Shareholder when presented as “shareholder” means he is party in litigation in his personal capacity

Constitutional Court of South Africa: A Single Judge Bench comprising of Mogoeng, CJ. Dlodlo, Goliath, Petse, AJ, Froneman, Jafta, Khampepe, Madlanga, and Theron, JJ., unanimously granted the applicants rescission in terms of the Uniform Rules of Court and granted leave to intervene to applicants in the trial.

This application was filed for leave to appeal against an order of Supreme Court Appeal where a refusal of rescission and dismissal of an application for leave to intervene by the High Court of South Africa was upheld. The issue before the Court was whether rescission and leave to intervene should have been granted.

Facts of the case are that a group of individuals acquired a company to use the same as a vehicle for commercial opportunities for the benefit of black people. Applicants were shareholders of this company. The company was converted into a public company in order to open up the shareholding to more than 50 persons. It was renamed NC Housing Services and Development Co. Ltd. Due to failure to file annual company returns ROC removed the name of the company from companies register. Later company wanted to sell its major asset for which they applied for re-registration and were subsequently re-registered. A dispute arose between the applicants and the second and third respondents, regarding the proportion of shares owned by the various shareholders.

The respondent filed an application in High Court against the company where the matter was referred to Trial. High Court held that the shareholders could not have been a party in trial as they could not have personally fought the case as they were representative directors. Supreme Court of Appeal held that although the applicants had been participating in the proceedings both as directors and as shareholders, the resolution passed by them barred them from participating in the litigation due to their failure to have set aside the above resolution.

Therefore, this Constitutional Court held that when an individual shareholder is presented as “shareholder” in court proceedings, he becomes party in the litigation in his personal capacity. Orders of the Supreme Court of Appeal and High Court of South Africa were set aside. Court granted rescission in terms of the Uniform Rules of Court and leave to appeal to intervene in the trial. [Morudi v. NC Housing Services and Development Co. Ltd. , (2018) ZACC 32, dated 25-09-2018]

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