement, which it accepted.
[5] This set in motion litigation in the Gauteng Local Division of the High
Court, Johannesburg (the high court). The litigation culminated in a trial in
which the Fund, as the plaintiff, sought an order declaring the agreement void,
for the reasons mentioned earlier. The Fund also claimed repayment of the sum
paid to Tristar in performance of the agreement.1 Tristar denied the Fund’s
allegations, and counter-claimed for the accrued income for the unexpired
period of the agreement, as well as for damages arising from the Fund’s
cancellation of the agreement.
[6] The trial court declared that the agreement was valid, and was thus
unlawfully terminated by the Fund. It accordingly dismissed the Fund’s claim

1 During the closing argument in the high court, counsel for the Fund conceded that no case had been made out
in respect of this claim, and accordingly abandoned the claim.

and upheld Tristar’s counter-claim in the amount of R20 139 810.96,2 but
dismissed its damages claim. The high court subsequently granted both the Fund
and Tristar leave, respectively, to appeal and cross-appeal its order.
[7] The background facts are straight-forward, and largely common cause.
They can be stated as follows. During February 2007 the trustees considered to
diversifying the Fund’s investment consulting services. This task was entrusted
to a sub-committee headed by the principal officer of the Fund, Mr Tsolo, and
Ms MacIntosh, the chairperson of the board of trustees.
[8] On 16 and 17August 2007, Tristar and two other prospective consultants
made presentations to the sub-committee, after having being invited to do so.
Tristar emerged as the preferred bidder. However, the final decision regarding
its appointment was deferred until its fees structure had been clarified. On 19
October 2007 the sub-committee met with Tristar where its fees structure was
discussed, to the satisfaction of the sub-committee. The sub-committee resolved
to recommend the appointment of Tristar to the trustees at their meeting in
November 2007. In anticipation of its appointment, Tristar furnished the sub-
committee with a draft investment consultancy agreement for perusal by the
Fund’s attorneys, Routledge Modise Attorneys. The attorneys suggested certain
amendments to the agreement, including a reduction of Tristar’s fees.
[9] The trustees met on 15 and 16 November 2007, when Tristar’s
appointment was approved. The decision, to which I shall fully revert, was
recorded in the minutes of the meeting as follows:

2 Initially the high court awarded an amount of R15 186 166.96, but subsequently amended this in terms of rule
42 of the Uniform Rules of Court, at the instance of Tristar.

‘After further discussions the agreement was reached on finalising the appointment of Tristar
as the Independent Investment Consultant to the Fund despite strong objections having been
raised by certain Trustees and these were noted.’
[10] On 28 November 2007, the Fund sent a letter to NBC terminating its
services as investment advisor to the Fund, and requesting it to make
arrangements to hand over its investment consulting duties to Tristar.
[11] On 11 December 2007,3 five trustees wrote a letter to the principal officer
of the Fund, objecting to the manner in which the appointment of Tristar was
conducted, particularly because the decision was taken without a formal vote.
[12] On 14 December 2007 Mr Tsolo and Ms MacIntosh signed the agreement
on behalf of the Fund. On the same day, the sub-committee circulated the
finalized agreement to all the trustees, as contemplated in the November
meeting. On 19 December 2007 the agreement was signed on behalf of Tristar.
[13] In the wake of the letter of 11 December 2007 referred to above, the
trustees held a special board meeting on 5 February 2008, when some trustees
voiced their objection to Tristar’s appointment. However, after some debate, the
trustees agreed that the appointment of Tristar would stand despite the objection.
On 17 April 2008 the trustees took a decision by a vote of more than two-thirds,
to cancel the appointment of Tristar.
[14] So much for the factual background. There are three issues in the appeal.
The first is whether the Fund’s representatives who signed the agreement, were
authorised to do so. If this issue is decided in Tristar’s favour, the Fund’s
alternative attack is that the agreement was ultra vires the rules of the Fund. The

3 The actual letter is dated 26 November 2007, but the covering letter is dated 11 December 2007.

third and final issue concerns Tristar’s counter-claim for the accrued income. I
consider these, in turn.
[15] With regard to the authority issue, the Fund predicates its argument on
rule 13.6.8 of its rules. It provides that all decisions of the trustees shall require
the support of at least two-thirds of each of the employer and member trustees. It
is common cause that no voting took place when the decision to appoint Tristar
was taken. It was submitted on behalf of the Fund that in the absence of a vote,
it was not possible to establish whether the requisite two-thirds of the trustees
had been met. Accordingly, it was argued, there has not been compliance with
the rule. In this regard, reliance was placed on Numsa v Cosatu.4 There, the
court found that the absence of voting on a resolution to suspend the General
Secretary of COSATU rendered the decision irregular and unlawful.
[16] Numsa v Cosatu is distinguishable from the present case in one material
respect. Cosatu’s constitution expressly prescribed voting by members of the
central executive committee over a motion for the suspension of the General
Secretary. There is no such obligation in rule 13.6.8. All that is required is that
resolutions must be carried by a two-third’s majority.
[17] The rule does not stipulate how the existence of the threshold is to be
ascertained. Tristar contends that in the absence of a stipulated method, it is
permissible for the Board to employ any method to determine the requisite level
of support for a particular decision. In this regard, Tristar relies on the practice
usually followed by the Fund when passing resolutions.

4 National Union of Metalworkers of South Africa and others v Congress of South Africa and others (32567/13)
[2014] ZAGPJHC 59 (4 April 2014).

[18] It is not disputed that historically, decisions of trustees have been adopted
consensually, without a formal vote. Thus, even though some trustees might
speak against a resolution and have reservations about it, if ultimately they are
prepared to ‘live with it’, so to speak, then it is carried. The appointment of
Tristar was no different. It appears from the minutes of the meeting that there
were indeed strong sentiments against the decision by some trustees. Ultimately,
however, after exhaustive debate, a decision was reached to appoint Tristar.
[19] It is therefore apparent that the Board was able to establish the requisite
two-thirds threshold satisfactorily without a formal vote. In this regard, it is
instructive that all the decisions of the trustees, except one, were adopted in this
manner. The only exception was the one taken on 17 April 2008, reversing
Tristar’s appointment. But, as is apparent from the evidence, that decision was
self-serving, and only taken by vote for the sole purpose of removing Tristar and
reinstating NBC. Rather than bolstering the Fund’s argument for a formal vote,
that decision fortifies Tristar’s assertion that the November 2017 decision, like
others before, was taken by consensus, and that this was the method employed
by the trustees to determine whether the two-thirds threshold had been reached.
It is worth noting that both the decision to appoint NBC, and later to reinstate it
in August 2008, were not taken by a formal vote. The Fund’s insistence on a
formal vote, in the circumstances, is without merit.
[20] It is clear from the factual background leading to the decision to appoint
Tristar that it was a carefully considered and managed process: A decision was
taken to diversify consulting services; potential service providers were
identified; prospective consultants, including Tristar made presentations; Tristar
was identified as a preferred bidder; Tristar’s fees were clarified (and reduced),
with the involvement of the Fund’s attorneys; Tristar was appointed in

November 2007 and the agreement was signed on behalf the Fund on 14
December 2007 by Tristar on 19 December 2007.
[21] Viewed in light of these events, the inescapable conclusion is that the
Fund’s representatives had the authority to sign the agreement on its behalf. It
follows that the Fund’s assertions to the contrary lack merit. Given this
conclusion, I do not deem it necessary to consider the two further disputes
regarding the issue of authority, namely whether the appointment of Tristar was
subsequently ratified, and whether issue estoppel operated against the Fund. The
trial court found in favour of Tristar on both issues.
[22] I turn briefly to the Fund’s alternative attack, that the agreement was ultra
vires the rules of the Fund. It is based on rule 13.7.5,  which provides:
‘The Trustees may appoint administrators and consultants on such terms as they may
determine and may withdraw any such appointment at any time; provided that a consultant
shall not rank as officer of the Fund.’
[23] The Fund’s argument is that because the rule allows the Fund to withdraw
an appointment at any time, an agreement which purports to run for a fixed term
such as a three-year term provided for the impugned agreement, is ultra vires
and invalid.
[24] I have some doubt that a rule which permits a fund to terminate a contract
contrary to its terms is enforceable against a third party such as Tristar as this
would mean that it permits the fund to breach or repudiate any agreement. But it
is not necessary to decide this question as I do not think that this is a sensible or
business-like interpretation of the rule. In my view the rule simply gives the
Fund the power to lawfully terminate a contract, whatever its duration. The rule
does not give it the power to terminate a fixed-term contract contrary to its terms

as this would necessarily imply that all contracts concluded by the Fund are
invalid unless they had summary termination clauses. This would make the
conduct of business by the Fund with service providers unworkable and result in
an absurd and unworkable interpretation of the rules.
[25] It follows that the first two issues, namely whether the Fund’s
representatives were authorised to sign the agreement, and whether the
agreement was ultra vires the rules of the Fund must be decided in favour of
Tristar, as the high court correctly found.
[26] What remains to be considered is Tristar’s counter-claim for the accrued
income. In terms of the agreement, the Fund undertook to pay Tristar a basic
annual fee of 0.2 per cent per annum for the gross returns of the Fund. The fee
was payable in monthly instalments on the last day of each month following the
commencement of the agreement. The claim involves a computation of fees that
Tristar would have earned over the applicable period, and of the saved costs for
the Fund. Thus, the payment of a basic fee was contingent upon Tristar saving
the Fund transaction and other costs over an eighteen-month period. The method
for calculating the savings was this: establish the costs through the assistance of
an advisor and the custodian bank at the beginning of the eighteen-month
period, and perform the same exercise eighteen months later, in order to
establish the savings.
[27] The Fund contends that the basic fee was not proved because Tristar did
not demonstrate the cost savings promised in the agreement. However, it does
not lie in the Fund’s mouth to make this assertion. It terminated the agreement
well before the eighteen-month period contemplated in the agreement. Tristar
was consequently unable to give the Fund the benefit of its advice over that

period, and the actual cost saving could not be computed. The result is that the
evidence in this regard was bound to be speculative.
[28] Tristar relied on the evidence of Mr Alex Burn, its Chief Executive
Officer, and Mr Brian Abrahams, an independent chartered accountant. Mr Burn
testified about a presentation he made at the trustees’ meeting on 28 February
2008 at which he reported that Tristar had had meetings with the Fund’s
custodian bank (Standard Bank) and had managed to reduce the fees charged by
the custodian to the Fund. He was emphatic that, given its past performances,
Tristar would have been able to achieve a reduction in fees from certain asset
managers. According to him, there had never been a situation where Tristar was
unable to achieve this.
[29] With regard to the cost savings Tristar actually brought about by April
2008, Mr Burn explained that Tristar had negotiated lower custodian, mandate,
and script lending costs on behalf of the Fund. According to him, the fact that
Tristar had achieved a cost saving in respect of the custodian’s costs was an
indication that Tristar had commenced the process of achieving cost savings for
the Fund.
[30] Mr Abrahams testified that the lost revenue would be based on the
estimated value of the assets which would be determined, among others, by the
market returns and by the investment consulting advice rendered by Tristar over
the period of the agreement. In his opinion, the key factors would be the unique
characteristics, including the investment assets and objectives of the Fund itself,
rather than those of other funds subject to Tristar’s investment consulting advice
over the period of the agreement. He postulated the basic annual fee using the
actual market value of the Fund’s assets over the period of the agreement.

[31] Counsel for the Fund criticised the evidence presented on behalf of
Tristar. According to counsel, the only basis on which returns would have been
achieved through Tristar’s advice was to examine the actual results achieved by
Tristar’s other clients, using the same advice over the period of the agreement.
Because this information was not provided, it was impossible to determine the
claim properly. To my mind, this criticism is not warranted. As explained by Mr
Abrahams, the key factors would be the unique characteristics, including the
investment assets and objectives of the Fund itself, rather than those of other
funds subject to Tristar’s investment consulting advice over the period of the
agreement.
[32] Because of the inherently speculative nature of the evidence, the court
could only do its best to assess whether the requisite cost saving was likely to
have been achieved had Tristar’s appointment not been terminated. Indeed, the
trial court adopted ‘a robust approach’ in the computation of Tristar’s accrued
income.
[33] What is more, the fact that the evidence is open to criticism is no reason
for the court not to make an award.  In Southern Insurance Association Limited
v Bailey NO 1984 (1) SA 98 (A) at 113F-114E Nicholas JA observed that
determining an appropriate award in circumstances such as the present
manifestly involves guesswork to a greater or lesser extent.  But, the learned
judge remarked, ‘the Court cannot for this reason adopt a non possumus attitude
and make no award.’ The learned judge then referred to the dictum in Hersman
v Shapiro & Co 1926 TPD 367 at 379 where Stratford J said:
‘Monetary damage having been suffered, it is necessary for the Court to assess the amount
and make the best use it can of the evidence before it.   There are cases where the assessment
by the Court is little more than an estimate; but even so, if it is certain that pecuniary damages
have been suffered, the Court is bound to award damages.’

[34] Given all these considerations, I am of the view that there is no basis for
this court to interfere with the award made by the high court in respect of
Tristar’s accrued income.

[35] In the result the following order is made:
The appeal is dismissed with costs, including the costs of two counsel where so
employed.

_______________________

T M Makgoka

Acting Judge of Appeal

APPEARANCES
For the Appellant:

A Redding SC
Instructed by:

Webber Wentzel, Sandton

Honey Attorneys Inc, Bloemfontein

For the Respondent:

A Franklin SC
Instructed by:

Werksmans Attorneys, Sandton

Symington & de Kok, Bloemfontein