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SCA sends Nova packing

Court finds that access to shareholder registers is an unqualified right and cannot be refused.

The media and any person has an unqualified right to access the shareholder registers of any company in South Africa; such a right is essential for effective journalism. The motive for seeking access to these registers is also totally irrelevant and the company cannot refuse access.

These are the two main findings in the judgement of the Supreme Court of Appeal (SCA) in Moneyweb’s protracted case against the Nova Property Group, Frontier Asset Management and Centro Property Group.

The SCA dismissed the companies’ appeal against an interlocutory judgement handed down in the North Gauteng High Court (NGHC) in 2014 with costs. In so doing, the SCA clarified the meaning of the relevant provisions of the Companies Act on which Moneyweb relied, paving the way for Moneyweb to gain compulsory access to the three companies’ share registers, which have been withheld for the last three years. 

Victory for media freedom and transparency

The judgement is not only a victory for Moneyweb, but also for media freedom and increased transparency.

The appeal arose after the directors of the three companies vociferously denied Moneyweb journalist Julius Cobbett and Moneyweb access to their shareholder registers and alleged that the information would be used to defame and discredit them. The requests to see the shareholder registers were made in terms of Section 26(2) of the Companies Act – an important tool for journalists to get quick and affordable access to shareholder registers of companies.

The directors argued that Moneyweb and Cobbett did not have an unqualified right of access and that they may refuse to allow an inspection of the registers.

In a series of delaying tactics, the directors then sought discovery of Moneyweb documents that they said were relevant to their defence for access to the registers. Moneyweb opposed this side argument and the NGHC then found in favour of Moneyweb, but at the same time, also made an erroneous interpretation of section 26 of the Companies Act, which has now been overruled. The  companies appealed against their loss of the side argument.

The NGHC did not agree in an interlocutory judgement, but granted leave to appeal. It is this appeal judgement that has now removed any ambiguity as to the rights enshrined in Section 26.

The media industry was also concerned about the potential impact. The amaBhungane Centre for Investigative Journalism joined Moneyweb’s defence of the case as an amicus curiae to affirm the importance of this provision in the Companies Act.. It is this appeal judgement that has now removed any ambiguity as to the rights enshrined in Section 26.

In the judgement, acting Judge of Appeal Fayeeza Kathree-Setiloane wrote that the three companies’ interpretation of Section 26(2) “would have a negative impact on openness and transparency, and would directly undermine the work of Moneyweb, amaBhungane and other investigative journalists, as it limits the right to freedom of expression… Preventing the press from reporting fully and accurately does not only violate the rights of the journalist, but it also violates the rights of all the people who rely on the media to provide them with ‘information and ideas’.”

Judge Kathree-Setiloane also said that if it was a qualified right and if companies refused to give access, “the inconvenience and cost of an application to court to challenge the refusal on those grounds would greatly inhibit access to securities registers. Given the significant expenses involved in the court process, it will in most cases lead to important investigations being aborted rather than an application to court being pursued.”

The judgement also states that it is irrelevant what the motive of the party is that seeks access to shareholder registers in terms of Section 26.

amaBhungane

Stefaans Brummer of amaBhungane said in response to the judgement that the team is over the moon. “This is not only a vindication for Julius and Moneyweb in their determination to expose corporate wrongdoing, but for corporate transparency and accountability in general.”

He added that the court made it blatantly clear that any member of the public has an unqualified right to know who owns a company, as intended by Parliament. And this is best practice internationally. “We are happy to have contributed.”

Nova

Dominique Haese, CEO of Nova, did not wish to comment, other than stating: “We are busy considering it (the judgement) together with our legal team. We are carefully considering what its import is in itself. We can thus not comment thereon presently.” 

The long road to the SCA

The case started back in July 2013 when Cobbett applied to access the shareholder registers of these companies.

The directors of the companies denied Cobbett and Moneyweb access based on our alleged vendetta.

Moneyweb has always denied that such a vendetta exists.

Moneyweb then turned to the NGHC to force the companies to comply. But before this application could be heard, the directors demanded a range of documents from Moneyweb in terms of Rule 35 which the directors alleged would help them prove that a vendetta exists and which they said was critical for their defence.

The documents the directors sought, included all notes, emails and correspondence between Cobbett and Sharemax investors, forensic auditors, complainants to the FAIS Ombud and the Financial Service Board.

Moneyweb argued that these documents were totally irrelevant to the Section 26 application, and that the interlocutory application was only brought to delay the process to get access to the registers.

Judge Neil Tuchten agreed with Moneyweb on a technicality and found that although the three companies made a “compelling case for discovery”, he dismissed their request for the documents.

The directors were not happy and asked for leave to appeal, which Judge Tuchten granted.

Why it is critical to see the shareholder registers

Nova is the company that owns the various properties that used to belong to Sharemax investors. Shortly after Sharemax failed, these properties were transferred to Nova as part of a high court-approved scheme of arrangement. In the process the overwhelming majority of shareholders became debenture holders.

It is now uncertain who actually owns Nova and by extension  the various Sharemax properties. With the announcement of the scheme of arrangement in 2011, the executive directors of the erstwhile Sharemax group, Haese, Rudi Badenhorst and Dirk Koekemoer held 43.2% of Nova’s issued shares. These three directors are also directors of Nova.

Connie Myburgh is Nova’s executive chairman.

Moneyweb was represented by Steven Budlender (Jnr) and Mpilo Sikhakhane; amaBhungane was represented by Geoff Budlender SC; and Nova, Frontier and Centro by JJ Brent SC, D Malion and K Hopkins.

Read the full judgement here: Judgment-Nova Property Group Holdings v Moneyweb

Read the media summary here: Media Summary-Nova Property Group Holdings v Moneyweb

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Well done

I note the list of counsel – which attorneys acted for the parties?

Willem de Klerk for Moneyweb
Webber Wentzel for amaBhungane
Faber Goëtz Ellis Austen for Nova, Centro and Frontier

Excellent outcome and a well-reasoned judgment. Congratulations

One can assume the investors would like to know how the 43.2% was secured?

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