SACTWU Investments Group (Pty) Ltd v Sekunjalo Independent Media (Pty) Ltd and Another

SACTWU Investments Group (Pty) Ltd (SIG) lent R150 million to Sekunjalo Independent Media (Pty) Ltd (SIM) in August 2013 under a loan agreement providing for quarterly interest, with unpaid interest to be capitalised. No interest was paid, and by 2017 SIG sought to exit the loan. This coincided with plans by SIM and its holding company to merge assets into Sagarmatha Technologies Ltd, intended to list on the JSE and NYSE. A sale agreement was concluded in November 2017 for SIG’s loan claim and shares in SIM to be exchanged for Sagarmatha shares, subject to listing. Around the same time, a subordination agreement was signed by Mr Andre Kriel, a director of SIG, subordinating SIG’s loan claim in favour of other creditors until SIM’s assets exceeded its liabilities. The Sagarmatha listing failed, the sale agreement became ineffective, and the loan was not repaid. SIG sued for repayment. SIM relied on the subordination agreement as a defence, contending that SIG could not enforce the loan until solvency was restored. SIG disputed the validity of the subordination agreement, alleging lack of authority, mistake or misrepresentation, and also disputed the application of the in duplum rule to capitalised interest.

The appeal was upheld with costs, including the costs of three counsel. The order of the high court was set aside and replaced with an order upholding SIG’s claim. SIM was ordered to pay SIG R458 606 995.07, together with interest from 29 August 2023 at the default interest rate provided for in the loan agreement.

The case is significant for its clarification of the limits of directors’ authority and the proper interpretation of board resolutions in South African company law. It reinforces that subordination agreements, particularly those with far-reaching and open-ended consequences, require clear and specific authorisation. The judgment also contributes to jurisprudence on the application of the in duplum rule in the context of capitalised interest under complex commercial loan arrangements.