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The Companies and Intellectual Property Commission has a statutory obligation to maintain “accurate, up-to-date and relevant information concerning companies”, the North Gauteng High Court ruled on Monday, in a judgment set to speed up recourse for company owners who claim that their entities have been hijacked.
Billionaire Pastor Joe Singh, based in Middelburg in Mpumalanga, lost his application to review the commission’s decision to investigate claims by Johannesburg-based businessman Ralston Smith, that Singh stole his companies, Finishing Touch Trading 204 and Lahleni Lakes.
Judge Annali Christelle Basson said that the commission was therefore “acting in terms of this obligation” when it initiated an investigation into the complaint lodged by Smith.
Smith claimed that Singh stole his companies by forging his signature to remove him as a director.
Singh made headlines last year when he told the media that he had donated R500 000 to the ANC Youth League in return for a “political solution” to his mining company Just Coal’s contractual problems with Eskom.
The fraudulent change of company directors listed in the commission’s database came under the spotlight in 2010, when a suspected syndicate hit 17 companies including two involved in the multimillion-rand Gautrain construction project, allegedly to steal tax refunds from the South African Revenue Service.
Late controversial businessman Sandile Majali, together with Stephan Khoza, Haralambos Sferopoulos and Elvis Bongani Ndala, were among those who faced fraud charges for allegedly changing the directorship of mining company Kalahari Resources.
Following Smith’s complaint in 2016, the commission summoned Singh in his capacity as a director of Lahleni and Finishing Touch to appear before the commission and to provide information.
Also summoned was business consultant and state witness Jan van Dyk, who wrote in an affidavit that in January 2012 he “had a copy of the signature of Mr Smith that I got somewhere, and made a copy of it”.
He “cut it out, gummed it in place on a mandate for resignation which (is) an attachment on the CoR 39 form”.
The CoR 39 is a standard commissions notification form used for the notice of change of directors.
Van Dyk said he made a copy of the altered form and emailed it to the commission to resign Mr Smith as a director in Finishing Touch Trading 204.
He “followed the same modus operandi to have him removed again as director in Lahleni Lakes.
Singh remained the sole director in both companies.
However, the court heard that Singh was not prepared to appear before the commission and instead opted to launch a review application to set aside various decisions by the commission and its commissioner.
Singh contested the investigation on at least three grounds: that it was time barred; that the commission failed to taken into account all relevant facts when deciding to investigate; and that the summonses were incorrectly served and therefore stand to be set aside.
Smith submitted that the relief sought by Singh was unsustainable because the commission was not time-barred from investigating the complaints in that his fraudulent removal as a director of Lahleni and Finishing Touch constituted a “continuing wrong”.
Smith said the commission bears a public duty to maintain ‘accurate, up-to-date and relevant information concerning companies” and, as such, “must remedy a wrong where it continues to exist”.
Smith added: “There is no merit in the complaint that the information that was placed before the commission is allegedly incomplete as Singh has not made out a case in support of this allegation.”
The court noted that for a decision to be reviewed under the Promotion of Administrative Justice Act it must amount to “administrative action”, which means “any decision taken, or any failure to take a decision, by an organ of state, when exercising a power in terms of the Constitution or a provincial constitution; or exercising a public power or performing a public function in terms of any legislation; or ... which adversely affects the rights of any person and which has a direct, external legal effect.”
Judge Basson agreed with Smith that the action of the commission, by accepting and investigating a complaint, did not constitute administrative action.
She cited the precedent “that the administrative justice requirement of procedural fairness does not arise from the mere institution of an investigation”.
“It follows in my view that, if the decision to investigate does not constitute administrative action, then the various constructive steps required to carry out the investigation – including the issuing of the summons also do not constitute administrative action ...”
She said that “in light of the foregoing I am in agreement with the submission on behalf of Smith that the decision of [the commission does] not constitute administrative action subject to a review under the Promotion of Administrative Justice Act”.
Basson also dismissed the argument that the investigation was time-barred, which Smith had rejected on the grounds that “in the case of a course of conduct or continuing practice the time-bar only starts running from the date that the conduct or practice ceased”.
She said the “continuing practice” referred to in terms of the law was not different from the “continuing wrong” in a precedent case by the Supreme Court of Appeal, which used the test whether or not “the wrongful conduct endures”.
She agreed with Smith that “the fact that the records continue to reflect that he is not a director of Lahleni and Finish Touch, it constitutes a continuous practice”.
She said that “where the companies register reflects an error or a falsification, [the commission] is statutorily obliged to perform any function reasonably necessary to carry out its assigned registry function, including correcting such an error or falsification”.
It was also in the public interest that the companies register accurately reflects the details of directors of a company, she said, adding that “should Smith be successful in his claim that he is still a director, this practice has continuous injurious effects in that it continues to reflect information that is not correct”.
