Capitec Bank Holdings Limited and Another v Coral Lagoon Investments 194 (Pty) Ltd and Others

Capitec Bank Holdings Limited and Coral Lagoon Investments 194 (Pty) Ltd concluded a subscription and shareholders’ agreement in 2006 to increase Capitec’s black shareholding. Coral subscribed for 10 million Capitec shares. In 2019, Coral sought to sell a portion of these shares to the Transnet Second Defined Benefit Fund to fund a settlement between the Fund and Regiments Capital-related parties. The settlement was subject to Capitec’s consent. Capitec refused to consent, contending that although Coral could sell its shares without consent, Capitec was entitled under clause 8.3 of the agreement to require Coral to reacquire shares if sold to a non-qualifying B-BBEE entity. Coral and Ash Brook applied to the High Court for an order compelling Capitec to consent, alleging breach of contractual and common-law duties of good faith. The High Court granted the relief. Capitec appealed to the Supreme Court of Appeal.

The appeal was upheld with costs. Paragraphs 4–8 of the High Court’s order were set aside and replaced with an order dismissing the application brought by Coral and Ash Brook, with costs including the costs of two counsel.

The judgment reaffirms orthodox principles of contractual interpretation in South African law, emphasising that courts may not impose obligations based on abstract notions of good faith where such duties are not grounded in the text of the contract. It clarifies that good faith is not an independent basis for compelling contractual consent and provides important guidance on the distinction between restrictions on share disposals and the consequences flowing from such disposals, particularly in B-BBEE structured transactions.