2

REPORTABLE

Case no: SA 15/2016

IN THE SUPREME COURT OF NAMIBIA

In the matter between:

KAI-UWE DENKER APPELLANT

and

AMEIB RHINO SANCTUARY (PTY) LTD FIRST RESPONDENT

REGISTRAR OF COMPANIES SECOND RESPONDENT

THE TRUSTEES OF MICHAEL VILJOEN TRUST THIRD RESPONDENT

MINISTER OF LANDS AND RESETTLEMENT FOURTH RESPONDENT

MICHAEL HERCULES VILJOEN FIFTH RESPONDENT

Coram: DAMASEB DCJ, SMUTS JA and HOFF JA

Heard: 2 November 2017

Delivered: 22 November 2017

Summary: The appellant (Denker) brought an application in the High Court seeking an order declaring that the transfer of his 1% share in a Namibian-registered company owning agricultural land to a foreign national (a trust), was unlawful and invalid. Since it was in breach of s 58(1)(a) for the company, in which a Namibian did not hold a controlling interest, to acquire agricultural land, the acquisition by the company was void. Denker requested the court, in addition to declaring the share transfer invalid, to rectify the share register of the company in terms of s 122 of the Companies Act, 2004 (Act no. 28 of 2004) making him 51% shareholder and the foreign national 49% shareholder. The relief was justified on three principal grounds. The first was that the fifth respondent had misrepresented to him that Namibian law permitted him (a foreigner) to own shares in the company (acquiring agricultural land) in equal proportion (50/50) when in truth that was not permitted by law. The second basis was that the documents evidencing the share transfer were not affixed with stamp duty as required by s 23 and s 10(6) of the Stamp Duties Act, 1993 (Act no. 15 of 1993), read with s 140 of the Companies Act - rendering the transaction void and unenforceable. The third ground was that since a trust was not in law capable of holding shares, the transaction was void because it was a foreign trust which, together with Denker, held the shares in the company.

The fifth respondent and the trustees of the third respondent opposed the application and brought a counter application, relying on the illegality of the transaction and asked the court a quo in terms of s 60 of the Agricultural (Commercial) Land Reform Act, 1995 (Act 6 of 1995), to order the Minister of Land, Resettlement and Rehabilitation to direct a forced sale on public auction. Alternatively, the winding up of the company was sought due to its alleged inability to pay its debts as contemplated by s 349 (1)(f) (read with s 350(1)(a) of the Companies Act, alternatively that it will be just an equitable to do so in terms of s 349(1)(h), read with s 350 (1)(c) of the Companies Act.

The High Court refused the main relief sought in terms of s 122(1) of the Companies Act. On the contrary, the High Court partially allowed the counter application which sought an invalidation of the purchase of the agricultural land by the company and directed the Minister to order a forced sale under s 60 of the Land Reform Act, premised on the common cause illegality of the transaction in so far as it involved a foreign national acquiring a controlling interest in the company.

On appeal, held that defective instruments of transfer did not necessarily result in a nullity and that the legislature did not intend the transaction to be vitiated by a nullity. Further held that both parties were equally culpable in the creation of the defective instruments of transfer and that justice and equity dictates that none of them benefit to the prejudice of the other.

Held further that the allegation that the appellant was induced to act to his prejudice by a misrepresentation of the law was, on the facts of the case, improbable as the appellant could, without any difficulty, have sought independent professional advice to establish it was wrong and to protect his interests.

Held further that the issue of whether a trust can own shares had become moot.

Held further that since the transaction is invalid for being in breach of s 58(1)(a) of the Land Reform Act, the Minister was obliged to invoke s 60. Appeal dismissed, with costs against the appellant.

______

APPEAL JUDGMENT

______

DAMASEB DCJ (SMUTS JA and HOFF JA concurring):

Background

[1] The central dispute in this case concerns what should be the shareholding ratio between two shareholders (one Namibian, the other South African) of a private limited liability company registered in Namibia and which owns agricultural land in the country. As owner of agricultural land, the company concerned is caught by s 58(1)(a) of the Agricultural (Commercial) Land Reform Act 6 of 1995 (the Land Reform Act). It states:

‘Notwithstanding anything to the contrary in any other law contained. . . , no foreign national shall . . ., without the prior written consent of the Minister, be competent –

(a) to acquire agricultural land through the registration of transfer of ownership in the deeds registry. . . ’

[2] As regards a company, the Land Reform Act defines a foreign national as: (i) a company incorporated under the laws of any country other than Namibia; or (ii) a company incorporated in Namibia in which the controlling interest is not held by Namibian citizens.

[3] A controlling interest in a company is in turn defined as ‘more than 50 percent of the issued share capital of the company’. It was settled by this court in Marot and others v Cotterell 2014 (2) NR 340 (SC) at 350G-H that for purposes of the Land Reform Act, ownership of 50% in a company by a foreign national constitutes a controlling interest.

[4] If it is established that on the date a company acquired the agricultural land, a Namibian did not hold a controlling interest in co-ownership with a foreign-national, that acquisition would be void and therefore trigger s 60 of the Land Reform Act which, in relevant part, states:

‘(1) Where any agricultural land has been acquired-

(a)  by a foreign national in contravention of section 58 (1) (a) or

(b)  …

the Minister may issue an order that such agricultural land be sold, unless the Minister decides to acquire such land in accordance with the provisions of Part IV for the purpose of section 14 (1).’

[5] Section 14(1) of the Land Reform Act empowers the Minister, out of moneys appropriated in the Land Acquisition and Development Fund (established by s 13A), to acquire agricultural land, chiefly to resettle previously disadvantaged Namibians in order to address the ravages of inequality brought about by Namibia’s colonial past.[1]

[6] The first respondent, Ameib Rhino Sanctuary (Pty) Ltd (the company), is registered in Namibia. It is common ground that on 22 August 2012 (the date of transfer) the company ostensibly acquired agricultural land constituting Portions A and B of the farm Ameib No. 60, Registration Division ‘H’ in the Erongo Region (farm Ameib). It is also common cause that on the date of transfer of farm Ameib, the share register of the company reflected the appellant (Denker), a Namibian, as holding 50% of its issued shares, while a South African Mr. Michael Hercules Viljoen (Viljoen), held the remaining 50% of the issued shares. A resolution was passed on 22 August 2012, although eventually signed by Denker only on 24 October 2012, revoking the 25 January 2012 resolution and which directed that Denker transfer 1% share to the Michael Viljoen Trust and that the Cobbett Trust transfer 49% shares to the Michael Viljoen Trust. The transfer was done and the register reflects a 50/50 shareholding split between Denker and the Michael Viljoen Trust.

[7] It follows that on the date of the company’s acquisition of farm Ameib, a Namibian did not hold a controlling interest in the company. It is for that reason illegal and void ab initio[2] and incapable of producing legal rights and obligations. It remains unenforceable. (Jajbay v Cassim 1939 AD 537 at 554-555). The litigation initiated by Denker (as applicant in the High Court), and which is the subject of the present appeal, was intended to avoid that consequence.

[8] As will soon become apparent, Denker endeavored to persuade the High Court that, based on (a) the manner (not complying with legislation[3]) in which he surrendered a 1% share he owned in the company to a foreign-registered trust (the Michael Viljoen Trust); (b) the fact that it was a trust which co-owned the issued shares in the company (which he maintained was not legally permissible[4]), and (c) a misrepresentation of law as to the effect of s 58(1)(a) by Viljoen for whose benefit he surrendered his 1% share to the Michel Viljoen Trust, the company remained under the control of a Namibian and, therefore, did not fall foul of s 58(1)(a) of the Land Reform Act.

[9] In terms of s 23, read with s 10(6) of the Stamp Duties Act, an instrument of transfer must bear a revenue stamp, be dated with the true dates of the signatures of the transferor and transferee and the revenue stamp must be defaced by an authorised person recording the true date of the defacement before the company may register the transfer. For its part s 140(2) of the Companies Act states:

‘Notwithstanding anything in the articles of a company, it is not lawful for the company to register a transfer of shares of or interest in the company unless a proper instrument of transfer has been delivered to the company, but nothing in this section prejudices any power of the company to register as a member any person to whom the right to any share of the company has been transmitted by operation of law.’

[10] Section 140(4) states that:

‘(4) The registration of any transfer of shares of or interest in a company is subject to the law relating to stamp duty and estate duty.

[11] It is not in dispute that the instruments of transfer which gave effect to the transfer of 1% share from Denker to the Michael Viljoen Trust and the 49% shares from the Cobbett Trust to the Michael Viljoen Trust, did not bear revenue stamps; the revenue stamps were not defaced by an authorised person to record the true date of the defacement; and bore a date other than the one on which the actual transactions took place. That was in breach of s 23, read with s 10(6) of the Stamp Duties Act and the instruments of transfer were therefore not valid instruments of transfer for the purposes of s 140 of the Companies Act. The documents in question being: the ‘Transfer of Shares, Stock, Debentures or Options’ dated 25 January 2012 in terms of which Denker transferred the one share for no consideration to Viljoen and the ‘Transfer of Shares, Stock, Debentures or Options’ dated 25 January 2012 in terms of which the Cobbett Trust transferred the 49 shares to Viljoen. It is common cause that the relevant instruments of transfer were backdated to 25 January 2012 while the transaction was completed on 24 October 2012. That was done on the instruction of Viljoen with the full knowledge and participation of Denker. His involvement notwithstanding, Denker contends, that the company was not competent to register the transfer of his 1 % share and to change its register of members on the strength of those instruments.

[12] It is undisputed that at some point before the change in the share register which reflected Denker and the Michael Viljoen Trust as equal shareholders (as evidenced by the transactions done on 25 January 2012, 22 August 2012, 22 August 2012 and 24 October 2012), by agreement between Denker and Viljoen (concluded on 8 July 2010), Denker held 51% of the issued shares, and a trust known as The Cobbett trust (also foreign-registered) held the remaining 49% of the issued shares representing Viljoen’s interest.

[13] There is no dispute between the parties that the 51% / 49% split was done on the advice of a lawyer, Mr Erasmus, who advised both Denker and Viljoen as such so as to bring the company within the four corners of s 58(1)(a) as Denker and Viljoen (a foreigner) formed a common intent to, through a special purpose vehicle, the company, purchase farm Ameib. At that time, the two men were ad idem, on the strength of lawyer Erasmus’ advice, that since Viljoen was a foreign national they needed to structure the shareholding in the company in the ratio of 51% for Denker and 49% for Viljoen.

[14] After the 51/49 split, but before the transfer date, Viljoen informed Denker in January 2012 that he had sourced legal advice to the effect that s 58(1)(a) of the Land Reform Act would not be violated if he and Denker held the shares in the company in equal proportion. It is that information given by Viljoen to Denker and which resulted in the alteration of the share register to reflect a 50/50 per cent shareholding in the company as at the transfer date, that is at the heart of the litigation now before court. According to Denker, but for the advice given by Viljoen, he would not have transferred his 1% share to the Michael Viljoen Trust.

The relief sought by Denker

[15] Denker approached the High Court on notice of motion to reverse the equal shareholding distribution in the company as at the transfer date to 51/49. He made clear in his founding affidavit that the reversal was necessary to avoid the acquisition of farm Ameib by the company being void as a result of s 58(1)(a). Denker anchored his relief on s 122 (1) of the Companies Act.

[16] According to s 122(1) and (3) of the Companies Act:

‘(1) If –

(a)  the name of any person is, without just cause, entered in or omitted from the register of members of a company; or

(b)  default is made or unnecessary delay takes place in entering in the register the fact of any person having ceased to be a member,