THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Non-Reportable
Case no: 267/2018
In the matter between:

NEO DOREEN MOSALAKAE
FIRST APPELLANT
KHOLOFELO MOSALA
SECOND APPELLANT
SEDIMOZA (PTY) LTD
THIRD APPELLANT
NTOMBISI CC
FOURTH APPELLANT
GUNDO INVESTMENTS (PTY) LTD
FIFTH APPELLANT

and

NOMSA MATLALA
FIRST RESPONDENT
ESTER MAPHANGWE
SECOND RESPONDENT
MARIAM MOTSHABI SEKATI
THIRD RESPONDENT
SUZAN NELUHENI
FOURTH RESPONDENT
TSHIMBILUNI INVESTMENT HOLDINGS (PTY) LTD
FIFTH RESPONDENT
PEMBALANI INVESTMENT HOLDINGS (PTY) LTD
SIXTH RESPONDENT
KOTULO-NALA CC
SEVENTH RESPONDENT
ISENZO ESHILE CONTRACTORS CC
EIGHTH RESPONDENT
BINDI J-ZEE TRADING ENTERPRISES CC
NINTH RESPONDENT

Neutral citation: Mosalakae & others v Matlala & Others (267/2018) [2019] ZASCA
125 (27 September 2019)

Coram:
Navsa, Plasket and Dlodlo JJA and Tsoka and Weiner AJJA

Heard:
22 August 2019

Delivered:
27 September 2019

Summary: Section 115 of the Companies Act 1973 – respondents applying to rectify
the share register of a company to reflect the fifth to ninth respondents  and the third
and fourth appellants as equal shareholders – third and fourth appellants relying on
an agreement in terms of which their shareholding was increased – whether the terms
of such agreement were proved.

ORDER

On appeal from: Gauteng Division of the High Court Pretoria, De Klerk AJ, (sitting as
a court of first instance):
The appeal is dismissed with costs including the costs occasioned by the employment
of two counsel.
JUDGMENT

Weiner AJA (Navsa, Plasket and Dlodlo JJA and Tsoka AJA concurring):
[1] This appeal concerns the shareholding in the fifth appellant, Gundo
Investments (Pty) Ltd (Gundo). The fifth to ninth respondents (hereinafter referred to
as Tshimbiluni, Pembelani, Kotulo-Nala, Isenzo Eshile and Bindi J-Zee or ‘the
respondent entities’) applied in terms of s 115 of the Companies Act 61 of 1973 (the
Act) for an order that they, together with the third and fourth appellants (hereinafter
referred to as Sedimoza and Ntombisi or ‘the appellant entities’),  were equal

shareholders in Gundo. The Gauteng Division of the High Court, Pretoria (De Klerk
AJ), upheld the application. This appeal is with the leave of the court a quo.
[2] In 1997, groups of black women belonging to societies and clubs were offered
the opportunity to become involved in certain Black Economic Empowerment (BEE)
ventures. The women were advised to register each group as a company or close
corporation. These entities would hold shares in a BEE company which would act as
the vehicle for such business ventures. At a meeting held in June 1997, approximately
28 groups and 225 individuals were in attendance. Each group was required to pay a
membership fee of R2 000, which would entitle them to one share each.
[3] On 25 August 1997, six directors were appointed in order to facilitate the
registration of the proposed BEE company. The first directors were the first and
second appellants (Ms Mosalakae and Ms Mosala) and the first to fourth respondents
(Ms Matlala, Ms Maphangwe, Ms Sekati and Ms Neluheni). A shelf company, New
Shelf 271(Pty) Ltd was acquired as the envisaged BEE company. On 8 December
1997, the name was changed to Gundo.

[4] About 15 women’s groups initially bought into the initiative. As Gundo failed to
secure any investments over the next five years, all but the seven entities involved in
this litigation, withdrew. It is common cause that the initial R2 000 investment was paid
by these seven entities. The intention was that each entity would hold an equal
shareholding in the BEE company.
[5] One of the opportunities which arose was for Gundo to acquire an indirect
shareholding in Phumelela Gaming and Leisure Ltd (Phumelela), through a company
to be formed as the vehicle for its participation in Phumelela. The company which was
formed was Dihla Investments (Pty) Ltd (Dihla). Phumelela’s shares would be listed
on the Johannesburg Stock Exchange (JSE). Gundo was selected by Phumelela as
one of the companies which would have a shareholding in Dihla, which would consist
of several BEE entities (including Gundo), that had been granted this opportunity.  It
was proposed that 7,5% of the issued share capital of Phumelela would be offered to
the shareholders of Dihla on the basis that each of the shareholders would participate
in equal proportions in that 7,5% shareholding. Dihla would hold the shareholding on
behalf of such shareholders.  A representative of each member company would serve

on the board of directors of Dihla. Ms Matlala was nominated as Gundo's
representative.
[6] On 15 May 2002, Dihla informed its members that Phumelela would be listed
on the JSE on 7 June 2002 at a price of R0,50 per share. In order to invest in
Phumelela through Dihla, each of the shareholders in Dihla was required to pay a total
amount of R525 000 for the shares. An amount equal to 10% of the value of the shares
allocated, in the sum of R52 500, was to be paid as a deposit by 25 October 2002.
The balance of the amount owing was to be financed by the dividends declared by
Phumelela. Gundo was also informed that a company styled Nafcoc Investment
Holding Co Ltd (Nafhold) had offered a ‘share swap’ to all members of Dihla in terms
of which Nafhold would raise the sum required to pay the deposit on certain terms and
conditions.
[7] On 5 June 2002, at a meeting of the board of directors of Gundo, it was
recorded that certain of the directors had resigned. The remaining directors were Ms
Matlala, Ms Mosalakae, Ms Mosala and Ms Makutu. It was resolved that Gundo would
not accept the share swap, but would raise the deposit itself. Ms Matlala was
mandated by the board to inform Dihla of such decision, which she did in a letter dated
7 June 2002. In subsequent correspondence, Ms Matlala informed Dihla that the
deposit was required six months after the effective date i.e by 15 November 2002. This
seems to have been accepted.
[8] The raising of the funds, however, became problematic. On 22 August 2002,
Ms Matlala informed the board of Dihla that she wished to reconsider Gundo’s position
in regard to the share swap offer from Nafhold. She had accordingly withdrawn the
letter dated 7 June 2002, in which the offer was declined.
[9] The appellants were apparently unaware of this decision. On 23 September
2002 a memorandum (the September memorandum) from Ms Mosalakae was
transmitted by Mr Don Qwelane (Mr Qwelane) to the members of Gundo, giving notice
of a meeting scheduled for 5 October 2002. It is common cause that Ms Mosalakae
appointed Mr Qwelane, an attorney, without the knowledge or consent of the directors
representing the respondent entities, to assist, inter alia, with administrative duties.
The September memorandum reads as follows:

‘Re: Gundo Investments (Pty) Ltd (“Gundo”) payment of outstanding money to Dihla
Investments (Pty) Ltd
1 . . . .
Gundo members are aware that Gundo have to pay approximately R60 000 . . . on or
before 15 November 2002 to Dihla Investments . . . . The amount constitutes 10% of
the value of Phumelela shares as at the date of listing of Phumelela.
A meeting will therefore take place on the 5 (Saturday) October 2002 . . . to resolve
the above issue. . . .
Please confirm your attendance prior to 30 September 2002.’
[10] The only members of Gundo who attended the meeting were Ms Mosalakae,
Ms Mosala and Dr Seoka. All three of them were members of Sedimoza. Dr Seoka
was also a member of Ntombisi. On 9 October 2002, a memorandum (the October
memorandum) was sent to members by Mr Qwelane. On Ms Mosalakae’s instructions,
Mr Qwelane had formulated what was envisaged as a ‘rights offer’, which was set out
in the memorandum. It recorded that, at the meeting of 5 October 2002,  it was
resolved that:
‘3.1
the amount of R60 000 was required on or before 15 November 2002 being
10% of the value of Gundo’s shares in Phumelela at the date of listing of Phumelela
plus Dihla’s administration costs be raised by issuing of new shares in Gundo, that will
be offered to present shareholders;
3.2
that such offer be sent to each shareholder stating that the offer is for a specific
period of 2 weeks from date of this letter;
3.3
that there should be no limit to the amount of shares a group/shareholder can
subscribe to, but that allocation will be as follows:
3.3.1 if fully subscribed, each offeree will be allocated full quota of shares applied for;
3.3.2 if oversubscribed, the amount will be reduced proportionally such that each
offeree is allocated a proportional amount of shares and any extra amount will
be refunded; and

3.3.3 if any shares remain unsubscribed, these will be offered to any shareholder(s)
able to take them up.
3.4
that all the other groups will still remain shareholders of Gundo based on their
subscription of R2 500 paid by each group in 1997. It should however be noted
that this will change the ultimate shareholding in Gundo.’1
[11] The appellants relied upon the September memorandum to demonstrate that
notice of the meeting to be held on 5 October 2002 was given to shareholders and
that the respondents did not respond. There was much argument put up by the
respondents on the way in which notices were communicated and whether they were
communicated to all shareholders. There was also some dispute as to whether a
special resolution was required to alter Gundo’s shareholding. In view, of the decision
to which I have come, I will, for the purposes of this judgment assume, as the court a
quo did, that proper notices were sent to all concerned and that all statutory
requirements were complied with.

[12] In evidence, Ms Mosalakae stated that, on the basis of ‘the understanding’
reached at the 5 October 2002 meeting, she and Ms Silimela resolved to raise the
R52 500 and pay it to Dihla before the closing date. In her answering affidavit,
however, she referred to a ‘resolution’ by her and Ms Silimela. However, Ms Silimela
was not a director of Gundo at the time. There appear to have been no shareholders’
meetings between 5 October 2002 and 12 November 2002, when the cheques were
presented. There are no minutes of the meeting of 5 October 2002 and Ms Mosalakae
was unable to clarify in evidence exactly what was discussed.

[13] On 22 October 2002, Ms Silimela on behalf of Ntombisi informed Mr Qwelane
that it would take up shares to the value of R30 000. No indication was given as to
how many shares it would take up for such sum, as the share price was not indicated
either in the October memorandum or in the alleged acceptance.

[14] On 25 October 2002, Dihla, ostensibly through Nafhold, made payment of the
deposit to Phumelela. On 12 November 2002, Ms Mosalakae and Ms Silimela,

1 It is common cause that the initial contribution was R2 000 not R2 500.

representing Sedimoza and Ntombisi, apparently being unaware of such payment,
attended at the offices of Dihla, to each present a cheque for the amount of R26 250.
They had prepared a letter on Gundo’s letterhead, which stated that Ntombisi and
Sedimoza, being shareholders of Gundo, had raised an amount of R52 500 as
payment for their shares in Phumelela.
[15] On the same day, Ms Mosalakae addressed a memorandum (the November
memorandum), to Ms Makutu, Ms Mokoena, Ms Matlala, Ms Maphangwe, Ms Silimela
and Ms Mosala. They represented Bokang (which later withdrew as a shareholder of
Gundo), Women in the Liquor Trade (which changed its name to Isenzo Eshile),
Tshimbiluni, Phembalani, Ntombisi and Sedimoza respectively. The memorandum
stated that the R52 500 deposit was paid to Dihla and that ‘[t]he shareholding within
Gundo will as a result change, in that Sedimoza and Ntombisi’s shareholding will
increase. All the other groups who had not been in a position to raise the R52 000,
would still remain shareholders of Gundo, based on their subscriptions of R2 500 paid
by each group in 1997.’
[16] The secretary of Dihla, Mr Leonard Makhanda (Mr Makhanda), did not accept
the cheques as Sedimoza and Ntombisi were not shareholders in Dihla. He informed
Ms Matlala of this and she agreed that the payment should not be accepted as being
paid on behalf of Gundo. In any event, payment had already been made by Nafhold
on 25 October 2002. The cheques were not deposited. According to Mr Makhanda, he
informed Ms Mosalakae of this.
[17] On 14 November 2002, at the instance of the appellants, notice of an
emergency shareholders meeting to be held on 16 November 2002, was sent by Mr
Qwelane to Gundo’s members. Various resolutions were proposed at this meeting.
Firstly, Dr Seoka proposed that the shareholding in Gundo be adjusted in proportion
to the financial contribution made by each shareholder, such that Ntombisi and
Sedimoza hold 282,5 shares each and the remaining groups hold the initial 20 shares
each, based on the initial contribution. Secondly, it was proposed that the minority
shareholders who did not take up the initial share offer be given a further opportunity
to raise their shareholding in Gundo, if they so wished, by further allotment of shares
in Gundo at R4.14 per Gundo share, based upon the value of Phumelela’s shares at
the close of the JSE on 15 November 2002. The payments had to be made by no later

than 31 March 2003. A further readjustment of shareholding in Gundo would then be
effected.

[18] There appears to be no further explanation at the meeting as to what the basis
of this offer was.  There was also no disclosure as to whether the price of the further
shares, purportedly allocated to Sedimoza and Ntombisi on 12 November 2002, was
based upon the value of Phumelela’s shares on the JSE on that date. It is common
cause that the closing date for the share offer was 15 November 2002, a day before
the proposal was made. In addition, the time for the payment of the deposit to Dihla
had come and gone. How this offer was thus to be implemented is not explained. None
of the resolutions were passed. It was recorded that the next meeting of shareholders
would be held on 30 November 2002.
[19] At the 30 November 2002 meeting, it was recorded that the minutes of the
previous meeting should be amended to reflect that Mr Qwelane ‘was not appointed
as a lawyer but by Sedimoza to facilitate/co-ordinate communication with Gundo
shareholders.’ It was further recorded that Nafhold had paid the required deposit on
behalf of the members of Gundo. Dihla had not deposited the cheques tendered by
Sedimoza and Ntombisi. The next meeting was to take place on 22 February 2003.
[20] By this time, it had become apparent that there were two opposing factions
within Gundo, the appellants on the one hand and the respondents on the other.
Sedimoza and Ntombisi consulted attorneys to deal with the impasse. On 18
December 2002, Moss Cohen Attorneys (Moss Cohen) addressed a letter on behalf
of Sedimoza and Ntombisi to Dihla enquiring why the cheques had not been
deposited. In reply, Dihla stated that, on 21 October 2002 Ms Matlala had agreed, on
behalf of Gundo, to accept Nafhold’s offer to make payment for the shares.

[21] On 22 February 2003, a further meeting of members of Gundo was held. It was
proposed that Sedimoza and Ntombisi should be reimbursed by all other members of
Gundo and that a dispute would be declared if the proposal was not accepted. This
resolution also failed to pass.
[22] In about September 2003, Nafhold was putting pressure on Dihla to repay the
loan. On 3 October 2003, Mr Makhanda and Sedimoza and Ntombisi arranged a

meeting and confirmed that Dihla would accept the cheques previously tendered,
which cheques were stale and were to be replaced. A direct deposit was made by
Sedimoza and Ntombisi into Dihla’s bank account on 15 October 2003. In November
2006, Dihla was liquidated. Over the next few years the animosity between the parties
escalated.
[23] A round table meeting was held on 22 May 2007 between the two factions and
their attorneys. Moss Cohen represented the appellants and Edelstein-Bosman
represented the respondents. On 28 May 2007, it was proposed by Moss Cohen in a
letter to Edelstein-Bosman that steps had to be taken to determine exactly who the
shareholders of Gundo were and what their respective entitlements were. It was
reiterated that the shareholders should be the BBE entities and not the individuals
representing them. It was accepted that the appellant entities together with the
respondent entities were shareholders based upon the initial R 2 000 investment.
What remained in dispute was the respondent entities’ asserted status as equal
shareholders, as opposed to the claim by the appellant entities of their entitlement to
an increased shareholding.
[24] In an apparent attempt to resolve this dispute, Ms Mosalakae, despite being
fully aware that the seven entities had paid their R2 000 contribution and were entitled
to be regarded as shareholders, decided to cause a notice to be published in The
Sowetan on 22 November 2007, calling upon all shareholders of Gundo to furnish
proof of their shareholding in order to ‘regularise Gundo’s shareholding’. Her evidence
that this was necessary because ‘all contact was lost’ can only be described as
untruthful. Not only was she still in possession of the contact details of all the
respondents, which she had previously relied upon to communicate with them, but
attorneys were involved on both sides. Her evidence that she cannot recall if Moss
Cohen was still acting for the appellants offers no excuse. A simple phone call to them
and/or to the respondents’ attorneys to find a proper means of communication was all
that was needed. Why the notice in The Sowetan was necessary is not adequately
explained and lends credence to the respondents’ contention that from 2002, the
appellants had embarked upon a scheme to ‘hi-jack’ Gundo and sought to legitimise
their increased shareholding.

[25] Only Sedimoza and Ntombisi responded to The Sowetan notice. Ms Mosalakae
approached an auditor’s firm to ‘regularise the shareholding’ in Gundo. At that stage,
the original shareholder, Mr Lederman, was still the only registered shareholder of
Gundo. The share register had never been updated. It is common cause that the
entries in the share register were backdated by Ms Mosalakae in December 2007. The
share register presently reflects that Lederman transferred his one share into Ms
Mosalakae’s name on 25 August 1997. She, in turn, transferred this share to
Sedimoza on the same day. On 12 November 2002, a further 99 shares were issued
to Sedimoza which transferred 50 shares to Ntombisi. The share register reflected that
Sedimoza and Ntombisi each held 50% of the shares. The directors who were then
nominated represented only Sedimoza and Ntombisi.

[26] Ms Mosalakae testified that this ‘regularisation’ was on the advice of one
Mariette, who was employed by the auditor, Johann Swart. She also stated that she
was not aware that the CM42 was backdated, but could not explain the date that
appeared with her signature. What is clear is that Ms Mosalakae knew that the
respondent entities were entitled to shares based upon their contribution of R2 000.
This had never previously been in dispute. Yet, she would have this court believe that
she blindly accepted Mariette’s advice that those contributions could be ignored. Both
legally and morally, this was wrong. This version is also contrary to the evidence in Ms
Mosalakae’s answering affidavit, in which she failed to mention that Mariette gave her
this advice. If this advice was given, and the R2 000 contributions were not to be taken
into account, one wonders how Ms Mosalakae and/or Sedimoza could be reflected as
the shareholders in 1997.

[27] The respondents submitted that the appellants’ failure to call Mariette to confirm
this advice is not explained by the appellants. Having regard to the different versions
proffered by the appellants, Mariette would have been a material witness in regard to
the ‘regularisation process’. The respondents contended that a negative inference
should be drawn in this regard.2

2 Pexmart CC v H. Mocke Construction (Pty) Ltd [2018] ZASCA 175; [2019] 1 All SA 335 (SCA).
Munster Estates (Pty) Ltd v Killarney Hills (Pty) Ltd 1979 (1) SA 621 (A) at 624B-F.

[28] On 31 March 2008, the representatives of the respondent entities removed the
representatives of the appellant entities as directors and replaced them with Ms
Matlala, Ms Maphangwe, Ms Sekati and Ms Neluheni.

[29] On 7 August 2008, at a shareholder’s meeting, initiated by the respondent
entities, it was resolved unanimously, by both the appellant and respondent entities,
that Gundo’s shareholding should be corrected and that ownership should be
registered in the names of the seven entities. However, at a later meeting on 19
November 2008, also initiated by the respondent entities, Dr Seoka stated that the
appellants did not recognise the present meeting, nor the meeting of 7 November
2008. Furthermore, they did not recognise any of the respondents as shareholders or
directors. The representatives of Sedimoza and Ntombisi then left the meeting.

[30] Sedimoza and Ntombisi had held a meeting on the previous day and had
appointed new directors of Gundo. On 20 November 2008, in a letter from Edward
Nathan Sonnenberg Attorneys (ENS), acting for the appellants, the respondents were
informed that Sedimoza and Ntombisi each held 50% of the shareholding in Gundo.

[31] In August 2010, the respondents launched an application in terms of s 115 of
the Companies Act 61 of 1973 (the 1973 Act).  The application was referred to trial on
21 November 2011. Before this court, it was accepted that the court has wide powers
in terms of s 115 of the Act. The section reads:
‘Rectification of register of members . . .
(3) On any application under this section the Court may decide any question relating to the
title of any person who is a party to the application to have his name entered in or omitted from
the register, whether the question arises between members or alleged members between
members or between alleged members on the one hand, and the company on the other hand
and generally may decide any question necessary or expedient to be decided for the
rectification of the register’.

[32] In Gafoor & another NNO v Vangates Investments (Pty) Ltd & others3 this court
held:
‘As indicated above, the court’s jurisdiction under s 115 of the Act has been described
as unlimited and the exercise of its discretion based on what equity requires. So too,
in Botha v Fick, Howie JA stated that–
‘Die Hof het ’n wye diskresie by ’n aansoek ingevolge hierdie artikel [s 115] om toe te
sien dat billikheid en geregtigheid geskied. En dit is “to make it reflect the state of
affairs which the appellant is entitled to claim that it ought to reflect” (Orr NO and Others
v Hill 1929 TPD 885 te 892) en, soos dit in die saak van In re The Contributories of the
Rosemount Gold Mining Syndicate in Liquidation 1905 TH 169 te 188 gestel is,
“to fix with the obligations of membership those persons and those persons only upon
whom such obligations should justly and equitably rest”.
In determining whether to grant or refuse an application for rectification, the court
makes a judgment in the light of all the relevant considerations. As with s 344(h) of the
Act, which provides that ‘[a] company may be wound up by the Court if – (h) it appears
to the Court that it is just and equitable that the company should be wound up’, there
is nothing about the power conferred by s 115 of the Act which results in the court of
first instance having any special advantage that would enable it to exercise the power
any more appropriately than a court of appeal. The power is one that the court of
appeal is in as good a position as the court of first instance to exercise. That being so,
and bearing in mind the equitable nature of the court’s discretion in terms of s 115, this
discretion can rightfully be described as a discretion in the broad sense. This court is
therefore empowered to re-examine all the relevant material and, if satisfied that the
discretion has not been appropriately exercised, to substitute its own opinion for that
of the court of first instance. It is not necessary to show that the exercise of its discretion
by the court below was flawed in one of the respects mentioned . . . above’
[33] As appears from what is set out above, it was initially contended by the
appellants that only Sedimoza and Ntombisi were the shareholders of Gundo. During
the course of the trial, it was conceded by the appellants that Tshimbiluni, Pembelani,
Kotulo-Nala, Isenzo Eshile and  Bindi J-Zee were also shareholders (the concession).

3 Gafoor & another NNO v Vangates Investments (Pty) Ltd & others [2012] ZASCA 52; 2012 (4) SA 281 (SCA)
para 40-41.

They persisted with their claim that they were entitled to a larger shareholding by virtue
of the ‘rights offer’.

[34] Prior to the concession, the appellants relied on the CM42 referred to above. It
was contended that as only Sedimoza and Ntombisi accepted the ‘rights offer’ and
each paid an amount of R26 250 to Dihla on behalf of Gundo, they were the only
shareholders. The appellants relied for this submission upon the resolution of 5
October 2002, which is recorded in the October memorandum. That memorandum,
however, also recorded that the respondent entities, none of which had subscribed for
additional shares, would remain shareholders of Gundo based on the subscriptions of
R2 000 paid in 1997. Sedimoza and Ntombisi countered this by  submitting that their
present claim for a larger shareholding is based upon the statement in the
memorandum that the shareholding would change as a result of parties taking up the
additional shares.

[35] The respondents submitted that the version pleaded by the appellants cannot
be reconciled with the CM42 form. It is clear that at the time the deposit was required
to be paid to Dihla during November 2002, Ms Mosalakae was not the sole shareholder
as reflected in the CM42. No resolution was taken by Gundo that the payment would
be made by Sedimoza and Ntombisi alone. No basis is set out for the issuing of the
additional 99 shares and/or the transfer of 50 shares to Ntombisi on
12 November 2002. There are no resolutions of Gundo authorising these transactions.
The CM42 does not reflect the issue of any further shares allegedly acquired pursuant
to the resolution of 5 October 2002, nor does it reflect a transfer of the issued shares
to Sedimoza and Ntombisi, which increased their pro rata shareholding. The
respondents contended that the shareholding of Sedimoza and Ntombisi was never
validly increased; further that Ms Mosalakae, without the knowledge and consent of
the other members, attended to the so-called ‘regularisation process’ and unlawfully
changed the shareholding to reflect only Sedimoza and Ntombisi as 50% shareholders
each.

[36] At the meeting held on 7 August 2008, when it was agreed that the shareholding
needed to be regularised, no mention was made by any of the appellants that the
share register had already been amended in December 2007 to reflect only Sedimoza

and Ntombisi as shareholders. At that stage, all of the entities were recognised as
shareholders by all parties and it was unanimously agreed that the Gundo
shareholding and ownership be rectified to reflect this. It was only at the subsequent
meeting held on 19 November 2008, that the appellants changed their stance.
[37] The respondents submitted that the various versions of the appellants are
factually and legally untenable. The initial version of the appellants is contained in
Moss Cohen’s letter dated 28 May 2007, when it was acknowledged that the
respondent entities were shareholders. In the answering affidavit, the first version
appeared to be that Sedimoza and Ntombisi were the only shareholders by virtue of
the payment of the deposit on 12 November 2002. The second version in such affidavit
was that Sedimoza and Ntombisi were the only entities that could prove that they had
acquired the shares. According to the appellants, ‘it was a misconception’ that the
seven entities had paid their joining fee.  At the trial, they persisted with their stance,
that they were the only shareholders. Only after the trial had been running for some
time, was the concession made. Their claim then mutated to one for the increase of
their shareholding and the dilution of the shareholding of the other shareholders.
[38] The onus was on the appellants to show that the shareholding of Sedimoza and
Ntombisi was subsequently validly increased in the manner alleged. The question in
this case is whether the onus has been discharged. It became common cause through
the concession that all parties claiming to be shareholders of Gundo paid the R2 000
joining fee and were therefore entitled to have their shareholding reflected in the share
register. By 30 November 2002, at the latest, the appellants knew that their payment
to Dihla on 12 November 2002 had not been accepted. Thus, as at that date, they had
no right to consider Sedimoza and Ntombisi as the only shareholders. Yet, in
December 2007, they backdated the change in shareholding to 12 November 2002.
None of the appellant’s witnesses could explain this.
[39] The court a quo correctly found that it was desirable that it first decide the
question as to whether a valid rights offer was made and accepted. Put differently, the
question is whether a contract was concluded between Gundo, Sedimoza and
Ntombisi to take up the further shares in Gundo. It found that the appellants had failed
to prove this.

[40] Sedimoza and Ntombisi’s claim to a larger shareholding is solely dependent on
the 12 November 2002 payments having been accepted, which they were not. It was
only on 15 October 2003 that Sedimoza and Ntombisi paid Dihla the sum of R56 200.
The respondents contended, correctly, that at best, the two entities have a loan
account in Gundo but no entitlement to increase their shareholding purely on the basis
that they made this payment. It is of note that when they made payment in October
2003, they did so without the knowledge and consent of the respondents, or the
approval of Gundo, in circumstances where they knew that they were not the only
shareholders. Thus, any decision they took in relation to this payment in October 2003
was not taken on behalf of Gundo and is accordingly invalid.
[41] The judge a quo decided the matter on a very narrow basis. She found that
there was no valid contract entered into between Sedimoza and Ntombisi and Gundo.
The appellants submitted that the court a quo erred in three respects. Firstly, the court
a quo decided the matter through the perspective of ‘purchase and sale’. They argued
that the contracts in the present matter are for the subscription or allocation of shares;
thus the test is different. Secondly, the court failed to consider the offer and the
acceptance in its context. Thirdly, the court failed to adopt a sensible commercial
interpretation of the contract. The agreement was not vague and it had been partially
executed.
[42] It is clear that a rights offer requires the same certainty as to its terms as any
other contract. In Moosa v Laloo & anther,4 the court held:
‘an allotment, by which shares are acquired from a company, is a contract. Although a share
is created and comes into existence upon its original issue by the company, and not before
issue (with the consequence that he who subscribes for it does not purchase it from the
company), the right to it springs from offer and acceptance. No ceremonious ritual, nor any
magic formula, is required for the process of allotting the share. It may be effected by way of
offer on the part of the company to the allottee, accepted by him, or, as is more usual, by way
of an offer (an application for shares) by him, accepted on behalf of the company; a contract
of allotment may be effected in any manner in which a contract may be concluded, even by
implication from conduct.’

4 Moosa v Laloo & another 1957 (4) SA 207 (D)at 219B-D.

[43] The appellants submitted that the established approach in our law is that an
agreement seriously entered into between two parties, especially when such
agreement has been partially executed, will not be struck down.5 It is trite that in a
contract of sale, the purchase price and merx must be agreed upon. With a rights offer,
as with any contract, the parties must either ‘fix the amount of the price in their contract
or agree upon some external standard by the application whereof it will be possible to
determine the price without further reference to them’.6 None of this is present in this
case. Neither Dr Seoka nor Ms Mosalakae were able to give an answer as to how
many shares were on offer and what the price per share was. Ms Mosalakae testified
that there were 1 000 shares at R1, 00 per share. She added ‘you do the maths and
divide’. On her version, however, only 100 shares were issued when Sedimoza and
Ntombisi allegedly became equal shareholders.
[44] Ms Mosalakae could also not give clarification as to what extent the other
shareholders’ shareholding would be diluted and to what extent Sedimoza and
Ntombisi’s shareholding would be increased. It is clear that the ’rights offer’ lacked the
material terms required in relation to the number of shares offered and the price
payable in respect of each share. There is further no evidence that such offer was
authorised by Gundo.
[45] In regard to whether the acceptance by Sedimoza and Ntombisi of the ‘rights
offer’ was communicated to Gundo, the appellants rely on Ms Silimela’s email of 22
October 2002 as conveying that Ntombisi accepted the offer from Gundo. The alleged
acceptance was sent to Mr Qwelane and Ms Mosalakae, not to Gundo. They were not
authorised to act on behalf of Gundo in concluding the agreement. In regard to
Sedimoza, Ms Mosalakae testified that Sedimoza would subscribe for as many shares
as were not subscribed for by the other shareholders. Thus, when only Ntombisi
responded, Sedimoza took up the balance of the shares. As Ms Mosalakae was the
‘responsible director’ who sent out the share offer, communication of Sedimoza’s
acceptance of the offer to Gundo was communicated by her on behalf of Sedimoza
and to her on behalf of Gundo.  She does not state the basis upon which she alone

5 De Beer v Keyser & others 2002 (1) SA 827 (SCA) para 12-14.
6 Burroughs Machines Ltd v Chenille Corporation of SA (Pty) Ltd 1964 (1) SA 669 (W) at 670C-E.

was authorised to act on behalf of Gundo in this regard. This version cannot assist the
appellants in proving the conclusion of an agreement.
[46] The submission that the agreement had been partially executed cannot be
accepted. There was no valid agreement and therefore, any purported execution
thereof was invalid. Sedimoza and Ntombisi had no entitlement to the sole
shareholding in Gundo, as the payment upon which their purported allotment was
based, had not been accepted. Even on a benevolent interpretation, as contended for
by the appellants, a court must guard against making a contract for the parties and
going outside the words they have used.7 The benevolent interpretation must not be
taken too far. A court cannot find ‘consensus ad idem by mere conjecture’.8 On the
affidavits and the evidence, this court cannot find that he appellants have discharged
the onus upon them to prove that an agreement was concluded between Gundo and
Sedimoza and Gundo and Ntombisi.
[47] The appellants submitted that whatever the result of the appeal, they should
not be mulcted in costs in relation to the full record which was placed before this court.
They contended that the respondents did not agree to a limited record being filed. I
find that the record was extremely useful in determining the issues and can see no
reason to deprive the respondents of their costs in relation thereto.
[48] Accordingly, the following order is made:
The appeal is dismissed with costs, including the costs occasioned by the employment
of two counsel.

______________________
S E Weiner
Acting Judge of Appeal

7 See Burroughs (fn 8) at 671A–B, citing with approval Hillas & Co Ltd v Arcos Ltd 147 LTR 503.
8 Viscount Maugham in Scammell & Nephew Ltd v Duston (1941) AC 251-255.

APPEARANCES:
For Appellant(s):
AJD Oliviera

Instructed by:

Swanepoel Attorneys c/o Dawie Beyers Attorneys, Pretoria

Webbers Attorneys, Bloemfontein

For Respondent(s):
A E Bham SC (with him D Prinsloo)

Instructed by:

Klagsbruin Edelstein Bosman, Pretoria

Symington De Kock, Bloemfontein