Lazarus Mbethe v United Manganese of Kalahari (Pty) Limited

Mr Lazarus Mbethe, the appellant, was the chairperson and a director of United Manganese of Kalahari (Pty) Ltd (UMK), a major manganese mining company. In 2012 he introduced UMK to Zastrospace (Pty) Ltd, a mobile crushing and screening contractor, promoting it as a community-benefiting enterprise. UMK contracted with Zastrospace during a period of high global demand for manganese ore. By late 2014 the market deteriorated, UMK reduced production, and its board resolved to terminate the Zastrospace arrangement. Aggrieved by the termination and by what he alleged were unlawful board committee practices and management deficiencies, Mbethe served statutory demands under s 165(2) of the Companies Act 71 of 2008 and applied for leave under s 165(5) to institute derivative proceedings on behalf of UMK. The Gauteng Local Division dismissed the application, finding that Mbethe failed to meet the statutory requirements, particularly good faith. He appealed to the Supreme Court of Appeal.

The appeal was dismissed with costs, including the costs of two counsel.

This judgment is a leading South African authority on the interpretation of s 165 of the Companies Act 71 of 2008. It clarifies the meaning of 'good faith' in statutory derivative actions, confirms the applicable onus and standard of proof, rejects the elevation of absence of collateral purpose as a separate requirement, and affirms that courts retain a discretion even where statutory criteria are satisfied. The case provides important guidance for directors and shareholders seeking to invoke derivative remedies.