Oppressed A C S A Minority 1 (Pty) Ltd (Formerly known as African Harvest Strategic Investments (Pty) Ltd) and Another v Government of the Republic of South Africa and Others

The two appellants were minority shareholders holding 4.21% shares in Airports Company of South Africa (ACSA), a statutory entity established by Government which held 74.6% shares. The appellants acquired their shares in 1998 for R172 million with expectations that ACSA would pursue an IPO and list on the JSE. Instead, ACSA adopted business practices prioritizing its economic developmental role, stopped declaring dividends, and the Government retained its shares. On 29 July 2015, the appellants brought an application under s 163 of the Companies Act 2008 seeking an order directing ACSA to acquire their shares at fair value due to alleged oppressive conduct. On 31 July 2017, the day before the hearing, a settlement agreement was concluded. On 1 August 2017, the high court per Matojane J granted a consent order directing ACSA to buy back the shares at a value to be determined by a referee. The order was partially implemented with a referee appointed and valuation completed on 26 February 2018. On 17 July 2018, almost a year after the consent order, the Government launched an application seeking rescission of the consent order on the basis that it was granted without proper authority and in breach of various statutory provisions including ss 3 and 4 of the Airports Company Act, provisions of ACSA's MOI, and ss 54(2)(c) and 66 of the PFMA. The high court per Yacoob J granted the rescission order.

• Whether the Government had standing to bring the rescission application when it was not a party to the consent order
• Whether ACSA could participate in opposing the appeal after filing a notice to abide
• Whether rescission of a consent order could be granted on the basis of lack of authority to conclude the underlying settlement agreement
• Whether the settlement agreement and consent order were unlawful due to non-compliance with statutory provisions (Airports Company Act, PFMA, Companies Act)
• Whether ACSA ratified the settlement agreement through subsequent conduct
• Whether ACSA was estopped from relying on lack of authority
• The correct approach to rescission of consent orders versus other judgments

The appeal was dismissed with costs, including the costs of two counsel. The rescission of the consent order granted by the high court was upheld.

In determining whether a consent order should be rescinded, the correct starting point is the court order itself rather than the underlying settlement agreement. Where the basis of attack on a consent judgment is lack of authority to conclude the underlying agreement, the principle that applies is that no agreement came into existence. A consent order cannot legitimize an unauthorized settlement agreement. For corporate bodies, authority to conclude settlement agreements rests with the board of directors and cannot be ratified or created through ostensible authority by individual corporate officers (such as the CEO, CFO or Chairman acting individually) even if they participate in negotiations or implement parts of an agreement. Lack of authority to conclude a settlement agreement constitutes good cause for rescission of the resulting consent order under common law principles applicable to rule 31(2)(b) of the Uniform Rules. The court has wide discretion in evaluating 'good cause' to ensure justice is done, considering factors including reasonableness of explanation and bona fides of the defence.

The Court observed that compliance with authorization requirements for settlement agreements by public entities is a fundamental necessity and cannot be bypassed. The Court noted that even where a party has partially implemented a consent order over an extended period, this does not necessarily constitute ratification where the proper corporate authorization was never obtained. The Court also observed that the doctrine of peremption (which normally bars a party from appealing after filing a notice to abide) is not absolute - courts may exercise discretion to allow participation where overriding policy considerations or interests of justice so require, particularly where the party's participation would be beneficial to proper determination of the issues. The Court expressed the view that arguments based on ss 54(2)(c) and 66(1) of the PFMA and s 163 of the Companies Act could be discounted where there was no evidence that minority shares amounted to 'significant shareholding' and where the buy-back was to be financed from retained income rather than borrowing. The Court also noted that where a settlement agreement supersedes the requirements of s 163 of the Companies Act (subject to its validity in other respects), compliance with s 163 requirements would no longer be necessary as it would defeat the purpose of settlement.

This case is significant in South African jurisprudence for clarifying: (1) The approach to rescission of consent orders - there is no distinction between consent orders and other judgments, the starting point is the court order rather than the underlying agreement; (2) That lack of authority to conclude a settlement agreement constitutes good cause for rescission; (3) The limits of ratification and estoppel in the context of corporate authority - conduct by individual corporate officers cannot ratify or create estoppel where Board authorization is required; (4) The principle that courts cannot legitimize unauthorized agreements through consent orders; (5) The application of corporate governance principles to state-owned entities and the importance of proper Board authorization for significant transactions; (6) The flexibility of the doctrine of peremption where interests of justice require allowing participation despite a notice to abide.