THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

JUDGMENT

REPORTABLE
Case number :  601/05
In the matter between :

SENWES LIMITED

FIRST APPELLANT
SENWESBEL LIMITED

SECOND APPELLANT
VAALHARTS CO-OPERATIVE
LIMITED

THIRD APPELLANT

and

JAN VAN HEERDEN & SONS CC

FIRST RESPONDENT
CHARLES ENGELBRECHT

SECOND RESPONDENT
LOUIS J FOURIE

THIRD RESPONDENT
CHARLES H DU P MARTINSON

FOURTH RESPONDENT
TIELMAN C L MEYER

FIFTH RESPONDENT
SUSANNA K OTTO NO

SIXTH RESPONDENT
PETRUS P V VAN WYK

SEVENTH RESPONDENT

CORAM :

SCOTT, BRAND, VAN HEERDEN,
COMBRINCK JJA et SNYDERS AJA
HEARD :

26 FEBRUARY 2007
DELIVERED :

23 MARCH 2007

Neutral citation:
This judgment may be referred to as Senwes v Van Heerden &
Sons [2007] SCA 18 (RSA)
Summary:
Vaalharts agricultural co-operative taken over by another co-
operative, Senwes, which was subsequently converted into
company – the plaintiffs, former members of Vaalharts, agreed
to take up shares in Senwes in exchange for members' levies
– whether transaction constituted an 'arrangement' in terms of
s 169A of Co-operatives Act 91 of 1981

BRAND JA/

BRAND JA:

[1] The seven respondents (plaintiffs), together with about 160
others, each instituted separate actions, on substantially the same
grounds, against the appellants (defendants) in the Kimberley High
Court. The actions of the seven plaintiffs were consolidated by
agreement between the parties. The fourth plaintiff's action fell
away when his estate was sequestrated. The remaining six then
proceeded to trial. The plaintiffs' pleadings in the consolidated
action still bear the scars of many amendments. They also retained
numerous factual allegations pleaded in support of causes of
action no longer relied upon at the trial. The trial was postponed on
many occasions and it ran for an inordinate number of days. From
its date of commencement on 19 February 2002 it stretched over
more than three years. In the end the court a quo (Majiedt J) gave
judgment in favour of the plaintiffs on 19 August 2005. The appeal
against that judgment, which has since been reported sub nom Jan
van Heerden en Seuns BK v Senwes Bpk [2006] 1 All SA 44 (NC),
is with the leave of the court a quo.

[2] The issues between the parties will best be understood in the
light of the background facts. The third defendant, Vaalharts Co-
operative Limited, had been established as an agricultural co-
operative in 1944. Until December 1996 all the plaintiffs were
members of that co-operative. The first defendant, Senwes
Limited, also started out life as an agricultural co-operative. During
April 1997, it was, however, converted into a public company
pursuant to the provisions of the Co-operatives Act 91 of 1981 ('the
Act').

[3] On 30 December 1996 Senwes and Vaalharts entered into a
written deed of sale, ('verkoop van besigheid'), in terms of which
Senwes essentially took over the business of Vaalharts as a going
concern. It acquired all the assets of Vaalharts in exchange for
most of the latter's liabilities. Some liabilities were, however,
expressly excluded from the deal. Most prominent amongst these
exclusions was the liability of Vaalharts towards its members for
the contributions they had made to its members' fund. For the sake
of brevity and convenience I will refer to these contributions as
'members' levies', though the term is not entirely accurate in that
some contributions were in fact voluntarily made.

[4] These members' levies, which played the central role in the
dispute between the parties, were governed by s 99 of Vaalharts'
statute. In terms of s 99(1), members were obliged to contribute a
certain percentage of the income they received from agricultural
produce to the members' fund. Members were also entitled,
however, to make additional voluntary contributions to the fund. At
some stage in the history of Vaalharts, these voluntary
contributions were quite popular as creating something in the
nature of a pension fund for members.

[5] From the members' point of view, the disadvantage of these
levies as an investment was the restrictions imposed on
repayment. In substance, s 99(5) of the statute provided that
members were only entitled to repayment upon termination of their
membership and then only if the directors were of the opinion that
the co-operative was in a financial position to do so. Probably as a
result of this discretion whether or not to make repayment, levies

were, for accounting purposes, looked upon as akin to share
capital and not as unsecured loans to the co-operative, which, from
a legal perspective, they obviously were.

[6] During the negotiations preceding the final conclusion of the
sale agreement with Senwes at the end of 1996, the directors of
Vaalharts were understandably anxious to secure repayment of
members' levies as part of the deal. The formula they eventually
assented to, in principle, appears from a circular which was
distributed by the directors of Vaalharts to all its members during
November 1996. Since this document was annexed to plaintiffs'
particulars of claim as 'annexure C', it was given that description in
the court a quo. I propose to follow the same terminology.

[7] Annexure C starts with an explanation by the directors of
Vaalharts as to why, as a result of the deteriorating financial
situation of the co-operative, it was compelled to sell its business
as a going concern to Senwes. The latter was, at the time, still a
co-operative but on the verge of converting into a public company.
It was pointed out in the document that, while the total sum of
members' levies owing amounted to about R50m, the financial
statements of the co-operative reflected an excess of assets over
liabilities (excluding the members' levies) of only R44m. But for the
fact that members' levies were regarded as akin to share capital,
the co-operative would thus be trading in insolvent circumstances.
Nevertheless, annexure C explained, Senwes was prepared, as
part of the package deal offered, to absorb the shortfall and to
afford the members of Vaalharts the full benefit of the members'
levies standing to their credit in the co-operative's accounts.

[8] The package deal offered also included the condition that all
members of Vaalharts should resign. Upon resignation, members
would be entitled to repayment of their levies. But, so annexure C
stated, repayment would not necessarily be in the form of cash.
Members were given two options: (a) to receive payment in cash;
or (b) to acquire, in lieu of a cash repayment, shares in Senwes in
exchange for two thirds of their levies and shares in Senwes'
holding company, Senwesbel Ltd, in exchange for the other third.
According to annexure C, the prices at which these shares would
be allocated were calculated with reference to their nett asset
value and amounted to R4,50 per share in Senwes and R6,00 per
share in Senwesbel. Another important part of the package deal
set out in annexure C was that Senwes reserved the right to resile
from the transaction if it were not satisfied with the percentage of
members who opted for shares. In fact, the deed of sale eventually
entered into in December 1996 was expressly made subject to the
suspensive condition in favour of Senwes that at least 95% of the
members take repayment of their levies in the form of shares.

[9] Attached to annexure C was a resignation form. According to
its content, the signing of this form by a member would constitute
both resignation of membership and the formal consent by the
member that the directors could proceed with the Senwes deal. It
also called upon each member to indicate which of the two options
available for repayment of his or her levies the member preferred.
An election of the share option, so the form stated, would be
regarded as an irrevocable mandate to the directors of Vaalharts to
subscribe to the number of shares to which the member would be
entitled in accordance with the agreed formula.

[10] All the plaintiffs signed the resignation form. Though the
issue was not specifically canvassed at the trial, all available
evidence seems to indicate that every member of Vaalharts did the
same. About 90% of the members, including the plaintiffs, chose
the share option. This apparently satisfied Senwes not to invoke
the 95% suspensive condition, but to go on with the sale.

[11] During 1997 effect was given to the terms of the sale. All
assets and liabilities of Vaalharts (that were not excluded from the
sale) were transferred to Senwes. Levies standing to the credit of
members who opted for shares were ceded to Senwes. When
Senwes became a public company in April 1997, these members
received the number of shares in Senwesbel and Senwes that
were allocated to them in accordance with the agreed formula.

[12] However, before long, remorse set in among some of the
lastmentioned group. They felt that they had been misled by the
representatives of Senwes, who were assisted in the process by
the directors and the auditors of Vaalharts. Though a number of
reasons for their dissatisfaction were advanced, their main
complaint related to the value of the Senwes shares. While they
were given the assurance, they said, that they were acquiring
these shares at substantially below market value, it turned out that
there was in fact a very limited market for the shares which, in the
event, traded at a price far below R4,50 per share.

[13] In November 1999 the dissatisfaction led to the institution of
proceedings by the plaintiffs and another 160 erstwhile members
of Vaalharts against Senwes, Senwesbel and Vaalharts, as well as

against the auditors of Vaalharts as the fourth defendant. Originally
the plaintiffs relied on two alternative causes of action. Their main
claim was for payment of the amounts credited to their levy
accounts that had been transferred to Senwes, against return of
the shares they had received. They based this claim on the
cancellation of a contract they allegedly concluded with Senwes,
Senwesbel and Vaalharts. This claim was brought only against the
first three defendants. In the alternative they sought to hold all four
defendants liable in delict for the damages they suffered as a result
of the Senwes transaction. Both claims were founded on
allegations of negligent misrepresentations made on behalf of the
defendants, including misrepresentations about the value of the
Senwes and Senwesbel shares.

[14] Two years after the actions were instituted, the plaintiffs
introduced a further alternative cause of action by way of an
amendment to their particulars of claim. The gravamen of this new
cause of action was that annexure C – inclusive of the resignation
form – constituted 'an arrangement' between Vaalharts and its
members as contemplated by s 169A of the Act which, in terms of
the section, required the sanction of the High Court. Because this
sanction had not been sought and obtained, so the amended
particulars averred, the arrangement was void ab initio. The
defendants' main response consisted of a denial that the
transaction constituted an 'arrangement' between Vaalharts and its
members as envisaged by s 169A.

[15] At the commencement of the proceedings the court a quo
ordered, on application by the defendants, that the question

regarding the applicability of s 169A be decided as a point in
limine, prior to the hearing of evidence. In the event, the court
decided the preliminary issue in favour of the plaintiffs.
Consequently it declared both the 'arrangement' between
Vaalharts and its members and the ensuing agreement of sale
between Vaalharts and Senwes, void ab initio. The court's reasons
for this conclusion appear from its reported judgment (see paras
16 – 40 at 49g – 62h).

[16] The effect of the declaratory order of invalidity on the further
proceedings turned out to be far-reaching. First, it led to the
summary dismissal of the plaintiffs' claim against the fourth
defendant, ie the auditors of Vaalharts. Seeing that the plaintiffs'
claims against this defendant were squarely based on the
proposition that they gave up their members' levies pursuant to a
valid agreement, the court a quo found that these claims could no
longer be sustained (see para 41 at 62h-63a of the reported
judgment). Secondly, it caused the plaintiffs to reformulate their
cause of action against the remaining defendants. What they now
sought to recover was an unjustified enrichment on the part of the
defendants on the basis of what the plaintiffs labelled the condictio
indebiti.

[17] In answer to this new cause of action, the remaining
defendants filed a special plea of prescription, contending that the
plaintiff's claim based on enrichment had become prescribed
before it was introduced for the first time in February 2002. In
addition they filed a plea on the merits in which several defences
were raised against the enrichment claim. But, as is evident from

the outcome, neither the plea of prescription nor any of the
defendant's answers on the merits found favour with the court a
quo.

[18] For the most part the various issues decided by the trial court
again arose on appeal. The question antecedent to all these
issues is, however, whether the transaction between the plaintiffs
and Vaalharts constituted 'an arrangement'  between a co-
operative and its members as envisaged in s 169A of the Act. The
material provisions of the section read as follows:

'169A.  Compromise and arrangement between co-operative, its members
and creditors
(1)
If any compromise or arrangement is proposed between a co-operative
and its creditors . . . or between a co-operative and its members, the court
may, on the application of the co-operative or any creditor or member of the
co-operative . . . order a meeting of the creditors . . . or of the members of the
co-operative, as the case may be, to be summoned in such manner as the
court may direct.
(2)
If a compromise or arrangement is agreed to by –
(i)
a majority in number representing three fourths in value of the
creditors . . . present and voting either in person or by proxy at the
meeting; or
(ii)
a special resolution,
as the case may be, such compromise or arrangement shall, if
sanctioned by the court, be binding on all the creditors . . . or on the
members, as the case may be, and also on the co-operative . . . .'

[19] It is clear that there are a number of transactions
contemplated by s 169A with which we are not concerned. First
among these are transactions arising from the relationship

between a co-operative and its creditors. Though the plaintiffs
were obviously also creditors of Vaalharts, they did not suggest
that that relationship is of any consequence in the present context.
The section also deals with 'compromises'. According to the
authorities, these transactions presuppose a dispute between the
parties (see eg Ex Parte Cyrildene Heights (Pty) Ltd 1966 (1) SA
307 (W) at 308G-H). Again it is not suggested that we are dealing
with a transaction of that nature. The sole question for
consideration is therefore whether there was 'an arrangement'
between Vaalharts and its members, including the plaintiffs, which
required the court's sanction in terms of s 169A.

[20] In identifying the transaction at issue, the court a quo
adopted the plaintiffs' contention by referring to the transaction
under consideration as the one 'embodied in annexure C' (see eg
para 20 at 50d-g). It is clear, however, that this cannot possibly be
correct. Annexure C did not in itself embody any transaction. It was
no more than a circular ('omsendbrief') advising the members of
Vaalharts of the reasons for a recommended transaction between
their co-operative and Senwes and of the proposed terms of that
transaction. What the document required of members, if they
supported the proposal, was to sign the resignation form which
was attached to annexure C.

[21] Signature of the resignation form brought about an
agreement between the member and the co-operative. That seems
to be the only transaction between Vaalharts and its members that
can legitimately be considered in the present context. It will be
remembered that members who signed the resignation form: (a),

authorised the directors of Vaalharts to proceed with the proposed
transaction with Senwes; (b) formally resigned their membership of
Vaalharts; and (c) exercised an election whether they wanted
payment of their levies in cash or in the form of shares. Did this
agreement constitute an 'arrangement' under s 169A? The answer
to this question will determine the outcome of the appeal.

[22] There appears to be no reported decision on the meaning of
'arrangement' in the context of s 169A of the Act. That in itself does
not result in any serious disadvantage. The wording of the section
was clearly taken over from s 311 of the Companies Act 61 of
1973 and the meaning of 'arrangement' in that section has indeed
enjoyed judicial consideration in a number of cases. As was
pointed out in some of them, the term is not one of any great
technical complexity. As a matter of ordinary English it is often
used in everyday life. It usually bears a wide meaning, extending to
transactions which would not even qualify as contracts.

[23] As was also stated in some of the cases, s 311 serves a
useful purpose in the commercial world. The same can be said
about s 169A. The potential application of the mechanism created
by the section should thus not be hampered by affording a
restricted meaning to the term of wide general import utilised by
the legislature. So, for example, it was said by Trollip J – with
reference to the similarly worded s 103(4) of the previous
Companies Act 46 of 1926 – in Du Preez v Garber: In re Die
Boerebank Bpk 1963 (1) SA 806 (W) 813C-D:

'Gower on Modern Company Law, 2nd ed. pp. 554-5, says that
'arrangements' covered by the section are of the widest character, and that
"the only limitations are that the scheme cannot authorise something contrary
to the general law or wholly ultra vires the company . . .".'

(See also eg Namex 1994 (2) SA 265 (A) 294E-F.)

[24] Nevertheless, it is clear that, despite these general
statements, some restrictions have been imposed in previous
decisions on the term 'arrangement' in s 311. The restriction most
pertinent for present purposes derives from what Coetzee DJP
described in Ex Parte NBSA Centre Ltd 1987 (2) SA 783 (T) 785G-
H as the 'inner logic' of the section as gathered from its history and
purpose. In this context he said (at 787D-H):

'The history and purpose of this section show that it is appropriate in cases
where the normal mechanisms for reaching agreement between members on
the one hand and the company on the other are not available due to the
context of the particular scheme . . .
The corollary is that where the normal mechanisms are available the scheme
of arrangement machinery is inappropriate.' (My emphasis.)

[25] The same principle appears from the judgment of Trollip J in
Cyrildene Heights (Pty) Ltd supra. After referring to his own
previous statement in Du Preez v Garber supra at 813C-D,
regarding the wide general ambit of 'arrangement' quoted earlier,
the learned judge continued as follows (at 309A-C):

'Despite that wide connotation I do not think that the offer in the present case
has been shown to be an "arrangement". In terms of the offer the company is
to pay most of its creditors in full and they are obliged and entitled to receive

such payments. The remainder of the creditors are to be paid amounts which
they have already agreed to accept in settlement. As the company is not in
liquidation there is no difficulty in effecting such proposed payments. It is not
shown, for example, that the bondholder cannot, because of the terms of its
bond, be repaid in full at this stage. Consequently there seems to be nothing
that requires to be arranged between the company and its creditors which
necessitates the invocation of sec. 103 [of Act 46 of 1926].
I cannot therefore find that the so-called compromise is an 'arrangement'. That
conclusion is supported by Ex parte British Mining Supply Co. Ltd., 1942
W.L.D. 96.'

(See also eg Ex Parte Lomati Landgoed Beherende (Edms) Bpk
1985 (2) SA 517 (W) at 521E-523D; Blackman, Jooste,
Everingham Commentary on the Companies Act, Vol 2, Revision
Service 2004, 12.4 – 12.5; Meskin Henochsberg on the
Companies Act 601.)

[26] I can find no reason to depart from the principle thus
established. On the contrary, in my view it accords with the
dictates of logic and pragmatism. The machinery of the section
was created for those arrangements which cannot conveniently be
achieved by obtaining the consent of every individual member.
Where the same result can be achieved by obtaining the consent
of every member, the section does not apply.

[27] This is even more so where the agreement is subject to the
condition that it will be agreed to by every member. In such a case,
the court's sanction can serve no purpose and can only result in a
costly and wasteful exercise. What is more, where the whole
transaction is predicated on every member's consent, insistence

on the court's sanction will enable those who agreed but, for some
or other reason, no longer wish to be bound, to avoid the
consequence of a perfectly valid agreement by subsequently
invoking the provisions of s 311 or s 169A. That result is, in my
view, untenable. After all, s 311 and s 169A were not intended to
enable the court to save members from entering into bad bargains,
but to facilitate transactions which would otherwise be practically
impossible or at least very difficult to conclude.

[28] In the present case, the proposed offer by Senwes, as
explained in annexure C, postulated that every member would sign
the resignation form. In the event, this goal appears to have been
achieved. On the authorities I have referred to, that excludes the
transaction from the ambit of s 169A. What the plaintiffs are
therefore trying to do is precisely what, in my view, s 169A was not
intended for, that is, to avoid the consequences of a bargain which
they have voluntarily concluded.

[29] The court a quo found support for its conclusion to the
contrary in the argument that the transaction was intended to have
a dramatic and far-reaching ('ingrypende') effect on the rights of
members. They lost their membership of and their claims against
one entity, so the court pointed out, in exchange for membership of
a different entity (see para 35.5 at 59a-c of the judgment). Of
course all this is perfectly true. But it seems, with respect, to miss
the point. What lies at the heart of the transaction is the
precondition that all this would only happen to members who gave
their express consent to the transaction.

[30] The other argument that found favour with the court a quo
was that the agreement between Senwes and Vaalharts made no
provision for members who did not wish to resign. Of what entity,
the court rhetorically asked, would they then be members? From
whom would they claim repayment of their membership levies?
(See para 35.4 of the judgment at 58j-59a.) The problem is that
these questions were never pertinently asked of those who
structured the transaction since the point in limine was decided
before any evidence was led. Three rather obvious solutions,
however, come to mind. The first is the pragmatic answer that in
the end there were no members who did not resign. As a fact only
those who agreed were therefore held bound. Any sanction by the
court would thus have been redundant. The question as to what
would have happened if every member did not agree, can
therefore be of no more than academic interest. The second
possible answer to this question is that, if every member did not
agree, the arrangement would not have gone through. This
prospect seems to be supported by the fact that the Senwes
proposal was expressly predicated on the consent of every
member. The third possible answer is that, in that event, Vaalharts
could have sought the court's sanction for the transaction in terms
of s 169A, which would then have bound any non-agreeing
member as well.

[31] In this court a further argument was raised on behalf of the
plaintiffs as to why the agreement between Vaalharts and its
members constituted an arrangement under s 169A. This
argument relied on the provisions of s 169C of the Act. As I
understood the argument, it was built on the proposition that

s 169C automatically rendered every agreement between a co-
operative and its members an 'arrangement' under s 169A if the
purpose of the agreement was to facilitate the amalgamation of
two or more co-operatives. There is no merit in this argument.
Section 169C operates the other way round. It only applies to
transactions which can properly be described as 'arrangements'
under s 169A. If not, the fact that the transaction satisfies the other
requirements of s 169C is of no consequence. The section does
not apply. The question whether or not a particular transaction can
properly be described as an 'arrangement' thus remains to be
determined by reference to s 169A.

[32] Since the one issue underlying all the others must therefore,
in my view, be decided against the plaintiffs, that, in reality, is the
end of the matter. The court a quo's judgment cannot stand and
the appeal must succeed. It is therefore not necessary to deal with
any of the other conclusions arrived at by the court a quo and this
court's failure to do so must not be construed as an endorsement
of their correctness. However, I propose to deal with one of these
to prevent any confusion in the future. It relates to the question of
which party bore the onus with regard to the quantum of the
plaintiffs' enrichment claims.

[33] The plaintiffs' claims were essentially for the amounts
standing to their credit in the Vaalharts members' levy account at
the time of the Senwes transaction. The defendants denied that
these amounts represented the true value of the plaintiffs' claims
against Vaalharts, inter alia, on the basis that, at that time, the
assets of the co-operative were exceeded by its liabilities. The

question then arose as to who bore the onus of proof in this factual
dispute. The court a quo decided that the onus rested on the
defendants (see para 47.5 at 70e-71f). Its underlying reasoning
appears to have been that, because the defendants had admittedly
derived some benefit from a transaction which was found to be
invalid, they had to prove that the quantum of their enrichment was
less than the amount alleged by the plaintiffs. The origin of this
reasoning appears from the court's reference (at 70h-i) to African
Diamond Exporters (Pty) Ltd v Barclays Bank International Ltd
1978 (3) SA 699 (A) at 713H and to the following statement in
LAWSA, 1st re-issue, Vol 9 para 80:

'The onus to prove non-enrichment (or diminution of enrichment) is on the
defendant and should he fail to prove it, he remains liable for the full value of
the property'.

[34] The flaw in the court a quo's line of reasoning in this regard
is that the defence raised by the defendants in this case was not
one of non-enrichment. A typical non-enrichment defence is to be
found in African Diamond Exporters, upon which the court a quo
relied. In that case the defendant admitted that it had received a
specific sum of money indebitum, but then pleaded that it had
subsequently parted with some of it without any fault of its own. It
was against this background that Muller JA stated (at 713H):

'I agree . . . that, where a plaintiff has proved an overpayment recoverable by
the condictio indebiti, the onus rests on the defendant to show that he was, in
fact, not enriched at all or was only enriched as to part of what was received.'

[35] According to established principle, the point of departure in
enrichment cases is that the onus rests on the plaintiff in respect of
every element of the cause of action relied upon (see eg Willis
Faber Enthoven (Pty) Ltd v The Receiver of Revenue 1992 (4) SA
202 (A) 224H-I). In casu the dispute related to the value of what
was transferred indebitum in the first place. There is no reason
why this should constitute an exception to the general rule. It
follows that, in my view, the plaintiffs bore the onus of proving the
value of their members' levies that were transferred to Senwes.

[36] Finally, it was contended on behalf of the plaintiffs that, if the
appeal were to succeed, the matter should be referred back to the
court a quo for the hearing of further evidence on their original
causes of action in contract and in delict, based on allegations of
negligent misrepresentation. It seems, however, that this
contention is based on a misunderstanding of the rules of civil
procedure. Barring a separation of issues, a plaintiff is required to
prove the elements of all causes of action upon which he or she
seeks to rely, albeit in the alternative. Since the plaintiffs in this
case elected to pin their colours exclusively to the enrichment
mast, there was no factual basis upon which the court a quo could
hold in their favour on any alternative ground. In the view that I
hold on the enrichment claim, it should therefore have dismissed
the plaintiffs' claims with costs. That then is the order I propose to
make.

[37] It is accordingly ordered:
(a)
The appeal is upheld with costs, including the costs of
two counsel.

(b)
The order of the court a quo is set aside and replaced
with the following:
'(i)
The plaintiffs' claims are dismissed with costs,
including the costs of two counsel.
(ii)
All costs previously reserved shall be costs in the
cause.'

..........................
F D J BRAND
JUDGE OF APPEAL.

CONCUR:

SCOTT JA
VAN HEERDEN JA
COMBRINCK JA
SNYDERS AJA
THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL

In the matter between :

SENWES LIMITED

FIRST APPELLANT
SENWESBEL LIMITED

SECOND APPELLANT
VAALHARTS CO-OPERATIVE
LIMITED

THIRD APPELLANT

and

JAN VAN HEERDEN & SONS CC

FIRST RESPONDENT
CHARLES ENGELBRECHT

SECOND RESPONDENT
LOUIS J FOURIE

THIRD RESPONDENT
CHARLES H DU P MARTINSON

FOURTH RESPONDENT
TIELMAN C L MEYER

FIFTH RESPONDENT
SUSANNA K OTTO NO

SIXTH RESPONDENT
PETRUS P V VAN WYK

SEVENTH RESPONDENT

From:
The Registrar, Supreme Court of Appeal
Date:
2007-03-23
Status:
Immediate

On 23 March 2007 the SCA delivered judgment in the appeal of Senwes
Ltd against Jan van Heerden & Sons CC and six other respondents.
The matter arose from a transaction between Senwes and Vaalharts Co-
operative which was concluded at the end of 1996.  In terms of the
transaction, Senwes took over the business of Vaalharts as a going
concern.  Prior to the transaction, Van Heerden & Sons and the other six

respondents were members of Vaalharts.  The Senwes transaction was
predicated on the condition that all Vaalharts members would resign,
which they then did.  Prior to their resignation, members had claims
against Vaalharts for repayment of the amounts standing to their credit
in the Vaalharts members' levy fund.  As part of the package deal
offered by Senwes, members were given an option to secure payment of
their levies in cash, or to exchange them for Senwes shares.  All the
respondents were part of the group who chose the share option.

During 1997 effect was given to the terms of the Senwes transaction.
Levy claims of the members who opted for shares were ceded to
Senwes and these members received a number of shares allocated to
them in accordance with the formula upon which the parties agreed.
Before long, however, some of them were dissatisfied with the result of
the transaction and particularly with the value of the shares they
received.

In November 1999 the dissatisfaction led to the institution of separate
actions by about 160 erstwhile members of Vaalharts against Senwes in
the Kimberley High Court for payment of their members' levies against
return of the shares they received.  By agreement between the parties
the cases of the six respondents were consolidated and proceeded with

as a test case.  The consolidated action was postponed on many
occasions and stretched over a number of years.  Eventually the High
Court gave judgment in favour of the respondents on 19 August 2005.

The High Court's judgment was based on the premise that the
agreement between Vaalharts and its members which preceded the
Senwes transaction constituted an 'arrangement' as contemplated by s
169A of the Co-operatives Act 91 of 1981. In terms of this section, so
the court found, the agreement thus required the sanction of the court.
Because the court's sanction had not been obtained, the court
concluded, the agreement was invalid and the respondents were thus
entitled to payment of their members' levies against return of the shares
they received.

On appeal the SCA, however, upheld the contention by Senwes that, on
a proper interpretation of s 169A, the agreement between Vaalharts and
its members did not constitute an arrangement under that section.
Consequently, it decided that the High Court's judgment was based on a
wrong premise.  In the result the appeal succeeded with costs.