Irrevocable shareholder undertakings: Valid and enforceable?

Note: Footnotes omitted and emphasis added

[1] The appellants are shareholders of the third respondent (ALI). In February 2019, the appellants each gave an irrevocable undertaking in favour of the first and second respondents (Messrs Scott and Ahmed) to vote their shares in ALI, at any meeting of the shareholders of ALI, in favour of certain resolutions. Messrs Scott and Ahmed were directors of ALI and procured the undertakings on behalf of ALI, and for its benefit.

[2] Among the resolutions referenced in the undertakings, two are relevant.

First, the appellants undertook to vote in favour of the performance and implementation of certain agreements (the transaction agreements). The transaction agreements arose from the funding by Glencore South Africa Oil Investments (Pty) Ltd (Glencore SA) of the acquisition by Off The Shelf Investment Fifty Six (RF) (Pty) Ltd (OTS56) of the shares in the companies that owned Chevron’s assets in South Africa and Botswana, and the sale and transfer to Glencore SA of these shares by OTS56. ALI controls OTS56. Undertakings were obtained from ALI shareholders, including the appellants, so as to ensure that ALI implements the sale of shares by OTS56 to Glencore SA.

[3] Second, the appellants undertook to vote in favour of the removal of Mr. Mashudu Ramano as a director of ALI. Messrs Scott and Ahmed, fearing that Mr. Ramano was seeking to take control of the board of ALI and derail the implementation of the transaction agreements, sought assurances from the appellants that they would honour their undertakings. Correspondence followed from which it became apparent that the appellants did not consider their undertakings valid and enforceable.

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[15] I proceed to consider the issue of mootness. If there are no longer live issues between the parties, then the appeal has no practical effect and the matter is moot. Section 16(2)(a)(i) of the Superior Courts Act 10 of 2013 provides that where the issues in an appeal are of such a nature that the decision sought will have no practical effect or result, the appeal may be dismissed on this ground alone. The point of principle has been formulated as follows:

‘This principle is based on the notion that judicial resources should be efficiently employed and not be used for advisory opinion or abstract propositions of law. ’

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[19] The contention of the first applicant is unavailing.

• First, it requires us to determine the validity of the undertakings in the appeal before us on the basis that this issue might have relevance in other proceedings that are not before us.
• Second, whether the undertakings were of application for the purpose of the resolution proposed at the annual general meeting of 27 February 2020 is a mixed question of fact and the proper interpretation of the undertakings that we are not called upon to determine in this appeal.
• Third, whether the court that hears the rectification application ever reaches the proposition as to what would have been required of the appellants in terms of their undertakings had they not voted as they did is a matter of conjecture, is too speculative to warrant this court entertaining the appeal.
• Fourth, and upon the assumption that the rectification of the share register is ordered and a meeting of shareholders is convened to consider afresh the resolutions that served before the annual general meeting, the undertakings will, by then, have lapsed. 

The validity of the undertakings is thus rendered academic.

[20] For these reasons, I find that the decision sought from this court on appeal has no practical effect or result.

[21] I turn to consider the submission of the second appellant. The second appellant accepted that the appeal was moot, but it contended that it would be in the interests of justice to determine whether the high court was correct in the interpretations it gave to the provisions of the Companies Act that were debated in the urgent application.

[22] The interests of justice are not engaged on the basis of res iudicata or issue estoppel. In Goldex, this court explained that the plea of the exceptio res iudicata requires that the question raised has been finally adjudicated upon in proceedings between the same parties, for the same relief, based upon the same cause of action. The less exacting defence of issue estoppel requires that the parties must be the same and the same issue of fact or law must be an essential element of the judgment already rendered.

[23] Neither res iudicata nor issue estoppel arise in respect of the rectification application that serves before the high court. Distinctive relief is sought in that application, at the instance of parties that include, but are not confined to, the appellants, and the validity of the undertakings will figure, if at all, as an ancillary issue concerning an appropriate remedy. Accordingly, the rectification application can be determined on its merits, without reference to the judgment in this urgent application.

[24] There is also no reason why the judgment of the court below should enjoy such strong precedential value that its review by this court is necessary.

• First, the judgment of the court below was given in an application brought as a matter of urgency, thus allowing less time for deliberation than a court would ordinarily desire. This is not in any way to denigrate the judgment, but simply to recognize the circumstances in which it was rendered.
• Second, the judgment relied principally upon whether the factual predicate for the application of s 58(8)(c) of the Companies Act had been met, a matter of no precedential significance.

As to s 71(2)(b), the court below interpreted the provision in the light of well-known principles, entailing little novelty. Should another court consider these principles of less interpretative significance to a proper understanding of s 71(2)(b), it will no doubt say so.

[25] I do not consider, therefore, that the interests of justice should incline this court to entertain the appeal.

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“Proxy undertakings to vote at company meeting – such meetings held and resolutions passed and implemented – undertakings due to expire – decision on appeal would not have a practical effect or result – appeal dismissed in terms of s 16(2)(a) of Superior Courts Act 10 of 2013.”