Claiming Damages where Dividends remain Unpaid: A Contribution towards a More Balanced Approach in South Africa




Company law, Dividends, shareholders


In the matter between Sumiseki Materials Co Ltd v Wambo Coal Pty Ltd 2013 NSWSC 235 (25 Mar 2013) the Supreme Court of New South Wales had to decide on the legal difficulty arising from unpaid dividends. The Court was required to decide whether a shareholder has a right to a predetermined annual dividend. The principles applied by the Supreme Court entailed estoppel (common law), minority oppression (company law) and contractual law principles. Although the principles of estoppel were relevant, these fall outside the ambit of this article concerning unpaid dividends. The Supreme Court cited approximately 40 cases and considered 5000 pages of documentary evidence pertaining to the contractual right to a predetermined dividend. Although the latter seems applicable and relevant to the South African corporate law environment, South African case law does not support it. Besides a contractual right, this article also investigates the Oxford Legal Group case in establishing at least an implied right (based on the doctrine of proper purpose) to claim an undeclared dividend or unauthorised dividend that is contrary to the board of directors discretion not to authorise any dividends. Both these cases argue when and why a court should interfere in company resolutions in striking a better balance between a right to a dividend and a company's discretionary power not to recommend or declare a dividend.


Google_Scholar_83.png   ScienceOpen_Log0321.png


Download data is not yet available.


Metrics Loading ...


Alevras A and Du Plessis J “The Payment of Dividends: Legal Confusion, Complexities and the Need for Comprehensive Reform in Australia” Co. Secur. Law J. 312-333

Arnold G The Handbook of Corporate Finance: A Business Companion to Financial Markets, Decisions and Techniques (Pearson Education Limited Harlow United Kingdom 2005)

Bainbridge SM “Corporate Decision Making and the Moral Rights of Employees: Participatory Management and Natural Law” Vill. L. Rev. 741-828

Black A, Wright P and Davies J In Search of Shareholder Value: Managing the Drivers of Performance (Financial Times/Prentice Hall Harlow United Kingdom 2001)

Blair MM and Stout LA “Trust, Trustworthiness and the Behavioral Foundations of Corporate Law” U. Pa. L. Rev. 1735-1810

Cassim FHI The Practitioner’s Guide to the Companies Act 71 of 2008 (Juta and Co. Ltd. Cape Town 2011)

Cilliers HS et al Corporate Law 3rd ed (Butterworths Durban 2000)

Copp S “Company Law Reform and Economic Analysis: Establishing Boundaries” JCLS 1-19

Correia C et al Financial management 3rd ed (Juta Academic Cape Town 1993)

Delport PA Die verkryging van kapitaal in die Suid-Afrikaanse maatskappyereg met spesifieke verwysing na die aanbod van aandele aan die publiek (LLD thesis University of Pretoria 1987)

Esser I and Du Plessis JJ “Stakeholder Debate and Directors’ Fiduciary Duties” SAMLJ 346-363

Golecki M “The Coase Theorem and Philosophical Foundations of Law and Economics” MUJLT 209-222

Havenga MK Fiduciary duties of company directors with specific regard to corporate opportunities (LLD thesis University of South Africa 1995)

Henning JJ “Die Leeuevennootskap: Aspekte van ’n Deelname in Wins en Verlies deur Vennote” MBL 143-145

Hoffnagle SB and Butler JA “Shareholders’ Right to Inspection of Corporate Stock Ledger” Conn. L. Rev. 707-733

Jaffey P “Restraining the Exercise of Corporate Statutory Powers” Denning L.J. 67-91

Jaffey P “Contractual obligations of the company in general meeting” J. Legal Stud. 27-50

Jehring JJ “The Reform of Corporation Law from a Social Science Viewpoint” U. Det. L.J. 496-500

Kilian CG “Legal, Economic and Dispute-Resolution Principles for a Forward Contract … Who Knows?” THRHR 391-406

Kilian CG and Du Plessis JJ “Possible Remedies for Shareholders when a Company Refuses to Declare Dividends or Declare Inadequate Dividends” TSAR 48-68

Koh P “Director’s fiduciary duties: unthreading the joints of shareholders ratification” JCLS 363-399

Marx J et al Investment Management (Van Schaik Pretoria 2005)

Millon D “Theories of the Corporation” Duke L.J. 201-262

Newberry J “Securing the Future in Financial Planning” Am. Bar Assoc. J. 60-65

Orts EW “Shirking and Sharking: a Legal Theory of the Firm” Yale L. & Pol’y Rev. 266-327

Pretorius JT et al Hahlo’s South African Company Law through the Cases 6th ed (Juta Co. Ltd. Cape Town 1999)

Redmond P “The Reform of Directors’ Duties” Univ. N. S. W. Law J. 86-151

Rider “Partnership Law and its Impact on ‘Domestic Companies” C. L. J. 148-179

Sealy LS Cases and materials in company law 7th ed (Butterworths Durban 2001)

Smart SB, Megginson WL and Gitman LJ Corporate finance 2nd ed (Thomson/South-Western 2006)

Snyman E Remedies ter beskikking van die vennote inter se (LLM thesis University of the Free State 1991)

Snyman E Die behoefte aan ’n algemene hervormende Suid-Afrikaanse Vennootskapswet: ’n Regsvergelykende studie (LLD thesis University of the Free State 2000)

Tomasic R “A Note on Law and Economic Thinking about Corporate Law” Canberra L. Rev. 155-164

Tyler ELG “Notes on cases” HKLJ 230-236

Vagts DF “Reforming the ‘Modern’ Corporation: Perspectives from the German” Harv. L. Rev. 23-89

Van Rooyen L “Enkele perspektiewe oor die reël dat lede van ’n maatskappy hul stemreg na wens kan uitoefen en die ongeldigheid van meerderheidsbesluite weens magsmisbruik” TSAR 593-616

Varallo GV and Finkelstein JA “Fiduciary Obligation of Directors of the Financially Troubled Company” Bus. Law. 239-255

Visser C et al South African Mercantile & Company Law (Juta Cape Town 1997)

Vliet RD “Voting rights and corporate control” Okla. L. Rev. 1-37

Wester JM “Achieving a Proper Economic Balance: Non-Shareholder Constituency Statutes” Stetson L. Rev. 581-632

Williamson OE “Intellectual foundations of law and economics: the need for a broader view” J. Legal Educ. 210-216

Dadoo Ltd v Krugersdorp Municipal Council 1920 AD 537

Ex Parte Buttner Bros 1930 CPD 138

Ex Parte Lebowa Development Corporation Ltd 1989 3 SA 71 (TPD)

Ex Parte Natal Coal Exploration Co Ltd 1985 4 SA 279 (W)

Ex Parte Satbel (Edms) Bpk: In re Meyer v Satbel (Edms) Bpk 1984 4 SA 347 (W)

Ex Parte Strydom NO: In Re Central Plumbing Works (Natal) (Pty) Ltd; Ex Parte Spendiff NO: In Re Candida Footwear Manufacturers (Ltd) Pty; Ex Parte Spendiff NO: In Re Jerseytex (Pty) Ltd 1988 1 SA 616 (D)

Foss v Harbottle 1843 67 ER 189

Howard Smith Ltd v Ampol Petroleum Ltd 1974 AC 821

Magwaza v Heenan 1979 2 SA 1019 (A)

Novick v Comair Holdings Ltd 1979 2 SA 116 (W)

Oxford Legal Group Limited v Sibbasbridge 2008 WL 1741230 (CA (Civ Div))

Pietermaritzburg Corporation v South African Breweries Ltd 1911 AD 501

Prudential Assurance Co Ltd v Newman Industries No 2; CA 1982

Renard Constructions v Minister for Public Works 1992 26 NSWLR 234

Sumiseki Materials Co Ltd v Wambo Coal Pty Ltd 2013 NSWSC 235 (25 Mar 2013)

Vasco Dry Cleaners v Twycross 1979 1 SA 603 (A)

Australian Corporations Act 2001

South African Companies Act 71 of 2008

United Kingdom Companies Act 1985



How to Cite

Kilian, C. G., & Snyman-Van Deventer, E. (2017). Claiming Damages where Dividends remain Unpaid: A Contribution towards a More Balanced Approach in South Africa. Potchefstroom Electronic Law Journal, 20, 1–26.