S a sogem nv

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Case No: A 105/2000
In the matter between:
S A SOGEM NV Appellant


[1] This case has had a long and somewhat complicated history. It started when the respondents, the Banro Resource Corporation ("Banro") and the Société Aurifère du Kivu et du Maniema SARL("Sakima SARL") brought an urgent application for the attachment of a cargo of ninety-nine tons of a mineral known as cassiterite (a form of tin oxide) on board a ship in the Cape Town harbour. The first respondent in that application was the Société Minière du Congo SARL("Somico"). The appellant in the present matter, namely the Société de gestion de l'energie de Manantali("Sogem"), was cited as fourth respondent. The second and third respondents were the respective Masters of the Ships MV Uranium MV Congo. On 12 February 1999 Traverso J issued an order authorising the attachment of the cassiterite pending an application to determine its ownership.

[2] The matter subsequently came before Davis J, who held, in a declaratory order dated 15 June 1999, that Banro was the owner of the cassiterite and was entitled to possession of it. Somico and Sogem were ordered to pay the costs of the application. Only Sogem noted an appeal against this judgment and order.
[3] With the leave of the Supreme Court of Appeal, the matter came on appeal before this court as presently constituted. On 20 June 2000 an order by consent was issued referring the matter to evidence on a number of defined issues and granting certain ancillary relief. The appeal on the merits was postponed sine diesubject thereto that either party could arrange for a hearing of the appeal, "including an appeal against any finding or order of the Judge hearing the evidence, either on the merits thereof and/or on any relevant question of costs".
[4] The matter thereupon came before Griesel J for the hearing of evidence. Despite expressing certain reservations as to whether he had the power to determine the disputed issues, the learned judge held, in a judgment handed down on 29 September 2000, that Banro had lawfully acquired ownership of the cassiterite from Sakima SARL and that Sogem was liable to pay the costs. He hence concurred, in substance, with Davis J's finding and order.
[5] At the commencement of the hearing of the present appeal, the appellant brought an application for leave to adduce further evidence in terms of section 22 of the Supreme Court Act59 of 1959. In the alternative it sought to adduce such evidence by way of affidavit in terms of section 38(2) of the Uniform Rules of this court. The application was dismissed on the basis that reasons would be furnished later. The costs thereof stood over for consideration in the main appeal. This court ruled, however, that the issue on which the appellant was seeking to adduce further evidence, namely the interpretation of Zaïrian decree 0035 of 6 May 1997, has become an issue on appeal. It was extensively traversed in evidence and argument, and comprehensively dealt with in the judgment of Griesel J. I shall address this matter later (par 76-84 below).
[6] I now return to the appeal before us. At the outset Mr Pincus, for Sogem, suggested that the effect of this court's referral of the matter for the hearing of oral evidence was that the appeal against the decision of Davis J had been upheld and that his judgment and order had been set aside. This suggestion loses sight of the fact that the order of this court was by agreement between the parties and expressly provided that the appeal on the merits would be postponed sine die. It provided in addition that the parties would be entitled to appeal against any finding or order of the judge, in casuGriesel J, on the issues referred to evidence, be it on the merits or on questions of costs. This court is, therefore, required to consider the findings and orders of both Davis J and Griesel J. In truth, as Mr Badenhorst, for Banro and Sakima SARL, quite correctly submitted, the effect of the order of this court referring the matter for the hearing of oral evidence on certain issues, was to suspend the operation of Davis J's judgment. The judgment of Griesel J can, and I believe must, be regarded as supplementing and augmenting that of Davis J, in that Griesel J had the benefit of a considerable body of evidence and documentation that were not available to Davis J when he was initially seized of the matter.
[7] We have also been called upon by the appellant to consider a number of further issues arising from the hearing before Griesel J. They include whether or not: (a) the appellant received a fair hearing; (b) an application to compel further discovery in terms of rule 35(3) of the Rules of this Court should have been granted; (c) an application that Griesel J should recuse himself from hearing the matter was properly dismissed; and (d) a commission de bene esseshould have been ordered. These issues, it would appear, all relate to whether or not, generally speaking, the appellant received a fair hearing. I shall return to them later.

[8] The first respondent, Banro, is a public company incorporated in Toronto, Canada, and registered as an external company in South Africa in terms of section 322 of the Companies Act67 of 1973. It is traded on the Dealer Network of the Toronto Stock Exchange and engages in the acquisition, exploitation and development of natural resource properties. Many of its activities have been conducted in the Democratic Republic of the Congo ("DRC"), formerly known as the Republic of Zaïre. Mr Bernard Renier van Rooyen ("Van Rooyen") is its chairperson and chief executive officer.
[9] Banro owns all the issued shares of Banro American Resources Inc ("Banro American"), a company with its principal place of business in Denver, Colorado, USA. With a view to becoming involved in mining activities in Zaïre it sought, during 1995, to acquire control of a Zaïrian company formed in 1974 and known as the Société Minière et Industrielle du Kivu SARL("Sominki"). Sominki had, pursuant to a mining convention concluded with the government of Zaïre, which held a 28% share in it, been mining in that country for decades. The convention, however, was due to expire during 1999. This prompted Banro, after acquiring 72% of Sominki's shares, to negotiate a new mining convention with the Zaïrian government and to establish a new private limited liability company, Sakima SPRL, to develop certain mining rights and concessions. Banro held 999 of the 1000 shares in Sakima SPRL, which was registered in Kinshasa during August 1996. The remaining share was held by a nominee shareholder employed by Banro's Kinshasa lawyers.
[10] It was, Banro avers, at all relevant times the intention of the parties to transform Sakima SPRL from a private limited liability company into a public ("joint-stock") limited liability company, Sakima SARL, which would acquire Sominki's mining rights and concessions. SPRL is the abbreviation for société privée à responsabilité limitée("private company with limited liability") SARL for société par actions à responsabilité limitée("joint-stock company with limited liability"). This was approved, it would appear, by a unanimously adopted resolution of the shareholders of Sakima SPRL at an extraordinary general meeting held on 21 October 1996. It was similarly approved in a mining convention, concluded on 13 February 1997 between Banro, Sominki and the Government of Zaïre. The mining convention was subsequently approved by ministerial decree 0021 of 17 March 1997, and the formation of Sakima SARL was authorised by ministerial decree 0035 of 6 May 1997. I shall return to these decrees, and other relevant documentation, at a later stage in this judgment, when consideration is given to the various issues between the parties.
[11] Suffice it to say that, in terms of the said mining convention, it was agreed that the mining rights and concessions held by Sominki would be transferred to Sakima SARL. Like its predecessor, Sakima SPRL, it was to engage in the acquisition, exploitation and development of natural resources in Zaïre. Banro American would own 93% and the Zaïrian government the remaining 7% of its shares. Van Rooyen would be its executive president.
[12] Sakima SARL is said to have been the holder of some forty-seven mining concessions issued by the Zaïrian government and directed at the exploitation and development of mineral and mining rights in Zaïre. They entitled Sakima SARL, inter alia, to mine a metal substance identified as a tin oxide and known as cassiterite. This would then be transported to Kindu, where Banro would purchase it for approximately $2 500 per ton. Since August 1997 Banro has bought every consignment of cassiterite produced by Sakima SARL and resold it to the Malaysian Smelting Corporation Berhad in Butterworth, Malaysia ("Malaysian Smelting Corporation") in terms of a written agreement.
[13] On 7 May 1998 Banro purchased 99 tons of cassiterite, packed into 132 drums and valued at approximately US$400 000, from Sakima SARL. According to Van Rooyen he negotiated the transaction from Johannesburg in his dual capacity as chief executive officer of both companies. The purchase price was duly paid to Sakima SARL whereupon, Van Rooyen avers, ownership of the cassiterite passed to Banro which in turn sold it to the Malaysian Smelting Corporation. The cassiterite, however, remained in the possession of Sakima SARL, in its Kindu warehouse, pending the issue of a government declaration of export to Malaysia.
[14] Before shipment of the cassiterite could be effected, a political upheaval took place in Zaïre. Towards the end of May 1998 the Zaïrian government of President Mobutu Sese Seko was overthrown and replaced by the DRC regime of President Laurent Désiré Kabila who, on 29 July 1998, issued a number of presidential decrees that had a devastating effect on Sakima SARL and its activities. Thus decree 101 abrogated ministerial decree 0035, which had authorised the formation of Sakima SARL, while decree 102 abrogated ministerial decree 0021 in terms of which the mining convention of 13 February 1997 had been approved. Decree 103 provided for the incorporation of a new company, the Société Minière du Congo("Somico"), to replace Sakima SARL. In terms of decrees 104 and 105 one Naluhwindja Makuba and one Maketa Mbaki Makanda were appointed as president and director general respectively of Somico.
[15] On 31 July 1998, by virtue of an order issued by the Minister for the Strategic Zones of Development, the president of Somico and one Ndume Nzogu, an adviser to the Ministry of Mines, took physical control of Sakima SARL's office in Kinshasa. They forthwith appropriated substantial assets of both Sakima SARL and Banro.

[16] During the course of September 1998 Somico removed the aforesaid cassiterite (par 13 above) from the warehouse in Kindu to a warehouse in Kinshasa. It thereupon purported to sell the cassiterite to a company known as W.E.M.I. SPRL, which in turn purported to sell it to Sogem. Sogem then arranged for it to be loaded onto a motor vessel, the MV Congo, bound for Cape Town. In Cape Town it was to be transferred to the MV Uraniumfor shipment to Singapore. On its arrival in Cape Town, however, Banro and Sakima SARL obtained an order for its attachment, as pointed out earlier in this judgment (par 1 above).

[17] The issues to be determined were agreed on by the parties and incorporated in the order of this court dated 20 June 2000. They may be paraphrased as follows:

  1. whether or not Sakima SPRL was properly incorporated and registered as a private company with limited liability in accordance with the laws of the DRC, and the legal consequences thereof (par 3.1 of the order);

  2. whether or not Sakima SARL was properly incorporated and registered as a joint stock limited liability company in accordance with the laws of the DRC, and the legal consequences thereof (par 3.2);

  3. whether or not a private company with limited liability (SPRL) may be transformed into a joint stock limited liability company (SARL) in accordance with the laws of the DRC, and if so:

  1. what the prerequisites are for such transformation;

  2. what the effect in law is of such transformation on the SPRL (par 3.3);

  1. whether or not, if Sakima SARL was not so incorporated and registered:

  1. it nevertheless acquired ownership in the cassiterite pursuant to the mining convention dated 13 February 1997; and

  2. it was entitled, as a matter of law, to transfer ownership in the cassiterite to Banro on or about 7 May 1998 (par 3.4);

  1. whether or not ownership of the cassiterite was lawfully acquired:

  1. by Sakima SARL from Sominki in terms of the mining convention dated 13 February 1997; and

  2. by Banro from Sakima SARL on or about 7 May 1998 (par 3.5);

  1. whether or not Sakima SARL had locus standi in iudicioto launch these proceedings, should this question become relevant (par 3.6);

  2. whether or not the removal of the cassiterite by Somico from the possession of Sakima SARL, and its subsequent sale thereof to Sogem, was lawful (par 3.7);

  3. whether or not Sogem had locus standi in iudicioin view of certain allegations in the papers (par 4).

Where reference is made to the laws of the DRC it includes, where relevant, the laws of Zaïre. For the sake of convenience I shall henceforth speak of the DRC. As mentioned previously (par 10 above) ministerial decree 0035 is of special relevance in this regard inasmuch as its interpretation, meaning, ambit and effect have become an issue on appeal. Likewise relevant are ministerial decree 0021 and presidential decrees 101 to 103. They will be discussed in due course.


[18] What started off as an appeal record of five volumes (approximately 500 pages), consisting of affidavits, annexures, the judgment of Davis J and certain formal documentation, grew into forty volumes (some 3 700 pages). This included a plethora of documents in French, with English translations thereof, and wide-ranging oral evidence on the aforesaid issues. Griesel J was called upon to consider all this documentation and evidence.
[19] At the outset the learned judge expressed certain reservations as to whether or not he had the power to determine the issues referred to him. He was nevertheless prepared "to exercise the power ostensibly conferred" upon him. In doing so, it is clear from his comprehensive and informative judgment that he applied his mind to the aforesaid documentation and evidence meticulously and carefully, giving full reasons for his various findings on such issues and on the various applications with which he was confronted from time to time.
[20] Three witnesses testified on behalf of Banro and Sakima SARL, namely Van Rooyen, Professor André Thomashausen ("Thomashausen"), Professor of International and Comparative Law and Director of the Institute of Comparative and International Law at the University of South Africa in Pretoria, and Mr Lambert Shango Djunga ("Djunga"), Banro's lawyer in Kinshasa. Only one witness, Ms (referred to in the record of proceedings as Maîtreor Madame) Genevieve Decamp ("Decamp"), a lawyer practising in Kinshasa, testified on behalf of Sogem.

[21] Van Rooyen testified that he had been the CEO of Banro and the president of Sakima SARL at the relevant stage. He confirmed the contents of the various affidavits to which he had deposed. He set forth the history of his involvement, in the aforesaid capacities, in the mining activities of Banro and Sakima in the DRC. He explained why it had been necessary for Sakima to acquire the mining rights of Sominki and to convert from an SPRL to an SARL. In this regard he made extensive reference to the relevant documentation submitted as exhibits.
[22] Van Rooyen confirmed that Banro had, on 7 May 1998, purchased the cassiterite in issue from Sakima SARL and accordingly acquired ownership thereof. He had acted on behalf of both companies in concluding and executing the agreement of purchase and sale. He thereupon accepted delivery of the cassiterite on behalf of Banro, but agreed that it remain in the possession of Sakima SARL pending its removal and onward transmission to the Malaysian Smelting Corporation. The government of the newly formed DRC subsequently "expropriated" the cassiterite illegally by purporting to dissolve Sakima SARL and to abrogate the mining convention of 13 February 1997. For purposes of acquiring the cassiterite, it "created" a new company, Somico, which purportedly stepped into the shoes of Sakima SARL and illegally removed the cassiterite from the warehouse in Kindu where it was being stored. Sogem then purportedly purchased the cassiterite and still claims to be its rightful owner.
[23] Van Rooyen impressed Griesel J as "an astute international businessman of experience and integrity" who wished at all times to conduct his business "in a meticulously correct manner and 'by the book' as far as reasonably possible". His testimony was presented calmly and confidently. There was, according to the learned judge, no reason to reject it.
[24] By way of introduction Thomashausen explained, with reference to the principles emanating from the conflict of laws, that the applicable law in the present case was that of the DRC, being the domicile and place of incorporation of the companies in question. This court may, in terms of section 1(1) of the South African Law of Evidence Amendment Act45 of 1988, take judicial notice of such foreign law in so far as it "can be ascertained readily and with sufficient certainty".
[25] The gist of Thomashausen's evidence, which was supported by a substantial number of documentary and legal references, was to the effect that Sakima had, during August 1996, been duly incorporated and registered as a private company with limited liability (SPRL) in accordance with the law of the DRC. It was subsequently, during 1997, transformed into a public ("joint-stock") company with limited liability (SARL). This was permissible in the DRC after the 1960 legal reforms which made provision for the transformation of an SPRL into an SARL, or into any other form of company, without the SPRL losing its legal personality in the process. On his view of the facts, Sakima SARL had lawfully acquired ownership of the cassiterite in issue from Sominki, and had thereupon lawfully sold it to Banro. The attempt by the new DRC government to expropriate it by allowing Somico to wrest possession thereof from Sakima SARL, and subsequently selling it to Sogem, was wrongful and unlawful.
[26] Thomashausen was described by Griesel J as "obviously an eminent and well-qualified expert" and, indeed, "by far the most impressive" of the legal experts called to testify before him. The learned judge found his views to be "well-motivated and expressed in a clear and logical manner". This was clearly no exaggeration, as may be gleaned from the record of his testimony and even from the most cursory survey of the summary of his expert evidence, which he confirmed at the outset of his testimony. I shall return to his views on the salient issues later on in this judgment.
[27] Far less impressive as a witness was Djunga, who was perceived by Griesel J as being partisan, and hence unreliable, in that he "allowed his loyalty to his client to overshadow his professional judgment in a few instances by propounding views that were … clearly untenable". Despite his expertise in the field of Congolese corporate law and practice, he was seldom able to give succinct and direct answers to questions, but, rather, tended to verbosity and long, rambling responses. This criticism appears to be eminently justified by a perusal of the record of his testimony, with which I shall deal briefly in what follows.
[28] In general terms Djunga confirmed the evidence of Thomashausen regarding the requirements for the establishment and transformation of companies with limited liability. He was likewise satisfied that Sakima SPRL had been properly incorporated and registered. The subsequent transformation of Sakima SPRL into Sakima SARL, supervised by Djunga, similarly complied with the relevant requirements in terms of sections 6 and 42 (as amended) of the 1887 decree. The SARL retained the file number (AS number - see par 31 below) administratively allocated to the SPRL on its incorporation and registration, and also retained the legal personality the SPRL had acquired on registration.
[29] The fact that mining concessions had been transferred to Sakima before its conversion from an SPRL to an SARL did not invalidate the transfer of such concessions. The reason was that Sakima, at all relevant times from its registration as an SPRL until its registration as an SARL, was a legal person capable of taking cession of rights. The purported abrogation of decree 0035 hence did not affect the transfer. Inasmuch as the mining concessions must be regarded as having been legally transferred from Sominki to Sakima SARL, the latter was entitled to sell the cassiterite in issue to Banro. Transfer of ownership took place immediately on agreement being reached on the thing being sold and the price. At no stage could this ownership be terminated by any attempted expropriation of the cassiterite by means of a presidential decree. At no stage was it possible for Somico to acquire any rights in respect of the cassiterite. Its purported appropriation thereof was indeed unlawful and constituted theft. At no stage could Sogem hence have acquired any rights therein from Somico. Any purported sale thereof by Somico to Sogem would hence be null and void.
[30] Griesel J had similar problems with the evidence of Decamp as he had with that of Djunga. Although she was "more articulate and ostensibly better qualified from a professional point of view" than Djunga, she was clearly biased in favour of Sogem. This resulted in her putting forward certain indefensible opinions and in failing to make certain obvious concessions. When confronted by Banro's counsel in this regard, she adopted an evasive stance, which tended to colour her evidence as unreliable in so far as it differed from that of Thomashausen or Djunga. Despite these unsatisfactory aspects of her testimony, however, Decamp provided some important insights and interesting debating points in her evidence.
[31] Decamp emphasised the need to file, by means of a filing certificate or "deed of deposit" (acte de depôt), a copy of the by-laws of the company to be formed. The registrar of companies would then allocate a filing number or "company deed" (acte de société- abbreviated AS) number to it, thereby confirming its incorporation and registration. Only then would it acquire corporate and legal personality. In this regard she was initially of the view that Sakima SPRL had never been properly formed, incorporated or registered, in that she could find no AS number or acte de depôtin its file. When later confronted with the relevant documentation, she retracted her opinion and conceded that Sakima SPRL had indeed been duly incorporated and registered.
[32] With reference to decree 0035 aforesaid, Decamp opined that the government of the DRC had not authorised the

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